-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MN0d2APJWKJtxWUp8UScxOKetyn7qQUXrW80BfJIcyLCqVsK1MTCQfWLZKRm3izl M4DJezbp+5WHyb85QiA0Pw== 0000950123-01-509597.txt : 20020413 0000950123-01-509597.hdr.sgml : 20020413 ACCESSION NUMBER: 0000950123-01-509597 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 50 FILED AS OF DATE: 20011227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIAGNOSTIC SOLUTIONS CORP CENTRAL INDEX KEY: 0001164056 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752565249 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-75984-02 FILM NUMBER: 1823478 MAIL ADDRESS: STREET 1: 4400 MACAUTHUR BOULEVARD STREET 2: SUITE 800 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NDDC INC CENTRAL INDEX KEY: 0001164057 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752407830 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-75984-03 FILM NUMBER: 1823479 MAIL ADDRESS: STREET 1: 4400 MACAUTHUR BOULEVARD STREET 2: SUITE 800 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAXUM HEALTH SERVICES OF DALLAS INC CENTRAL INDEX KEY: 0001164059 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752615132 STATE OF INCORPORATION: TX FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-75984-04 FILM NUMBER: 1823480 MAIL ADDRESS: STREET 1: 4400 MACAUTHUR BOULEVARD STREET 2: SUITE 800 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSIGHT HEALTH SERVICES HOLDINGS CORP CENTRAL INDEX KEY: 0001145238 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-75984-12 FILM NUMBER: 1823488 BUSINESS ADDRESS: STREET 1: ONE FEDERAL ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6177531100 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSIGHT HEALTH SERVICES CORP CENTRAL INDEX KEY: 0001012697 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 330702770 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-75984 FILM NUMBER: 1823476 BUSINESS ADDRESS: STREET 1: 4400 MACARTHUR BLVD STREET 2: SUITE 800 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 9494760733 MAIL ADDRESS: STREET 1: 4400 VON KARMAN AVE STE 800 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSIGHT HEALTH CORP CENTRAL INDEX KEY: 0001164086 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-75984-01 FILM NUMBER: 1823477 BUSINESS ADDRESS: STREET 1: 4400 MACARTHUR BLVD STREET 2: SUITE 800 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 9494760733 MAIL ADDRESS: STREET 1: 4400 MACARTHUR BLVD STREET 2: SUITE 800 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAXUM HEALTH SERVICES CORP CENTRAL INDEX KEY: 0001164051 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752135957 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-75984-05 FILM NUMBER: 1823481 BUSINESS ADDRESS: STREET 1: 4400 MACARTHUR BLVD STREET 2: STE 800 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 9494760733 MAIL ADDRESS: STREET 1: 4400 MACARTHUR BLVD STREET 2: STE 800 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAXUM HEALTH SERVICES OF NORTH TEXAS INC CENTRAL INDEX KEY: 0001164048 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752435797 STATE OF INCORPORATION: TX FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-75984-06 FILM NUMBER: 1823482 BUSINESS ADDRESS: STREET 1: 4400 MACARTHUR BLVD STREET 2: STE 800 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 9494760733 MAIL ADDRESS: STREET 1: 4400 MACARTHUR BLVD STREET 2: STE 800 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MRI ASSOCIATES LP CENTRAL INDEX KEY: 0000885280 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-75984-07 FILM NUMBER: 1823483 BUSINESS ADDRESS: STREET 1: 4400 MACARTHUR BLVD STREET 2: STE 800 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 9494760733 MAIL ADDRESS: STREET 1: 4400 MACARTHUR BLVD STREET 2: STE 800 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RADIO SURGERY CENTERS INC CENTRAL INDEX KEY: 0001164050 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 330522445 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-75984-08 FILM NUMBER: 1823484 BUSINESS ADDRESS: STREET 1: 4400 MAXARTHUR BLVD STE 800 CITY: NEW BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 9494760733 MAIL ADDRESS: STREET 1: 4400 MACARTHUR BLVD STE CITY: NEW PORT BEACH STATE: CA ZIP: 92660 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAXUM HEALTH CORP/CA CENTRAL INDEX KEY: 0001164052 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752287276 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-75984-09 FILM NUMBER: 1823485 BUSINESS ADDRESS: STREET 1: 4400 MAXARTHUR BLVD STE 800 CITY: NEW BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 9494760733 MAIL ADDRESS: STREET 1: 4400 MACARTHUR BLVD STE CITY: NEW PORT BEACH STATE: CA ZIP: 92660 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPEN MRL INC CENTRAL INDEX KEY: 0001164053 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 943251529 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-75984-10 FILM NUMBER: 1823486 BUSINESS ADDRESS: STREET 1: 4400 MAXARTHUR BLVD STE 800 CITY: NEW BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 9494760733 MAIL ADDRESS: STREET 1: 4400 MACARTHUR BLVD STE CITY: NEW PORT BEACH STATE: CA ZIP: 92660 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIGNAL MEDICAL SERVICES CENTRAL INDEX KEY: 0001164049 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 330802413 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-75984-11 FILM NUMBER: 1823487 BUSINESS ADDRESS: STREET 1: 4400 MAXARTHUR BLVD STE 800 CITY: NEW BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 9494760733 MAIL ADDRESS: STREET 1: 4400 MACARTHUR BLVD STE CITY: NEW PORT BEACH STATE: CA ZIP: 92660 S-4 1 y55701s-4.txt FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 27, 2001 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- INSIGHT HEALTH SERVICES CORP.* (Exact name of registrant as specified in its charter) DELAWARE 621510 33-0702770 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.)
--------------------- *SEE TABLE OF ADDITIONAL REGISTRANTS --------------------- 4400 MACARTHUR BOULEVARD, SUITE 800 NEWPORT BEACH, CA 92660 (949) 476-0733 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) --------------------- MARILYN U. MACNIVEN-YOUNG, ESQ. EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL 4400 MACARTHUR BOULEVARD NEWPORT BEACH, CA 92660 (949) 476-0733 (Name, address, including zip code, and telephone number, including area code, of agent for service) COPIES TO: STEPHEN C. KOVAL, ESQ. KAYE SCHOLER LLP 425 PARK AVENUE NEW YORK, NEW YORK 10022 (212) 836-8000 --------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: The exchange will occur as soon as practicable after this Registration Statement becomes effective. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement under the earlier effective registration statement for the same offering. [ ] CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION TO BE REGISTERED REGISTERED UNIT(1) PRICE FEE - --------------------------------------------------------------------------------------------------------------------------- 9 7/8% Senior Subordinated Notes due 2011................................. $225,000,000 100% $225,000,000 $53,775(1) Guarantees on Senior Subordinated Notes(2)............................. (3) - --------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------
(1) Calculated in accordance with Rule 457 under the Securities Act of 1933, as amended. (2) InSight Health Services Holdings Corp., the parent corporation of the issuer, and certain wholly-owned subsidiaries of the issuer have each guaranteed the Senior Subordinated Notes. (3) Pursuant to Rule 457(n), no separate fee is payable with respect to the guarantees being registered hereby. THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF ADDITIONAL REGISTRANTS
I.R.S. EMPLOYER STATE OR OTHER JURISDICTION OF IDENTIFICATION EXACT NAME OF ADDITIONAL REGISTRANTS* INCORPORATION NUMBER - ------------------------------------- ------------------------------ --------------- InSight Health Services Holdings Corp.................. Delaware 04-3570028 InSight Health Corp.................................... Delaware 52-1278857 Signal Medical Services, Inc........................... Delaware 33-0802413 Open MRI, Inc.......................................... Delaware 94-3251529 Maxum Health Corp...................................... Delaware 75-2287276 Radiosurgery Centers, Inc.............................. Delaware 33-0522445 Maxum Health Services Corp............................. Delaware 75-2135957 MRI Associates, L.P.................................... Indiana 35-1881106 Maxum Health Services of North Texas, Inc.............. Texas 75-2435797 Maxum Health Services of Dallas, Inc................... Texas 75-2615132 NDDC, Inc.............................................. Texas 75-2407830 Diagnostic Solutions Corp.............................. Delaware 75-2565249
- --------------- * The address for InSight Health Services Holdings Corp. is c/o J.W. Childs Associates, L.P., 111 Huntington Avenue, Suite 2900, Boston, MA 02199, telephone (617) 753-1100. The primary standard industrial classification number for InSight Health Services Holdings Corp. is 6719. The address of each other additional registrant is c/o InSight Health Services Corp., 4400 MacArthur Boulevard, Newport Beach, CA 92660, telephone (949) 476-0733. The primary standard industrial classification number for each of the additional registrants is 621510. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED 2002 INSIGHT HEALTH SERVICES CORP. OFFER TO EXCHANGE $225,000,000 9 7/8% SENIOR SUBORDINATED NOTES DUE 2011 FOR REGISTERED 9 7/8% SENIOR SUBORDINATED NOTES DUE 2011 We are offering to exchange all of our $225,000,000 9 7/8% senior subordinated notes, which we refer to as the outstanding notes, for $225,000,000 in registered 9 7/8% senior subordinated notes, which we refer to as the exchange notes. The outstanding notes and the exchange notes are collectively referred to as the notes. The outstanding notes were issued on October 30, 2001. The exchange notes represent the same indebtedness as the outstanding notes. The terms of the exchange notes are identical to the terms of the outstanding notes except that the exchange notes are registered under the Securities Act of 1933 and therefore are freely transferable, subject to certain conditions. You should consider the following: - PARTICIPATING IN THE EXCHANGE OFFER INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 13 OF THIS PROSPECTUS. - Our offer to exchange the outstanding notes for exchange notes will expire at 5:00 p.m. New York City time on , 2002 unless we extend the time of expiration. You may withdraw your tender of outstanding notes at any time before the expiration of this exchange offer. - No public market currently exists for the notes. We do not intend to list the exchange notes on any securities exchange or seek approval for quotation through any automated trading system and, therefore, no active public market is anticipated. - We have been advised by counsel that the exchange of outstanding notes for exchange notes will not be a taxable event for U.S. federal income tax purposes. - The exchange offer is subject to customary conditions, including that it does not violate applicable law or any applicable interpretation of the staff of the SEC. - We will not receive any proceeds from the exchange offer. - Each broker-dealer that receives exchange notes pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. If the holder of the notes is a broker-dealer that will receive exchange notes for its own account in exchange for outstanding notes that were acquired as a result of market-making activities or other trading activities, it will be required to acknowledge that it will deliver this prospectus, as it may be amended or supplemented, in connection with any resale of the exchange notes. NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is , 2002 WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR REPRESENT ANYTHING TO YOU OTHER THAN THE INFORMATION CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. TABLE OF CONTENTS
PAGE ---- Prospectus Summary.......................................... 1 Risk Factors................................................ 13 The Acquisition and Related Financing Transactions.......... 26 Exchange Offer.............................................. 27 Use of Proceeds............................................. 34 Capitalization.............................................. 35 Ratio of Earnings to Fixed Charges.......................... 35 Unaudited Pro Forma Condensed Consolidated Financial Statements................................................ 36 Selected Historical Financial and Operating Data............ 44 Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 46 The Diagnostic Imaging Industry............................. 57 Business.................................................... 60 Management.................................................. 75 Security Ownership of Certain Beneficial Owners and Management................................................ 84 Certain Relationships and Related Transactions.............. 87 Description of New Senior Credit Facilities................. 88 Description of Notes........................................ 90 Certain Federal Income Tax Considerations................... 124 Plan of Distribution........................................ 127 Legal Matters............................................... 127 Experts..................................................... 128 Available Information....................................... 128 Index to Consolidated Financial Statements.................. F-1
i MARKET, RANKING AND OTHER DATA The data included in this prospectus regarding markets and ranking, including the size of certain markets and our position and the position of our competitors within these markets, are based on independent industry publications, reports of government agencies or other published industry sources and our estimates based on our management's knowledge and experience in the markets in which we operate. Our estimates have been based on information obtained from our customers, suppliers, trade and business organizations and other contacts in the markets in which we operate. We believe these estimates to be accurate as of the date of this prospectus. However, this information may prove to be inaccurate because of the method by which we obtained some of the data for our estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in a survey of market size. As a result, you should be aware that market, ranking and other similar data included in this prospectus, and estimates and beliefs based on that data, may not be reliable. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus includes "forward-looking statements." Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, our competitive strengths and weaknesses, our business strategy and the trends we anticipate in the industry and economies in which we operate and other information that is not historical information and, in particular, appear under the heading "Prospectus Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "The Diagnostic Imaging Industry" and "Business." When used in this prospectus, the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes" and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, our examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them, but we cannot assure you that our expectations, beliefs and projections will be realized. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this prospectus. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this prospectus are set forth in this prospectus, including the factors described in the section entitled "Risk Factors," and the following: - limitations and delays in reimbursement by third-party payors; - contract renewals and financial stability of customers; - conditions within the healthcare environment; - adverse utilization trends for certain diagnostic imaging procedures; - our ability to successfully integrate acquisitions; - competition in our markets; - the potential for rapid and significant changes in technology and their effect on our operations; - operating, legal, governmental and regulatory risks; and - economic, political and competitive forces affecting our business. If any of these risks or uncertainties materialize, or if any of our underlying assumptions are incorrect, our actual results may differ significantly from the results that we express in or imply by any of our forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect future events or circumstances. ii PROSPECTUS SUMMARY In this prospectus, the words "InSight," "our company," "we," "us" or "our" refer to the combined business of InSight Health Services Corp. and all of its subsidiaries, "the issuer" refers to InSight Health Services Corp., exclusive of its subsidiaries, "InSight Holdings" refers to InSight Health Services Holdings Corp., the parent company of InSight and "EBITDA" refers to operating income plus depreciation and amortization. This summary highlights the information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all of the information that may be important to you. For a more complete understanding of this offering, we encourage you to read this entire prospectus and documents to which we refer you. You should read the following summary together with the more detailed information and consolidated financial statements and the notes to those statements included elsewhere in this prospectus. We report our financial results on a fiscal year rather than a calendar year basis. When we refer to a particular fiscal year in this prospectus, we mean the twelve months ended June 30 of that year. When we refer to contract services, we are generally referring to our mobile business. When we refer to patient services, we are generally referring to our fixed-site business. GENERAL On October 30, 2001, we issued an aggregate principal amount of $225 million of 9 7/8% senior subordinated notes due 2011 in an offering exempt from registration under the Securities Act. We refer to the notes issued in October 2001 as the "outstanding notes." The term "exchange notes" refers to the 9 7/8% senior subordinated notes due 2011 newly offered under this prospectus. In connection with the private offering of the outstanding notes, we entered into a registration rights agreement. Under the registration rights agreement, we are obligated, among other things, to deliver to you this prospectus and complete the exchange offer. This exchange offer allows you to exchange your outstanding notes for newly registered exchange notes with substantially similar terms. If the exchange offer is not completed as contemplated in the registration rights agreement, we will be required to pay liquidated damages to holders of the outstanding notes, and to holders of the exchange notes under limited circumstances. You should read the registration rights agreement in its entirety for more information. Refer to the section in this prospectus entitled "Available Information" for information on how to obtain a copy of the registration rights agreement. OUR COMPANY We are a leading nationwide provider of outsourced diagnostic imaging services, serving a diverse portfolio of customers, including healthcare providers, such as hospitals and physicians, and payors, such as managed care organizations and insurance companies. As the largest integrated network of mobile facilities and fixed-site imaging centers in the United States, we believe we are unique in our ability to offer healthcare providers a broad range of comprehensive imaging solutions, from mobile magnetic resonance imaging, or MRI, services to MRI-only and multi-modality fixed-site centers, many of which we jointly own with hospitals, physician groups or other healthcare providers. We deliver our services through regional networks of diagnostic imaging facilities, comprised of: - 91 mobile, including 82 MRI and five positron emission tomography, or PET, facilities. The revenues generated primarily from our mobile facilities, which we refer to as our contract services revenues, represent approximately 47% of our total revenues; and - 68 fixed-site centers operating 72 MRI systems. Approximately 40% of these are multi-modality centers, which typically include MRI and one or more of computed tomography, or CT, x-ray, mammography, ultrasound, nuclear medicine and bone densitometry services. The revenues generated primarily from our fixed-site centers, which we refer to as our patient services revenues, represent approximately 53% of our total revenues. 1 Healthcare providers contract with us for our outsourced imaging services because they may lack: - the financial resources to make the significant capital investments associated with the purchase of an imaging system; - the patient volume to utilize their own imaging system in a cost-effective manner; - the management and marketing expertise or the billing and collections capabilities to operate an imaging facility or center efficiently and profitably; or - the ability to add capacity independently to meet local demand. In addition, hospitals may use our outsourced imaging services to take advantage of recent federal healthcare regulatory changes that favor the outsourcing of radiology services to facilities managed by and jointly owned with a third party. We have contracts with approximately 240 hospitals and have over 850 contracts with managed care organizations across 28 states. In the three months ended September 30, 2001, we completed over 186,000 procedures, and MRI services accounted for approximately 78% of our total revenues. For the year ended June 30, 2001, we had revenues of $211.5 million and EBITDA of $81.0 million. For the three months ended September 30, 2001, we had revenues of $53.1 million and EBITDA of $21.0 million. DIAGNOSTIC IMAGING INDUSTRY OVERVIEW Diagnostic imaging involves the use of non-invasive techniques to generate representations of internal anatomy on film or video. Based on government and industry sources, in calendar year 2000, the diagnostic imaging industry generated revenues in excess of $70 billion in the United States, or approximately 6% of total healthcare spending. MRI and CT services constituted approximately $10 billion or approximately 13% of the diagnostic imaging industry in 2000. MRI services have experienced substantial scan volume growth, which increased at a compounded annual growth rate, or CAGR, of 10.7% from 9.8 million in 1996 to 13.3 million in 1999 and is projected to grow at a CAGR of approximately 10.4% to 26.6 million in 2006. We believe that growth in the diagnostic imaging industry as a whole, and MRI in particular, is attributable to: - strong demand for healthcare services due to an aging population; - wider physician and payor acceptance of MRI as a cost-effective, non-invasive diagnostic tool, with superior image quality; - expanding applications for MRI technology; - a currently relatively stable reimbursement environment with respect to non-governmental payors; and - the increased role of preventive medicine. COMPETITIVE STRENGTHS We believe we are well-positioned to capitalize on the favorable trends in the diagnostic imaging industry. We attribute our leading market position to the following strengths: COMPREHENSIVE OUTSOURCED IMAGING SOLUTIONS. Unlike most of our competitors, we operate integrated, regional networks comprised of both mobile facilities and fixed-site imaging centers. Through these networks, we believe we have a unique ability to offer healthcare providers a broad range of outsourcing solutions to meet their diverse and developing imaging needs, whether through mobile MRI, MRI-only or multi-modality fixed-site centers or joint venture facilities. In addition to providing these customers with imaging equipment and technical expertise, we can tailor solutions, based on customers' needs, to include day-to-day management, marketing support, billing and collection assistance, as well as site design and development. STRONG REGIONAL NETWORKS WITH SIGNIFICANT MARKET PRESENCE. We have developed a substantial presence in our targeted markets by forming regional networks of imaging facilities that emphasize quality of care, 2 produce cost-effective diagnostic information and provide superior service to our customers. Clustering our facilities in regional networks enables us to: - offer a broad range of imaging services; - provide access to convenient locations and greater scheduling flexibility; - maximize our equipment utilization; - leverage our marketing efforts; and - benefit from economies of scale in purchasing, negotiating payor contracts and reducing overhead through the centralization of certain administrative functions. WELL ESTABLISHED RELATIONSHIPS WITH HOSPITAL AND MANAGED CARE CUSTOMERS. Our hospital and managed care customers accounted for approximately 50% and 33%, respectively, of total revenues for the fiscal year ended June 30, 2001. Our 60-member sales force focuses its marketing efforts on maintaining and expanding our relationships with hospital and managed care customers. Hospitals. We have approximately 240 exclusive contracts with hospitals, including 200 for mobile facility services and 40 for fixed-site services. - Our mobile facilities typically operate under contracts with average terms of three to five years with an overall renewal rate of approximately 85% since July 2000. Our mobile facilities operate under a wholesale model in which we provide a specified schedule of services and bill the hospital directly, typically on a fee-per-scan basis. Our mobile facilities are rotated among multiple hospitals in a manner intended to optimize equipment utilization. - Our contracts with hospitals for fixed-site services generally have terms of five to 15 years. We primarily operate our fixed-site centers under a retail model in which we bill our payor customers and patients directly on a fee-for-service basis. As one of the largest networks of hospital outsourced radiology services, we believe we are a preferred joint venture partner for hospitals and are uniquely positioned to convert mobile customers into long-term fixed-site center relationships as these customers' scan volumes increase and it becomes more economical for them to establish a fixed-site center. These conversions also decrease the risk associated with mobile contract renewal. To date, we have completed 19 mobile to fixed-site conversions. Managed Care Organizations. Through our regional networks, we offer managed care organizations "one-stop shopping," which includes centralized scheduling, single invoices, multiple locations and quality assurance. Since the fiscal year ended June 30, 1997, we have more than doubled the number of our managed care contracts, and we currently have over 850 contracts at our fixed-site centers. Due to our extensive relationships with managed care payors, we are able to provide services for a large base of referring physicians and as a result, increase scan volumes at our centers. TECHNOLOGICALLY ADVANCED MRI SYSTEMS. We operate our mobile facilities and fixed-site centers with state-of-the-art equipment that allows us to perform the variety, quality and volume of scans required by our customers. Of our 126 conventional MRI systems, 69% have a magnet field strength of 1.5 Tesla, which is the industry's highest commercial standard, and 94% have a magnet field strength of 1.0 Tesla or greater. We maintain our imaging systems with software enhancements and upgrades to increase capacity and to perform new applications, such as stroke and cardiac evaluation and cancer detection. The average age of our MRI equipment is 3.1 years with an estimated useful life of 10 years. EXPERIENCED MANAGEMENT TEAM. We have a highly experienced senior management team with an average of 17 years of experience in the healthcare services industry. Management has demonstrated its ability to generate significant growth through a combination of same-store growth, developing new mobile customers and routes, establishing fixed-site centers and successfully integrating 12 acquisitions since the fiscal year ended June 30, 1996. From the fiscal year ended June 30, 1997 to the fiscal year ended June 30, 2001, 3 revenues increased from $92.3 million to $211.5 million, reflecting a 23.0% CAGR, while EBITDA increased from $15.5 million to $81.0 million, a 51.1% CAGR. BUSINESS STRATEGY Our objective is to be the leading provider of outsourced diagnostic imaging services in our target markets by further developing and expanding our regional networks. We plan to realize our objective by: MAXIMIZING UTILIZATION OF OUR EXISTING FACILITIES. We intend to expand in our regional markets by leveraging our existing facility network and customer relationships, while reducing costs through economies of scale and ongoing cost reduction measures. To this end, we intend to: - broaden our physician referral base and generate new sources of revenues through selective marketing activities, such as educating physicians on new applications for diagnostic imaging equipment, providing technology training for physicians and their staffs, and other customer service programs; - focus our marketing efforts on attracting additional managed care customers; - add new modalities such as CT, ultrasound and bone densitometry to increase scan volume and economies of scale by leveraging our existing fixed-site infrastructure; - expand MRI applications to increase scan volume; - continue to focus on our unique ability to convert developing mobile operations into fixed-site centers; and - maximize cost efficiencies through increased purchasing power and the continual reduction of overhead expenses. DEVELOPING DE NOVO OPPORTUNITIES. We will continue to pursue growth opportunities within our existing regional networks by opening new fixed-site centers and adding new mobile routes where attractive returns on investment can be achieved and sustained. We will also selectively implement additional mobile PET systems and routes. Mobile PET presents an attractive growth opportunity due to increased physician acceptance of PET as a diagnostic tool and recently expanded Medicare coverage of PET procedures. In addition, we will continue to pursue partnerships with hospitals because we believe that they have the potential to provide us with a steady source of scan volume. We believe this will be an area for additional growth for us because we expect that hospitals may respond to recent federal healthcare regulatory changes by outsourcing radiology services to facilities that are managed by and jointly owned with third parties. PURSUING STRATEGIC ACQUISITIONS. Acquisitions have been an integral part of our strategy. We expect to selectively acquire imaging centers to augment our penetration in existing regional markets and increase economies of scale. We may also enter new markets where we believe we can establish a strong regional network. Diagnostic imaging remains a highly fragmented industry as multi-facility chains account for less than half of the total imaging centers. We believe we are well positioned to capitalize on the ongoing consolidation of the imaging industry. Our management team is experienced at successfully identifying, negotiating, completing and integrating acquisitions. Since the fiscal year ended June 30, 1996, we have completed 12 acquisitions comprising over 45 imaging facilities. THE EQUITY SPONSORS The acquisition and refinancing of InSight referred to below was sponsored by J.W. Childs Associates, L.P., The Halifax Group, L.L.C. and certain of their affiliates. J.W. Childs Associates, a Boston-based private investment firm, manages $1.5 billion of institutional private equity through J.W. Childs Equity Partners, L.P. and J.W. Childs Equity Partners II, L.P. J.W. Childs Associates' investment strategy is to invest, in partnership with management, in middle-market growth companies. J.W. Childs Associates' principal executive offices are located at 111 Huntington Avenue, 4 Suite 2900, Boston, Massachusetts 02199. J.W. Childs Associates, J.W. Childs Equity Partners and J.W. Childs Equity Partners II are Delaware limited partnerships. The Halifax Group, L.L.C., a private equity firm with $200 million under management through Halifax Capital Partners, L.P., operates from offices in Washington, D.C., Fort Worth, Texas, Los Angeles, California, and Raleigh, North Carolina. Halifax was launched in January 1999 to capitalize on opportunities for equity investments in small and mid-cap companies. Halifax looks to partner with management teams to make investments that demonstrate sustainable long-term growth potential and compelling long-term value propositions. The Halifax Group's principal executive offices are located at 1133 Connecticut Avenue, N.W., Suite 700, Washington, D.C. 20036, and 201 Main Street, Suite 2420, Fort Worth, Texas 76102. The Halifax Group is a Delaware limited liability company and Halifax Capital Partners is a Delaware limited partnership. We refer to these entities and their affiliates as the equity sponsors. THE ACQUISITION AND RELATED FINANCING TRANSACTIONS On October 17, 2001, InSight was acquired by and became a wholly-owned subsidiary of InSight Holdings. Concurrently with the closing of the acquisition, J.W. Childs Equity Partners II, Halifax Capital Partners and certain of their affiliates made an equity contribution to InSight Holdings of approximately $98.1 million. J.W. Childs Equity Partners II and an affiliate own approximately 80% of the outstanding common stock of InSight Holdings and Halifax Capital Partners and an affiliate own approximately 20% of the outstanding common stock of InSight Holdings. In addition, concurrently with the closing of the acquisition, certain members of our senior management rolled over a portion of their InSight stock options into stock options of InSight Holdings. Also in connection with the acquisition, we incurred $200 million of indebtedness under a senior subordinated bridge financing, entered into a credit agreement providing up to a maximum of $275 million of new senior credit facilities, and repurchased by tender offer all of our 9 5/8% senior subordinated notes due 2008 in an aggregate principal amount of $100 million. The new senior credit facilities consist of: - a $50 million six-year revolving credit facility; - a $150 million seven-year term loan B (all of which was drawn in connection with the acquisition); and - a $75 million seven-year delayed-draw term loan facility (which is only available for draw for two years following the closing of the acquisition). The funds from the equity contribution, the senior subordinated bridge financing and the new senior credit facilities, along with a portion of our cash, were used to: - pay the merger consideration, the warrant consideration and the option consideration pursuant to the merger agreement; - complete a tender offer to purchase our existing 9 5/8% senior subordinated notes due in 2008 in the aggregate principal amount of $100 million and the related consent solicitation; - refinance most of our other indebtedness; and - pay related fees and expenses. We will use availability under our new senior credit facilities to fund our future working capital requirements, capital expenditures, acquisitions and for other general corporate purposes. We refer to these events as the acquisition and related financing transactions. For additional information, see "The Acquisition and Related Financing Transactions," "Capitalization" and "Description of New Senior Credit Facilities." Following the closing of the acquisition on October 17, 2001, our common stock ceased to be publicly traded, and we terminated the registration of our common stock under the Exchange Act which termination will become effective on January 15, 2002. 5 InSight is a Delaware corporation. Our principal executive offices are located at 4400 MacArthur Boulevard, Suite 800, Newport Beach, California 92660 and our telephone number is (949) 476-0733. SUMMARY OF THE EXCHANGE OFFER THE INITIAL OFFERING OF OUTSTANDING NOTES............. We refinanced the senior subordinated bridge financing by issuing the outstanding notes on October 30, 2001 to Banc of America Securities LLC and First Union Securities, Inc. We collectively refer to those parties in this prospectus as the "initial purchasers." The initial purchasers subsequently resold the outstanding notes to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933 and to non-U.S. Persons within the meaning of Regulation S under the Securities Act. Registration Rights Agreement..................... Simultaneously with the issuance of the outstanding notes, we entered into a registration rights agreement for the exchange offer. In the registration rights agreement, we agreed, among other things, to file a registration statement with the SEC within 120 days of the issue date of the outstanding notes and to use our reasonable best efforts to complete the exchange offer within 210 days of the issue date of the outstanding notes. The exchange offer is intended to satisfy our obligations under the registration rights agreement. After the exchange offer is complete, you will no longer be entitled to any exchange or registration rights with respect to your outstanding notes. The Exchange Offer............ We are offering to exchange the exchange notes, which have been registered under the Securities Act, for your outstanding notes. In order to be exchanged, an outstanding note must be properly tendered and accepted. All outstanding notes that are validly tendered and not validly withdrawn will be exchanged. We will issue exchange notes promptly after the expiration of the exchange offer. Resales....................... We believe that the exchange notes issued in the exchange offer may be offered for resale, resold and otherwise transferred by you without compliance with the registration and prospectus delivery provisions of the Securities Act provided that: - the exchange notes are being acquired in the ordinary course of your business; - you are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate, in the distribution of the exchange notes issued to you in the exchange offer; and - you are not an affiliate of ours. If any of these conditions are not satisfied and you transfer any exchange notes issued to you in the exchange offer without delivering a prospectus meeting the requirements of the Securities Act or without an exemption from registration of your exchange notes from these requirements, you may incur liability under the Securi- 6 ties Act. We will not assume, nor will we indemnify you against, any such liability. Each broker-dealer that is issued exchange notes in the exchange offer for its own account in exchange for outstanding notes that were acquired by that broker-dealer as a result of market-making or other trading activities, must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the exchange notes. A broker-dealer may use this prospectus for an offer to resell, resale or other transfer of the exchange notes issued to it in the exchange offer. Record Date................... We mailed this prospectus and the related exchange offer documents to registered holders of outstanding notes on , 2002. Expiration Date............... The exchange offer will expire at 5:00 p.m., New York City time, , 2002, unless we decide to extend the expiration date. Conditions to the Exchange Offer......................... The exchange offer is subject to customary conditions, including that it does not violate applicable law or any applicable interpretation of the staff of the SEC. Procedures for Tendering Outstanding Shares............ If you wish to tender your outstanding notes for exchange in this exchange offer, you must transmit to the exchange agent on or before the expiration date either: - an original or a facsimile of a properly completed and duly executed letter of transmittal, which accompanies this prospectus, together with your outstanding notes and any other documentation required by the letter of transmittal, at the address provided on the cover page of the letter of transmittal; or - if the notes you own are held of record by The Depositary Trust Company, or DTC, in book-entry form and you are making delivery by book-entry transfer, a computer-generated message transmitted by means of the Automated Tender Offer Program System of DTC, or ATOP, in which you acknowledge and agree to be bound by the terms of the letter of transmittal and which, when received by the exchange agent, forms a part of a confirmation of book-entry transfer. As part of the book-entry transfer, DTC will facilitate the exchange of your notes and update your account to reflect the issuance of the exchange notes to you. ATOP allows you to electronically transmit your acceptance of the exchange offer to DTC instead of physically completing and delivering a letter of transmittal to the notes exchange agent. In addition, you must deliver to the exchange agent on or before the expiration date: - if you are effecting delivery by book-entry transfer, a timely confirmation of book-entry transfer of your outstanding notes into the account of the notes exchange agent at DTC; or - if necessary, the documents required for compliance with the guaranteed delivery procedures. 7 Special Procedures for Beneficial Owners............. If you are the beneficial owner of book-entry interests and your name does not appear on a security position listing of DTC as the holder of the book-entry interests or if you are a beneficial owner of outstanding notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender the book-entry interest or outstanding notes in the exchange offer, you should contact the person in whose name your book-entry interests or outstanding notes are registered promptly and instruct that person to tender on your behalf. Withdrawal Rights............. You may withdraw the tender of your outstanding notes at any time prior to 5:00 p.m., New York City time on , 2002. Federal Income Tax Considerations................ Based on the advice of counsel, the exchange of outstanding notes will not be a taxable event for U.S. federal income tax purposes. Use of Proceeds............... We will not receive any proceeds from the issuance of exchange notes pursuant to the exchange offer. We will pay all of our expenses incident to the exchange offer. Exchange Agent................ American Stock Transfer & Trust Company is serving as the exchange agent in connection with the exchange offer. 8 SUMMARY OF TERMS OF THE EXCHANGE NOTES The form and terms of the exchange notes are the same as the form and terms of the outstanding notes, except that the exchange notes will be registered under the Securities Act. As a result, the exchange notes will not bear legends restricting their transfer and will not contain the registration rights and liquidated damage provisions contained in the outstanding notes. The exchange notes represent the same debt as the outstanding notes. Both the outstanding notes and the exchange notes are governed by the same indenture. Unless otherwise required by the context, we use the term "notes" in this prospectus to collectively refer to the outstanding notes and the exchange notes. Issuer........................ InSight Health Services Corp., a Delaware corporation. Securities.................... $225.0 million in principal amount of 9 7/8% Senior Subordinated Notes due 2011. Maturity...................... November 1, 2011. Interest...................... Annual rate: 9 7/8%. Payment frequency: every six months on May 1 and November 1. First payment: May 1, 2002. Ranking....................... The notes are senior subordinated debt. Accordingly, they will rank: - behind all of the issuer's and the guarantors' existing and future senior debt; - equally with all of the issuer's existing and future senior subordinated, unsecured debt that does not expressly provide that it is subordinated to the notes; - ahead of any of the issuer's future debt that expressly provides that it is subordinated to the notes; and - structurally behind the liabilities of any of the issuer's subsidiaries that do not guarantee the notes. Assuming we had completed the acquisition and the related financing transactions, including this offering, on September 30, 2001, the notes would have been subordinated to approximately $150.0 million of senior debt of the issuer and the guarantees would have been subordinated to approximately $154.1 million of senior debt of the guarantors, $150.0 million of which would have represented guarantees of the issuer's senior debt. Guarantees.................... The notes will be unconditionally guaranteed on a senior subordinated basis by InSight Holdings, our parent company, and each of our existing and future domestic wholly-owned subsidiaries. If we cannot make payments on the notes when they are due, the guarantors must make them instead. Optional Redemption........... On or after November 1, 2006, we may redeem some or all of the notes at any time at the redemption prices described in the section "Description of Notes -- Optional Redemption." Prior to November 1, 2004, we may redeem up to 35% of the notes with the proceeds of qualified sales of our equity at the price listed in the section "Description of Notes -- Optional Redemption." 9 Mandatory Offer to Repurchase.................... If we sell certain assets or if we or InSight Holdings experience specific kinds of changes of control, we must offer to repurchase the notes at the prices listed in the section "Description of Notes--Repurchase at the Option of Holders." Basic Covenants of the Indenture..................... The indenture under which the outstanding notes were issued will govern the exchange notes. This indenture contains certain covenants which will, among other things, restrict our ability and the ability of our restricted subsidiaries to: - borrow money; - pay dividends on or redeem or repurchase our stock; - make investments; - create liens; - use assets as security in other transactions; - sell certain assets or merge with or into other companies; - enter into certain transactions with affiliates; - sell stock in our subsidiaries; and - restrict dividends, distributions or other payments from our subsidiaries. For more details, see the section "Description of Notes -- Certain Covenants." YOU SHOULD REFER TO THE SECTION ENTITLED "RISK FACTORS" FOR AN EXPLANATION OF CERTAIN RISKS OF PARTICIPATING IN THE EXCHANGE OFFER. 10 SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA The following table contains summary historical financial information derived from our audited consolidated financial statements for the five fiscal years ended June 30, 1997, 1998, 1999, 2000 and 2001 and our unaudited consolidated financial statements for the three months ended September 30, 2000 and 2001. The table also contains summary unaudited pro forma financial information derived from the financial information set forth under "Unaudited Pro Forma Condensed Consolidated Financial Statements." This summary financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Selected Historical Financial and Operating Data" and our consolidated financial statements and related notes contained elsewhere in this prospectus. The data under the "Pro Forma Data" caption adjusts the historical information to give effect to (1) the acquisition and related financing transactions and (2) the issuance of the outstanding notes and extinguishment of the senior subordinated bridge financing. The pro forma income statement related data for the fiscal year ended June 30, 2001 and three months ended September 30, 2001 are presented as if these transactions had occurred on July 1, 2000. The pro forma balance sheet related data are presented as if these transactions had occurred as of September 30, 2001. The pro forma information is presented for illustration purposes only and does not purport to represent what our actual financial position or results of operations would have been had these transactions actually been completed on the date or for the periods indicated and is not necessarily indicative of our future financial position or results of operations.
THREE MONTHS ENDED FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30, --------------------------------------------------- ------------------- 1997 1998 1999 2000 2001 2001 2000 ------- -------- -------- -------- -------- -------- -------- (DOLLARS IN THOUSANDS) INCOME STATEMENT DATA: Revenues................................... $92,273 $119,018 $161,992 $188,574 $211,503 $ 53,117 $ 52,220 Costs of operations........................ 79,634 96,887 131,343 151,429 161,872 38,071 40,549 ------- -------- -------- -------- -------- -------- -------- Gross profit............................... 12,639 22,131 30,649 37,145 49,631 15,046 11,671 Corporate operating expenses............... 7,431 8,759 10,475 10,946 10,783 2,660 2,702 Provision for reorganization and other costs.................................... -- -- 3,300 -- -- -- -- Provision for supplemental service fee termination.............................. -- 6,309 -- -- -- -- -- ------- -------- -------- -------- -------- -------- -------- Income from company operations............. 5,208 7,063 16,874 26,199 38,848 12,386 8,969 Equity in earnings of unconsolidated partnerships............................. 566 707 548 817 971 334 126 ------- -------- -------- -------- -------- -------- -------- Operating income........................... 5,774 7,770 17,422 27,016 39,819 12,720 9,095 Interest expense, net...................... 4,066 6,827 14,500 18,696 23,394 5,336 6,032 ------- -------- -------- -------- -------- -------- -------- Income before income taxes................. 1,708 943 2,922 8,320 16,425 7,384 3,063 Provision (benefit) for income taxes....... 427 431 (3,190) 1,131 2,624 2,417 306 ------- -------- -------- -------- -------- -------- -------- Net income................................. $ 1,281 $ 512 $ 6,112 $ 7,189 $ 13,801 $ 4,967 $ 2,757 ======= ======== ======== ======== ======== ======== ======== BALANCE SHEET DATA: Cash and cash equivalents.................. $ 6,884 $ 44,740 $ 14,294 $ 27,133 $ 23,254 $ 13,684 $ 15,268 Working capital (deficit).................. (6,162) 36,109 24,651 20,814 16,791 5,698 12,756 Total assets............................... 97,271 231,592 238,304 328,872 321,056 320,285 332,146 Total debt (including current maturities).............................. 73,195 164,798 172,630 248,232 228,253 219,806 248,124 Stockholders' equity....................... 6,685 37,858 44,106 51,487 65,471 69,901 54,325 OTHER FINANCIAL DATA: EBITDA(1).................................. $15,514 $ 29,694 $ 45,608 $ 60,646 $ 80,953 $ 21,003 $ 19,309 EBITDA margin.............................. 16.8% 24.9% 28.2% 32.2% 38.3% 39.5% 37.0% Depreciation and amortization.............. 9,740 15,615 24,886 33,630 41,134 8,283 10,340 Capital expenditures....................... 6,868 23,644 18,440 23,170 22,911 14,178 12,469 Ratio of earnings to fixed charges......... 1.1x 1.0x 1.1x 1.3x 1.6x 2.2x 1.4x Number of mobile facilities................ 40 67 86 82 88 91 84 Number of fixed-site centers............... 39 52 59 68 69 66 71
11
THREE MONTHS ENDED FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30, --------------------------------------------------- ------------------- 1997 1998 1999 2000 2001 2001 2000 ------- -------- -------- -------- -------- -------- -------- (DOLLARS IN THOUSANDS) PRO FORMA DATA (UNAUDITED): Cash and cash equivalents.................. $ 29,366 Interest expense, net...................... $ 36,678 9,215 Total debt (including current maturities).............................. 380,519 Stockholders' equity....................... 78,950 Ratio of EBITDA to interest expense, net(1)................................... 2.2x 2.3x Ratio of net debt to EBITDA(1)(2).......... 4.4x
- --------------- (1) EBITDA is defined as operating income plus depreciation and amortization. This measurement has been included because management believes that certain investors will find it to be a useful tool for measuring our ability to meet debt service, capital expenditure and working capital requirements. EBITDA should not be considered an alternative to, or more meaningful than, income from company operations or other traditional indicators of operating performance and cash flow from operating activities determined in accordance with generally accepted accounting principles. EBITDA excludes the provision for supplemental service fee termination in 1998 and the provision for reorganization and other costs in 1999. (2) Net debt is total debt, including current maturities, less cash and cash equivalents. 12 RISK FACTORS You should read and carefully consider the following factors and other information in this prospectus before deciding to participate in the exchange offer. RISKS RELATING TO THE EXCHANGE OFFER BECAUSE THERE IS NO PUBLIC MARKET FOR THE NOTES, YOU MAY NOT BE ABLE TO RESELL YOUR NOTES. The exchange notes will be registered under the Securities Act, but will constitute a new issue of securities with no established trading market, and there can be no assurance as to: - the liquidity of any trading market that may develop; - the ability of holders to sell their exchange notes; or - the price at which the holders would be able to sell their exchange notes. If a trading market were to develop, the exchange notes might trade at higher or lower prices than their principal amount or purchase price, depending on many factors, including prevailing interest rates, the market for similar notes and our financial performance. We understand that the initial purchasers presently intend to make a market in the notes. However, the initial purchasers may stop their market-making activities at any time. Any market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act, and may be limited during the exchange offer or the pendency of an applicable shelf registration statement. In addition, the liquidity of the trading market in these notes, and the market price quoted for these notes, may be adversely affected by changes in the overall market for high-yield securities and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. As a result, you cannot be sure that an active trading market will develop for these notes. In addition, any holder of outstanding notes who tenders in the exchange offer for the purpose of participating in a distribution of the exchange notes may be deemed to have received restricted securities, and if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. For a description of these requirements, see "Exchange Offer." YOUR NOTES WILL NOT BE ACCEPTED FOR EXCHANGE IF YOU FAIL TO FOLLOW THE EXCHANGE OFFER PROCEDURES AND, AS A RESULT, YOUR NOTES WILL CONTINUE TO BE SUBJECT TO EXISTING TRANSFER RESTRICTIONS AND YOU MAY NOT BE ABLE TO SELL YOUR NOTES. We will not accept your notes for exchange if you do not follow the exchange offer procedures. We will issue exchange notes as part of this exchange offer only after a timely receipt of your outstanding notes, a properly completed and duly executed letter of transmittal and all other required documents. Therefore, if you want to tender your notes, please allow sufficient time to ensure timely delivery. If we do not receive your notes, letter of transmittal and other required documents by the expiration date of the exchange offer, we will not accept your notes for exchange. We are under no duty to give notification of defects or irregularities with respect to the tenders of outstanding notes for exchange. If there are defects or irregularities with respect to your tender of notes, we will not accept your notes for exchange. IF YOU DO NOT EXCHANGE YOUR NOTES, YOUR NOTES WILL CONTINUE TO BE SUBJECT TO THE EXISTING TRANSFER RESTRICTIONS AND YOU MAY NOT BE ABLE TO SELL YOUR NOTES. We did not register the outstanding notes, nor do we intend to do so following the exchange offer. Outstanding notes that are not tendered will therefore continue to be subject to the existing transfer restrictions and may be transferred only in limited circumstances under the securities laws. If you do not exchange your notes, you will lose your right to have such notes registered under the federal securities laws. As a result, if you hold outstanding notes after the exchange offer, you may not be able to sell your outstanding notes. 13 RISKS RELATING TO THE NOTES OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT THE ISSUER FROM FULFILLING ITS OBLIGATIONS UNDER THESE NOTES. We have a significant amount of indebtedness. The following table sets forth our total debt, stockholders' equity and ratio of earnings to fixed charges, assuming we had completed the acquisition and the related financing transactions and applied the net proceeds as intended as of September 30, 2001, or at July 1, 2001 in the case of the ratio of earnings to fixed charges:
PRO FORMA AT SEPTEMBER 30, 2001 ------------------ (UNAUDITED) (IN THOUSANDS) Total debt (including current maturities)................... $380,519 Stockholders' equity........................................ 78,950
PRO FORMA THREE MONTHS ENDED SEPTEMBER 30, 2001 ------------------ (UNAUDITED) Ratio of earnings to fixed charges.......................... 1.4x
Our substantial indebtedness could have important consequences to you. For example, it could: - make it more difficult for the issuer to satisfy its obligations with respect to these notes; - increase our vulnerability to general adverse economic and industry conditions; - require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes; - limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate; - place us at a competitive disadvantage compared to our competitors that have less debt; and - limit, among other things, our ability to borrow additional funds. In addition, we may be able to incur substantial additional indebtedness in the future. The terms of the indenture governing the notes and the new senior credit facilities allow us to issue and incur additional debt upon satisfaction of certain conditions. If new debt is added to current debt levels, the related risks described above could intensify. YOUR RIGHT TO RECEIVE PAYMENTS ON THESE NOTES IS JUNIOR TO THE ISSUER'S EXISTING SENIOR INDEBTEDNESS AND POSSIBLY ALL OF ITS FUTURE BORROWINGS. FURTHER, THE GUARANTEES OF THESE NOTES ARE JUNIOR TO ALL OF THE GUARANTORS' EXISTING SENIOR INDEBTEDNESS AND POSSIBLY TO ALL THEIR FUTURE BORROWINGS. These notes and the guarantees rank behind all of the issuer's and the guarantors' existing senior indebtedness and all of the issuer's and the guarantors' future senior indebtedness. Assuming we had completed the acquisition and the related financing transactions, including this offering, on September 30, 2001, the notes would have been subordinated to approximately $150.0 million of senior debt of the issuer and the guarantees would have been subordinated to approximately $154.1 million of senior debt of the guarantors, $150.0 million of which would have represented guarantees of the issuer's senior debt. In addition, our new senior credit facilities permit additional borrowings up to approximately $125.0 million, subject to compliance with the covenants and conditions to borrowing under the new senior credit facilities, and all of these borrowings would be senior to the notes and the guarantees. We will be permitted to borrow substantial additional indebtedness, including senior debt, in the future. 14 As a result of this subordination, upon any distribution to the issuer's creditors or the creditors of the guarantors in a bankruptcy, liquidation or reorganization or similar proceeding relating to the issuer or the guarantors or the issuer's or the guarantors' property, the holders of senior debt of the issuer and the guarantors will be entitled to be paid in full in cash before any payment may be made with respect to these notes or the guarantees. In addition, all payments on the notes and the guarantees will be blocked in the event of a payment default on senior debt and may be blocked for up to 179 consecutive days in the event of certain non-payment defaults on designated senior debt. In the event of a bankruptcy, liquidation or reorganization or similar proceeding relating to the issuer or the guarantors, holders of the notes will participate with trade creditors and all other holders of subordinated indebtedness of the issuer and the guarantors in the assets remaining after the issuer and the guarantors have paid all of the senior debt. However, because the indenture relating to the notes requires that amounts otherwise payable to holders of the notes in a bankruptcy or similar proceeding be paid to holders of senior debt instead, holders of the notes may receive less, ratably, than holders of trade payables in any such proceeding. In any of these cases, the issuer and the guarantors may not have sufficient funds to pay all of their creditors and holders of notes may receive less, ratably, than the holders of senior debt. SINCE THE NOTES ARE UNSECURED, YOUR RIGHT TO ENFORCE REMEDIES IS LIMITED BY THE RIGHTS OF HOLDERS OF SECURED DEBT. In addition to being contractually subordinated to all existing and future senior indebtedness, the issuer's obligations under the notes will be unsecured while obligations under the new senior credit facilities are secured by substantially all of its assets and those of its parent and its subsidiaries. If the issuer becomes insolvent or is liquidated, or if payment under the new senior credit facilities is accelerated, the lenders under the new senior credit facilities are entitled to exercise the remedies available to a secured lender under applicable law. These lenders have a claim on all assets securing the new senior credit facilities before the holders of unsecured debt, including the notes. See "Description of New Senior Credit Facilities." YOU SHOULD NOT RELY ON OUR PARENT COMPANY'S GUARANTEE IN EVALUATING AN INVESTMENT IN THE NOTES. InSight Holdings, our parent company, was formed as a holding company in connection with the acquisition. Its sole source of operating income and cash flow is derived from us and its only material asset is our capital stock. As a result, our parent company's guarantee provides little, if any, additional credit support for the notes. Furthermore, the indenture will not impose any restrictions on the business or operations of our parent company or on, among other things, the amount of indebtedness that our parent company may incur. NOT ALL OF OUR SUBSIDIARIES GUARANTEE OUR OBLIGATIONS UNDER THE NOTES, AND THE ASSETS OF THE NON-GUARANTOR SUBSIDIARIES MAY NOT BE AVAILABLE TO MAKE PAYMENTS ON THE NOTES. Our subsidiaries that are not wholly-owned by us will not be guarantors of the notes. Our present and future wholly-owned domestic subsidiaries will guarantee the notes. Payments on the notes are only required to be made by us, our parent company and the subsidiary guarantors. As a result, no payments are required to be made from assets of subsidiaries that do not guarantee the notes, unless those assets are transferred by dividend or otherwise to us or a subsidiary guarantor. In addition, the historical consolidated financial statements included in this prospectus are represented on a consolidated basis, including all of our domestic subsidiaries. The aggregate revenues, EBITDA and total assets for the fiscal year ended June 30, 2001 of our subsidiaries which are not guarantors were $45.1 million, $16.8 million and $43.6 million, respectively, or 21.3%, 20.7% and 13.6%, respectively, of our total revenues, EBITDA and total assets for the fiscal year ended June 30, 2001. The aggregate revenues, EBITDA and total assets for the three months ended September 30, 2001 of our subsidiaries which are not guarantors were $11.6 million, $4.0 million and $43.1 million, respectively, or 21.9%, 19.1% and 13.9%, respectively, of our total revenues, EBITDA and total assets for the three months ended September 30, 2001. We expect that as a result of our strategy of entering into 15 partnerships and joint ventures with hospitals, an increasing portion of our revenues, EBITDA and total assets will be attributable to the operations of subsidiaries that are not guarantors. In the event of a bankruptcy, liquidation or reorganization of any of the non-guarantor subsidiaries, holders of their liabilities, including their trade creditors, will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us. As a result, the notes are effectively subordinated to the indebtedness of the non-guarantor subsidiaries. As of September 30, 2001, the total liabilities of our non-guarantor subsidiaries, excluding intercompany liabilities, were $6.4 million. WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH TO SERVICE OUR INDEBTEDNESS. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL. Our ability to make payments on and to refinance our indebtedness, including these notes and amounts borrowed under the new senior credit facilities, and to fund planned capital expenditures and expansion efforts and any strategic acquisitions we may make in the future, if any, will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control. Based on our current level of operations, we believe our cash flow from operations, together with available cash and available borrowings under the new senior credit facilities, will be adequate to meet future liquidity needs for at least the next twelve months. However, we cannot assure you that our business will generate sufficient cash flow from operations in the future, that our currently anticipated growth in revenues and cash flow will be realized on schedule or that future borrowings will be available to us under the new senior credit facilities in an amount sufficient to enable the issuer to repay indebtedness, including these notes, or to fund other liquidity needs. We may need to refinance all or a portion of our indebtedness, including these notes, on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including the new senior credit facilities and these notes, on commercially reasonable terms or at all. THE INDENTURE RELATED TO THE NOTES AND THE NEW SENIOR CREDIT FACILITIES CONTAIN VARIOUS COVENANTS WHICH LIMIT OUR MANAGEMENT'S DISCRETION IN THE OPERATION OF OUR BUSINESS. The indenture under which the outstanding notes were issued will govern the exchange notes. The new senior credit facilities, and the indenture related to the notes contain various provisions which limit our management's discretion by restricting our, our subsidiaries' and our parent's ability to: - borrow money; - pay dividends on stock or purchase stock; - make investments and other restricted payments; - use assets as security in other transactions; - sell certain assets or merge with or into other companies; - enter into certain transactions with affiliates; - sell stock in certain of our subsidiaries; and - restrict dividends or other payments to the issuer. In addition, the new senior credit facilities require us to meet certain financial ratios. Covenants in our new senior credit facilities also require us to use a portion of the proceeds we receive in specified debt or equity issuances to repay outstanding borrowings under our new senior credit facilities. Any failure to comply with the restrictions of the new senior credit facilities, the indenture related to the notes or any other subsequent financing agreements may result in an event of default. An event of default may allow the creditors, if the agreements so provide, to accelerate the related debt as well as any other debt to 16 which a cross-acceleration or cross-default provision applies. In addition, the syndicate of lenders may be able to terminate any commitments they had made to supply us with further funds. WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE. Upon the occurrence of certain specific kinds of change of control events, we will be required to offer to repurchase all notes. However, it is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of notes or that restrictions in the new senior credit facilities will not allow such repurchases. In addition, certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a "change of control" under the indenture related to the notes. Our ability to repurchase these notes upon certain specific kinds of change of control events may be limited by the terms of our senior indebtedness and the subordination provisions of the indenture. For example, the new senior credit facilities prohibit us from repurchasing these notes after certain specific kinds of change of control events until we first repay debt under the new senior credit facilities in full or obtain a waiver from the syndicate of lenders under the new senior credit facilities. If we fail to repurchase these notes in that circumstance, we will go into default under the indenture related to these notes and the new senior credit facilities. Any future debt which we incur may also contain restrictions on repayment which come into effect upon certain specific kinds of change of control events. If a change of control occurs, we cannot assure you that we will have sufficient funds to repay other debt obligations which will be required to be repaid, in addition to these notes. See "Description of Notes -- Repurchase at the Option of Holders -- Change of Control" and "Description of New Senior Credit Facilities." FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM GUARANTORS. If a bankruptcy case or lawsuit is initiated by unpaid creditors of any guarantor, the debt represented by the guarantees entered into by the guarantors may be reviewed under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws. Under these laws, a guarantee could be voided, or claims in respect of the guarantee could be subordinated to certain obligations of a guarantor if, among other things, the guarantor, at the time it entered into the guarantee: - received less than reasonably equivalent value or fair consideration for entering into the guarantee; and - either: - was insolvent or rendered insolvent by reason of entering into a guarantee; or - was engaged in a business or transaction for which the guarantor's remaining assets constituted unreasonably small capital; or - intended to incur, or believed that it would incur, debts or contingent liabilities beyond its ability to pay them as they become due. In addition, any payment by a guarantor could be voided and required to be returned to the guarantor or to a fund for the benefit of the guarantor's creditors under those circumstances. If a guarantee of a subsidiary were voided as a fraudulent conveyance or held unenforceable for any other reason, holders of the notes would be solely creditors of our company and creditors of our parent company and our other subsidiaries that have validly guaranteed the notes. These notes then would be effectively subordinated to all obligations of the subsidiary whose guarantee was voided. The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if: - the sum of its debts, including contingent liabilities, were greater than the fair saleable value of all of its assets; or 17 - the present fair saleable value of its assets were less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or - it could not pay its debts or contingent liabilities as they become due. If the claims of the holders of the notes against any subsidiary were subordinated in favor of other creditors of the subsidiary, the other creditors would be entitled to be paid in full before any payment could be made on the notes. If one or more of the guarantees is voided or subordinated, we cannot assure you that after providing for all prior claims, there would be sufficient assets remaining to satisfy the claims of the holders of the notes. Based upon financial and other information, we believe that the guarantees are being incurred for proper purposes and in good faith and that we, our parent company and our subsidiaries that are guarantors, on a consolidated basis, are solvent and will continue to be solvent after this offering is completed, will have sufficient capital for carrying on our business after the issuance of the exchange notes and will be able to pay our debts as they mature. We cannot assure you, however, as to the standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard. RISKS RELATING TO OUR COMPANY AND OUR INDUSTRY CHANGES IN THE RATES OR METHODS OF THIRD-PARTY REIMBURSEMENTS FOR DIAGNOSTIC IMAGING AND THERAPEUTIC SERVICES COULD RESULT IN REDUCED DEMAND FOR OUR SERVICES OR CREATE DOWNWARD PRICING PRESSURE, WHICH WOULD RESULT IN A DECLINE IN OUR REVENUES AND HARM OUR FINANCIAL POSITION. We derive approximately 53% of our revenues from direct billings to patients and third-party payors such as Medicare, Medicaid, managed care and private health insurance companies. Changes in the rates or methods of reimbursement for the services we provide could have a significant negative impact on those revenues. Moreover, our healthcare provider customers on whom we depend for approximately 47% of our revenues generally rely on reimbursement from third-party payors. In the past, initiatives have been proposed which, if implemented, would have the effect of substantially decreasing reimbursement rates for diagnostic imaging services provided at non-hospital facilities. Most recently, effective January 1, 2002, the Medicare Program adopted final regulations reducing Medicare payment across-the-board for all services provided under the Medicare Physician Fee Schedule (including MRI and other services we provide in non-hospital settings) by approximately 5.4%. In addition these regulations would reduce Medicare payment for the technical component of virtually all services reimbursed under the Medicare Physician Fee Schedule (including those we provide in non-hospital settings) by approximately 2 to 3%. Thus, in the aggregate, Medicare payment for diagnostic imaging services covered by Medicare will be reduced by approximately 7% to 9%. Similar initiatives enacted in the future may have an adverse impact on our financial condition and our operations. In addition, effective August 2000, the Medicare program implemented a new prospective payment system for hospital outpatient services which establishes rates for hospital-based diagnostic imaging services that are unrelated to hospital costs. In the case of MRI services, these rates are lower than the amounts generally paid to non-hospital facilities. While Congress enacted additional legislation in 2000 intended to ease the effect of the new hospital outpatient prospective payment system (OPPS), the transitional provisions will phase out at the end of 2003. Moreover, rates will be modified significantly, effective January 1, 2002, to differentiate between contrast-enhanced and unenhanced procedures. Any change in the rates of or conditions for reimbursement could substantially reduce the number of procedures for which we or our customers can obtain reimbursement or the amounts reimbursed to us or our customers for services provided by us. If third-party payors reduce the amount of their payments to our customers, our customers may seek to reduce their payments to us or seek an alternate supplier of diagnostic imaging services. Because unfavorable reimbursement policies have constricted and may continue to constrict the profit margins of the hospitals and clinics we bill directly, we have lowered and may continue to need to lower our fees to retain existing customers and attract new ones. These reductions could have a significant adverse effect on our revenues and financial results by decreasing demand for our services or creating downward pricing pressure. 18 OUR REVENUES MAY FLUCTUATE OR BE UNPREDICTABLE AND THIS MAY HARM OUR FINANCIAL RESULTS. The amount and timing of revenues that we may derive from our business will fluctuate based on: - variations in the rate at which customers renew their contracts; - the extent to which our mobile customers convert into a fixed-site operation and choose not to continue using our services; - changes in the number of days of service we can offer with respect to a given diagnostic imaging or therapeutic system due to equipment malfunctions or seasonal factors; and - the mix of wholesale and retail billing for our services. We may not be able to reduce our expenses, including our debt service obligations, quickly enough to respond to these declines in revenues, which would make our business difficult to operate and would harm our financial results. A FAILURE TO MEET OUR CAPITAL EXPENDITURE REQUIREMENTS CAN ADVERSELY AFFECT OUR BUSINESS. We operate in a capital intensive, high fixed-cost industry that requires significant amounts of capital to fund operations, particularly the initial start-up and development expenses of de novo centers, or new operations, and the acquisition of additional businesses and new imaging equipment. We incur capital expenditures to, among other things: - upgrade our imaging systems and software; - purchase systems upon termination of operating leases; and - purchase new systems. To the extent we are unable to generate sufficient cash from our operations or funds are no longer available under our senior credit facilities, we may be unable to meet our capital expenditure requirements and therefore unable to achieve our estimates of EBITDA growth. Furthermore, we cannot assure you that we will be able to raise any necessary additional funds through bank financing or the issuance of equity or debt securities on terms acceptable to us, if at all. WE MAY EXPERIENCE COMPETITION FROM OTHER DIAGNOSTIC IMAGING COMPANIES AND THIS COMPETITION COULD ADVERSELY AFFECT OUR REVENUES AND OUR BUSINESS. The market for diagnostic imaging services and systems is competitive. We compete principally on the basis of our reputation for our productive and cost-effective superior services. We compete with groups of radiologists, established hospitals and certain other independent organizations, including equipment manufacturers and leasing companies, that own and operate imaging equipment. Our major competitors include Alliance Imaging, Inc., Shared Medical Services, Medical Resources, Inc., Radiologix, Inc., U.S. Diagnostic Inc. and Syncor International Corporation. Some of our direct competitors which provide diagnostic imaging services may now or in the future have access to greater financial resources than we do and may have access to newer, more advanced equipment. In addition, some customers have in the past elected to provide imaging services to their patients directly rather than renewing their contracts with us. Finally, we face competition from providers of competing technologies such as PET and ultrasound and may face competition from providers of new technologies in the future. If we are unable to successfully compete, our customer base would decline and our business, financial condition and results of operations would be harmed. Certain hospitals, particularly the larger hospitals, may directly acquire and operate imaging and treatment equipment on-site as part of their overall inpatient servicing capability, subject only to their decision to acquire a high-cost diagnostic imaging system, assume the associated financial risk, employ the necessary technologists and satisfy applicable licensure and certificate of need requirements, if any. Historically, smaller hospitals have often been reluctant to purchase imaging and treatment equipment. This reluctance, however, has in the past encouraged the entry of start-up ventures and more established business operations into the 19 diagnostic and treatment services business. As a result, there have been periods in the recent past when there has been significant excess capacity in the diagnostic imaging business in the United States, which can negatively affect utilization and reimbursement. In addition, in the past some non-radiologist physician practices have refrained from establishing their own diagnostic imaging facilities because of the federal physician self-referral legislation. Final regulations issued in January 2001 clarify certain of the exceptions to the physician self-referral legislation, which may create opportunities for and encourage some physician practices to establish their own diagnostic imaging facilities which may compete with us. MANAGED CARE ORGANIZATIONS MAY PREVENT HEALTHCARE PROVIDERS FROM USING OUR SERVICES, CAUSING US TO LOSE CURRENT AND PROSPECTIVE CUSTOMERS. Healthcare providers participating as providers under managed care plans may be required to refer diagnostic imaging tests to specific imaging service providers depending on the plan in which each covered patient is enrolled. These requirements currently inhibit healthcare providers from using our diagnostic imaging services in some cases. The proliferation of managed care may prevent an increasing number of healthcare providers from using our services in the future, which would cause our revenues to decline. OUR FIXED-SITE CENTERS DEPEND ON PHYSICIAN REFERRALS AND CONTRACTUAL ARRANGEMENTS WITH INSURANCE CARRIERS FOR THEIR BUSINESS. Our fixed-site centers are principally dependent on our ability to attract referrals from physicians and other healthcare providers representing a variety of specialties. Our eligibility to provide service in response to a referral is often dependent on the existence of a contractual arrangement with the referred patient's health plan. We currently have in excess of 850 contracts with managed care organizations for diagnostic imaging services provided at our fixed-site centers, primarily on a discounted fee-for-service basis. A significant decline in referrals would have a material adverse effect on our business, financial condition and results of operations. WE MAY BE UNABLE TO RENEW OR MAINTAIN OUR CUSTOMER CONTRACTS WHICH WOULD HARM OUR BUSINESS AND FINANCIAL RESULTS. Upon expiration of our customer contracts, we are subject to the risk that customers will cease using our imaging services and purchase or lease their own imaging systems or use our competitors' imaging systems. 29% of our MRI contracts will expire in the fiscal year ending June 30, 2002 and an additional 16% will expire in the fiscal year ending June 30, 2003. If these contracts are not renewed or are renewed at lower prices, we could experience a significant negative impact on our business. Our mobile contract renewal rate for the fiscal year ended June 30, 2001 was approximately 85%. It is not always possible to immediately obtain replacement customers, and historically many replacement customers have been smaller facilities which have a lower number of scans than lost customers. Although the non-renewal of a single customer contract would not have a material impact on our contract services revenues, non-renewal of several contracts could have a material impact on contract services revenues. WE MAY BE SUBJECT TO PROFESSIONAL LIABILITY RISKS WHICH COULD BE COSTLY AND NEGATIVELY IMPACT OUR BUSINESS AND FINANCIAL RESULTS. We have not experienced any material losses due to claims for malpractice. However, claims for malpractice have been asserted against us in the past and any future claims, if successful, could entail significant defense costs and could result in substantial damage awards to the claimants, which may exceed the limits of any applicable insurance coverage. While we maintain professional liability insurance, there can be no assurance that any claim against us will not exceed the amount of our insurance. Successful malpractice claims asserted against us, to the extent not covered by our liability insurance, could have a material adverse effect on our business, financial condition and results of operations. In addition to being exposed to claims for malpractice, there are other professional liability risks to which we are exposed through our operation of diagnostic imaging systems. Equipment literature recommends that, 20 until further information is available, pregnant women should be scanned only under limited circumstances. Furthermore, MRI magnets may disrupt the operation of cardiac pacemakers and may react with metal implants utilized in various surgical procedures. Additionally, some MRI examinations require injection of a paramagnetic contrast material and certain CT examinations require the injection of an iodine-based contrast material, allowing for better visualization of the anatomy. Although it is unusual, some patients may develop a significant adverse reaction to these contrast materials; however, chances of fatalities as a result of such reaction are remote. Patients are screened to safeguard against potential risks, but screening may nevertheless fail to identify the hazard. To protect against possible professional liability either from malpractice claims or the other risks described above, we maintain professional liability insurance. However, if we are unable to maintain insurance in the future at an acceptable cost or at all or if our insurance does not fully cover us, and a successful claim was made against us, we could incur substantial losses. Any successful malpractice or other professional liability claim made against us not fully covered by insurance could be costly to defend against, result in a substantial damage award against us and divert the attention of our management from our operations, which could have a material adverse effect on our business, financial condition and results of operations. TECHNOLOGICAL CHANGE IN OUR INDUSTRY COULD REDUCE THE DEMAND FOR OUR SERVICES AND REQUIRE US TO INCUR SIGNIFICANT COSTS TO UPGRADE OUR EQUIPMENT. Technological change in the MRI industry has been gradual since the last technological advancements were made in 1994. Although we believe that substantially all of our MRI and other diagnostic imaging systems are upgradeable to maintain their state-of-the-art character, the development of new technologies or refinements of existing ones might make our existing systems technologically or economically obsolete, or cause a reduction in the value of, or reduce the need for, our systems. MRI and other diagnostic imaging systems are currently manufactured by numerous companies. Competition among manufacturers for a greater share of the MRI and other diagnostic imaging systems market may result in technological advances in the speed and imaging capacity of these new systems. Consequently, the obsolescence of our systems may be accelerated. Although we are aware of no imminent substantial technological changes, should such changes occur, we cannot assure you that we would be able to acquire the new or improved systems. The development of new scanning technology or new diagnostic applications for existing technology may require us to adapt our existing technology or acquire new or technologically improved systems in order to successfully compete. In the future, however, we may not have the financial resources to do so, particularly given our indebtedness. In addition, advancing technology may enable hospitals, physicians or other diagnostic service providers to perform tests without the assistance of diagnostic service providers such as ourselves. OUR FAILURE TO EFFECTIVELY MAKE OR INTEGRATE ACQUISITIONS AND ESTABLISH CO-SOURCING ARRANGEMENTS THROUGH PARTNERSHIPS WITH HOSPITALS AND OTHER HEALTHCARE PROVIDERS COULD IMPAIR OUR BUSINESS. As part of our business strategy, we have pursued and intend to continue to pursue strategic acquisitions and establish co-sourcing arrangements through partnerships and joint ventures with hospitals and other healthcare providers. We are continuously evaluating acquisition opportunities and consolidation possibilities, and, at any given time, may be in various stages of due diligence or preliminary discussions with respect to a number of potential transactions. From time to time we may enter into non-binding letters of intent, but we are not currently subject to any definitive agreement with respect to any transaction or otherwise so far advanced in any discussions as to make a transaction material to our operations reasonably certain. Nevertheless, some of these potential transactions, if we were to complete our business and legal due diligence and enter into a definitive agreement, could, if consummated, be material to our operations and to our financial condition. We cannot assure you that we will succeed in identifying suitable acquisition or co-sourcing candidates or in consummating any such acquisitions or co-sourcing arrangements. Our acquisition and co-sourcing strategies require substantial capital which may exceed the funds available to us from internally generated funds and under the new senior credit facilities. We cannot assure you that we will be able to raise any necessary additional funds through bank financing or through the issuance of equity or debt securities on terms acceptable to us, if at all. 21 Additionally, acquisitions involve the integration of acquired operations with our operations. Integration involves a number of risks, including: - demands on management related to the increase in our size after an acquisition; - the diversion of our management's attention from the management of daily operations to the integration of operations; - integration of information systems; - difficulties in the assimilation and retention of employees; - potential adverse effects on operating results; and - challenges in retaining customers and referral sources. Although we believe we have successfully integrated acquisitions in the past, we cannot assure you that we will be able to successfully integrate the operations of any future acquisitions. If we do not successfully integrate acquisitions, we may not realize anticipated operating advantages, economies of scale and cost savings. Also, we may not be able to maintain the levels of operating efficiency acquired companies will have achieved or might achieve separately. Successful integration of each of their operations will depend upon our ability to manage those operations and to eliminate redundant and excess costs. LOSS OF KEY EXECUTIVES AND FAILURE TO ATTRACT QUALIFIED MANAGERS, TECHNOLOGISTS AND SALESPERSONS COULD LIMIT OUR GROWTH AND NEGATIVELY IMPACT OUR OPERATIONS. We depend upon our management team to a substantial extent. During the fiscal year ended June 30, 2001, we added approximately 80 employees. As we grow, we will increasingly require field managers and salespersons with experience in our industry and skilled technologists to operate our diagnostic equipment. It is impossible to predict the availability of qualified field managers, salespersons and technologists or the compensation levels that will be required to hire them. In particular, there is a very high demand for qualified technologists who are necessary to operate our systems. We may not be able to hire and retain a sufficient number of technologists, and we may be required to pay bonuses and higher salaries to our technologists, which would increase our expenses. The loss of the services of any member of our senior management or our inability to hire qualified field managers, salespersons and skilled technologists at economically reasonable compensation levels could adversely affect our ability to operate and grow our business. OUR PET SERVICE AND SOME OF OUR OTHER IMAGING SERVICES REQUIRE THE USE OF RADIOACTIVE MATERIALS, WHICH COULD SUBJECT US TO REGULATION, RELATED COSTS AND DELAYS AND POTENTIAL LIABILITIES FOR INJURIES OR VIOLATIONS OF ENVIRONMENTAL, HEALTH AND SAFETY LAWS. Our PET service and some of our other imaging and therapeutic services require radioactive materials. While this radioactive material has a short half-life, meaning it quickly breaks down into inert, or non-radioactive substances, storage, use and disposal of these materials present the risk of accidental environmental contamination and physical injury. We are subject to federal, state and local regulations governing storage, handling and disposal of these materials and waste products. Although we believe that our safety procedures for storing, handling and disposing of these hazardous materials comply with the standards prescribed by law and regulation, we cannot completely eliminate the risk of accidental contamination or injury from those hazardous materials. In the event of an accident, we would be held liable for any resulting damages, and any liability could exceed the limits of or fall outside the coverage of our insurance. We may not be able to maintain insurance on acceptable terms, or at all. We could incur significant costs and the diversion of our management's attention in order to comply with current or future environmental, health and safety laws and regulations. 22 WE MAY BE UNABLE TO EFFECTIVELY MAINTAIN OUR IMAGING AND THERAPEUTIC SYSTEMS OR GENERATE REVENUES WHEN OUR SYSTEMS ARE NOT FULLY OPERATIONAL. Timely, effective service is essential to maintaining our reputation and high utilization rates on our imaging systems. Repairs to one of our systems can take up to two weeks and result in a loss of revenues. Our warranties and maintenance contracts do not compensate us for loss of revenues when our systems are not fully operational. The principal components of our operating costs include depreciation, salaries paid to technologists and drivers, annual system maintenance costs, insurance and transportation costs. Because the majority of these expenses are fixed, a reduction in the number of scans performed due to out-of-service equipment will result in lower revenues and margins. Repairs of our equipment are performed for us by the equipment manufacturers. These manufacturers may not be able to perform repairs or supply needed parts in a timely manner. Thus, if we experience more system malfunctions than anticipated or if we are unable to promptly obtain the service necessary to keep our systems functioning effectively, our revenues could decline and our ability to provide services would be harmed. THE INTERESTS OF OUR CONTROLLING STOCKHOLDERS COULD CONFLICT WITH THOSE OF THE HOLDERS OF THE NOTES OFFERED HEREBY. We are a wholly-owned subsidiary of InSight Holdings which is a corporation controlled by J.W. Childs Equity Partners II and Halifax Capital Partners. As a result, J.W. Childs Equity Partners II and Halifax Capital Partners, through InSight Holdings, have the ability to elect all of the members of our board of directors, appoint new management and approve any action requiring the approval of our stockholders. The board of directors has the authority to make decisions affecting our capital structure, including the issuance of additional indebtedness and the declaration of dividends. In addition, transactions may be pursued that could enhance the equity sponsors' equity investment while involving risks to your interests. There can be no assurance that the interests of the equity sponsors will not conflict with your interests. RISKS RELATING TO GOVERNMENT REGULATION OF OUR BUSINESS COMPLYING WITH FEDERAL AND STATE REGULATIONS IS AN EXPENSIVE AND TIME-CONSUMING PROCESS, AND ANY FAILURE TO COMPLY COULD RESULT IN SUBSTANTIAL PENALTIES. We are directly or indirectly through our customers subject to extensive regulation by both the federal government and the states in which we conduct our business, including: - the federal False Claims Act; - the federal Medicare and Medicaid Anti-kickback Law, and state anti-kickback prohibitions; - federal and state billing and claims submission laws and regulations; - the federal Health Insurance Portability and Accountability Act of 1996; - the federal physician self-referral prohibition commonly known as the Stark Law and the state law equivalents of the Stark Law; - state laws that prohibit the practice of medicine by non-physicians, and prohibit fee-splitting arrangements involving physicians; and - federal and state laws governing the diagnostic imaging and therapeutic equipment we use in our business concerning patient safety, equipment operating specifications and radiation exposure levels. If our operations are found to be in violation of any of the laws and regulations to which we or our customers are subject, we may be subject to the applicable penalty associated with the violation, including civil and criminal penalties, damages, fines and the curtailment of our operations. Any penalties, damages, fines or curtailment of our operations, individually or in the aggregate, could adversely affect our ability to operate our business and our financial results. The risks of our being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action brought 23 against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business. For a more detailed discussion of the various state and federal regulations to which we are subject, see "Business -- Government Regulation." FUTURE FEDERAL LEGISLATION COULD LIMIT THE PRICES WE CAN CHARGE FOR OUR SERVICES, WHICH WOULD REDUCE OUR REVENUES AND HARM OUR OPERATING RESULTS. In addition to extensive existing government healthcare regulation, there are numerous initiatives affecting the coverage of and payment for healthcare services, including proposals that would significantly limit reimbursement under the Medicare and Medicaid programs. Most recently, for example, the Medicare Program issued its Physician Fee Schedule for calendar year 2002, which reduces Medicare payment for MRI services by approximately 7% to 9%. In addition, also effective January, 2002, the Medicare Program announced new rates under the hospital outpatient prospective payment system that would reduce Medicare payment for unenhanced MRI procedures and would increase Medicare payment for certain contrast-enhanced procedures. Limitations on reimbursement amounts and other cost containment pressures have in the past resulted in a decrease in the revenues we receive for each scan we perform. It is not clear at this time what additional proposals, if any, will be made or adopted or, if adopted, what effect these proposals would have on our business. THE APPLICATION OR REPEAL OF STATE CERTIFICATE OF NEED REGULATIONS COULD HARM OUR BUSINESS AND FINANCIAL RESULTS. Some states require a certificate of need or similar regulatory approval prior to the acquisition of high-cost capital items including diagnostic imaging systems or provisions of diagnostic imaging services by us or our customers. Twelve of the 28 states in which we operate mobile and fixed-site centers have some form of certificate of need regulation and more states may adopt similar licensure frameworks in the future. In many cases, a limited number of these certificates are available in a given state. If we are unable to obtain the applicable certificate or approval or additional certificates or approvals necessary to expand our operations, these regulations may limit or preclude our operations in the relevant jurisdictions. Conversely, states in which we have obtained a certificate of need may repeal existing certificate of need regulations or liberalize exemptions from the regulations. The repeal of certificate of need regulations in states in which we have obtained a certificate of need or a certificate of need exemption would lower barriers to entry for competition in those states and could adversely affect our business. RECENTLY PROMULGATED FEDERAL REGULATIONS AND GUIDELINES MAY PREVENT OUR CUSTOMERS FROM QUALIFYING OUR SERVICES FOR PROVIDER-BASED STATUS, AND MAY IMPOSE PHYSICIAN SUPERVISION GUIDELINES WITH WHICH WE MAY HAVE DIFFICULTY COMPLYING. Recent regulations may affect the ability of a Medicare provider, such as a hospital, to include a service or facility as provider-based, as opposed to treating the service as if it were offered offsite from the hospital, for purposes of Medicare reimbursement. The application of these regulations to mobile facilities is uncertain. While the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) offers some relief for facilities recognized as provider-based on October 1, 2000, under these new regulations some of our customers may have difficulty qualifying our services for provider-based status. If a hospital customer cannot obtain provider-based status for our services, then the hospital might decide not to contract with us, which could have a material adverse effect on our business, financial condition and results of operations. In addition, the Medicare program has recently implemented regulations and guidelines establishing the level of physician supervision required for various diagnostic services. It is unclear how these medical supervision requirements will be implemented, especially with regard to mobile facilities. Strict implementation of these guidelines may render it impracticable for some of our hospital customers to continue to contract with us or to otherwise provide diagnostic imaging services through an outside supplier, and this would have a material adverse effect on our business, financial condition and results of operations. 24 IF WE FAIL TO COMPLY WITH VARIOUS LICENSURE, CERTIFICATION AND ACCREDITATION STANDARDS, WE MAY BE SUBJECT TO LOSS OF LICENSURE, CERTIFICATION OR ACCREDITATION, WHICH WOULD ADVERSELY AFFECT OUR OPERATIONS. All of the states in which we operate require that the imaging technologists that operate our CT and PET systems be licensed or certified. Certain states in which we operate require that our centers be licensed or specifically exempt from licensure, and that the imaging technologists that operate our MRI and ultrasound systems be licensed or certified. Also, each of our fixed-site centers must continue to meet various requirements in order to receive payments from the Medicare program. All of our mammography units are required to be accredited under the Mammography Quality Standards Act of 1992 (MQSA). In addition, a number of our facilities are currently accredited by the Joint Commission on Accreditation of Healthcare Organizations, an independent, non-profit organization that accredits various types of healthcare providers such as hospitals, nursing homes and providers of diagnostic imaging services. In the healthcare industry, various types of organizations are accredited to meet certain Medicare certification requirements, expedite third-party payment, and fulfill state licensure requirements. Some managed care providers prefer to contract with accredited organizations. Any lapse in our licenses, certifications or accreditations, or those of our technologists or physicians, or the failure of any of our fixed-site centers to satisfy the necessary requirements under Medicare or MQSA, could have a material adverse effect on our business, financial condition and results of operations. 25 THE ACQUISITION AND RELATED FINANCING TRANSACTIONS On October 17, 2001, a corporation organized by the equity sponsors and wholly-owned by InSight Health Services Holdings Corp., merged with and into InSight. InSight was the surviving corporation and became a wholly-owned subsidiary of InSight Holdings. J.W. Childs Equity Partners II and an affiliate own approximately 80% of the outstanding common stock of InSight Holdings and Halifax Capital Partners and an affiliate own approximately 20% of the outstanding common stock of InSight Holdings. In addition, certain members of our senior management rolled over a portion of their InSight stock options into stock options of InSight Holdings at the consummation of the acquisition. Upon consummation of the acquisition, each of our stockholders became entitled to receive $18.00 in cash for each share of our common stock that they owned prior to the acquisition. Holders of options and warrants, which prior to the acquisition were exercisable for our common stock, received the difference between $18.00 and the exercise price for each share of common stock the holder could have acquired pursuant to the terms of the options or warrants, and the options and warrants were terminated. Our stockholders, option holders and warrant holders immediately prior to the acquisition became entitled to receive aggregate cash consideration of approximately $187.7 million as a result of the acquisition. Concurrently with the acquisition, we repurchased by tender offer all of our 9 5/8% senior subordinated notes due 2008 in an aggregate principal amount of $100 million. Additionally, upon consummation of the acquisition, we repaid our then outstanding senior credit facilities and certain other indebtedness and paid fees and expenses relating to the acquisition and related financing transactions. These transactions were financed through: - borrowings of $150 million under the $275 million new senior credit facilities; - a $200 million senior subordinated bridge financing; and - the investment by the equity sponsors of $98.1 million; management options and common stock rollover with a total net value of approximately $1.9 million. 26 EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER The issuer, the guarantors and the initial purchasers entered into a registration rights agreement in connection with the issuance of the outstanding notes. The registration rights agreement provides that we will take the following actions, at our expense, for the benefit of the holders of the outstanding notes: - within 120 days after the date on which the outstanding notes were issued, file the exchange offer registration statement, of which this prospectus is a part, relating to the exchange offer; - cause the exchange offer registration statement to be declared effective under the Securities Act within 180 days after the date on which the outstanding notes were issued; and - keep the exchange offer open for at least 30 business days, or longer if required by applicable law, after the date notice of the exchange offer is mailed to the holders of the outstanding notes. For each of the outstanding notes surrendered in the exchange offer, the holder who surrendered the note will receive an exchange note having a principal amount equal to that of the surrendered note. Interest on each exchange note will accrue from the later of (1) the last interest payment date on which interest was paid on the outstanding note surrendered or (2) if no interest has been paid on the outstanding note, from the date on which the outstanding notes were issued. If the note is surrendered for exchange on a date after the record date for the payment of interest to occur on or after the date of exchange, interest on the exchange note will accrue from that interest payment date. We will be required to file a shelf registration statement covering resales of the outstanding notes if: - because of any change in law or in currently prevailing interpretations of the staff of the SEC, we are not permitted to effect an exchange offer, - in some circumstances, the holders of outstanding notes so request, or - in the case of any holder that participates in the exchange offer, the holder does not receive exchange notes on the date of the exchange that may be sold without restriction under state and federal securities laws. Following the consummation of the exchange offer, holders of the outstanding notes who were eligible to participate in the exchange offer, but who did not tender their outstanding notes, will not have any further registration rights and the outstanding notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for the outstanding notes could be adversely affected. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, we will accept any and all outstanding notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer. We will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of outstanding notes accepted in the exchange offer. Any holder may tender some or all of its outstanding notes pursuant to the exchange offer. However, outstanding notes may be tendered only in integral multiples of $1,000. The form and terms of the exchange notes are the same as the form and terms of the outstanding notes except that: (1) the exchange notes bear a Series B designation and a different CUSIP Number from the outstanding notes; (2) the exchange notes have been registered under the Securities Act and hence will not bear legends restricting their transfer; and 27 (3) the holders of the exchange notes will not be entitled to certain rights under the registration rights agreement, including the provisions providing for an increase in the interest rate on the outstanding notes in certain circumstances relating to the timing of the exchange offer, all of which rights will terminate when the exchange offer is terminated. The exchange notes will evidence the same indebtedness as the outstanding notes and will be entitled to the benefits of the indenture. As of the date of this prospectus, $225,000,000 aggregate principal amount of the outstanding notes were outstanding. We have fixed the close of business on , 2002 as the record date for the exchange offer for purposes of determining the persons to whom this prospectus and the letter of transmittal will be mailed initially. Holders of outstanding notes do not have any appraisal or dissenters' rights under the Delaware General Corporation Law. We intend to conduct the exchange offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the SEC thereunder. We will be deemed to have accepted validly tendered outstanding notes when, as and if we have given oral or written notice thereof to the exchange agent. The exchange agent will act as agent for the tendering holders for the purpose of receiving the exchange notes from us. If any tendered outstanding notes are not accepted for exchange because of an invalid tender, the occurrence of specified other events set forth in this prospectus or otherwise, the certificates for any unaccepted outstanding notes will be returned, without expense, to the tendering holder thereof as promptly as practicable after the expiration date of the exchange offer. Holders who tender outstanding notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of outstanding notes pursuant to the exchange offer. We will pay all charges and expenses, other than transfer taxes in certain circumstances, in connection with the exchange offer. See "-- Fees and Expenses." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "expiration date" will mean 5:00 p.m., New York City time, on , 2002, unless we, in our sole discretion, extend the exchange offer, in which case the term "expiration date" will mean the latest date and time to which the exchange offer is extended. In order to extend the exchange offer, we will notify the exchange agent of any extension by oral or written notice and will mail to the registered holders an announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. We reserve the right, in our sole discretion, (1) to delay accepting any outstanding notes, to extend the exchange offer or to terminate the exchange offer if any of the conditions set forth below under "-- Conditions" have not been satisfied, by giving oral or written notice of any delay, extension or termination to the exchange agent or (2) to amend the terms of the exchange offer in any manner. Any delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders. INTEREST ON THE EXCHANGE NOTES The exchange notes will bear interest from their date of issuance. Holders of outstanding notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but not including, the date of issuance of the exchange notes. Such interest will be paid with the first interest payment on the exchange notes on May 1 , 2002. Interest on the outstanding notes accepted for exchange will cease to accrue upon issuance of the exchange notes. 28 Interest on the exchange notes is payable semi-annually on each May 1 and November 1, commencing on May 1, 2002. PROCEDURES FOR TENDERING Only a holder of outstanding notes may tender outstanding notes in the exchange offer. To tender in the exchange offer, a holder must complete, sign and date the letter of transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the letter of transmittal or transmit an agent's message in connection with a book-entry transfer, and mail or otherwise deliver the letter of transmittal or the facsimile, together with the outstanding notes and any other required documents, to the exchange agent prior to 5:00 p.m., New York City time, on the expiration date. To be tendered effectively, the outstanding notes, letter of transmittal or an agent's message and other required documents must be completed and received by the exchange agent at the address set forth below under "Exchange Agent" prior to 5:00 p.m., New York City time, on the expiration date. Delivery of the outstanding notes may be made by book-entry transfer in accordance with the procedures described below. Confirmation of the book-entry transfer must be received by the exchange agent prior to the expiration date. The term "agent's message" means a message, transmitted by a book-entry transfer facility to, and received by, the exchange agent forming a part of a confirmation of a book-entry, which states that the book-entry transfer facility has received an express acknowledgment from the participant in the book-entry transfer facility tendering the outstanding notes that the participant has received and agree: (1) to participate in ATOP; (2) to be bound by the terms of the letter of transmittal; and (3) that we may enforce the agreement against the participant. To participate in the exchange offer, each holder will be required to make the following representations to us: - Any exchange notes to be received by the holder will be acquired in the ordinary course of its business. - At the time of the commencement of the exchange offer, the holder has no arrangement or understanding with any person to participate in the distribution, within the meaning of Securities Act, of the exchange notes in violation of the Securities Act. - The holder is not our affiliate as defined in Rule 405 promulgated under the Securities Act. - If the holder is not a broker-dealer, it is not engaged in, and does not intend to engage in, the distribution of exchange notes. - If the holder is a broker-dealer that will receive exchange notes for its own account in exchange for outstanding notes that were acquired as a result of market-making or other trading activities, the holder will deliver a prospectus in connection with any resale of the exchange notes. We refer to these broker-dealers as participating broker-dealers. - The holder is not acting on behalf of any person or entity that could not truthfully make these representations. The tender by a holder and our acceptance thereof will constitute agreement between the holder and us in accordance with the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal or agent's message. THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL OR AGENT'S MESSAGE AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO US. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR THEM. 29 Any beneficial owner whose outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct the registered holder to tender on the beneficial owner's behalf. See "Instructions to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner" included with the letter of transmittal. Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a member of the Medallion System unless the outstanding notes tendered pursuant to the letter of transmittal are tendered (1) by a registered holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on the letter of transmittal or (2) for the account of a member firm of the Medallion System. If signatures on a letter of transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, the guarantee must be by a member firm of the Medallion System. If the letter of transmittal is signed by a person other than the registered holder of any outstanding notes listed in this prospectus, the outstanding notes must be endorsed or accompanied by a properly completed bond power, signed by the registered holder as the registered holder's name appears on the outstanding notes with the signature thereon guaranteed by a member firm of the Medallion System. If the letter of transmittal or any outstanding notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, the person signing should so indicate when signing, and evidence satisfactory to us of its authority to so act must be submitted with the letter of transmittal. We understand that the exchange agent will make a request promptly after the date of this prospectus to establish accounts with respect to the outstanding notes at DTC for the purpose of facilitating the exchange offer, and subject to the establishment thereof, any financial institution that is a participant in DTC's system may make book-entry delivery of outstanding notes by causing DTC to transfer the outstanding notes into the exchange agent's account with respect to the outstanding notes in accordance with DTC's procedures for the transfer. Although delivery of the outstanding notes may be effected through book-entry transfer into the exchange agent's account at DTC, unless an agent's message is received by the exchange agent in compliance with ATOP, an appropriate letter of transmittal properly completed and duly executed with any required signature guarantee and all other required documents must in each case be transmitted to and received or confirmed by the exchange agent at its address set forth below on or prior to the expiration date, or, if the guaranteed delivery procedures described below are complied with, within the time period provided under the procedures. Delivery of documents to DTC does not constitute delivery to the exchange agent. All questions as to the validity, form, eligibility, including time of receipt, acceptance of tendered outstanding notes and withdrawal of tendered outstanding notes will be determined by us in our sole discretion, which determination will be final and binding. We reserve the absolute right to reject any and all outstanding notes not properly tendered or any outstanding notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right in our sole discretion to waive any defects, irregularities or conditions of tender as to particular outstanding notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of outstanding notes must be cured within the time we determine. Although we intend to notify holders of defects or irregularities with respect to tenders of outstanding notes, neither we, the exchange agent nor any other person will incur any liability for failure to give the notification. Tenders of outstanding notes will not be deemed to have been made until the defects or irregularities have been cured or waived. Any outstanding notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent to the tendering holders, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their outstanding notes and (1) whose outstanding notes are not immediately available, (2) who cannot deliver their outstanding notes, the letter of transmittal or any other required 30 documents to the exchange agent or (3) who cannot complete the procedures for book-entry transfer, prior to the expiration date, may effect a tender if: (A) the tender is made through a member firm of the Medallion System; (B) prior to the expiration date, the exchange agent receives from a member firm of the Medallion System a properly completed and duly executed Notice of Guaranteed Delivery by facsimile transmission, mail or hand delivery setting forth the name and address of the holder, the certificate number(s) of the outstanding notes and the principal amount of outstanding notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal or facsimile thereof together with the certificate(s) representing the outstanding notes or a confirmation of book-entry transfer of the outstanding notes into the exchange agent's account at DTC, and any other documents required by the letter of transmittal will be deposited by the member firm of the Medallion System with the exchange agent; and (C) the properly completed and executed letter of transmittal or facsimile thereof, as well as the certificate(s) representing all tendered outstanding notes in proper form for transfer or a confirmation of book-entry transfer of the outstanding notes into the exchange agent's account at DTC, and all other documents required by the letter of transmittal are received by the exchange agent within five New York Stock Exchange trading days after the expiration date. Upon request to the exchange agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their outstanding notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided in this prospectus, tenders of outstanding notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date. To withdraw a tender of outstanding notes in the exchange offer, a telegram, telex, letter or facsimile transmission notice of withdrawal must be received by the exchange agent at its address set forth in this prospectus prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer. Any notice of withdrawal must: (1) specify the name of the person having deposited the outstanding notes to be withdrawn; (2) identify the outstanding notes to be withdrawn, including the certificate number(s) and principal amount of the outstanding notes, or, in the case of outstanding notes transferred by book-entry transfer, the name and number of the account at DTC to be credited; (3) be signed by the holder in the same manner as the original signature on the letter of transmittal by which the outstanding notes were tendered, including any required signature guarantees, or be accompanied by documents of transfer sufficient to have the trustee with respect to the outstanding notes register the transfer of the outstanding notes into the name of the person withdrawing the tender; and (4) specify the name in which any outstanding notes are to be registered, if different from that of the person depositing the outstanding notes to be withdrawn. All questions as to the validity, form and eligibility, including time of receipt, of the notices will be determined by us. Our determination will be final and binding on all parties. Any outstanding notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer and no exchange notes will be issued with respect thereto unless the outstanding notes so withdrawn are validly retendered. Any outstanding notes which have been tendered but which are not accepted for exchange will be returned to the holder thereof without cost to the holder as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn outstanding notes may be retendered by 31 following one of the procedures described above under "-- Procedures for Tendering" at any time prior to the expiration date. CONDITIONS Notwithstanding any other term of the exchange offer, we will not be required to accept for exchange, or exchange notes for, any outstanding notes, and may terminate or amend the exchange offer as provided in this prospectus before the acceptance of the outstanding notes, if: (1) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer which, in our sole judgment, might materially impair our ability to proceed with the exchange offer or any material adverse development has occurred in any existing action or proceeding with respect to us or any of our subsidiaries; or (2) any law, statute, rule, regulation or interpretation by the staff of the SEC is proposed, adopted or enacted, which, in our sole judgment, might materially impair our ability to proceed with the exchange offer or materially impair the contemplated benefits of the exchange offer to us; or (3) any governmental approval has not been obtained, which approval we will, in our sole discretion, deem necessary for the consummation of the exchange offer as contemplated by this prospectus. If we determine in our sole discretion that any of the conditions are not satisfied, we may (1) refuse to accept any outstanding notes and return all tendered outstanding notes to the tendering holders, (2) extend the exchange offer and retain all outstanding notes tendered prior to the expiration of the exchange offer, subject, however, to the rights of holders to withdraw the outstanding notes (See "-- Withdrawal of Tenders") or (3) waive the unsatisfied conditions with respect to the exchange offer and accept all properly tendered outstanding notes which have not been withdrawn. EXCHANGE AGENT American Stock Transfer & Trust Company has been appointed as exchange agent for the exchange offer. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for Notice of Guaranteed Delivery should be directed to the exchange agent addressed as follows: By Overnight Courier or Registered/Certified By Hand Prior to 4:30 p.m., New York City Mail: time: 59 Maiden Lane 59 Maiden Lane New York, New York 10038 New York, New York 10038 For Information Telephone (718) 921-8200 or (800) 937-5449
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. FEES AND EXPENSES We will bear the expenses of soliciting tenders. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telecopy, telephone or in person by our and our affiliates' officers and regular employees. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or others soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses incurred in connection with these services. We will pay the cash expenses to be incurred in connection with the exchange offer. Such expenses include fees and expenses of the exchange agent and trustee, accounting and legal fees and printing costs, among others. 32 ACCOUNTING TREATMENT We will record the exchange notes at the same carrying value as the outstanding notes, which is face value, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes as a result of the exchange offer. The expenses of the exchange offer will be deferred and charged to expense over the term of the exchange notes. CONSEQUENCES OF FAILURE TO EXCHANGE The outstanding notes that are not exchanged for exchange notes pursuant to the exchange offer will remain restricted securities. Accordingly, the outstanding notes may be resold only: (1) to us upon redemption thereof or otherwise; (2) so long as the outstanding notes are eligible for resale pursuant to Rule 144A, to a person inside the United States whom the seller reasonably believes is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act in a transaction meeting the requirements of Rule 144A, in accordance with Rule 144 under the Securities Act, or pursuant to another exemption from the registration requirements of the Securities Act, which other exemption is based upon an opinion of counsel reasonably acceptable to us; (3) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act; or (4) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. RESALE OF THE EXCHANGE NOTES With respect to resales of exchange notes, based on interpretations by the staff of the SEC set forth in no-action letters issued to third parties, we believe that a holder or other person who receives exchange notes, whether or not the person is the holder, other than a person that is our affiliate within the meaning of Rule 405 under the Securities Act, in exchange for outstanding notes in the ordinary course of business and who is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of the exchange notes, will be allowed to resell the exchange notes to the public without further registration under the Securities Act and without delivering to the purchasers of the exchange notes a prospectus that satisfies the requirements of Section 10 of the Securities Act. However, if any holder acquires exchange notes in the exchange offer for the purpose of distributing or participating in a distribution of the exchange notes, the holder cannot rely on the position of the staff of the SEC expressed in the no-action letters or any similar interpretive letters, and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. Further, each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where the outstanding notes were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. 33 USE OF PROCEEDS This exchange offer is intended to satisfy some of our obligations under the registration rights agreement. We will not receive any cash proceeds from the issuance of the exchange notes. In consideration for issuing the exchange notes, we will receive outstanding notes in like principal amount, the form and terms of which are substantially identical to the form and terms of the exchange notes, except as otherwise described in this prospectus. We used the proceeds from the issuance of the outstanding notes to retire in full the $200 million of indebtedness under a senior subordinated bridge financing and for general corporate purposes. The senior subordinated bridge financing was used, together with the related financing transactions, to fund a portion of the cash required to consummate the acquisition, repay certain indebtedness outstanding prior to the acquisition and pay related fees and expenses. 34 CAPITALIZATION The following table sets forth our cash and cash equivalents and capitalization derived from our unaudited consolidated financial statements as of September 30, 2001, both on an actual and unaudited pro forma basis giving effect to the acquisition and related financing transactions including the issuance of the outstanding notes and the application of the proceeds therefrom. This table should be read in conjunction with "Use of Proceeds," "Selected Historical Financial and Operating Data," "Unaudited Pro Forma Condensed Consolidated Financial Statements," our consolidated financial statements and related notes and other financial information appearing elsewhere in this prospectus.
AS OF SEPTEMBER 30, 2001 ------------------------ ACTUAL PRO FORMA ---------- ----------- (UNAUDITED) (IN THOUSANDS) Cash and cash equivalents................................... $ 13,684 $ 29,366 ======== ======== Long-term debt (including current maturities): Existing senior credit facilities......................... $ 66,645 $ -- New senior credit facilities(1)........................... -- 150,000 Capital leases............................................ 53,161 5,519 -------- -------- Total senior debt...................................... 119,806 155,519 9 5/8% senior subordinated notes due 2008................. 100,000 -- 9 7/8% senior subordinated notes due 2011................. -- 225,000 -------- -------- Total long-term debt................................... 219,806 380,519 Total stockholders' equity.................................. 69,901 78,950 -------- -------- Total capitalization................................... $289,707 $459,469 ======== ========
- --------------- (1) The new senior credit facilities consist of a $50.0 million revolving credit facility, a $150.0 million term loan B and a $75.0 million delayed-draw term loan facility. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the historical consolidated ratio of earnings to fixed charges of our company for the periods indicated.
THREE MONTHS ENDED FISCAL YEAR ENDED ----------------------------- - ------------------------------------------------ SEPTEMBER 30, SEPTEMBER 30, 1997 1998 1999 2000 2001 2001 2000 - ---- ---- ---- ---- ---- ------------- ------------- 1.1x 1.0x 1.1x 1.3x 1.6x 2.2x 1.4x
For the purpose of calculating the ratio of earnings to fixed charges, earnings are defined as (i) pre-tax income from continuing operations before adjustment for income or loss from equity investments, (ii) fixed charges and (iii) distributed income of equity investments. Fixed charges are the sum of (i) interest expense, (ii) amortized premiums, discounts and capitalized expenses related to indebtedness and (iii) an estimate of the interest within rental expense. 35 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated financial statements have been derived by the application of pro forma adjustments to our historical consolidated financial statements included elsewhere in this prospectus and reflect the unaudited pro forma consolidated financial statements of InSight Health Services Corp. The unaudited pro forma condensed consolidated balance sheet data give effect to 1) the acquisition and related financing transactions, and the application of the net proceeds and 2) the issuance of the outstanding notes and extinguishment of the senior subordinated bridge financing, as if all such transactions had occurred on September 30, 2001. The unaudited pro forma condensed consolidated statement of income data give effect to 1) the acquisition and related financing transactions, and the application of the net proceeds and 2) the issuance of the outstanding notes and extinguishment of the senior subordinated bridge financing, as if all such transactions had occurred on July 1, 2000. Assumptions underlying the pro forma adjustments are described in the accompanying notes which should be read in conjunction with these unaudited pro forma condensed consolidated financial statements. The pro forma adjustments reflect the adoption of Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." Among other things, this requires the elimination of goodwill amortization in the unaudited pro forma condensed consolidated statement of income, however, amortization of other identifiable intangible assets is required. After an acquisition, the total consideration of such acquisition will be allocated to the tangible and intangible assets acquired and liabilities assumed. The actual purchase accounting and other adjustments described in the accompanying notes will be made as of the closing date of the acquisition and may differ from the preliminary adjustments reflected in these unaudited pro forma condensed consolidated financial statements. For example, an increase in the allocation to identifiable intangible assets with a corresponding reduction in goodwill will result in an increase in related amortization expense. The unaudited pro forma condensed consolidated financial statements should not be considered indicative of actual results that would have been achieved had the acquisition, related financing transactions and notes offered hereby been consummated on the date or for the periods indicated and do not purport to indicate consolidated balance sheet data or results of operations as of any future date or any future period. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the information contained in "Selected Historical Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes appearing elsewhere in this prospectus. 36 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2001 (IN THOUSANDS)
HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- ASSETS: Current assets: Cash and cash equivalents.............................. $ 13,684 $ 15,682(1) $ 29,366 Trade accounts receivables, net........................ 43,069 -- 43,069 Other current assets................................... 7,183 -- 7,183 Deferred income taxes.................................. 3,350 -- 3,350 -------- --------- -------- Total current assets................................ 67,286 15,682 82,968 -------- --------- -------- Property and equipment, net.............................. 154,276 -- 154,276 Investments in partnerships.............................. 1,788 -- 1,788 Other assets............................................. 6,562 16,225(2) 22,787 Intangible assets........................................ 90,373 137,855(3) 228,228 -------- --------- -------- Total assets........................................ $320,285 $ 169,762 $490,047 ======== ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Current portion of equipment and other notes........... $ 21,981 $ (21,981)(4) $ -- Current portion of new senior credit facilities........ -- 1,500(4) 1,500 Current portion of capital lease obligations........... 12,722 (11,063)(4) 1,659 Accounts payable and other accrued expenses............ 26,885 -- 26,885 -------- --------- -------- Total current liabilities........................... 61,588 (31,544) 30,044 -------- --------- -------- Long-term liabilities: Equipment and other notes, less current portion........ 144,664 (144,664)(4) -- New senior credit facilities and notes, less current... -- 373,500(4) 373,500 Capital lease obligations, less current portion........ 40,439 (36,579)(4) 3,860 Other long-term liabilities............................ 3,693 -- 3,693 -------- --------- -------- Total long-term liabilities......................... 188,796 192,257 381,053 -------- --------- -------- Stockholders' equity: Preferred stock, $.001 par value, 3,500,000 shares authorized: Convertible Series D preferred stock................... 37,096 (37,096)(5) -- Common stock........................................... 3 8(6) 11 Additional paid-in capital............................. 24,071 62,618(7) 86,689 Accumulated other comprehensive loss................... (682) 682(8) -- Retained earnings (deficit)............................ 9,413 (17,163)(9) (7,750) -------- --------- -------- Total stockholders' equity.......................... 69,901 9,049 78,950 -------- --------- -------- Total liabilities and stockholders' equity.......... $320,285 $ 169,762 $490,047 ======== ========= ========
37 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) The unaudited pro forma condensed consolidated balance sheet as of September 30, 2001, reflects the following pro forma adjustments: (1) To reflect the increase in cash and cash equivalents as a result of the acquisition related financing transactions and issuance of the outstanding notes as follows: Acquisition: Gross proceeds of senior subordinated bridge financing.... $ 200,000 Gross proceeds from new senior credit facilities.......... 150,000 New cash equity........................................... 98,125 Purchase of equity, net(a)................................ (187,723) Refinancing of existing indebtedness(b)................... (229,169) Transaction fees and expenses............................. (27,027) --------- Subtotal............................................... 4,206 --------- Refinancing: Gross proceeds of outstanding notes....................... 225,000 Extinguishment of senior subordinated bridge financing.... (200,000) Transaction fees and expenses............................. (13,524) --------- Subtotal............................................... 11,476 --------- Total................................................ $ 15,682 =========
(a) The purchase of equity is shown net of the value of the management options and common stock rollover of $1,875 and the aggregate exercise price of outstanding options and warrants totaling $16,617, that were exercised on a cashless basis. (b) The refinancing of existing indebtedness includes $14,882 of tender offer premium and related consent solicitation costs. (2) To reflect the change in deferred finance costs as a result of the acquisition related financing transactions and issuance of the outstanding notes, calculated as follows: Acquisition: Deferred financing costs associated with the new financing transactions........................................... $15,368 Write-off of deferred financing costs associated with the existing senior indebtedness and the 9 5/8% senior subordinated notes..................................... (4,917) ------- Subtotal............................................... 10,451 ------- Refinancing: Deferred financing costs associated with the outstanding notes.................................................. 13,524 Write-off of deferred financing costs associated with the senior subordinated bridge financing................... (7,750) ------- Subtotal............................................... 5,774 ------- Total................................................ $16,225 =======
38 (3) To record estimated additional intangible assets booked resulting from the allocation of the purchase price: Purchase of equity, net..................................... $187,723 Net assets acquired......................................... (69,901) Transaction fees and expenses............................... 20,033 -------- $137,855 ========
The entire intangible asset has been characterized as goodwill, pending the final purchase price allocation. (4) To reflect gross proceeds from the senior subordinated bridge financing, the new senior credit facilities, the issuance of the outstanding notes, and the subsequent application of such proceeds to repay the existing senior indebtedness, the 9 5/8% senior subordinated notes and the senior subordinated bridge financing. (5) To record the conversion of the Convertible Series D preferred stock into common stock, resulting in the elimination of existing preferred stock. (6) To record the par value from the conversion of the Convertible Series D preferred stock into common stock and from the issuance of common stock resulting from the exercise of outstanding options and warrants. (7) To reflect adjustments to additional paid-in capital as follows: Conversion of Convertible Series D preferred stock.......... $ 37,096 Settlement of outstanding options and warrants.............. 19,617 New cash equity............................................. 98,125 Transaction fees and expenses............................... (11,425) Purchase accounting adjustment.............................. (80,795) -------- $ 62,618 ========
(8) To reflect the purchase accounting adjustment. (9) To reflect adjustments to retained earnings (deficit) as follows: Acquisition: Purchase accounting adjustment............................ $ 30,237 Compensation charge from cashless settlement of options and warrants........................................... (19,617) Transaction fees and expenses............................. (20,033) -------- Subtotal............................................... (9,413) -------- Refinancing: Write-off of deferred financing costs associated with the senior subordinated bridge financing................... (7,750) -------- Total.................................................. $(17,163) ========
39 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED JUNE 30, 2001 (IN THOUSANDS)
HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- Revenues.................................................. $211,503 $ -- $211,503 Costs of operations....................................... 161,872 (5,530)(1) 156,342 -------- ------- -------- Gross profit............................................ 49,631 5,530 55,161 Corporate operating expenses.............................. 10,783 -- 10,783 -------- ------- -------- Income from company operations.......................... 38,848 5,530 44,378 Equity in earnings of unconsolidated partnerships......... 971 -- 971 -------- ------- -------- Operating income........................................ 39,819 5,530 45,349 Interest expense, net..................................... 23,394 13,284(2) 36,678 -------- ------- -------- Income before income taxes.............................. 16,425 (7,754) 8,671 Provision for income taxes................................ 2,624 844(3) 3,468 -------- ------- -------- Net income.............................................. $ 13,801 $(8,598) $ 5,203 ======== ======= ======== EBITDA.................................................... $ 80,953 -- $ 80,953 Pro forma ratio of earnings to fixed charges.............. 1.1x
40 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) The unaudited pro forma condensed consolidated income statement for the year ended June 30, 2001, reflects the following pro forma adjustments: (1) To record the elimination of goodwill amortization of $5,530 in accordance with SFAS 142. (2) To reflect adjustments to interest expense as follows: Interest on the outstanding notes at 9 7/8%(a).............. $ 22,219 Interest on term loan B facility at LIBOR plus 350 bps (estimated rate of 6.0%).................................. 9,000 Effect of interest rate swap on notional amount of $37,250 of term loan B facility................................... 1,100 Commitment fee on revolving credit facility (0.5% of unused facility) and delayed-draw term loan facility (2.0% of unused facility).......................................... 1,750 Amortization of deferred loan fees on new senior credit facilities ($1,589) and the outstanding notes ($1,352).... 2,941 Elimination of historical interest expense.................. (23,726) -------- $ 13,284 ========
The actual interest on the term loan B facility could vary from that used to compute the above adjustment of interest expense. The effect on pre-tax income of a 0.125% variance in such rate would be approximately $188. (a) Incremental interest expense on the senior subordinated bridge financing is not material to the pro forma presentation due to the limited period outstanding. (3) To record the tax effect on the above entries at estimated effective rates. 41 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 (IN THOUSANDS)
HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- Revenues.................................................... $53,117 $ -- $53,117 Costs of operations......................................... 38,071 -- 38,071 ------- ------- ------- Gross profit.............................................. 15,046 -- 15,046 Corporate operating expenses................................ 2,660 -- 2,660 ------- ------- ------- Income from company operations............................ 12,386 -- 12,386 Equity in earnings of unconsolidated partnerships........... 334 -- 334 ------- ------- ------- Operating income.......................................... 12,720 -- 12,720 Interest expense, net....................................... 5,336 3,879(1) 9,215 ------- ------- ------- Income before income taxes................................ 7,384 (3,879) 3,505 Provision for income taxes.................................. 2,417 (1,015)(2) 1,402 ------- ------- ------- Net income................................................ $ 4,967 $(2,864) $ 2,103 ======= ======= ======= EBITDA...................................................... $21,003 -- $21,003 Pro forma ratio of earnings to fixed charges................ 1.4x
42 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) The unaudited pro forma condensed consolidated income statement for the three months ended September 30, 2001, reflects the following pro forma adjustments: (1) To reflect adjustments to interest expense as follows: Interest on the outstanding notes at 9 7/8%(a).............. $ 5,555 Interest on term loan B facility at LIBOR plus 350 bps (estimated rate of 6.0%).................................. 2,250 Effect of interest rate swap on notional amount of $37,250 of term loan B facility................................... 275 Commitment fee on revolving credit facility (0.5% of unused facility) and delayed-draw term loan facility (2.0% of unused facility).......................................... 438 Amortization of deferred loan fees on new senior credit facilities ($1,589) and the outstanding notes ($1,352).... 735 Elimination of historical interest expense.................. (5,374) ------- $ 3,879 =======
The actual interest on the term loan B facility could vary from that used to compute the above adjustment of interest expense. The effect on pre-tax income of a 0.125% variance in such rate would be approximately $47. (a) Incremental interest expense on the senior subordinated bridge financing is not material to the pro forma presentation due to the limited period outstanding. (2) To record the tax effect on the above entries at estimated effective rates. 43 SELECTED HISTORICAL FINANCIAL AND OPERATING DATA The following table sets forth our selected historical financial and other data as of and for each of the five fiscal years ended June 30, 1997, 1998, 1999, 2000 and 2001 and the three months ended September 30, 2000 and 2001. The selected historical financial and other data as of and for the fiscal years ended June 30, 1999, 2000 and 2001 have been derived from our audited consolidated financial statements and the related notes, which are included elsewhere in this prospectus. The selected historical financial and other data as of and for the three months ended September 30, 2000 and 2001 have been derived from our unaudited consolidated financial statements and the related notes, which are included elsewhere in this prospectus. The selected historical financial and other data as of and for the fiscal years ended June 30, 1997 and 1998 have been derived from our audited consolidated financial statements for the fiscal years ended June 30, 1997 and 1998, which are not included in this prospectus. The selected historical financial data set forth below are not necessarily indicative of the results of future operations and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes and other financial information appearing elsewhere in this prospectus.
THREE MONTHS ENDED FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30, --------------------------------------------------- ------------------- 1997 1998 1999 2000 2001 2001 2000 ------- -------- -------- -------- -------- -------- -------- (DOLLARS IN THOUSANDS) INCOME STATEMENT DATA: Revenues......................... $92,273 $119,018 $161,992 $188,574 $211,503 $53,117 $52,220 Costs of operations.............. 79,634 96,887 131,343 151,429 161,872 38,071 40,549 Gross profit..................... 12,639 22,131 30,649 37,145 49,631 15,046 11,671 Corporate operating expenses..... 7,431 8,759 10,475 10,946 10,783 2,660 2,702 Provision for reorganization and other costs(1)................. -- -- 3,300 -- -- -- -- Provision for supplemental service fee termination........ -- 6,309 -- -- -- -- -- Income from company operations... 5,208 7,063 16,874 26,199 38,848 12,386 8,969 Equity in earnings of unconsolidated partnerships.... 566 707 548 817 971 334 126 Operating income................. 5,774 7,770 17,422 27,016 39,819 12,720 9,095 Interest expense, net............ 4,066 6,827 14,500 18,696 23,394 5,336 6,032 Income before income taxes....... 1,708 943 2,922 8,320 16,425 7,384 3,063 Provision (benefit) for income taxes.......................... 427 431 (3,190) 1,131 2,624 2,417 306 Net income....................... $ 1,281 $ 512 $ 6,112 $ 7,189 $ 13,801 $ 4,967 $ 2,757 BALANCE SHEET DATA: Cash and cash equivalents........ $ 6,884 $ 44,740 $ 14,294 $ 27,133 $ 23,254 $13,684 $15,268 Working capital (deficit)........ (6,162) 36,109 24,651 20,814 16,791 5,698 12,756 Total assets..................... 97,271 231,592 238,304 328,872 321,056 320,285 332,146 Total debt (including current maturities).................... 73,195 164,798 172,630 248,232 228,253 219,806 248,124 Stockholders' equity............. 6,685 37,858 44,106 51,487 65,471 69,901 54,325
44
THREE MONTHS ENDED FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30, --------------------------------------------------- ------------------- 1997 1998 1999 2000 2001 2001 2000 ------- -------- -------- -------- -------- -------- -------- (DOLLARS IN THOUSANDS) OTHER FINANCIAL DATA: EBITDA(2)........................ $15,514 $ 29,694 $ 45,608 $ 60,646 $ 80,953 $21,003 $19,309 EBITDA margin.................... 16.8% 24.9% 28.2% 32.2% 38.3% 39.5% 37.0% Depreciation and amortization.... 9,740 15,615 24,886 33,630 41,134 8,283 10,340 Capital expenditures............. 6,868 23,644 18,440 23,170 22,911 14,178 12,469 Net cash provided by operating activities..................... 7,478 18,216 10,892 40,524 50,682 13,932 7,609 Net cash used in investing activities..................... (30,377) (78,168) (47,201) (49,070) (23,442) (15,214) (12,329) Net cash provided by (used in) financing activities........... 23,204 97,808 5,863 21,385 (31,119) (8,288) (7,145) Ratio of earnings to fixed charges(3)..................... 1.1x 1.0x 1.1x 1.3x 1.6x 2.2x 1.4x Number of mobile facilities...... 40 67 86 82 88 91 84 Number of fixed-site centers..... 39 52 59 68 69 66 71 PRO FORMA DATA (UNAUDITED): Cash and cash equivalents........ $29,366 Interest expense, net............ $ 36,678 9,215 Total debt (including current maturities).................... 380,519 Stockholders' equity............. 78,950 Ratio of EBITDA to interest expense, net(1)................ 2.2x 2.3x Ratio of net debt to EBITDA(1)(2)................... 4.4x
- --------------- (1) In connection with the recapitalization by The Carlyle Group and General Electric Company (GE) in October 1997, we recorded a one-time non-cash charge of $6,309 for the elimination of a supplemental service fee payment due to GE. In 1999, we recorded a one-time charge of $3,300 related to the realignment of our corporate and regional organization. (2) EBITDA is defined as operating income plus depreciation and amortization. This measurement has been included because management believes that certain investors will find it to be a useful tool for measuring our ability to meet debt service, capital expenditure and working capital requirements. EBITDA should not be considered an alternative to, or more meaningful than, income from company operations or other traditional indicators of operating performance and cash flow from operating activities determined in accordance with generally accepted accounting principles. EBITDA excludes the provision for supplemental service fee termination in 1998 and the provision for reorganization and other costs in 1999. 45 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our consolidated financial statements and the related notes and other financial information appearing elsewhere in this prospectus. This prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those indicated in forward-looking statements. See "Cautionary Note Regarding Forward-Looking Statements." OVERVIEW We are a leading nationwide provider of outsourced diagnostic imaging services, serving a diverse portfolio of customers, including healthcare providers, such as hospitals and physicians, and payors, such as managed care organizations and insurance companies, and are the largest integrated provider of fixed and mobile diagnostic imaging services in the United States. We have two reportable segments, the Eastern Division and the Western Division. Our operations are located throughout the United States, with a substantial presence in California, Texas, New England, North Carolina, South Carolina, Florida and the midwest (Indiana and Ohio). While we generated approximately 80% of our revenues from MRI services during the fiscal year ended June 30, 2001, we provide a comprehensive offering of diagnostic imaging and treatment services, including CT, PET, mammography, bone densitometry, diagnostic ultrasound, lithotripsy and x-ray. We have developed and continue to develop strong regional networks of diagnostic imaging services, enabling us to increase overall utilization of our imaging equipment and to benefit from enhanced economies of scale. We provide our services through 68 fixed-site centers, including 27 multi-modality centers and 91 mobile facilities. At our multi-modality imaging centers, we typically offer MRI and one or more of CT, x-ray, mammography, ultrasound, nuclear medicine and bone densitometry services. Our revenues are primarily generated from contract services and patient services. Contract services revenues are primarily earned through mobile facilities. Patient services revenues are primarily earned through fixed-site centers. Contract services revenues are generally earned from services billed to hospitals or other healthcare providers, which include: (1) fee-for-service arrangements in which revenues are based upon a contractual rate per procedure; (2) management fees; and (3) equipment rental in which revenues are generally based upon a fixed monthly rental. Patient services revenues are earned from services billed directly to patients or third-party payors (generally managed care organizations, Medicare, Medicaid, commercial insurance carriers and workers' compensation funds). Contract and patient services revenues represented approximately 49% and 51%, respectively, of our total revenues for the fiscal year ended June 30, 2001. During the fiscal year ended June 30, 2001, compared to the fiscal year ended June 30, 2000, we increased scan volumes at our fixed-site centers by 9%. During the same period, the average fee-per-scan at our fixed-site centers remained relatively constant. The average fee-per-scan at our MRI-only fixed-site centers is higher than at our multi-modality centers, due to the range of procedures, many of which have a lower fee-per-scan than MRI, provided at our multi-modality centers. We maintain a high fixed cost structure, with fixed costs and variable costs representing 80.1% and 19.9% of total operating expenses, respectively, for the fiscal year ended June 30, 2001. Four categories of fixed expenses account for approximately 73.9% of our total operating expenses: (1) salaries and benefits expenses; (2) equipment lease expenses; (3) contractual maintenance expenses; and (4) depreciation and amortization, comprising 34.9%, 5.0%, 25.9% and 8.1%, respectively, of our total operating expenses for the fiscal year ended June 30, 2001. Due to this high degree of operating leverage with respect to our equipment, any increase in existing facility scan volumes disproportionately increases our operating cash flow. Service supplies, consisting mainly of film and contrast media used in our diagnostic imaging services, comprised 5.6% of our total operating expenses for the fiscal year ended June 30, 2001 and were our largest variable operating expense during this period. We believe that the expansion of our business through the addition of new facilities and acquisitions is a key factor in achieving our growth. Generally, acquisition opportunities are aimed at increasing revenues and profits and maximizing utilization of existing capacity and increasing economies of scale. Incremental 46 operating profit resulting from future acquisitions will vary depending on geographic location, whether facilities are mobile or fixed, the range of services provided and our ability to integrate the acquired businesses into our existing infrastructure. Since 1996, we have completed 12 acquisitions. We are continuously evaluating acquisition opportunities and consolidation possibilities, and, at any given time, may be in various stages of due diligence or preliminary discussions with respect to a number of potential transactions. From time to time, we may enter into non-binding letters of intent, but we are not currently subject to any definitive agreement with respect to any transaction material to our operations or otherwise so far advanced in any discussions as to make a transaction material to our operations reasonably certain. Nevertheless, some of these potential transactions, if we were to complete our business and legal due diligence and enter into a definitive agreement, could, if consummated, be material to our operations and to our financial condition. ACQUISITIONS AND NEW FACILITIES In the fiscal year ended June 30, 2000, we completed two acquisitions in the Eastern Division: (1) two fixed-site centers in Indianapolis and Clarksville, Indiana, respectively and (2) a 90% interest in a partnership which owns a multi-modality fixed-site center in Wilkes-Barre, Pennsylvania. The aggregate purchase price for these two acquisitions was approximately $24.5 million, which was financed with our acquisition facility under our existing senior credit facilities. In the fiscal year ended June 30, 2000, we opened in the Western Division: (1) a radiology co-source outpatient fixed-site center in Granada Hills, California, (2) a radiology co-source outpatient multi-modality fixed-site center in Henderson, Nevada and (3) an Open MRI fixed-site center in Pleasanton, California. These were financed through both capital leases with General Electric Company and internally generated funds. In the fiscal year ended June 30, 2000, we closed in the Eastern Division an Open MRI fixed-site center in Atlanta, Georgia. In the fiscal year ended June 30, 2001, we opened: (1) in the Western Division a radiology co-source outpatient fixed-site center in Marina del Rey, California, which was financed with a capital lease from General Electric Company and internally generated funds; and (2) in the Eastern Division a PET fixed-site center in Louisville, Kentucky, which was financed with outside financing. In the three months ended September 30, 2001, we opened in the Eastern Division a radiology co-source outpatient fixed-site center in Largo, Florida, which is expected to be financed with an operating lease from a local financial institution. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES We operate in a capital-intensive, high fixed-cost industry that requires significant amounts of working capital to fund operations, particularly the initial start-up and development expenses of new operations, but we are constantly under external pressure both from our customers and competitors to contain costs and reduce prices. On October 17, 2001 we entered into new senior credit facilities with Bank of America, N.A. and a syndicate of other lenders consisting of (1) a $150.0 million seven year term loan B (the entire amount of which was drawn down in connection with the acquisition), (2) a $75 million seven year delayed-draw term loan facility and (3) a $50.0 million revolving credit facility. Borrowings under the new senior credit facilities bear interest at LIBOR plus 3.5%. We are required to pay an annual unused facility fee of between 0.5% and 2.0%, payable quarterly, on unborrowed amounts under both facilities. For more information, see "Description of New Senior Credit Facilities." We expect to use our delayed-draw facility, which is available through the second anniversary of the acquisition, to fund future acquisitions and capital expenditures. We expect to use the revolving credit facility primarily to fund our future working capital needs. The new senior credit facilities contain various restrictive covenants. They prohibit us from prepaying other indebtedness, including the notes described below, and they require us to maintain specified financial ratios and satisfy financial condition tests. In addition, the new senior credit facilities prohibit us from declaring or paying any dividends and prohibit us from making any payments with respect to the new notes if 47 we fail to perform our obligations under, or fail to meet the conditions of, the new senior credit facilities or if payment creates a default under the new senior credit facilities. For more information, see "Description of New Senior Credit Facilities," "Description of Notes" and "Risk Factors -- Risks Relating to the Notes." In addition to the indebtedness under the new senior credit facilities, we also issued the outstanding notes, consisting of $225 million aggregate principal amount, in a private placement exempt from registration under the Securities Act and used the proceeds thereof to retire $200 million of indebtedness under a senior subordinated bridge financing, which we incurred to finance the acquisition and related refinancing transactions, and for general corporate purposes. The indenture governing the outstanding notes, among other things, (1) restricts our and our restricted subsidiaries' ability, including the ability of the guarantors of the new notes, to incur additional indebtedness, issue shares of preferred stock, incur liens, pay dividends or make certain other restricted payments and enter into certain transactions with affiliates, (2) places certain restrictions on the ability of certain of our restricted subsidiaries, including the guarantors of the new notes, to pay dividends or make certain payments to us and (3) places restrictions on our restricted subsidiaries' ability, including the ability of the guarantors of the notes, to merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets. As a result of the acquisition and related financing transactions, in the second quarter of fiscal year ended 2002 we will record extraordinary losses of (i) approximately $20.0 million on extinguishment of existing indebtedness related to the repurchase of our 9 5/8% senior subordinated notes and the repayment of the senior credit facilities and certain other indebtedness and (ii) approximately $7.8 million on extinguishment of the senior subordinated bridge financing. For details regarding the refinancing and the terms of the new indebtedness, see "Description of New Senior Credit Facilities" and "Description of Notes." Net cash provided by operating activities was approximately $13.9 million for the three months ended September 30, 2001. Cash provided by operating activities resulted primarily from net income before depreciation and amortization (approximately $13.3 million), an increase in accounts payable and other accrued expenses (approximately $2.6 million) and a decrease in trade accounts receivable, net (approximately $0.3 million) partially offset by an increase in other current assets (approximately $2.2 million). Net cash used in investing activities was approximately $15.2 million for the three months ended September 30, 2001. Cash used in investing activities resulted primarily from our purchasing or upgrading diagnostic imaging equipment at our existing facilities (approximately $14.2 million). Net cash used in financing activities was approximately $8.3 million for the three months ended September 30, 2001, resulting primarily from principal payments of debt and capital lease obligations (approximately $8.4 million). We have committed to purchase or lease in connection with the development of new fixed-site centers and mobile facilities and replacement of diagnostic imaging equipment at fixed-site centers and mobile facilities, at an aggregate cost of approximately $26.3 million, 19 diagnostic imaging systems for delivery through January 2002. We expect to use either internally generated funds or leases from General Electric Company and others to finance the purchase of this equipment. We may purchase, lease or upgrade other diagnostic imaging systems as opportunities arise to place new equipment into service when new contract services agreements are signed, existing agreements are renewed, acquisitions are completed, or new fixed-site centers and mobile facilities are developed in accordance with our business strategy. Effective December 1, 1999, we purchased 38 pieces of diagnostic imaging equipment from General Electric Company by converting operating leases to capital leases. The capital leases bear interest at 9% per annum, have 48 to 72 month terms and contain a $1.00 buyout at the end of each lease. The total purchase price was approximately $45 million. In connection with the acquisition, we refinanced all but approximately $5.5 million of these capital leases through borrowings under the new senior credit facilities. In the future, we intend to finance purchases of diagnostic imaging equipment primarily with internally generated funds, capital leases or our new senior credit facilities rather than entering into operating leases; although we may choose to enter into operating leases for certain diagnostic imaging equipment. 48 In addition, in connection with the implementation of the electronic transaction, security and privacy standards mandated by the Health Insurance Portability and Accountability Act, or HIPAA, we expect to spend approximately $1.5 million to make necessary software upgrades to our radiology information system to make it compliant with the HIPAA transaction standards by late 2002 and with the privacy standards by 2003. We believe that, based on current levels of operations and anticipated growth, our cash from operations, together with other available sources of liquidity, including borrowings available under our new senior credit facilities, will be sufficient through September 30, 2002 to fund anticipated capital expenditures and make required payments of principal and interest on our debt, including payments due on the notes and obligations under our new senior credit facilities. In addition, we continually evaluate potential acquisitions and expect to fund such acquisitions from our available sources of liquidity, as discussed above. Our acquisition strategy may require sources of capital in addition to those currently available to us. No assurance can be given that such necessary additional funds will be available on terms acceptable to us or at all. RESULTS OF OPERATIONS For the three months ended September 30, 2001 and 2000, we focused on our results of operations through the division of our diagnostic imaging business into two geographical regions of the United States: Western and Eastern Divisions. We have divided our operations into two Divisions only for the purposes of the separation of internal management responsibilities. We do not focus on each of these Divisions as a separate business or make financial decisions as if they are separate businesses. Each Division provides diagnostic imaging services and generates both contract services and patient services revenues. In addition, we allocate resources on an overall basis to each Division to maximize returns on investment. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 Revenues: Revenues increased approximately 1.7% from approximately $52.2 million for the three months ended September 30, 2000, to approximately $53.1 million for the three months ended September 30, 2001. This increase was due primarily to the opened fixed-site centers discussed above (approximately $0.5 million) and an increase in patient services revenues (approximately $2.0 million) at existing facilities, partially offset by a decrease in contract services and other revenues (approximately $1.6 million) at existing facilities. Revenues for the Eastern and Western Division represented approximately 60% and 36%, respectively, of total revenues for the three months ended September 30, 2001. However, the percentages will be affected by future acquisitions and the establishment of fixed-site centers and mobile facilities. Contract services revenues decreased approximately 5.7% from approximately $26.3 million for the three months ended September 30, 2000, to approximately $24.8 million for the three months ended September 30, 2001. The decrease was due to the loss of certain high volume contracts which were replaced by contracts which initially have lower volumes. Contract services revenues for the Eastern and Western Division represented approximately 88% and 5%, respectively, of contract services revenues for the three months ended September 30, 2001. However, the percentages will be affected by future acquisitions and the establishment of fixed-site centers and mobile facilities. Contract services revenues, primarily earned by our mobile facilities, represented approximately 47% of total revenues for the three months ended September 30, 2001. Each year approximately one-quarter to one-third of the contract services agreements for mobile facilities are subject to renewal. It is expected that some high volume customer accounts will elect not to renew their contracts and instead will purchase or lease their own diagnostic imaging equipment and some customers may choose an alternative services provider. In the past, when such contracts have not been renewed, we have been able to obtain replacement contracts. While some replacement accounts have initially been smaller than the lost accounts, such replacement accounts' revenues have generally increased over the term of the contract; however, new and renewal contracts may not offset revenues from customers electing not to renew their contracts with us. No single source accounts for more than 10% of our total revenues. The non-renewal of a single customer contract would not have a material impact on our contract services revenues, although non-renewal of several contracts could have a material impact on contract services revenues. 49 As a result of the implementation of the OPPS for outpatient services, effective August 1, 2000 Medicare began paying hospitals for outpatient services based on ambulatory payment classification (APC) groups rather than on a hospital's costs. Each APC has been assigned a payment weight by the Centers for Medicare and Medicaid Services (CMS). Under the new OPPS, the payment due a hospital for performing an outpatient service will be an amount based on the APC weight, a dollar based conversion factor, a geographic adjustment factor to account for area labor cost differences and any other adjustments applicable to the hospital or case. Because the new OPPS appeared to have a severe adverse economic effect on hospitals, Congress enacted additional legislation in the Balanced Budget Refinement Act of 1999 (BBA) to ease such effect through 2003. Under the BBA, hospitals may receive additional payments for new technologies, transitional pass-through for innovative medical devices, drugs and biologics, outlier adjustments and transitional payment corridors. In addition, the BIPA included certain provisions requiring CMS to revise the APCs to separate contrast-enhanced diagnostic imaging procedures from those that are not contrast-enhanced. Payment for unenhanced diagnostic procedures will be reduced as a result of implementation of these provisions effective January 1, 2002, but the APC rates for certain contrast-enhanced diagnostic procedures will increase. The APC rates to become effective on January 1, 2002 will also significantly reduce Medicare payment for PET services provided to hospital outpatients. As a result of the implementation of the new OPPS, we believe that our hospital customers may seek reductions in contractual rates to the extent the hospital believes it will pay more to us than it will receive from Medicare and other third-party payors. The reduction of contractual rates for a single customer or loss of a single customer to a competitor prepared to reduce contractual rates would not have a material adverse impact on our contract services revenues; however, the reduction in contractual rates for several customers or loss of several contracts could have a material impact on our business, financial condition and results of operations. On the other hand, we believe that the impact of the new OPPS on hospital payments for diagnostic imaging services, especially for MRI and CT services, may cause hospitals to consider restructuring their diagnostic outpatient imaging services as freestanding centers which are unaffected by the new OPPS. This may provide us with additional opportunities for our radiology co-source product which involves the joint ownership and management of single and multi-modality imaging centers with hospitals. However, recent reductions in Medicare payment for MRI services provided in freestanding centers will reduce the differential between the amounts payable by Medicare for services provided in freestanding and hospital-based centers. Given the infancy and complexity of the new OPPS and the reduction in the differential between hospital and freestanding payment rates, it is difficult to determine to what extent hospitals will attempt to renegotiate existing contractual arrangements. Patient services revenues, primarily earned by our fixed-site centers, represented approximately 53% of total revenues for the three months ended September 30, 2001. Patient services revenues increased approximately 9.7% from approximately $25.7 million for the three months ended September 30, 2000, to approximately $28.2 million for the three months ended September 30, 2001. This increase was due primarily to the acquisitions and opened fixed-site centers discussed above (approximately $0.5 million) and an increase in revenues at existing facilities (approximately $2.0 million). The increase at existing facilities was due to higher utilization (approximately 7%), and a nominal increase in reimbursement from third-party payors. Patient services revenues for the Eastern and Western Division represented approximately 35% and 64%, respectively, of patient services revenues for the three months ended September 30, 2001. However, the percentages will be affected by future acquisitions and the establishment of fixed-site centers and mobile facilities. We believe that our patient services revenues received from Medicare will not be materially impacted by the new OPPS because we primarily operate freestanding fixed-site centers which are unaffected thereby. However, regulations were recently adopted by the Medicare Program which, effective January 1, 2002, reduce Medicare payment for diagnostic imaging services, including MRI and other services we provide in non-hospital settings, by approximately 7% to 9%. These reductions are expected to negatively impact our patient services revenues in the annual amount of approximately $2 million based on current revenue amounts. 50 Management believes that any future increases in revenues at existing facilities can only be achieved by higher utilization and not by increases in procedure prices; however, slower start-ups of new operations, excess capacity of diagnostic imaging equipment, competition, and the expansion of managed care may impact utilization and make it difficult for us to achieve revenue increases in the future, absent the execution of provider agreements with managed care companies and other payors, and the execution of our business strategy, particularly acquisitions. Our operations are principally dependent on our ability (either directly or indirectly through our hospital customers) to attract referrals from physicians and other health care providers representing a variety of specialties. Our eligibility to provide services in response to a referral is often dependent on the existence of a contractual arrangement with the referred patient's insurance carrier (primarily if the insurance is provided by a managed care organization). Managed care contracting is very competitive and reimbursement schedules are at or below Medicare reimbursement levels, and a significant decline in referrals could have a material impact on our business, financial condition and results of operations. Costs of Operations: Costs of operations decreased approximately 5.9% from approximately $40.5 million for the three months ended September 30, 2000, to approximately $38.1 million for the three months ended September 30, 2001. This decrease was due primarily to the elimination of amortization as a result of the adoption of SFAS 142 discussed below (approximately $1.4 million), and reduced costs at existing facilities (approximately $1.4 million), partially offset by costs related to the opened fixed-site centers discussed above (approximately $0.4 million). The decrease at existing facilities was due primarily to reduced supply, vehicle operations and depreciation costs, partially offset by increased salary and benefits. Costs of operations, as a percentage of total revenues, decreased to approximately 71.7% for the three months ended September 30, 2001 from approximately 77.7% for the three months ended September 30, 2000. The percentage decreased is primarily due to the elimination of goodwill amortization (discussed below) and reduced costs in equipment lease, equipment maintenance, occupancy, consulting and communications costs, partially offset by higher salary and benefit costs. We are continuing to improve operating efficiencies through cost reduction initiatives. The cost reduction initiatives are focused primarily on costs for diagnostic imaging equipment, including lease, depreciation and maintenance, occupancy, marketing and salary and benefits. Corporate Operating Expenses: Corporate operating expenses decreased approximately 1.5% from approximately $2.70 million for the three months ended September 30, 2000, to approximately $2.66 million for the three months ended September 30, 2001. The decrease was due primarily to reduced salary and benefits associated with our acquisition and development activities, consulting and travel costs, partially offset by additional information systems costs. Corporate operating expenses, as a percentage of total revenues, decreased from approximately 5.2% for the three months ended September 30, 2000, to approximately 5.0% for the three months ended September 30, 2001. Interest Expense, Net: Interest expense, net decreased approximately 11.7% from approximately $6.0 million for the three months ended September 30, 2000, to approximately $5.3 million for the three months ended September 30, 2001. This decrease was due to principal payments of long-term debt and a reduction in the effective interest rate on our variable rate debt. Provision for Income Taxes: For the three months ended September 30, 2001, the effective tax rate increased to approximately 33% from approximately 10% for the three months ended September 30, 2000, primarily as a result of recognizing in fiscal 2001 the benefits from previously unused net operating loss carryforwards. At the beginning of each fiscal year, we estimate our effective tax rate for the fiscal year. In addition, we periodically review the effective tax rate in light of certain factors, including actual operating income, acquisitions completed and new facilities opened, and the effects of benefits from our net operating loss carryforwards. This review may result in an increase or decrease in the effective tax rate during the fiscal year. We expect our effective tax rate will continue to increase in the future as previously unused net operating loss carryforwards are used. EBITDA: Earnings before interest, taxes, depreciation and amortization (EBITDA) increased approximately 8.2% from approximately $19.4 million for the three months ended September 30, 2000, to approximately $21.0 million for the three months ended September 30, 2001. This increase was primarily due 51 to lower costs of services as a result of the cost reduction initiatives described above. EBITDA for the Western Division increased approximately 33.9% from approximately $6.2 million for the three months ended September 30, 2000 to approximately $8.3 million for the three months ended September 30, 2001. EBITDA for the Eastern Division decreased approximately 7.8% from approximately $16.7 million for the three months ended September 30, 2000 to approximately $15.4 million for the three months ended September 30, 2001. The reduction in EBITDA in the Eastern Division is due primarily to the reduction in contract services revenues discussed above and to start-up costs relating to five mobile PET facilities. Income per Common and Preferred Share: On a diluted basis, net income per common and preferred share was $0.49 for the three months ended September 30, 2001, compared to net income per common and preferred share of $0.29 for the three months ended September 30, 2000. The increase in net income per common and preferred share is the result of (i) increased income from company operations, (ii) an increase in earnings from unconsolidated partnerships and (iii) reduced interest expense, partially offset by an increase in provision for income taxes. RESULTS OF OPERATIONS FOR YEARS ENDED JUNE 30, 2001 AND 2000 Revenues: Revenues increased approximately 12.1% from approximately $188.6 million for the fiscal year ended June 30, 2000, to approximately $211.5 million for the fiscal year ended June 30, 2001. This increase was due primarily to the acquisitions and opened fixed-site centers discussed above (approximately $10.9 million) and an increase in contract services, patient services and other revenues (approximately $16.4 million) at existing facilities, resulting from sales efforts and incentive initiatives implemented at existing facilities, partially offset by the assignment in the fiscal year ended June 30, 2000 of certain managed care contracts to an outside third party (approximately $4.4 million). Revenues for the Eastern and Western Divisions represented approximately 61% and 35%, respectively, of total revenues for the fiscal year ended June 30, 2001. However, the percentages will be affected by future acquisitions and the establishment of fixed-site centers and mobile facilities. Contract services revenues, primarily earned by our mobile facilities, represented approximately 49% of total revenues for the fiscal year ended June 30, 2001. Contract services revenues increased approximately 3.3% from approximately $100.1 million for the fiscal year ended June 30, 2000, to approximately $103.4 million for the fiscal year ended June 30, 2001. The increase was due to the addition of five mobile facilities and a combination of higher utilization and more fixed monthly fee contracts at our existing mobile customer base (approximately $7.7 million), partially offset by the assignment in the fiscal year ended June 30, 2000 of certain managed care contracts to an outside third party (approximately $4.4 million). Contract services revenues for the Eastern and Western Divisions represented approximately 87% and 6%, respectively, of contract services revenues for the fiscal year ended June 30, 2001. However, the percentages will be affected by future acquisitions and the establishment of fixed-site centers, and mobile facilities. Patient services revenues, primarily earned by our fixed-site centers, represented approximately 51% of total revenues for the fiscal year ended June 30, 2001. Patient services revenues increased approximately 23.8% from approximately $86.8 million for the fiscal year ended June 30, 2000, to approximately $107.5 million for the fiscal year ended June 30, 2001. This increase was due primarily to the acquisitions and opened fixed-site centers discussed above (approximately $10.9 million) and an increase in revenues at existing facilities (approximately $9.8 million). The increase at existing facilities was due to higher utilization (approximately 9%), and a nominal increase in reimbursement from third-party payors. Patient services revenues for the Eastern and Western Divisions represented approximately 37% and 62%, respectively, of patient services revenues for the fiscal year ended June 30, 2001. However, the percentages will be affected by future acquisitions and the establishment of fixed-site centers and mobile facilities. Costs of Operations: Costs of operations increased approximately 6.9% from approximately $151.4 million for the fiscal year ended June 30, 2000, to approximately $161.9 million for the fiscal year ended June 30, 2001. This increase was due primarily to additional costs related to the acquisitions and opened fixed-site centers discussed above (approximately $7.1 million) and at existing facilities (approximately $8.0 million), primarily salary and benefits and depreciation, partially offset by reduced equipment leases, supply costs, 52 consulting and marketing costs, and the elimination of costs resulting from the assignment in the fiscal year ended June 30, 2000 of certain managed care contracts to an outside third party (approximately $4.6 million). The decrease in equipment lease costs and the increase in depreciation is primarily the result of the buy-out of operating leases discussed above and purchases of new diagnostic imaging equipment rather than entering into operating leases. The adoption of SFAS 142 in the fiscal year ending June 30, 2002 discussed below will result in a decrease of annual goodwill amortization of approximately $5.4 million. Costs of operations, as a percentage of total revenues, decreased to approximately 76.5% for the fiscal year ended June 30, 2001 from approximately 80.3% for the fiscal year ended June 30, 2000. The percentage decrease is primarily due to reduced costs in equipment lease, equipment maintenance, occupancy, consulting and communications costs, partially offset by higher depreciation and salary and benefit costs. Corporate Operating Expenses: Corporate operating expenses decreased approximately 0.9% from approximately $10.9 million for the fiscal year ended June 30, 2000, to approximately $10.8 million for the fiscal year ended June 30, 2001. The decrease was due primarily to reduced salary and benefits associated with our acquisition and development activities, consulting and travel costs, partially offset by additional information systems costs. Corporate operating expenses, as a percentage of total revenues, decreased from approximately 5.8% for the fiscal year ended June 30, 2000, to approximately 5.1% for the fiscal year ended June 30, 2001. Interest Expense, Net: Interest expense, net increased approximately 25.1% from approximately $18.7 million for the fiscal year ended June 30, 2000, to approximately $23.4 million for the fiscal year ended June 30, 2001. This increase was due primarily to additional debt related to (1) the acquisitions discussed above, (2) the buy-out of operating leases discussed above, (3) upgrades to existing diagnostic imaging equipment, and (4) a charge of approximately $0.7 million related to the interest rate swap discussed below, partially offset by reduced interest as a result of principal payments of long-term debt. Provision for Income Taxes: For the fiscal year ended June 30, 2001, the effective tax rate increased to approximately 16% from approximately 14% for the fiscal year ended June 30, 2000, primarily as a result of recognizing in the fiscal year ended June 30, 2000 the benefits from previously unused net operating loss carryforwards. EBITDA: EBITDA increased approximately 33.7% from approximately $60.6 million for the fiscal year ended June 30, 2000, to approximately $81.0 million for the fiscal year ended June 30, 2001. This increase was primarily due to higher revenues at existing facilities as a result of the revenue enhancing efforts described above, lower costs of services as a result of the cost reduction initiatives described above, and decreased equipment lease expense as a result of the buy-out of operating leases discussed above. Income per Common and Converted Preferred Share: On a diluted basis, net income per common and converted preferred share was $1.42 for the fiscal year ended June 30, 2001, compared to net income per common and converted preferred share of $0.76 for the fiscal year ended June 30, 2000. The increase in net income per common and converted preferred share is the result of (1) increased income from company operations and (2) an increase in earnings from unconsolidated partnerships, partially offset by (1) increased interest expense and (2) an increase in provision for income taxes. RESULTS OF OPERATIONS FOR FISCAL YEARS ENDED JUNE 30, 2000 AND 1999 Revenues: Revenues increased approximately 16.4% from approximately $162.0 million for the fiscal year ended June 30, 1999, to approximately $188.6 million for the fiscal year ended June 30, 2000. This increase was due primarily to the acquisitions and opened fixed-site centers discussed above (approximately $15.2 million) and an increase in contract services and patient services revenues (approximately $12.7 million) at existing facilities, partially offset by a decrease in other revenues (approximately $1.3 million), primarily due to a one-time settlement payment in connection with an earn-out from the sale of our lithotripsy partnerships, which was recorded in the fiscal year ended June 30, 1999 (approximately $0.4 million). Contract services revenues increased approximately 17.1% from approximately $85.5 million for the fiscal year ended June 30, 1999, to approximately $100.1 million for the fiscal year ended June 30, 2000. This 53 increase was due primarily to the acquisitions discussed above (approximately $4.0 million) and an increase in our existing mobile customer base (approximately $10.6 million). The increase in our existing mobile customer base was due to (1) the addition of six mobile facilities and (2) higher utilization (approximately 14%) at our existing mobile facilities, partially offset by a decline in reimbursement from customers (approximately 3%). Patient services revenues increased approximately 17.9% from approximately $73.6 million for the fiscal year ended June 30, 1999, to approximately $86.8 million for the fiscal year ended June 30, 2000. This increase was due primarily to the acquisitions and opened fixed-site centers discussed above (approximately $11.1 million) and an increase in revenues at existing facilities (approximately $2.3 million), partially offset by reduced revenues from the closure of the Open MRI fixed-site center discussed above (approximately $0.2 million). The increase at existing facilities was due to higher utilization (approximately 9%), partially offset by a decline in reimbursement from third-party payors (approximately 3%). Costs of Operations: Costs of operations increased approximately 15.3% from approximately $131.3 million for the fiscal year ended June 30, 1999, to approximately $151.4 million for the fiscal year ended June 30, 2000. This increase was due primarily to additional costs related to the acquisitions and opened fixed-site centers discussed above (approximately $14.5 million) and at existing facilities (approximately $5.9 million), partially offset by reduced expenses for the closed Open MRI fixed-site center discussed above (approximately $0.3 million). Costs of operations, as a percentage of total revenues, decreased to approximately 80.3% for the fiscal year ended June 30, 2000 from approximately 81.1% for the fiscal year ended June 30, 1999. The percentage decrease is primarily due to reduced costs in equipment lease, depreciation, equipment maintenance and occupancy, partially offset by higher salary and benefit costs. Corporate Operating Expenses: Corporate operating expenses increased approximately 3.8% from approximately $10.5 million for the fiscal year ended June 30, 1999, to approximately $10.9 million for the fiscal year ended June 30, 2000. This increase was due primarily to additional information systems costs, partially offset by a decrease in travel, legal and consulting costs. Corporate operating expenses, as a percentage of total revenues, decreased from approximately 6.5% for the fiscal year ended June 30, 1999, to approximately 5.8% for the fiscal year ended June 30, 2000. Interest Expense, Net: Interest expense, net increased approximately 29.0% from approximately $14.5 million for the fiscal year ended June 30, 1999, to approximately $18.7 million for the fiscal year ended June 30, 2000. This increase was due primarily to additional debt related to (1) the acquisitions discussed above, (2) the buy-out of operating leases discussed above, (3) higher interest rates on our floating rate debt and (4) the upgrade of our existing diagnostic imaging equipment, partially offset by reduced interest as a result of principal payments of long-term debt. EBITDA: EBITDA increased approximately 32.9% from approximately $45.6 million for the fiscal year ended June 30, 1999, to approximately $60.6 million for the fiscal year ended June 30, 2000. EBITDA for the fiscal year ended June 30, 1999 excludes the provision for reorganization and other costs of approximately $3.3 million. This increase was primarily due to higher revenues at existing facilities as a result of the revenue enhancing efforts described above, lower costs of services as a result of the cost reduction initiatives described above, and decreased equipment lease expense as a result of the buy-out of operating leases discussed above. Provision for Income Taxes: Provision for income taxes increased from a benefit of approximately $3.2 million for the fiscal year ended June 30, 1999, to approximately $1.1 million for the fiscal year ended June 30, 2000. The increase is due to our recording a reduction to the valuation allowance of approximately $3.5 million to recognize anticipated benefits from the utilization of certain net operating loss carryforwards in 1999. The effective tax rate increased to approximately 14% in 2000 from approximately 11% in 1999 primarily as a result of the effects of benefits from our net operating loss carryforwards. Income per Common and Converted Preferred Share: On a diluted basis, net income per common and converted preferred share was $0.76 for the fiscal year ended June 30, 2000, compared to net income per common and converted preferred share of $0.65 for the fiscal year ended June 30, 1999. Excluding the one- 54 time provision for reorganization and other costs and the benefit for income taxes, net income per common and converted preferred share on a diluted basis for the fiscal year ended June 30, 1999 would have been $0.63. The increase in net income per common and converted preferred share is the result of (1) increased income from company operations and (2) an increase in earnings from unconsolidated partnerships, as a result of new diagnostic imaging equipment installed in 1999, partially offset by (1) increased interest expense and (2) an increase in provision for income taxes. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK In the fiscal year ended June 30, 1998, in the normal course of business, we entered into an interest rate swap with a notional amount of $40 million, for the purpose of fixing the interest rate of a corresponding amount of $40 million of floating rate debt. This swap had a three year term and was extendable for an additional three years at the option of the bank. During the fiscal year ended June 30, 2001, we recorded additional interest expense of approximately $0.7 million due to changes in the fair value of the swap. In March 2001, the swap was extended for an additional three years by the bank. We expect the swap to qualify for hedge accounting through its maturity. At September 30, 2001, we had outstanding long-term debt of approximately $65.5 million, which has floating rate terms. We had outstanding an interest rate swap, converting $36.0 million of our floating rate debt to fixed rate debt. Under the terms of the interest rate swap agreement, we are exposed to credit loss in the event of non-performance by the swap counterparty. However, we do not anticipate non-performance by the counterparty. We provide our services in the United States and receive payment for our services exclusively in United States dollars. Therefore, our business is unlikely to be affected by factors such as changes in foreign market conditions or foreign currency exchange rates. RECENT DEVELOPMENTS On November 1, 2001, the Centers for Medicare and Medicaid Services ("CMS") announced Medicare payment rates for services reimbursed under the Medicare Physician Fee Schedule, which are to become effective January 1, 2002. The new Medicare rates for MRI and many other diagnostic imaging services will be reduced by approximately 7% to 9%, effective in calendar year 2002. In addition, CMS published a notice announcing the new rates for procedures performed in hospital outpatient departments, which reduce Medicare payment for MRI and CT services performed without the use of contrast agents and increase the Medicare payment for certain procedures performed without contrast and then with contrast. NEW PRONOUNCEMENTS In March 2000, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation" (FIN 44). FIN 44 provides guidance for issues arising in applying APB Opinion No. 25, "Accounting for Stock Issued to Employees." FIN 44 applies specifically to new awards, exchanges of awards in a business combination, modifications to outstanding awards and changes in grantee status that occur on or after July 1, 2001, except for the provisions related to repricings and the definition of an employee which apply to awards issued after December 15, 1998. The requirements of FIN 44 did not have a material impact on our financial condition and results of operations. In June 2001, the FASB issued SFAS No. 141, "Business Combinations." SFAS 141 addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, "Business Combinations," and FASB Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." All business combinations in the scope of SFAS 141 are to be accounted for using the purchase method of accounting. We will adopt SFAS 141 for all business combinations initiated after June 30, 2001. Also in June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes 55 APB Opinion No. 17, "Intangible Assets." SFAS 142 addresses, among other things, how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Goodwill is no longer amortized but is assessed at least annually for impairment using a fair value methodology. We adopted SFAS 142 for all goodwill and other intangible assets acquired after June 30, 2001 and for all existing goodwill and other intangible assets beginning July 1, 2001. As a result of the adoption of SFAS 142 on July 1, 2001 we ceased recording annual goodwill amortization of approximately $5.4 million. For the year ending June 30, 2002, SFAS 142 also changes the methodology and potential timing of impairment charges; however, the effect of these charges (if any) cannot be determined at this time. Under the transition arrangements of SFAS 142, we are required to complete a preliminary evaluation of impairment charges by December 31, 2001 and recognize the effects of any impairment charges prior to June 30, 2002. Such amounts would be recorded as a cumulative effect of a change in accounting principle, effective in the first quarter of fiscal 2002. Also in June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset, except for certain obligations of lessees. SFAS 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002 (with earlier application being encouraged). We do not expect the adoption of SFAS 143 to have a material impact on our financial condition and results of operations. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, " and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects and Transactions, " for the disposal of a segment of a business (as previously defined in that Opinion). The provisions of SFAS 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001, with early application encouraged and generally are to be applied prospectively. We do not expect the adoption of SFAS 144 to have a material impact on our financial condition and results of operations. 56 THE DIAGNOSTIC IMAGING INDUSTRY OVERVIEW Diagnostic imaging involves the use of non-invasive techniques to generate representations of internal anatomy on film or video. Based on government and industry sources, in calendar year 2000, the diagnostic imaging industry generated revenues in excess of $70 billion in the United States, or approximately 6% of total healthcare spending. MRI and CT services constituted approximately $10 billion or approximately 13% of the diagnostic imaging industry in 2000. MRI services have experienced substantial scan volume growth, which increased at a compounded annual growth rate, or CAGR, of 10.7% from 9.8 million in 1996 to 13.3 million in 1999 and is projected to grow at a CAGR of approximately 10.4% to 26.6 million in 2006. We believe that growth in the diagnostic imaging industry as a whole, and MRI in particular, is attributable to: - STRONG DEMAND FOR HEALTHCARE SERVICES DUE TO AN AGING POPULATION. Based on United States Census Bureau projections, one of the fastest growing segments of the population is the group over 65 years of age, which is expected to increase 14% by 2010. This aging population is expected to drive imaging scan volume increases over the coming years primarily because annual diagnostic imaging utilization increases substantially as a person ages. - WIDER PHYSICIAN AND PAYOR ACCEPTANCE OF IMAGING SYSTEMS AS A COST-EFFECTIVE, NON-INVASIVE DIAGNOSTIC TOOL WITH SUPERIOR IMAGE QUALITY. During approximately the last 30 years, there has been a major effort undertaken by the medical and scientific communities to develop cost-effective diagnostic imaging technologies and to minimize the risks associated with the application of these technologies. Much of the thrust of product development during the period has been to reduce the hazards associated with conventional x-ray and nuclear medicine techniques and to develop new, virtually harmless imaging technologies. Traditional x-rays continue to be the primary diagnostic imaging modality based on the number of procedures performed. However, the use of advanced diagnostic imaging modalities, such as MRI, which provides superior image quality compared to other diagnostic imaging technologies, CT and PET has increased rapidly in recent years. These advanced modalities allow physicians to diagnose a wide variety of diseases and injuries quickly and accurately without exploratory surgery or other surgical or invasive procedures, which are usually more expensive, involve greater risk to patients and result in longer rehabilitation time. Because advanced imaging systems are increasingly seen as a tool for reducing long-term healthcare costs, they are gaining wider acceptance among payors. - EXPANDING APPLICATIONS FOR MRI TECHNOLOGY. New technological developments are expected to extend the clinical uses of MRI and increase the number of scans performed. Recent technological advancements include: (1) magnetic resonance spectroscopy, which can differentiate malignant from benign lesions; (2) magnetic resonance angiography, which can produce three-dimensional images of body parts and assess the status of blood vessels; and (3) enhancements in teleradiology systems, which permit the digital transmission of radiological images from one location to another for interpretation. Additional improvements in imaging technologies, contrast agents and scan capabilities are leading to new non-invasive methods of diagnosing blockages in the heart's vital coronary arteries, liver metastases, pelvic diseases and certain vascular abnormalities without exploratory surgery. We believe that the use of both the diagnostic and therapeutic capabilities of MRI and other imaging services will continue to increase because of their cost-effective, time-efficient and risk/benefit advantages over alternative procedures, including surgery, and that newer technologies and future technological advancements will continue the increased use of imaging services. - A CURRENTLY RELATIVELY STABLE REIMBURSEMENT ENVIRONMENT WITH RESPECT TO NON-GOVERNMENTAL PAYORS. The diagnostic imaging industry currently benefits from relatively stable pricing from managed care payors. Focusing more on product differentiation than price competition, managed care payors have witnessed approximately 10% premium growth in calendar year 2000. As a result, the pricing pressure from this payor group has recently stabilized. 57 - INCREASED ROLE OF PREVENTIVE MEDICINE. In addition, diagnostic imaging is increasingly being used as a screening tool for preventive care. We believe that future technological advances will continue to enhance the ability of radiologists to diagnose and influence treatment. For example, experimental MRI imaging techniques, such as magnetic resonance spectroscopic imaging, are used to show the functions of the brain and to investigate how epilepsy, AIDS, brain tumors, Alzheimer's and other abnormalities affect the brain. DIAGNOSTIC IMAGING TECHNOLOGY The major categories of diagnostic imaging systems currently offered in the medical marketplace are MRI systems, CT scanners, PET scanners, digital ultrasound systems, computer-based nuclear gamma cameras, conventional x-ray and radiography/fluoroscopy systems. Each of these types of imaging systems (other than conventional x-ray) represents the marriage of computer technology and various medical imaging modalities. The following highlights the key imaging systems: Magnetic Resonance Imaging or MRI MRI is a technique that involves the use of high-strength magnetic fields to produce computer-processed, three-dimensional, cross-sectional images of the body. The resulting image reproduces soft tissue anatomy (as found in the brain, spinal cord and interior ligaments of body joints such as the knee) with superior clarity, not available by any other currently existing imaging modality, and without exposing patients to ionizing radiation. A typical MRI examination takes from 20 to 45 minutes. MRI generally reduces the cost and amount of care needed and often eliminates the need for invasive diagnostic procedures. MRI systems are typically priced in the range of $0.9 million to $2 million each. Computed Tomography or CT In CT imaging, a computer analyzes the information received from an x-ray beam to produce multiple cross-sectional images of a particular organ or area of the body. CT imaging is used to detect tumors and other conditions affecting bones and internal organs. A typical CT examination takes from 15 to 45 minutes. The current selling prices of CT systems are typically in the range of $0.3 million to $0.8 million each. Positron Emission Tomography or PET PET is a nuclear medicine procedure that produces pictures of the body's metabolic and biological functions. PET can provide earlier detection as well as monitoring of certain cancers, coronary diseases or neurological problems than other diagnostic imaging systems. The information provided by PET technology often obviates the need to perform further highly invasive and/or diagnostic surgical procedures. Interest in PET scanning has increased recently due to several factors including, among others, a growing recognition by clinicians that PET is a powerful diagnostic tool that can be used to evaluate and guide management of a patient's disease, increased third-party payor coverage and reimbursement and the availability of the isotopes without an in-house cyclotron. PET systems are priced in the range of $1.0 million to $1.4 million each. OTHER IMAGING TECHNOLOGIES - Ultrasound systems use, detect and process high frequency sound waves to generate images of soft tissues and internal body organs. - X-ray is the most common energy source used in imaging the body and is now employed in conventional x-ray systems, CT scanners and digital x-ray systems. - Bone densitometry uses an advanced technology called dual-energy x-ray absorptiometry, or DEXA, which safely, accurately and painlessly measures bone density and the mineral content of bone for the diagnosis of osteoporosis and other bone diseases. 58 - Nuclear medicine gamma cameras, which are based upon the detection of gamma radiation generated by radioactive pharmaceuticals injected or inhaled into the body, are used to provide information about organ function as opposed to anatomical structure. - Radiation oncology generally uses external beam radiation from a linear accelerator to treat cancer with ionizing radiation of the same type, but at higher doses, as diagnostic x-rays. - Lithotripsy is a non-invasive procedure for the treatment of kidney stones, typically performed on an outpatient basis, that eliminates the need for lengthy hospital stays and extensive recovery periods associated with surgery. - Gamma Knife is a radiosurgical device used to treat intracranial neoplasma and vascular anomalies, that are inaccessible or unsuitable for conventional invasive surgery. DIAGNOSTIC IMAGING SETTINGS Diagnostic imaging services, such as MRI, CT and PET are typically provided in one of the following settings: Mobile Facilities Mobile imaging facilities enable small to mid-size hospitals to gain access to advanced diagnostic imaging technology. Using specially designed trailers, imaging service providers transport imaging equipment and provide services to hospitals and clinics on a shared-service or full-time basis. Generally, hospitals and clinics contract with the imaging service provider to provide a specified schedule of service to perform scans of their patients. Providers are paid, on a fee-per-scan basis, directly by the hospitals or clinics, rather than third-party payors, such as managed care organizations, insurance companies, Medicare or Medicaid. Fixed-site Centers Fixed-site centers are diagnostic imaging facilities which range from MRI-only to multi-modality centers. Fixed-site centers may be owned and operated as: Hospitals or clinics. Imaging systems are located in and owned and operated by a hospital or clinic. These systems are primarily used by patients of the hospital or clinic, and the hospital or clinic bills third- party payors. Freestanding imaging centers. Imaging systems are located in permanent facilities not generally owned by hospitals or clinics. These centers depend upon physician referrals for their patients and generally do not maintain dedicated, contractual relationships with hospitals or clinics. In fact, these centers may compete with hospitals or clinics that have their own imaging systems to provide services to these patients. Like hospitals and clinics, these centers bill third-party payors for their services. Co-source imaging centers. Imaging systems are housed in permanent or semi-transportable facilities jointly owned by imaging service providers and hospitals. Under these arrangements, the hospital outsources its radiology function to the jointly owned facility, which is managed by the imaging services provider and located on the hospital campus. Like the other fixed-site centers, these joint venture entities bill third-party payors for their services. We believe we are one of the few participants in the diagnostic imaging industry to establish these kinds of co-sourcing arrangements. 59 BUSINESS COMPANY OVERVIEW We are a leading nationwide provider of outsourced diagnostic imaging services, serving a diverse portfolio of customers, including healthcare providers, such as hospitals and physicians, and payors, such as managed care organizations and insurance companies. As the largest integrated network of mobile facilities and fixed-site imaging centers in the United States, we believe we are unique in our ability to offer healthcare providers a broad range of comprehensive imaging solutions, from MRI services to MRI-only and multi- modality fixed-site centers, many of which we jointly own with hospitals, physician groups or other healthcare providers. We deliver our services through regional networks of diagnostic imaging facilities, comprised of: - 91 mobile, including 82 MRI and five PET, facilities. The revenues generated primarily from our mobile facilities, which we refer to as our contract services revenues, represent approximately 47% of our total revenues; and - 68 fixed-site centers operating 69 MRI systems. Approximately 40% of these are multi-modality centers, which typically include MRI and one or more of CT, x-ray, mammography, ultrasound, nuclear medicine and bone densitometry services. The revenues generated primarily from our fixed-site centers, which we refer to as our patient services revenues, represent approximately 53% of our total revenues. Healthcare providers contract with us for our outsourced imaging services because they may lack: - the financial resources to make the significant capital investments associated with the purchase of an imaging system; - the patient volume to utilize their own imaging system in a cost-effective manner; - the management and marketing expertise or the billing and collections capabilities to operate an imaging facility or center efficiently and profitably; or - the ability to add capacity independently to meet local demand. In addition, hospitals may use our outsourced imaging services to take advantage of recent federal healthcare regulatory changes that favor the outsourcing of radiology services to facilities managed by and jointly owned with a third party. We have contracts with approximately 240 hospitals and over 850 contracts with managed care organizations across 28 states. In the three months ended September 30, 2001, we completed over 186,000 procedures, and MRI services accounted for approximately 78% of our total revenues. For the fiscal year ended June 30, 2001, we had revenues of $211.5 million and EBITDA of $81.0 million. For the three months ended September 30, 2001, we had revenues of $53.1 million and EBITDA of $21.0 million. MOBILE BUSINESS OVERVIEW Hospitals can obtain access to advanced imaging technology through our network of 91 mobile, including 82 MRI, facilities. We currently have contracts with approximately 200 small to mid-size hospitals. We recruit, train, and manage the technologists that operate the equipment and provide imaging equipment services and upgrades that enable hospitals to benefit from upgraded systems without spending their own capital directly. We do not provide interpretation services for the diagnostic images produced. Interpretation services are provided by the hospital's radiologists. During the three months ended September 30, 2001, we performed over 47,000 procedures in our mobile facilities. Our mobile business operates using a wholesale model. We enter into mid-to-long-term contracts (typically three to five years) with hospitals, under which the hospitals assume responsibility for billing and collections. We are paid directly by the hospitals on a pre-determined contracted amount for our services, 60 regardless of the hospitals' reimbursement. Thus, we are able to collect our mobile revenues independently of the hospital billing and collection process. The wholesale rate is generally based upon one of three items: (1) a fee-per-scan basis (approximately 69% of our mobile business); (2) a fixed daily fee (approximately 22% of our mobile business); or (3) a monthly equipment rental fee (approximately 9% of our mobile business). We have not experienced any material write-offs with respect to our mobile business, which represents approximately 47% of our total revenues. After examining the needs of our customers, route patterns, travel times, fuel costs and system utilization, our field managers implement planning and route management to maximize the utilization of our mobile equipment while controlling the costs to locate and relocate the mobile facilities. Our mobile MRI facilities are scheduled for as little as one-half day and up to seven days per week at any particular site. Our mobile business provides a significant advantage for establishing co-source arrangements with hospitals and expanding our fixed-site business. We establish mobile routes in selected markets with the intent of growing with our customers. Our mobile facilities give us the flexibility to (1) supplement fixed-site centers operating at or near capacity until volume has grown sufficiently to warrant additional fixed-site centers, and (2) test new markets on a short-term basis prior to establishing new mobile routes or opening new fixed-site centers. Our goal is to enter into long term co-source relationships with our mobile route customers once the local market matures and sufficient patient volume is attained to support a fixed-site center. FIXED-SITE BUSINESS OVERVIEW Our fixed-site centers provide easily accessible state-of-the-art radiological services to patients, physicians, insurance payors and managed care organizations. We provide a full spectrum of imaging services through our network of 65 technologically-advanced, outpatient diagnostic imaging centers. Thirty-five of our fixed-site centers offer MRI services exclusively while our 27 multi-modality sites typically offer MRI and one or more of CT, x-ray, mammography, ultrasound, nuclear medicine and bone densitometry services. Our fixed-site business operates using a retail model. We provide the equipment and technologists for the procedures, contract with radiologists to interpret the scans, and bill payors directly. Revenue is recorded as patient services revenues after the service has been provided, net of a contractual allowance that varies in each market. We bill the payors and patients for the technical fee associated with the use of the equipment and a professional fee associated with the radiologists interpreting the scans. We do not recognize the professional fees as revenues, and we exclude the associated receivables from our balance sheet. During the three months ended September 30, 2001, we performed over 139,000 procedures at our fixed-site centers. We do not engage in the practice of medicine. We enter into agreements with radiologists to provide professional services, which include supervision and interpretation of radiological procedures and quality assurance. We have approximately 40 exclusive contracts with hospitals for our fixed-site services. Our contracts with hospitals for fixed-site services are generally five to 15 years in length. We have over 850 contracts with managed care organizations at our fixed-site centers. These contracts generally have one-year terms which automatically renew for one-year periods and are primarily on a discounted fee-for-service basis. We have more than doubled our number of managed care contracts since the fiscal year ended June 30, 1997. In addition to our independent facilities, we co-source operations with hospitals through strategic partnerships, often in the form of joint ventures. Under these arrangements, the hospital outsources its radiology function (primarily MRI) to us and we then install the appropriate imaging equipment on the hospital campus. The co-source product is attractive to hospitals who cannot afford the significant capital investment associated with MRI systems or lack patient volume to utilize these systems in a cost-effective manner but want to maintain some control over the MRI operation as well as a residual equity interest. These co-source arrangements provide additional benefits in that they (1) permit hospitals to take advantage of recent federal healthcare regulatory changes that favor the outsourcing of radiology services to facilities that are jointly owned with and managed by third parties and (2) obtain, for our company, a motivated partner capable of generating significant scan volumes through the fixed-site centers. A further benefit to us is that we 61 charge the joint venture a management and billing fee for supporting the day-to-day operations of the jointly owned and managed facility. COMPETITIVE STRENGTHS We believe we are well-positioned to capitalize on the favorable trends in the diagnostic imaging industry. We attribute our leading market position to the following strengths: COMPREHENSIVE OUTSOURCED IMAGING SOLUTIONS. Unlike most of our competitors, we operate integrated, regional networks comprised of both mobile facilities and fixed-site imaging centers. Through these networks, we believe we have a unique ability to offer healthcare providers a broad range of outsourcing solutions to meet their diverse and developing imaging needs, whether through mobile MRI, MRI-only or multi-modality fixed-site centers or joint venture facilities. In addition to providing these customers with imaging equipment and technical expertise, we can tailor solutions, based on customers' needs, to include day-to-day management, marketing support, billing and collection assistance, as well as site design and development. STRONG REGIONAL NETWORKS WITH SIGNIFICANT MARKET PRESENCE. We have developed a substantial presence in our targeted markets by forming regional networks of imaging facilities that emphasize quality of care, produce cost-effective diagnostic information and provide superior service to our customers. Clustering our facilities in regional networks enables us to: - offer a broad range of imaging services; - provide access to convenient locations and greater scheduling flexibility; - maximize our equipment utilization; - leverage our marketing efforts; and - benefit from economies of scale in purchasing, negotiating payor contracts and reducing overhead through the centralization of certain administrative functions. WELL ESTABLISHED RELATIONSHIPS WITH HOSPITAL AND MANAGED CARE CUSTOMERS. Our hospital and managed care customers accounted for approximately 50% and 33%, respectively, of total revenues for the fiscal year ended June 30, 2001. Our 60-member sales force focuses its marketing efforts on maintaining and expanding our relationships with hospital and managed care customers. Hospitals. We have approximately 240 exclusive contracts with hospitals, including 200 for mobile facility services and 40 for fixed-site services. - Our mobile facilities typically operate under contracts with average terms of three to five years with an overall renewal rate of approximately 85% since July 2000. Our mobile facilities operate under a wholesale model in which we provide a specified schedule of services and bill the hospital directly, typically on a fee-per-scan basis. Our mobile facilities are rotated among multiple hospitals in a manner intended to optimize equipment utilization. - Our contracts with hospitals for fixed-site services generally have terms of five to 15 years. We primarily operate our fixed-site centers under a retail model in which we bill our payor customers and patients directly on a fee-for-service basis. As one of the largest networks of hospital outsourced radiology services, we believe we are a preferred joint venture partner for hospitals and are uniquely positioned to convert mobile customers into long-term fixed-site center relationships as these customers' scan volumes increase and it becomes more economical for them to establish a fixed-site center. These conversions also decrease the risk associated with mobile contract renewal. To date, we have completed 19 mobile to fixed-site conversions. Managed Care Organizations. Through our regional networks, we offer managed care organizations "one-stop shopping," which includes centralized scheduling, single invoices, multiple locations and quality assurance. Since the fiscal year ended June 30, 1997, we have more than doubled the number of our managed care contracts, and we currently have over 850 contracts at our fixed-site centers. Due to our extensive 62 relationships with managed care payors, we are able to provide services for a large base of referring physicians and as a result, increase scan volumes at our centers. TECHNOLOGICALLY ADVANCED MRI SYSTEMS. We operate our mobile facilities and fixed-site centers with state-of-the-art equipment that allows us to perform the variety, quality and volume of scans required by our customers. Of our 126 conventional MRI systems, 69% have a magnet field strength of 1.5 Tesla, which is the industry's highest commercial standard, and 94% have a magnet field strength of 1.0 Tesla or greater. We maintain our imaging systems with software enhancements and upgrades to increase capacity and to perform new applications, such as stroke and cardiac evaluation and cancer detection. The average age of our MRI equipment is 3.1 years with an estimated useful life of 10 years. EXPERIENCED MANAGEMENT TEAM. We have a highly experienced senior management team with an average of 17 years of experience in the healthcare services industry. Management has demonstrated its ability to generate significant growth through a combination of same-store growth, developing new mobile customers and routes, establishing fixed-site centers and successfully integrating 12 acquisitions since the fiscal year ended June 30, 1996. From the fiscal year ended June 30, 1997 to the fiscal year ended June 30, 2001, revenues increased from $92.3 million to $211.5 million, reflecting a 23.0% CAGR, while EBITDA increased from $15.5 million to $81.0 million, a 51.1% CAGR. BUSINESS STRATEGY Our objective is to be the leading provider of outsourced diagnostic imaging services in our target markets by further developing and expanding our regional networks. We plan to realize our objective by: MAXIMIZING UTILIZATION OF OUR EXISTING FACILITIES. We intend to expand in our regional markets by leveraging our existing facility network and customer relationships, while reducing costs through economies of scale and ongoing cost reduction measures. To this end, we intend to: - broaden our physician referral base and generate new sources of revenues through selective marketing activities, such as educating physicians on new applications for diagnostic imaging equipment, providing technology training for physicians and their staffs, and other customer service programs; - focus our marketing efforts on attracting additional managed care customers; - add new modalities such as CT, ultrasound and bone densitometry to increase scan volume and economies of scale by leveraging our existing fixed-site infrastructure; - expand MRI applications to increase scan volume; - continue to focus on our unique ability to convert developing mobile operations into fixed-site centers; and - maximize cost efficiencies through increased purchasing power and the continual reduction of overhead expenses. DEVELOPING DE NOVO OPPORTUNITIES. We will continue to pursue growth opportunities within our existing regional networks by opening new fixed-site centers and adding new mobile routes where attractive returns on investment can be achieved and sustained. We will also selectively implement additional mobile PET systems and routes. Mobile PET presents an attractive growth opportunity due to increased physician acceptance of PET as a diagnostic tool, and recently expanded Medicare coverage of PET procedures. In addition, we will continue to pursue partnerships with hospitals because we believe they have the potential to provide us with a steady source of scan volume. We believe this will be an area for additional growth for us because we expect that hospitals may respond to recent federal healthcare regulatory changes by outsourcing radiology services to facilities that are jointly owned with and managed by third parties. PURSUING STRATEGIC ACQUISITIONS. Acquisitions have been an integral part of our strategy. We expect to selectively acquire imaging centers to augment our penetration in existing regional markets and increase economies of scale. We may also enter new markets where we believe we can establish a strong regional network. Diagnostic imaging remains a highly fragmented industry as multi-facility chains account for less 63 than half of the total imaging centers. We believe we are well positioned to capitalize on the ongoing consolidation of the imaging industry. Our management team is experienced at successfully identifying, negotiating, completing and integrating acquisitions. Since the fiscal year ended June 30, 1996, we have completed 12 acquisitions comprising over 45 imaging facilities. CUSTOMERS AND CONTRACTS Our revenues are primarily generated from contract services and patient services. During the fiscal year ended June 30, 2001, approximately 49% of our revenues were generated from contract services, which we generally refer to as our mobile business, and approximately 51% were generated from patient services, which we generally refer to as our fixed-site business. The following illustrates our payor mix based on revenues for the fiscal year ended June 30, 2001:
PERCENT OF TOTAL PAYOR REVENUES - ----- ---------------- Hospital(1)................................................. 50% Managed Care and Insurance.................................. 33% Medicare/Medicaid........................................... 12% Workers' Compensation....................................... 3% Other....................................................... 2%
- --------------- (1) No single hospital accounts for more than 2% of our total revenues. Contract services revenues are generally earned from services billed to a hospital or other healthcare provider, which include fee-for-service arrangements in which revenues are based upon a contractual rate per procedure; equipment rental in which revenues are generally based upon a fixed monthly rental; and management fees. Contract services revenues are primarily earned through mobile facilities and are generally paid pursuant to hospital contracts with a life span of up to five years. Each year approximately one-quarter to one-third of the contract services agreements for mobile facilities are subject to renewal. It is expected that some high volume customer accounts will elect not to renew their agreements and instead will purchase or lease their own diagnostic imaging equipment and some customers may choose an alternative services provider. Patient services revenues are earned from services billed directly to patients or third-party payors (generally managed care organizations, Medicare, Medicaid, commercial insurance carriers and workers' compensation funds) on a fee-for-service basis and are primarily earned through fixed-site centers. Our fixed-site center operations are principally dependent on our ability (either directly or indirectly through our hospital customers) to attract referrals from physicians and other healthcare providers representing a variety of specialties. Our eligibility to provide service in response to a referral is often dependent on the existence of a contractual arrangement with the referred patient's insurance carrier (primarily if the insurance is provided by a managed care organization). We currently have in excess of 850 contracts with managed care organizations for diagnostic imaging services provided at our fixed-site centers primarily on a discounted fee-for-service basis. Managed care contracting has become very competitive and reimbursement schedules are at or below Medicare reimbursement levels. A significant decline in referrals and/or reimbursement rates would adversely affect our business, financial condition and results of operations. SALES AND MARKETING We employ 60 sales representatives serving approximately 240 hospitals and over 850 contracts with managed care organizations. We selectively invest in marketing activities to obtain new sources of revenues, expand business relationships, grow revenues at existing facilities, and maintain present business alliances and contractual relationships. Marketing activities for the fixed-site business include educating physicians on new applications, uses of the technology and customer service programs. In addition, our sales force leverages our regional market concentration to develop contractual relationships with managed care payors to increase 64 patient volume. Marketing activities for our mobile business include direct marketing to hospitals and developing leads through current customers, equipment manufacturers, and other vendors. In addition, marketing activities for the mobile business include contacting referring physicians associated with hospital customers and educating physicians. DIAGNOSTIC IMAGING AND OTHER EQUIPMENT We own or lease 187 diagnostic imaging and treatment systems, of which 154 are MRI systems, 20 are CT systems, six are PET systems, four are lithotripters, two are radiation oncology systems and one is a Gamma Knife. We own 99 of our imaging and treatment systems and have leases for the remaining 88 systems, of which 30 are operating and 58 are capital leases. Magnet strengths are measured in Tesla, and MRI systems typically use magnets with strengths ranging from 0.2 to 1.5 Tesla. The 1.0 and 1.5 Tesla strengths are generally considered optimal because they are strong enough to produce relatively fast scans but are not so strong as to create discomfort for most patients. We are in the process of upgrading or replacing our remaining conventional MRI systems from magnet strengths of less than 1.0 Tesla to magnet strengths of at least 1.0 Tesla. Our master lease agreement with GE Medical Systems (GEMS) includes a variable lease arrangement for six of our 30 leased imaging systems, which can significantly reduce our downside cash flow risk. Under our standard operating lease agreement with GEMS, we pay approximately $29,000 per month to lease each system. Under the variable rate election, we may choose to pay a monthly rental fee averaging $18,000 per system, plus 40% of the operating profits generated by such system, or to store idle systems at a fixed location for a monthly payment to GEMS of $1,500 per system, representing approximately half of the monthly maintenance costs for an idle system. Our variable lease arrangement with GEMS covers most of our older systems, which we either have upgraded or expect to replace within the next 18 to 24 months. As of November 1, 2001, we had elected the variable lease option with respect to three of the six systems in the variable rate pool. The option to elect the variable lease structure in the future with respect to additional systems provides us with downside cash flow protection in the event that any particular MRI system experiences low utilization. We continue to evaluate the mix of our diagnostic imaging equipment in response to changes in technology and to the surplus capacity in the marketplace. The overall technological competitiveness of our equipment continues to improve through upgrades, disposal and/or trade-in of older equipment and the purchase or execution of leases for new equipment. Several substantial companies are presently engaged in the manufacture of MRI (including Open MRI), CT and other diagnostic imaging equipment, including GEMS, Hitachi Medical Systems, Siemens Medical Systems and Phillips Medical Systems. We maintain good working relationships with many of the major manufacturers to better ensure an adequacy of supply as well as access to those types of diagnostic imaging systems which appear most appropriate for the specific imaging facility to be established. COMPETITION The healthcare industry in general, and the market for diagnostic imaging services in particular, is highly competitive and fragmented, with only a few national providers. We compete principally on the basis of our reputation for productive and cost-effective quality services. Our operations must compete with groups of radiologists, established hospitals and certain other independent organizations, including equipment manufacturers and leasing companies that own and operate imaging equipment. We will continue to encounter substantial competition from hospitals and independent organizations, including Alliance Imaging, Inc., Shared Medical Services, Medical Resources, Inc., Radiologix, Inc., U.S. Diagnostic Inc. and Syncor International Corporation. Some of our direct competitors that provide contract diagnostic imaging services may have access to greater financial resources than we do. Certain hospitals, particularly the larger hospitals, may be expected to directly acquire and operate imaging and treatment equipment on-site as part of their overall inpatient servicing capability, assume the associated financial risk, employ the necessary technologists and satisfy applicable certificate of need (CON) 65 and licensure requirements, if any. In addition, some physician practices that refrained from establishing diagnostic imaging capability may decide to do so, in light of the flexibility provided by the final physician self-referral regulations adopted in January 2001 and the increased availability of lower-cost specialty MRI scanners. Historically, smaller hospitals have been reluctant to purchase imaging and treatment equipment. PROPERTIES We lease approximately 20,000 square feet of office space for our executive offices in Newport Beach, California, under a lease expiring on December 14, 2002; approximately 13,000 square feet of office space for part of our Eastern Division offices in Farmington, Connecticut, under a lease expiring on April 15, 2004; approximately 4,400 square feet of office space for a billing office in Merrillville, Indiana, under a lease expiring on August 31, 2003; approximately 5,400 square feet of office space for a billing office in Santa Ana, California, under a lease expiring on October 30, 2004, and approximately 3,000 square feet of office space for a billing office in Scarborough, Maine, under a lease expiring on June 30, 2006. As of June 30, 2001, we owned 14 and leased 38 properties used as office, imaging or treatment facilities. We do not own the land underlying 11 of the 14 facilities that we own. In each case, the land is leased under a long-term lease. In addition, we own 77,690 square feet of land in Fort Worth, Texas, upon which we intended to build a multi-modality fixed- site center to which certain existing operations in Fort Worth would be relocated; however, we are currently evaluating our options. We believe our existing facilities are adequate for our reasonably foreseeable needs. In addition, the following table set forth the other principal properties used as imaging or treatment facilities by us as of September 30, 2001:
APPROXIMATE NAME OF FACILITY SQUARE FEET LOCATION - ---------------- ----------- -------- OWNED: Western Division Northern Indiana Oncology Center 800 Valparaiso, Indiana Granada Hills Open MRI Center(1) 1,100 Granada Hills, California Daniel Freeman Open MRI Center(1) 1,400 Marina Del Rey, California Berwyn Magnetic Resonance Center(1) 3,800 Berwyn, Illinois Garfield Imaging Center(1) 5,000 Monterey Park, California LAC/USC Imaging Sciences Center(1) 8,500 Los Angeles, California Maxum Diagnostic Center -- Eighth Avenue 10,000 Ft. Worth, Texas Harbor/UCLA Diagnostic Imaging Center(1) 15,000 Torrance, California Diagnostic Outpatient Center(1) 17,800 Hobart, Indiana Eastern Division Sun Coast Imaging Center(1) 1,000 Largo, Florida Thorn Run MRI(1) 1,300 Coraopolis, Pennsylvania Greater Waterbury Imaging Center(1) 3,700 Waterbury, Connecticut Wilkes-Barre Imaging Center(1) 8,200 Wilkes-Barre, Pennsylvania Chattanooga Outpatient Center 14,700 Chattanooga, Tennessee LEASED: Western Division InSight Diagnostic Imaging Center -- N. 18th Place 1,800 Phoenix, Arizona Redwood City MRI 2,900 Redwood City, California InSight Diagnostic Imaging Center 3,100 Tempe, Arizona Open MRI of Orange County 4,000 Santa Ana, California Open MRI of Pleasanton 4,400 Pleasanton, California
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APPROXIMATE NAME OF FACILITY SQUARE FEET LOCATION - ---------------- ----------- -------- InSight Diagnostic Imaging Center -- 15th Avenue 4,600 Phoenix, Arizona Washington Magnetic Resonance Center 5,000 Whittier, California InSight Diagnostic Imaging Center 5,800 Peoria, Arizona Parkway Imaging Center 5,800 Henderson, Nevada Maxum Diagnostic Center -- Preston Road 5,800 Dallas/Plano, Texas Open MRI of Hayward 6,500 Hayward, California St. John's Regional Imaging Center 10,000 Oxnard, California InSight Diagnostic Imaging Center -- E. Thomas Road 10,600 Phoenix, Arizona Maxum Diagnostic Center -- Forest Lane 18,500 Dallas, Texas InSight Mountain Diagnostics 20,000 Las Vegas, Nevada Eastern Division Lockport MRI -- Maple Road 500 Williamsville, New York Metabolic Imaging of Kentucky 1,800 Louisville, Kentucky Open MRI of Indianapolis 1,900 Indianapolis, Indiana Lockport MRI -- River Road 2,200 N. Tonawanda, New York Lockport MRI 2,400 Lockport, New York Open MRI of Southern Regional 2,400 Clarksville, Indiana Whitney Imaging Center 2,900 Hamden, Connecticut Lockport MRI -- Sheridan Drive 3,800 Tonawanda, New York Dublin Imaging Center 3,900 Dublin, Ohio Lockport MRI -- Youngs Road 4,000 Williamsville, New York Marshwood Imaging Center 5,000 Scarborough, Maine Lockport MRI -- Transit Road 5,200 East Amherst, New York Imaging Center at Murfreesboro 6,000 Murfreesboro, Tennessee Broad Street Imaging Center 6,600 Columbus, Ohio Ocean Medical Imaging Center 8,500 Tom's River, New Jersey Central Maine Imaging Center 8,700 Lewiston, Maine
- --------------- (1) We own the building and hold the related land under a long-term lease. INFORMATION SYSTEMS Our internal information technology systems allow us to manage our operations, accounting and finance, human resources, payroll, document imaging, and data warehousing. Our primary operating system is InSight Radiological Information System (IRIS), our proprietary information system. Developed between 1994 and 1999, IRIS provides front-office support for scheduling and administration of imaging procedures and back office support for billing and collections. Additional functionality includes workflow, transcription, and image management. As a result of the acquisition of imaging centers that employed other applications, we also utilize several third-party applications. At present, approximately 70% of our revenues are derived from centers that use IRIS with the remainder using third-party applications. By December 31, 2001, we expect to convert 40% of these sites to IRIS with the remainder to be converted over the next 18 months. We believe that our information technology systems infrastructure has adequate capacity for our currently projected growth. In connection with the implementation of the electronic transaction, security and privacy standards mandated by HIPAA, we project spending approximately $1.5 million to make necessary software upgrades to IRIS to make 67 the system compliant with the HIPAA transaction standards by late 2002 and with the privacy standards by 2003. See "Reimbursement of Health Care Costs -- Health Insurance Portability and Accountability Act." REIMBURSEMENT OF HEALTHCARE COSTS Medicare: Beginning in late 1983, prospective payment regulations for hospital inpatient services became effective under the federal Medicare program. The Medicare program provides reimbursement for hospitalization, physician, diagnostic and certain other services to eligible persons 65 years of age and over and certain others. Providers of service are paid by the federal government in accordance with regulations promulgated by the Department of Health and Human Services (HHS) and generally accept said payment with nominal deductible and co-insurance amounts required to be paid by the service recipient, as payment in full. In general, these regulations provide for a specific prospective payment to reimburse hospitals for inpatient treatment services based upon the diagnosis of the patient. On April 7, 2000, the Centers for Medicare and Medicaid Services (CMS) published its final rules concerning the new hospital outpatient prospective payment system for most outpatient services in Medicare-participating hospitals. Effective August 1, 2000, Medicare pays hospitals for outpatient services based on ambulatory payment classification (APC) groups rather than on a hospital's costs. Each APC has been assigned a payment weight by CMS. Under the new OPPS, the payment due a hospital for performing an outpatient service will be an amount based on the APC weight, a dollar based conversion factor, a geographic adjustment factor to account for area labor cost differences and any other adjustments applicable to the hospital or case. Because the new OPPS appeared to have a severe adverse economic effect on hospitals, Congress enacted additional legislation in the BBA to ease such effect through 2003. Under the BBA, hospitals may receive additional payments for new technologies, transitional pass-through for innovative medical devices, drugs and biologics, outlier adjustments and transitional payment corridors. As these transitional payments phase out or expire, some of our hospital customers may decide to discontinue or restructure their arrangements with providers of diagnostic imaging services, which may have a material adverse effect on our operations. In addition, the BIPA included certain provisions requiring CMS to revise the APCs to separate contrast-enhanced diagnostic imaging procedures from those that are not contrast-enhanced. Accordingly, payment for unenhanced MRI and other diagnostic procedures will be reduced as a result of implementation of these provisions, effective January 1, 2002; however the APC rates for certain contrast-enhanced diagnostic procedures will increase. The APC rates to become effective on January 1, 2002 will also significantly reduce Medicare payment for PET services provided to hospital outpatients. As a result of the implementation of the new OPPS, we believe that our hospital customers may seek reductions in contractual rates to the extent the hospital believes it will pay more to us than it will receive from Medicare and other third-party payors. The reduction of contractual rates for a single customer or loss of a single customer to a competitor prepared to reduce contractual rates would not have a material adverse impact on our contract services revenues; however, the reduction in contractual rates for several customers or loss of several contracts could have a material impact on our business, financial condition and results of operations. On the other hand, we believe that the impact of the new OPPS on hospital payments for diagnostic imaging services, especially for MRI services, may cause hospitals to consider restructuring their MRI facilities as freestanding centers which are unaffected by the new OPPS. This may provide us with additional opportunities for our radiology co-source product which involves the joint ownership and management of MRI facilities with hospitals. On the other hand, recent reductions in Medicare payment for MRI services provided in freestanding centers will reduce the differential between the amounts payable by Medicare for services provided in freestanding and hospital-based centers. Given the infancy and complexity of the new OPPS and the reduction in the differential between hospital and freestanding payment rates, it is difficult to determine to what extent hospitals will attempt to renegotiate existing contractual arrangements. Multi-modality and certain fixed-site centers which are freestanding are not directly affected by OPPS, which applies only to hospital-based facilities. Congressional and regulatory actions reflect industry-wide cost-containment pressures that we believe will affect all healthcare providers for the foreseeable future. A recent 68 initiative by CMS to impose a 24% reduction in Medicare payment for the technical component (i.e. the facilities, equipment, overhead and non-physician staff) of diagnostic imaging services provided in non-hospital settings was indefinitely postponed due to flaws in CMS' cost study methodology. CMS has indicated that it will continue to evaluate diagnostic imaging technical component reimbursement. Effective January 1, 2002, payment for these services is to be reduced by approximately 5.4% as part of an across-the-board reduction affecting all services reimbursed under the Medicare Physician Fee Schedule. In addition, the Medicare allowances to become effective on January 1, 2002 reflect an additional 2% to 3% reduction for the technical component of all services, including the MRI and other diagnostic imaging services provided by us. We cannot assure you that Medicare payment for diagnostic imaging services will not be further reduced in the future, which would have a material adverse effect on our financial condition and results of operations. In order for our hospital customers to receive payment from Medicare with respect to our mobile services, our services must be furnished in a "provider-based" department or be a covered service furnished "under arrangements." On April 7, 2000, Medicare published new rules establishing financial, technical and administrative criteria for being a "provider-based" department, as well as new requirements for management contracts for "provider-based" departments. Our services to hospitals possibly may not meet Medicare's new standards for being a "provider-based" service, although that is uncertain because at this time very little guidance exists regarding the proper interpretation of this new Medicare regulation. If our services to hospital customers are not furnished in a "provider-based" setting, the services would not be covered by Medicare unless they are found to be a service furnished "under arrangements" to a hospital. The extent to which "under arrangements" services may be covered by Medicare when they do not meet the "provider-based" standards is unclear. In the BIPA, Congress "grandfathered" until October 1, 2002 all sites that were paid as provider-based sites as of October 1, 2000. The provision permits such sites to continue to be treated as "provider-based" during the two-year grandfather period and not be subject to penalties for past non-compliance as long as they either have a prior written determination of "provider-based" status, or apply for "provider-based" status before October 1, 2001. As the Medicare rules are clarified, it may be necessary for us to modify the contracts we have with hospital customers or to take other steps that may affect our revenues, our cost for our mobile business or the manner in which we furnish wholesale services to hospital customers. Medicaid: The Medicaid program is a jointly-funded federal and state program providing coverage for low-income persons. In addition to federally-mandated basic services, the services offered and reimbursement methods vary from state to state. In many states, Medicaid reimbursement is patterned after the Medicare program; however, an increasing number of states have established or are establishing payment methodologies intended to provide healthcare services to Medicaid patients through managed care arrangements. In addition, in a number of states, state Medicaid agencies have refused to authorize entities organized as Independent Diagnostic Treatment Facilities (IDTFs) (such as most of our fixed-site centers) to participate in the Medicaid program. Because the volume of services that we provide to Medicaid patients is limited, however, modifications of Medicaid reimbursement methodologies are not expected to have a material adverse impact on our business, financial condition and results of operations. Managed Care: Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) and other managed care organizations attempt to control the cost of healthcare services, including, imposing lower payment rates, limiting services or mandating less costly treatment alternatives. Managed care contracting has become very competitive and reimbursement schedules are at or below Medicare reimbursement levels. The development and expansion of HMOs, PPOs and other managed care organizations within our regional networks could have a negative impact on utilization of our services in certain markets and/or affect the revenue per procedure which we can collect, since such organizations will exert greater control over patients' access to diagnostic imaging services, the selection of the provider of such services and the reimbursement thereof. The competition among healthcare providers for contracts with all types of managed care organizations has resulted in an average length of term of such contracts of between one and three years. See "-- Customers and Contracts." Some states have adopted expanded laws or regulations restricting the assumption of financial risk by healthcare providers contracting with health plans. While we are not presently subject to such regulation, we or our customers may in the future be restricted in our ability to assume financial risk, or may be subjected to 69 reporting requirements if we do so. Any such restrictions could negatively affect our contracting relationships with health plans. Private Insurance: Private health insurance programs generally have authorized the payment for our services on satisfactory terms. However, if Medicare reimbursement is reduced, we believe that private health insurance programs will also reduce reimbursement in response to reductions in government reimbursement, which could have an adverse impact on our business, financial condition and results of operations. GOVERNMENT REGULATION The healthcare industry is highly regulated and changes in laws and regulations can be significant. Changes in the law or new interpretation of existing laws can have a material effect on our permissible activities, the relative costs associated with doing business and the amount of reimbursement by government and other third-party payors. The federal government and all states in which we currently operate regulate various aspects of our business. Failure to comply with these laws could adversely affect our ability to receive reimbursement for our services and subject us and our officers and agents to civil and criminal penalties. Federal False Claims Act: There has been an increase in qui tam actions brought under the federal False Claims Act and, in particular, under the False Claims Act's "whistleblower" provisions. Those provisions allow a private individual to bring actions in the name of the government alleging that the defendant has made false claims for payment from federal funds. After the individual has initiated the lawsuit, the government must decide whether to intervene in the lawsuit and to become the primary prosecutor. Until then the lawsuit is kept secret. If the government declines to join the lawsuit, the individual may choose to pursue the case alone, in which case the individual's counsel will have primary control over the prosecution, although the government must be kept apprised of the progress of the lawsuit, and may intervene later. Whether or not the federal government intervenes in the case, it will receive the majority of any recovery. If the litigation is successful, the individual is entitled to no less than 15%, but no more than 30%, of whatever amount the government recovers. The percentage of the individual's recovery varies, depending on whether the government intervened in the case and other factors. Recently, the number of suits brought against healthcare providers by government regulators and private individuals has increased dramatically. In addition, various states are considering or have enacted laws modeled after the federal False Claims Act, penalizing false claims against state funds. If a whistleblower action is brought against us, even if it is dismissed with no judgment or settlement, we may incur substantial legal fees and other costs relating to an investigation. Actions brought under the False Claims Act may result in significant fines and legal fees and distract our management's attention, which would adversely affect our business, financial condition and results of operations. When an entity is determined to have violated the federal False Claims Act, it must pay three times the actual damages sustained by the government, plus mandatory civil penalties of between $5,500 to $11,000 for each separate false claim, as well as the government's attorneys fees. Liability arises when an entity knowingly submits, or causes someone else to submit, a false claim for reimbursement to the federal government or submits a false claim with reckless disregard for, or in deliberate ignorance of, its truth or falsity. Simple negligence should not give rise to liability. Examples of the other actions which may lead to liability under the Act: - Failure to comply with the many technical billing requirements applicable to our Medicare and Medicaid business. - Failure to comply with Medicare requirements concerning the circumstances in which a hospital, rather than we, must bill Medicare for diagnostic imaging services we provide to outpatients treated by the hospital. - Failure of our hospital customers to accurately identify and report our reimbursable and allowable services to Medicare. - Failure to comply with the prohibition against billing for services ordered or supervised by a physician who is excluded from any federal healthcare programs, or the prohibition against employing or contracting with any person or entity excluded from any federal healthcare programs. 70 - Failure to comply with the Medicare physician supervision requirements for the services we provide, or the Medicare documentation requirements concerning physician supervision. - The past conduct of the businesses we have acquired. We strive to ensure that we meet applicable billing requirements. However, the costs of defending claims under the False Claims Act, as well as sanctions imposed under the Act, could significantly affect our business, financial condition and results of operations. Anti-kickback Statutes: We are subject to federal and state laws which govern financial and other arrangements between healthcare providers. These include the federal anti-kickback statute which, among other things, prohibits the knowing and willful solicitation, offer, payment or receipt of any remuneration, direct or indirect, in cash or in kind, in return for or to induce the referral of patients for items or services covered by Medicare, Medicaid and certain other governmental health programs. Violation of the anti-kickback statute may result in civil or criminal penalties and exclusion from the Medicare, Medicaid and other federal healthcare programs. In addition, it is possible that private parties may file qui tam actions based on claims resulting from relationships that violate this statute, seeking significant financial rewards. Many states have enacted similar statutes, which are not limited to items and services paid for under Medicare or a federally funded healthcare program. In recent years, there has been increasing scrutiny by law enforcement authorities, HHS, the courts and Congress of financial arrangements between healthcare providers and potential sources of referrals to ensure that such arrangements do not violate the anti-kickback provisions. HHS and the federal courts interpret the anti-kickback statutes broadly to apply to a wide range of financial incentives, including, under certain circumstances, distributions of partnership and corporate profits to investors who refer federal healthcare program patients to a corporation or partnership in which they have an ownership interest and to payments for service contracts and equipment leases that are designed, even if only in part, to provide direct or indirect remuneration for patient referrals or similar opportunities to furnish reimbursable items or services. HHS has issued "safe harbor" regulations that set forth certain provisions which, if met, will assure that healthcare providers and other parties who refer patients or other business opportunities, or who provide reimbursable items or services, will be deemed not to violate the anti-kickback statutes. The safe harbors are narrowly drawn and some of our relationships may not qualify for any "safe harbor"; however, failure to comply with a "safe harbor" does not create a presumption of liability. We believe that our operations materially comply with the anti-kickback statutes; however, because these provisions are interpreted broadly by law enforcement authorities, we cannot assure you that law enforcement officials or others will not challenge our operations under these statutes. Health Insurance Portability and Accountability Act: In 1996, Congress passed HIPAA, designed to guarantee the availability and renewability of health insurance coverage for certain employees and individuals, while also limiting the use of pre-existing condition restrictions. HIPAA also made substantial amendments to federal healthcare fraud and abuse laws, including: - the establishment of fraud and abuse control programs to coordinate and fund the investigation and prosecution of healthcare fraud and abuse; - the establishment of a Medicare integrity program, including medical, utilization and fraud review of Medicare providers; - the extension of existing Medicare-Medicaid anti-fraud and abuse provisions to all federal healthcare programs; - the provision of enhanced civil penalties; and - the creation of new federal crimes of healthcare fraud and making false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government sponsored programs such as the Medicare and Medicaid programs. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a 71 material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services, including those provided by non-government payors. A violation of this statute is a felony and may result in fines or imprisonment. HIPAA requires health care providers to maintain the privacy and security of health information. It will also require us to follow federal standards for electronic transactions with health plans and for protecting the privacy of individually identifiable health information and the security standards for all electronic health information. The government recently published regulations to implement the privacy standards under the Act. We are beginning to address compliance with the Act and applicable regulations. We project spending approximately $1.5 million for necessary software upgrades to make our proprietary computer operating system, IRIS, fully compliant with the HIPPA transactions standards by late 2002 and with the privacy standards by 2003. A violation of the Act's health fraud, privacy or security provisions may result in criminal and civil penalties, which may adversely affect our business, financial condition and results of operations. Stark II, State Physician Self-referral Laws: A federal law, commonly known as the "Stark Law" or "Stark II," also imposes civil penalties and exclusions from federal health programs for referrals for "designated health services" by physicians or their family members to certain entities with which they have a financial relationship (subject to certain exceptions), and for claims for payments by entities receiving such referrals. A private party may also bring a qui tam action in federal court on the basis of a Stark Law violation. "Designated health services" include, among other things, radiology services, including MRI, CT and ultrasound, radiation therapy, and hospital inpatient and outpatient services. The Stark Law does not require any fraudulent intent. Providers furnishing services pursuant to a prohibited referral may not present a claim for the services and if payments are made they may be recouped. The law applies directly to services reimbursable by Medicare and may apply to services reimburseable under Medicaid, depending on state law. Final regulations partially implementing the Stark Law were issued in January 2001 and will become effective in April 2002. It is not clear when further regulations will be published, but the CMS has taken the position that the Stark Law is self-effectuating and does not require implementing regulations. In addition, several states in which we operate have enacted or are considering legislation that prohibits "self-referral" arrangements or requires physicians or other healthcare providers to disclose to their patients any financial interest they may have with a healthcare provider whom they recommend. Possible sanctions for violating these provisions include loss of licensure and civil and criminal sanctions. Such state laws vary from state to state and seldom have been interpreted by the courts or regulatory agencies. Nonetheless, strict enforcement of these requirements is likely. Although we believe our operations materially comply with these federal and state physician self-referral laws, we cannot assure you that Stark II or other physician self-referral regulations will not be interpreted or applied in a manner that would have a material adverse effect on our business, financial condition and results of operations. FDA: The U.S. Food and Drug Administration (FDA) has issued the requisite premarket approval for all of our MRI, CT, PET, lithotripsy and Gamma Knife systems. We do not believe that any further FDA approval is required in connection with equipment currently in operation or proposed to be operated; except under regulations issued by the FDA pursuant to MQSA, all mammography facilities must have a certificate issued by the FDA. In order to obtain a certificate ,all mammography facilities are required to be accredited by an approved non-profit organization or state agency or other agency designated by the FDA. Pursuant to the accreditation process, each facility providing mammography services must comply with certain standards including annual inspection. Compliance with these standards is required to obtain payment for Medicare services and to avoid various sanctions, including monetary penalties, or suspension of certification. Although all of our facilities which provide mammography services are currently accredited by the Mammography Accreditation Program of the American College of Radiology and we anticipate continuing to meet the requirements for accreditation, the withdrawal of such accreditation could result in the revocation of certification. Congress has extended Medicare benefits to include coverage of screening mammography subject to the prescribed quality standards described above. The regulations apply to diagnostic mammography as well as screening mammography. Radiologist and Facility Licensing: The radiologists with whom we may enter into agreements to provide professional services are subject to licensing and related regulations by the states, including 72 registrations to use radioactive materials. As a result, we require our radiologists to have and maintain appropriate licensure and registrations. In addition, some states also impose licensing or other requirements on us at our facilities and other states may impose similar requirements in the future. Local authorities may also require us to obtain various licenses, permits and approvals. We believe that we have obtained all required licenses and permits; however, we cannot assure you that additional laws and state licensure requirements governing our facilities' operations will not be enacted. Liability Insurance: The hospitals and physicians who use our diagnostic imaging systems are involved in the delivery of healthcare services to the public and, therefore, are exposed to the risk of liability claims. Our position is that we do not engage in the practice of medicine. We provide only the equipment and technical components of diagnostic imaging, including certain limited nursing services, and we have not experienced any material losses due to claims for malpractice. Nevertheless, claims for malpractice have been asserted against us in the past and any future claims, if successful, could entail significant defense costs and could result in substantial damage awards to the claimants, which may exceed the limits of any applicable insurance coverage. We maintain professional liability insurance in amounts we believe are adequate for our business of providing diagnostic imaging, treatment and management services. In addition, the radiologists or other healthcare professionals with whom we contract are required by such contracts to carry adequate medical malpractice insurance. Successful malpractice claims asserted against us, to the extent not covered by our liability insurance, could have a material adverse effect on our business, financial condition and results of operations. Independent Diagnostic Treatment Facilities: Under prior Medicare policy, imaging centers generally participated in the Medicare program as either medical groups or, subject to the discretion of individual Medicare carriers, Independent Physiological Laboratories (IPLs). The IPL was a loosely defined Medicare provider category that was not specifically authorized to provide imaging services. Accordingly, certain carriers permitted IPLs to provide imaging services and others did not. In the past, we preferred, to the extent possible, to operate imaging centers for Medicare purposes as IPLs. We believed that the designation of our imaging centers as IPLs gave us greater operational control than we would have had if our imaging centers were operated under the medical group model, where we would function as a "manager." Under the IDTF regulations, imaging centers have the option to participate in the Medicare program as either IDTFs or medical groups. The IDTF regulations include more specific operational requirements than were previously required for IPLs. We either have converted or have submitted applications to convert all of our fixed-site imaging centers from IPLs to IDTFs, except in those states where the medical group model is required. In addition, since the IDTF designation is new, it is unclear to what extent and in what manner IDTFs will be monitored by CMS, but it is probable that CMS will exercise increased oversight of IDTFs compared to IPLs, which could have a material adverse effect on our business, financial condition and results of operations. Certificates of Need: Some states require hospitals and certain other healthcare facilities and providers to obtain a CON or similar regulatory approval prior to the commencement of certain healthcare operations or services, the incurring of certain capital expenditures and/or the acquisition of major medical equipment including MRI, PET and Gamma Knife systems. CON regulations may limit or preclude us from providing diagnostic imaging services or systems in certain states. We believe that we have complied or will comply with applicable CON requirements in those states where we operate. Nevertheless, a significant increase in the number of states regulating our business within the CON or state licensure framework could adversely affect our business, financial condition and results of operations. Conversely, repeal of existing CON regulations in jurisdictions where we have obtained or operate under a CON could also adversely affect our business, financial condition and results of operations, since CON regulation effectively functions as a barrier to entry. This is an area of continuing legislative activity, and we cannot assure you that CON and licensing statutes will not be modified in the future in a manner that may have a material adverse effect on our business and operations. 73 COMPLIANCE PROGRAM We have voluntarily implemented a program to monitor compliance with federal and state laws and regulations applicable to healthcare entities. We have appointed a compliance officer who is charged with implementing and supervising our compliance program, which includes a code of ethical conduct for our employees and affiliates and a process for reporting regulatory or ethical concerns to our compliance officer, including a toll-free telephone hotline. We believe that our compliance program meets the relevant standards provided by the Office of Inspector General of the HHS. An important part of our compliance program consists of conducting periodic reviews of various aspects of our operations. Our compliance program also contemplates mandatory education programs designed to familiarize our employees with the regulatory requirements and specific elements of our compliance program. EMPLOYEES As of October 31, 2001, we had approximately 1,100 full-time, 80 part-time and 340 per diem employees. None of our employees are covered by a collective bargaining agreement. Management believes its employee relations to be satisfactory. LEGAL PROCEEDINGS We are engaged from time to time in the defense of lawsuits arising out of the ordinary course and conduct of our business and have insurance policies covering such potential insurable losses where such coverage is cost-effective. We believe that the outcome of any such lawsuits will not have a material adverse impact on our business, financial condition and results of operations. COMPANY HISTORY We were formed in June 1996 as a result of the merger of American Health Services Corp. and Maxum Health Corp., two publicly held providers of diagnostic imaging services. The merger was consummated in order to achieve cost savings, enhance marketing capabilities, increase market presence and financial resources, and to take advantage of positive consolidating trends in the diagnostic imaging industry. In October 1997, we consummated a recapitalization pursuant to which (a) certain investors affiliated with TC Group, LLC and its affiliates (Carlyle), a private merchant bank headquartered in Washington, D.C., made a cash investment of $25 million in InSight and received convertible preferred stock and warrants and (b) General Electric Company surrendered its rights previously granted in connection with the merger and debt restructuring agreement to receive supplemental service fee payments equal to 14% of pretax income, plus existing preferred stock, in exchange for convertible preferred stock and warrants. These securities gave Carlyle and General Electric beneficial ownership of more than a majority of our common stock, all of which were purchased in the acquisition. On October 17, 2001, as a result of the acquisition, InSight became a wholly-owned subsidiary of InSight Holdings. See "The Acquisition and Related Financing Transactions." 74 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS We are a wholly-owned subsidiary of InSight Holdings, a corporation owned by J.W. Childs Equity Partners II, Halifax Capital Partners and certain of their affiliates. The following table sets forth the name, age and position of our directors and executive officers as of December 19, 2001.
NAME AGE POSITION - ---- --- -------- Steven T. Plochocki................... 50 President, Chief Executive Officer and Director Thomas V. Croal....................... 42 Executive Vice President and Chief Financial Officer Michael A. Boylan..................... 45 Executive Vice President, Operations, Eastern Division Michael S. Madler..................... 43 Executive Vice President, Operations, Western Division Patricia R. Blank..................... 51 Executive Vice President and Chief Information Officer Marilyn U. MacNiven-Young............. 50 Executive Vice President, General Counsel and Secretary Brian G. Drazba....................... 40 Senior Vice President, Finance and Corporate Controller Cecilia A. Guastaferro................ 41 Senior Vice President, Human Resources Steven G. Segal....................... 41 Director Edward D. Yun......................... 34 Director Michael N. Cannizzaro................. 52 Director Mark J. Tricolli...................... 30 Director David W. Dupree....................... 48 Director Kenneth M. Doyle...................... 36 Director
Our directors are elected annually by, and serve at the discretion of, our stockholder. Our executive officers are elected annually by, and serve at the discretion of our board of directors. Steven T. Plochocki has been our President, Chief Executive and a director since November 22, 1999. From January 1998 through November 19, 1999, Mr. Plochocki was President and Chief Executive Officer of Centratex Support Services, Inc., a support services company for the healthcare industry. Mr. Plochocki was President and Chief Operating Officer of Apria Healthcare Group Inc., a home healthcare company, from July 1995 through October 1997. Thomas V. Croal has been our Executive Vice President and Chief Financial Officer since February 1996. From July 1998 to June 1999, Mr. Croal also served as Chief Operating Officer. Mr. Croal served as a director of American Health Services Corp. (AHS) from March 1991 until June 1996. He served as Vice President and Chief Financial Officer of AHS from April 1991. He was Controller of AHS from 1989 until April 1991. From 1981 to 1989, Mr. Croal was employed by Arthur Andersen & Co., an independent public accounting firm. Michael A. Boylan has been our Executive Vice President, Operations, Eastern Division since July 1, 2000. From April 1998 to July 1, 2000, he was Executive Vice President and Chief Development Officer. From February 1996 to April 1998, he was Senior Vice President-Operations. Mr. Boylan has served as Executive Vice President of Maxum Health Corp. (MHC) since March 1994. From 1992 to 1994, he served as a regional vice president of MHC's principal operating subsidiary, Maxum Health Services Corp. From 1991 to 1992, he served as an Executive Director of certain of MHC's operations. From 1986 to 1991, Mr. Boylan served in various capacities as an officer or employee, including President and Chief Operating Officer, with American Medical Imaging Corporation. 75 Michael S. Madler joined us as a Senior Vice President in October 1998 and served as such until June 8, 1999 when he was appointed Executive Vice President, Operations, Western Division. From 1993 through October 1998, Mr. Madler was Chief Operating Officer of Prime Medical Services, Inc. an Austin, Texas-based lithotripsy services management company. Patricia R. Blank has been our Executive Vice President and Chief Information Officer since September 1, 1999. Prior to joining us, Ms. Blank was the principal of Blank & Company, a consulting firm specializing in healthcare consulting. From 1995 to 1998, Ms. Blank served as Executive Vice President and Chief Operating Officer of HealthHelp, Inc., a Houston, Texas-based radiology services organization managing radiology provider networks in multiple states. From 1988 to 1995, she was Corporate Director of radiology of FHP, a California insurance company. Marilyn U. MacNiven-Young has been our Executive Vice President, General Counsel and Corporate Secretary since August 1998. From February 1996 through July 1998, she was an independent consultant to us. From September 1994 through June 1995, she was Senior Vice President and General Counsel of Abbey Healthcare Group, Inc., a home healthcare company. From 1991 through 1994, Ms. MacNiven-Young served as General Counsel of AHS. Brian G. Drazba has been our Senior Vice President-Finance and Controller since July 1997. From March 1996 to July 1997, he served as Vice President-Finance. From June 1995, he served as Vice President-Finance of AHS. Mr. Drazba served as corporate controller for AHS from 1992 to 1995. From 1985 to 1992, Mr. Drazba was employed by Arthur Andersen & Co. Cecilia A. Guastaferro has been our Senior Vice President-Human Resources since July 1, 2000. From July 1997 to June 30, 2000, she was Vice President-Human Resources. Ms. Guastaferro served as Director of Human Resources of AHS from May 1994 through June 1996, when she became Director of Human Resources of InSight. Steven G. Segal became a member of our board of directors upon consummation of the acquisition. He is Senior Managing Director of J.W. Childs Associates, L.P. and has been at Childs since 1995. Prior to that time, he was an executive at Thomas H. Lee Company from 1987, most recently holding the position of Managing Director. He is also a director of Quality Stores Inc., Jillian's Entertainment Corp., National Nephrology Associates, Inc., Big V Supermarkets, Inc., The NutraSweet Company, Universal Hospital Services, Inc. and is Chairman of the Board of Empire Kosher Poultry, Inc. Edward D. Yun is a director and President of InSight Holdings and became a member of our board of directors upon consummation of the acquisition. He is a Managing Director of J.W. Childs Associates, L.P. and has been at Childs since 1996. From 1994 until 1996, he was an Associate at DLJ Merchant Banking, Inc. He is also a director of Jillian's Entertainment Corp., Pan Am International Flight Academy, Inc., National Nephrology Associates, Inc., Equinox Holdings, Inc., Chevys, Inc., Universal Hospital Services, Inc. and Hartz Mountain Corporation. Michael N. Cannizzaro became a member of our board of directors upon consummation of the acquisition. He is a Managing Director of J.W. Childs Associates, L.P. Prior to that, he was President and Chief Executive Officer of Beltone Electronics Corporation from 1998 to 2000. Prior to that, he was President of Caremark International's Prescription Service Division from 1994 to 1997; Vice President, Business Development of Caremark's Nephrology Service Division from April 1994 to September 1994; and President of Leica North America from 1993 to 1994. Prior to that, he held numerous positions in general management at Baxter Healthcare Corporation from 1976 to 1993, including the position of President of four different divisions. He is also a director of National Nephrology Associates, Inc., Universal Hospital Services, Inc. and Life Spring Nutrition Company. Mark J. Tricolli is a director and Vice President and Treasurer of InSight Holdings and became a member of our board of directors upon consummation of the acquisition. Mr. Tricolli is a Senior Associate at J.W. Childs Associates, which he joined in 2000. Prior to that Mr. Tricolli was an Associate in the Merchant Banking Division of Goldman Sachs from 1999 to 2000, an Analyst at William Blair Capital Partners, a 76 private equity firm based in Chicago, Illinois from 1995 to 1997 and an Analyst at Chemical Securities, Inc. from 1993 to 1995. David W. Dupree is a director of InSight Holdings and became a member of our board of directors upon consummation of the acquisition. Mr. Dupree is a Managing Director of The Halifax Group which he founded in January 1999. Prior to joining Halifax, Mr. Dupree was a Managing Director and Partner with The Carlyle Group, a global investment firm located in Washington, D.C., where he was primarily responsible for investments in healthcare and related sectors. Mr. Dupree is a founder of Franklin Street/Fairview Capital and served on its investment committee for its first two capital pools. Prior to joining The Carlyle Group in 1992, Mr. Dupree was a Principal in Corporate Finance with Montgomery Securities and prior to that, he was Co-Head of Equity Private Placements at Alex. Brown & Sons Incorporated. Mr. Dupree currently serves on the board of directors of Whole Foods Markets, Inc. and National Packaging Solutions Group, Inc. and previously served on our board of directors, as a designee of The Carlyle Group, from October 1997 to December 1999. Kenneth M. Doyle is a director and Vice President of InSight Holdings and became a member of our board of directors upon consummation of the acquisition. Mr. Doyle is a principal of The Halifax Group. Mr. Doyle joined The Halifax Group in January 2000. Prior to joining The Halifax Group, Mr. Doyle was an Industry Lender and Vice President at GE Equity, the private equity subsidiary of GE Capital. Prior to joining GE Equity, Mr. Doyle spent four years in investment banking as a Senior Associate for the Telecommunications Corporate Finance Group at Merrill Lynch and as an Associate with Chase Manhattan Bank in the Media and Telecommunications Group. Mr. Doyle also spent three years with Ernst & Young in the Entrepreneurial Services Group. Mr. Doyle currently serves on the board of directors of National Packaging Solutions Group, Inc. 77 EXECUTIVE COMPENSATION The following table sets forth information concerning the annual, long-term and all other compensation for services rendered in all capacities to InSight and its subsidiaries for the years ended June 30, 2001, 2000, and 1999 of (i) InSight's chief executive officer during the year ended June 30, 2001, and (ii) the four most highly compensated executive officers (other than the chief executive officer) of InSight serving as executive officers at June 30, 2001 ("Other Executive Officers"), and whose aggregate cash compensation exceeded $100,000 for the year ended June 30, 2001 (collectively, "Named Executive Officers"): SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM --------------------------------------- COMPENSATION FISCAL AWARDS YEAR STOCK OPTIONS ALL OTHER NAME AND PRINCIPAL POSITION ENDED SALARY BONUS(1) OTHER(2) (SHARES) COMP(2) - --------------------------- ------ -------- -------- -------- ------------- --------- Steven T. Plochocki.............. 2001 $280,000 $238,000 $ 9,000 50,000 $ 3,324 President and Chief 2000 158,749 125,000 5,625 125,000 1,655 Executive Officer(3) 1999 -- -- -- -- -- Thomas V. Croal.................. 2001 236,000 140,420 9,000 5,000 1,409 Executive Vice President, and 2000 225,500 75,250 9,000 -- 8,319 Chief Financial Officer 1999 215,000 -- 9,000 -- 12,596 Marilyn U. MacNiven-Young........ 2001 243,300 103,403 9,000 10,000 3,850 Executive Vice President, 2000 236,250 59,063 9,000 -- 3,964 General Counsel and Secretary 1999 206,250 -- 8,250 50,000 4,195 Michael A. Boylan................ 2001 210,000 124,950 9,000 10,000 4,365 Executive Vice President -- 2000 195,000 68,250 14,000 -- 4,819 Operations, Eastern Division 1999 195,000 -- 9,000 -- 7,277 Michael S. Madler................ 2001 200,000 119,000 9,000 50,000 6,618 Executive Vice President -- 2000 175,000 61,250 16,341 -- 4,090 Operations, Western Division 1999 106,450 25,000 4,000 30,000 3,437
- --------------- (1) Annual bonuses are earned and accrued during the fiscal years indicated, and paid subsequent to the end of each fiscal year. (2) Amounts of Other Compensation include perquisites (auto allowances and commissions for contract awards and renewals) and amounts of All Other Compensation include (i) amounts contributed to InSight's 401(k) profit sharing plan, (ii) specified premiums on executive split-dollar insurance arrangements and (iii) specified premiums on executive health insurance arrangements, for the Named Executive Officers. (3) On November 22, 1999, Mr. Plochocki joined InSight as president and chief executive officer. OPTION GRANTS For the year ended June 30, 2001, stock options were granted under the 1999 Stock Option Plan to the Named Executive Officers, as follows: 78
INDIVIDUAL GRANTS POTENTIAL REALIZABLE --------------------------------------------------------- VALUE AT ASSUMED NUMBER OF PERCENT OF ANNUAL RATES OF STOCK SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR UNDERLYING GRANTED TO OPTION TERM(2) OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------------- NAME GRANTED FISCAL YEAR(1) PER SHARE DATE(3) 5% 10% - ---- ---------- -------------- -------------- ---------- ---------- ---------- Steven T. Plochocki........... 50,000 14% $8.37 8/25/10 $263,192 $666,982 Thomas V. Croal............... 5,000 1% $8.37 8/25/10 26,319 66,698 Marilyn U. MacNiven-Young..... 10,000 3% $8.37 8/25/10 52,638 133,398 Michael A. Boylan............. 10,000 3% $8.37 8/25/10 52,638 133,398 Michael S. Madler............. 50,000 14% $8.37 8/25/10 263,192 666,982
- --------------- (1) The options were granted at an exercise price exceeding the fair market value (the closing price reported on The Nasdaq SmallCap Market) for the common stock on the date of grant. (2) Potential realizable value is determined by taking the exercise price per share and applying the stated annual appreciation rate compounded annually for the remaining term of the option (ten years), subtracting the exercise price per share at the end of the period and multiplying the remaining number by the number of options granted. Actual gains, if any, on stock option exercises and InSight's common stock holdings are dependent on the future performance of the common stock and overall stock market conditions. (3) Options were exercisable starting twelve months after the date of grant, with 25% of the shares becoming exercisable at that time and with an additional 25% of the shares becoming exercisable on each successive anniversary date with full vesting occurring on the fourth anniversary date. The options were granted for a term of ten years, subject to earlier termination in certain events related to termination of employment. OPTION EXERCISES AND FISCAL YEAR-END VALUES. During the year ended June 30, 2001, none of the Named Executive Officers of InSight exercised any stock options. The following table sets forth information with respect to the unexercised options to purchase common stock granted under (i) MHC's and AHS's stock option plans and assumed by InSight pursuant to the merger of American Health Services Corp. and Maxum Health Corp., (ii) InSight's 1996 Employee Stock Option Plan, (iii) InSight's 1997 Management Stock Option Plan, (iv) InSight's 1998 Employee Stock Option Plan, and (v) InSight's 1999 Stock Option Plan, for the Named Executive Officers as of June 30, 2001:
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED NUMBER OPTIONS HELD IN-THE-MONEY OPTIONS OF SHARES AT JUNE 30, 2001 AT JUNE 30, 2001(1)(2) ACQUIRED ON VALUE --------------------------- --------------------------- NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---- ----------- -------- ----------- ------------- ----------- ------------- Steven T. Plochocki........... -- -- 20,833 154,167 $ 194,372 $1,438,378 Thomas V. Croal............... -- -- 113,750 81,250 1,185,725 781,875 Marilyn U. MacNiven-Young..... -- -- 25,000 35,000 208,000 301,300 Michael A. Boylan............. -- -- 81,370 37,500 1,113,362 359,400 Michael S. Madler............. -- -- 15,000 65,000 139,950 606,450
- --------------- (1) Based on the closing price reported on The Nasdaq SmallCap Market for the InSight common stock on that date of $17.70 per share. (2) At the consummation of the acquisition, the Named Executive Officers became entitled to receive in cash the difference between $18.00 and the exercise price for each share of common stock which each could acquire pursuant to the terms of their stock option agreements; except that Messrs. Plochocki, Croal, Boylan and Madler rolled over certain of their stock options (totaling an aggregate of approximately $1.7 million) into fully vested options to purchase the common stock of InSight Holdings. 79 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Upon the consummation of the acquisition, the committees of our board of directors ceased to exist and new committees have since been established. The current compensation arrangements for our chief executive officer and each of our executive officers were established pursuant to the terms of the respective employment agreements between us and each executive officer. The terms of the employment agreements were established pursuant to arms-length negotiations between the equity sponsors and each executive officer. During fiscal year ended June 30, 2001, our former board of directors established a Compensation, Audit, Executive and Nominating Committee. None of our current directors served on any of these committees. Since the acquisition, our board of directors has established the following committees: A Compensation Committee consisting of Michael Cannizzaro, David Dupree, Steven Plochocki and Steven Segal. The Compensation Committee is responsible for determining the specific forms and levels of compensation of our executive officers. An Audit Committee consisting of Kenneth Doyle, Mark Tricolli and Edward Yun. The committee's principal function is to review the results of our annual audit with our independent auditors and review the performance of our independent auditors. An Executive Committee consisting of Michael Cannizzaro, David Dupree, Steven Plochocki and Steven Segal. The committee is authorized to exercise all the power and authority of the board of directors in the management of our business, however, its authority does not extend to certain fundamental corporate transactions. A Regulatory Compliance Committee consisting of Kenneth Doyle, Mark Tricolli and Edward Yun. The committee is responsible for monitoring regulatory compliance of our business. COMPENSATION OF DIRECTORS All members of our board of directors will be reimbursed for their usual and customary expenses incurred in connection with attending all board meetings but will not otherwise be compensated for serving in such capacity. MANAGEMENT PARTICIPATION As described elsewhere in this prospectus, upon consummation of the acquisition, certain members of our senior management rolled over a portion of their options in InSight into options of InSight Holdings and exchanged their common stock and remaining options in InSight for cash. The individuals, the value of their InSight common stock and options, the value of their option rollover into InSight Holdings and cash proceeds as a result of the acquisition are indicated in the chart below.
TOTAL COMMON STOCK TOTAL CASH NAME AND OPTION VALUE OPTION ROLLOVER VALUE PROCEEDS - ---- ------------------ --------------------- ---------- Steven T. Plochocki......................... $1,685,250 $ 505,575 $1,179,675 Thomas V. Croal............................. 2,026,100 505,575 1,520,525 Michael A. Boylan........................... 1,508,370 452,514 1,055,856 Michael S. Madler........................... 770,400 231,120 539,280 ---------- ---------- ---------- TOTAL.................................. $5,990,120 $1,694,784 $4,295,336 ========== ========== ==========
INDEMNIFICATION AGREEMENTS InSight has entered into separate indemnification agreements with Mr. Plochocki, its executive officers and each of our former directors that could require InSight, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors and executive officers and to 80 advance expenses incurred by them as a result of any proceedings against them as to which they could be indemnified. EMPLOYMENT AGREEMENTS The employment agreement with Steven T. Plochocki is for a term of three years, subject to certain termination rights. Under the employment agreement, Mr. Plochocki receives an annual base salary as well as a discretionary bonus of up to 75% of his annual base salary if we achieve our budgetary goals and a discretionary bonus of an additional 25% of his annual base salary upon the achievement of other goals mutually agreed upon by Mr. Plochocki and our board of directors. Mr. Plochocki is currently being paid an annual base salary of $300,000. Mr. Plochocki's employment agreement also provides for a life insurance policy of three times the amount of his annual base salary and entitles him to participate during the term of his employment in our life insurance, medical, health and accident and disability plan or program, pension plan or other similar benefit plan. Mr. Plochocki is subject to a noncompetition covenant and nonsolicitation provisions (relating to our employees and customers) during the term of his employment agreement and continuing for a period of 24 months after the termination of his employment. Mr. Plochocki's employment agreement will terminate and he will be entitled to all accrued and unpaid compensation, as well as 24 months of compensation at the annual salary rate then in effect (1) upon his permanent and total disability (as defined in his employment agreement); (2) upon our 30 days' written notice to him of the termination of his employment without cause (as defined in his employment agreement); (3) if he terminates his employment with us for good reason (as defined in the employment agreement); and (4) if his employment is terminated by us without cause or he terminates his employment for good reason within 12 months of a change in control (as defined in his employment agreement) which occurs after the acquisition contemplated by the merger agreement. In addition, we will maintain at our expense until the earlier of 24 months after the date of termination or commencement of Mr. Plochocki'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 Mr. Plochocki was entitled to participate immediately prior to the date of termination. Mr. Plochocki's employment will immediately terminate upon his death and the executors or administrators of his estate or his heirs or legatees (as the case may be) will be entitled to all accrued and unpaid compensation up to the date of his death. Mr. Plochocki's employment will terminate and he will not be entitled to receive any monetary compensation or benefit upon (1) the termination of his employment by us for cause or (2) his voluntary termination of his employment with us without good reason. The employment agreement with each of Thomas V. Croal, Michael A. Boylan, Marilyn U. MacNiven-Young and Michael S. Madler provides for a term of 12 months on a continuing basis, subject to certain termination rights. The executives' respective employment agreement provides for an annual salary as well as a discretionary bonus of up to 75% of the executive's annual base salary if we achieve our budgetary goals and a discretionary bonus of an additional 25% of the executive's annual base salary upon the achievement of other goals mutually agreed upon by each executive and our President and Chief Executive Officer and approved by our board of directors. Mr. Croal, Mr. Boylan and Mr. Madler are currently being paid an annual base salary of $252,500, $225,000, $263,000 and $214,000, respectively. Each executive is provided with a life insurance policy of three times the amount of his annual base salary and is entitled to participate in our life insurance, medical, health and accident and disability plan or program, pension plan or other similar benefit plan. Each executive is subject to a noncompetition covenant and nonsolicitation provisions (relating to our employees and customers) during the term of his respective employment agreement and continuing for a period of 12 months after the termination of his respective employment. Each executive's employment agreement will terminate and each of them will be entitled to all accrued and unpaid compensation, as well as 12 months of compensation at the annual salary rate then in effect (1) upon the executive's permanent and total disability (as defined in the respective employment agreement); (2) upon our 30 days' written notice to the executive of the termination of the executive's employment without cause (as defined in the respective employment agreement); (3) if the executive terminates his respective employment with us for good reason (as defined in the respective employment agreement); and (4) if the executive's employment is terminated by us without cause or he terminates his employment for good reason within 12 months of a change in control (as defined in the respective employment agreement) which occurs after the acquisition contemplated in the merger 81 agreement. In addition, we will maintain at our expense until the earlier of 12 months after the date of termination or 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 date of termination. Each executive's employment will immediately terminate upon his death and the executors or administrators of his estate or his heirs or legatees (as the case may be) will be entitled to all accrued and unpaid compensation up to the date of his death. The executive's employment will terminate and the executive will not be entitled to receive any monetary compensation or benefit upon (1) the termination of his respective employment by us for cause; or (2) his voluntary termination of his respective employment with us without good reason. The employment agreement with each of Patricia R. Blank, Cecilia A. Guastaferro and Brian G. Drazba provides for a term of 12 months on a continuing basis, subject to certain termination rights. The executives' respective employment agreements provide for an annual salary and should make them eligible for discretionary bonuses, if any, as awarded by our President and Chief Executive Officer and approved by our board of directors. Ms. Blank, Ms. Guastaferro and Mr. Drazba are currently being paid an annual base salary of $198,000, $145,000 and $146,000, respectively. Each executive is provided with a life insurance policy of three times the amount of the executive's annual base salary and is entitled to participate in our health, hospitalization or disability insurance plan, pension plan or other similar benefit plan. Each executive is subject to a noncompetition covenant and nonsolicitation provisions (relating to our employees and customers) during the term of the executive's respective employment agreement and continuing for a period of 12 months after the termination of the executive's respective employment. Each executive's employment agreement will terminate and each of them will be entitled to all accrued and unpaid compensation, as well as 12 months of compensation at the annual salary rate then in effect (1) upon the executive's permanent and total disability (as defined in the respective employment agreement); (2) upon our 30 days' written notice to the executive of the termination of the executive's employment without cause (as defined in the respective employment agreements); and (3) if the executive's employment is terminated by us within 12 months of a change in control (as defined in the respective employment agreement) which occurs after the acquisition contemplated in the merger agreement. In addition, we will maintain at our expense until the earlier of 12 months after the date of termination or 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 date of termination. Each executive's employment will immediately terminate upon his or her death and the executors or administrators of his or her estate or his or her heirs or legatees (as the case may be) will be entitled to all accrued and unpaid compensation up to the date of his or her death. Each of the executive's employment will terminate and each executive will not be entitled to receive any monetary compensation or benefit upon (1) the termination of his or her employment by us for cause; or (2) voluntary termination of his or her employment with us. 2001 STOCK OPTION PLAN In connection with the acquisition, Mr. Plochocki, Mr. Croal, Mr. Boylan and Mr. Madler rolled over a certain number of the stock options in our company that they held prior to the acquisition into stock options under the 2001 Stock Option Plan of InSight Holdings. Under the Stock Option Plan, the board of directors of InSight Holdings has been authorized to issue stock options to purchase the common stock of InSight Holdings, not to exceed 175,990 shares, at an option price of $8.37 per share. Pursuant to stock option agreements entered into by each of Mr. Plochocki, Mr. Croal, Mr. Boylan and Mr. Madler and InSight Holdings, Mr. Plochocki and Mr. Croal both were granted options to purchase up to 52,500 shares of common stock, Mr. Boylan was granted options to purchase up to 46,990 shares of common stock, and Mr. Madler was granted options to purchase up to 24,000 shares of common stock under the Stock Option Plan. The Stock Option Plan provides for a term of ten years and any options outstanding under the Stock Option Plan upon the termination date of the Plan will continue to be exercisable pursuant to their terms. 82 Upon consummation of the acquisition, each option granted under the Stock Option Plan vested fully and became exercisable, in whole or in part, at any time. The minimum number of shares of InSight Holdings common stock that may be purchased is the lesser of 100 shares or the maximum number of shares available for purchase under the option at the time of exercise. The exercise price will be payable (1) in cash or in cash equivalents, (2) with the consent of the board of directors of InSight Holdings through a cashless exercise, or (3) by any other method or methods as the board of directors of InSight Holdings may authorize. Upon the termination of employment of an optionee for any reason, the option granted will terminate on the earlier to occur of (1) the expiration of the term of the Stock Option Plan and (2) a change in control (as defined in the Stock Option Plan). STOCK OPTION AGREEMENTS Certain of our employees are eligible to receive a number of options to purchase the common stock of InSight Holdings. The exercise price of the options is the price per share that subscribing stockholders paid to InSight Holdings at the time the acquisition was consummated in connection with their subscription for the common stock of InSight Holdings. The options will be administered by the board of directors of InSight Holdings. Options may be exercised when fully vested by giving written notice stating the number of shares (not 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. Twenty percent of the options will vest annually on the following schedule: (1) 25% of the number of available options shall vest and become exercisable upon the anniversary of the consummation of the acquisition in each of the fiscal years ending on June 30 in the years 2003-2007 and (2) 75% of the number of available options shall vest and become exercisable for each fiscal year ending on June 30 in the years 2002-2006 upon the attainment of a set of predetermined performance-based targets. The options expire on the tenth anniversary of the consummation of the acquisition, unless: (1) the employee is terminated for cause (as defined in the employee's stock option agreement) or voluntarily terminates his or her employment without good reason (as defined in the employee's stock option agreement), in which case the options shall terminate on the date of such termination of employment, whether or not then fully vested or exercisable; or (2) the employee is terminated without cause, resigns for good reason, dies or becomes disabled (as defined in the employee's stock option agreement) at any time during the term of his or her employment, in which case any portion of the option not fully vested and exercisable shall terminate immediately, and any option that is vested and exercisable shall terminate on the 120th day following such termination of employment. However, the board of directors of InSight Holdings has discretion to vest any portion of options not already vested at the time of such termination. All options subject solely to time vesting will become fully vested immediately prior to a change of control (as defined in the employee's stock option agreement). In addition, in the case of a change in control, the board of directors of InSight Holdings may, in its sole discretion, accelerate the vesting of all or any portion of the options that would remain unvested. All options subject to performance-based vesting will become fully vested on the eighth anniversary of the grant date to the extent they have not previously vested. 83 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Upon consummation of the acquisition, we became a wholly-owned subsidiary of InSight Holdings, a corporation owned by J.W. Childs Equity Partners II, Halifax Capital Partners and certain of their affiliates. The following table sets forth certain information regarding beneficial ownership of the common stock of InSight Holdings, as of December 19, 2001, by: (1) each person or entity known to us owning beneficially 5% or more of InSight Holdings' common stock; (2) each director of InSight and InSight Holdings; (3) each of InSight's named executive officers; and (4) all directors of InSight and InSight Holdings and executive officers of InSight, as a group. Upon consummation of the acquisition, InSight Holdings' outstanding securities consisted of approximately 5,461,401 shares of common stock and options to purchase 175,990 shares of common stock which are immediately exercisable. Beneficial ownership of the securities listed in the table has been determined in accordance with the applicable rules and regulations promulgated under the Exchange Act.
SHARES BENEFICIALLY NAME AND ADDRESS OWNED(1) PERCENT - ---------------- ------------ ------- J.W. Childs Equity Partners II, L.P.(2) 111 Huntington Avenue, Suite 2900 Boston, Massachusetts 02199............................... 4,350,290 80% JWC-InSight Co-invest LLC(3) 111 Huntington Avenue, Suite 2900 Boston, Massachusetts 02199............................... 338,532 6.0% Halifax Capital Partners, L.P.(4) 1133 Connecticut Avenue, N.W. Washington, D.C. 20036.................................... 1,111,112 20% Steven G. Segal(5) 111 Huntington Avenue, Suite 2900 Boston, Massachusetts 02199............................... -- -- Edward D. Yun(6) 111 Huntington Avenue, Suite 2900 Boston, Massachusetts 02199............................... -- -- Michael N. Cannizzaro(7) 111 Huntington Avenue, Suite 2900 Boston, Massachusetts 02199............................... -- -- Mark J. Tricolli(8) 111 Huntington Avenue, Suite 2900 Boston, Massachusetts 02199............................... -- -- David W. Dupree(9) 1133 Connecticut Avenue, N.W. Washington, D.C. 20036.................................... 4,092 * Kenneth M. Doyle(10) 1133 Connecticut Avenue, N.W. Washington, D.C. 20036.................................... -- -- Steven T. Plochocki(11) 4400 MacArthur Blvd., Suite 800 Newport Beach, California 92660........................... 52,500 * Michael A. Boylan(12) 110 Gibraltar Road Horsham, Pennsylvania 18901............................... 46,990 * Thomas V. Croal(13) 4400 MacArthur Blvd., Suite 800 Newport Beach, California 92660........................... 52,500 *
84
SHARES BENEFICIALLY NAME AND ADDRESS OWNED(1) PERCENT - ---------------- ------------ ------- Michael S. Madler(14) 4400 MacArthur Blvd., Suite 800 Newport Beach, California 92660........................... 24,000 * Marilyn U. MacNiven-Young 4400 MacArthur Blvd., Suite 800 Newport Beach, California 92660........................... -- -- All directors and executive officers, as a group (14 persons).................................................. 243,709 4.3%
- --------------- * Less than 1% (1) For purposes of this table, a person is deemed to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after the date of this prospectus. (2) Includes 4,011,758 shares of InSight Holdings common stock owned directly by J.W. Childs Equity Partners II and 338,532 shares of InSight Holdings common stock owned directly by JWC-InSight Co-invest LLC, an affiliate of J.W. Childs Equity Partners II. The general partner of J.W. Childs Equity Partners II, L.P. is J.W. Childs Advisors II, L.P., a Delaware limited partnership. The general partner of J.W. Childs Advisors II, L.P. is J.W. Childs Associates, L.P., a Delaware limited partnership. The general partner of J.W. Childs Associates, L.P. is J.W. Childs Associates, Inc., a Delaware corporation. J.W. Childs Advisors II, L.P., J.W. Childs Associates, L.P. and J.W. Childs Associates, Inc. may be deemed to beneficially own the 4,350,290 shares of InSight Holdings common stock held by J.W. Childs Equity Partners II and JWC-InSight Co-invest LLC. (3) JWC-InSight Co-invest LLC is a Delaware limited liability company and affiliate of J.W. Childs Equity Partners II. J.W. Childs Associates Inc. is the managing member of JWC-InSight Co-invest LLC. As the managing member, J.W. Childs Associates Inc. owns the 338,532 shares of InSight Holdings to be held directly by JWC-InSight Co-invest LLC. Steven G. Segal, Edward D. Yun, Michael N. Cannizzaro and Mark J. Tricolli are each members of JWC-InSight Co-invest LLC. (4) Includes 1,107,020 shares of InSight Holdings common stock owned directly by Halifax Capital Partners and 4,092 shares of InSight Holdings common stock owned directly by David W. Dupree, a Managing Director of The Halifax Group, L.L.C. The general partner of Halifax Capital Partners, L.P. is Halifax Genpar, L.P., a Delaware limited partnership. The general partner of Halifax Genpar, L.P. is The Halifax Group, L.L.C., a Delaware limited liability company. Halifax Genpar, L.P. and The Halifax Group, L.L.C. may be deemed to beneficially own the 1,111,112 shares of InSight Holdings common stock held by Halifax Capital Partners, L.P. and its affiliate, Mr. Dupree. Halifax Capital Partners, Halifax Genpar, L.P. and The Halifax Group, L.L.C. disclaim beneficial ownership of the 4,092 shares of InSight Holdings common stock owned directly by Mr. Dupree. (5) As a Senior Managing Director of J.W. Childs Associates, L.P., which manages J.W. Childs Equity Partners II, and a member of JWC-InSight Co-invest LLC, Mr. Segal may be deemed to beneficially own the 4,011,758 shares of InSight Holdings common stock owned by J.W. Childs Equity Partners II and the 338,532 shares of InSight Holdings common stock held directly by JWC-InSight Co-invest LLC. Mr. Segal disclaims beneficial ownership of such shares of InSight Holdings. (6) As a Managing Director of J.W. Childs Associates, L.P., which manages J.W. Childs Equity Partners II, L.P. and a member of JWC-InSight Co-invest LLC, Mr. Yun may be deemed to beneficially own the 4,011,758 shares of InSight Holdings common stock owned by J.W. Childs Equity Partners II, and the 338,532 shares of InSight Holdings common stock held directly by JWC-InSight Co-invest LLC. Mr. Yun disclaims beneficial ownership of such shares of InSight Holdings. (7) As a Managing Director of J.W. Childs Associates, L.P., which manages J.W. Childs Equity Partners II, L.P. and a member of JWC-InSight Co-invest LLC, Mr. Cannizzaro may be deemed to beneficially own the 4,011,758 shares of InSight Holdings common stock owned by J.W. Childs Equity 85 Partners II and the 338,532 shares of InSight Holdings common stock held directly by JWC-InSight Co-invest LLC. Mr. Cannizzaro disclaims beneficial ownership of such shares of InSight Holdings. (8) As a Senior Associate at J.W. Childs Associates, L.P., which manages J.W. Childs Equity Partners II and a member of JWC-InSight Co-invest LLC, Mr. Tricolli may be deemed to beneficially own the 4,011,758 shares of InSight Holdings common stock owned by J.W. Childs Equity Partners II and the 338,532 shares of InSight Holdings common stock held directly by JWC-InSight Co-invest LLC. Mr. Tricolli disclaims beneficial ownership of such shares of InSight Holdings. (9) As a Managing Director of The Halifax Group, L.L.C., which manages Halifax Capital Partners, L.P., Mr. Dupree may also be deemed to beneficially own the 1,107,020 shares of InSight Holdings common stock owned by Halifax Capital Partners, L.P. Mr. Dupree disclaims beneficial ownership of such shares of InSight Holdings. (10) As a Principal of The Halifax Group, L.L.C., which manages Halifax Capital Partners, L.P., Mr. Doyle may be deemed to beneficially own the 1,111,112 shares of InSight Holdings common stock owned by Halifax Capital Partners, L.P. and its affiliates. Mr. Doyle disclaims beneficial ownership of the shares of InSight Holdings owned by Halifax Capital Partners and its affiliates. (11) Consists of options to purchase 52,500 shares of InSight Holdings common stock at an exercise price of $8.37 per share which options were granted upon the consummation of the acquisition and are fully vested and immediately exercisable. (12) Consists of options to purchase 46,990 shares of InSight Holdings common stock at an exercise price of $8.37 per share which options were granted upon the consummation of the acquisition and are fully vested and immediately exercisable. (13) Consists of options to purchase 52,500 shares of InSight Holdings common stock at an exercise price of $8.37 per share which options were granted upon the consummation of the acquisition and are fully vested and immediately exercisable. (14) Consists of options to purchase 24,000 shares of InSight Holdings common stock at an exercise price of $8.37 per share which options were granted upon the consummation of the acquisition and are fully vested and immediately exercisable. Except as otherwise noted, InSight Holdings believes that each of the stockholders listed in the table above has sole voting and dispositive power over all shares beneficially owned. Each of the stockholders of InSight Holdings in the table above is party to a stockholders agreement which governs the transferability and voting of shares of InSight Holdings common stock held by them. See "Certain Relationships and Related Transactions -- Stockholders Agreement." 86 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Management Agreement. Upon the completion of the acquisition, InSight and InSight Holdings entered into a management agreement with J.W. Childs Advisors II, L.P., the general partner of J.W. Childs Equity Partners II, and Halifax Genpar, L.P., the general partner of Halifax Capital Partners. Under the agreement, InSight paid J.W. Childs Advisors II and Halifax Genpar a transaction fee of $4,500,000 and $1,125,000, respectively, for services rendered in connection with the acquisition. Additionally, J.W. Childs Advisors II and Halifax Genpar will provide business, management and financial advisory services to InSight and InSight Holdings in consideration of (1) an annual fee of $240,000 to be paid to J.W. Childs Advisors II and (2) an annual fee of $60,000 to be paid to Halifax Genpar. InSight and InSight Holdings will also reimburse such entities for all travel and other out-of-pocket expenses incurred by such entities in connection with their performance of the advisory services under the agreement. The management agreement has an initial term of five years, which term will automatically renew for one year periods thereafter and is subject to earlier termination by the board of directors of InSight and InSight Holdings. Furthermore, InSight Holdings and InSight have agreed to indemnify and hold harmless J.W. Childs Advisors II and Halifax Genpar and their affiliates, from and against any and all claims, losses, damages and expenses arising out of the acquisition or the performance by J.W. Childs Advisors II and Halifax Genpar of their obligations under the management agreement. Stockholders Agreement. InSight Holdings, J.W. Childs Equity Partners II, JWC-InSight Co-invest LLC, Halifax Capital Partners, Mr. Dupree, management of InSight and all other holders of capital stock or stock options of InSight Holdings have entered into a stockholders agreement. Under the stockholders agreement, InSight Holdings and each stockholder have a right of first refusal to purchase any stock proposed to be sold by all other stockholders, except J.W. Childs Equity Partners II and JWC-InSight Co-invest LLC. Additionally, the stockholders agreement affords (1) stockholders, other than J.W. Childs Equity Partners II and JWC-InSight Co-invest LLC, so-called "tag-along" rights on proposed sales of capital stock of InSight Holdings by J.W. Childs Equity Partners II and JWC-InSight Co-invest LLC; (2) J.W. Childs Equity Partners II and JWC-InSight Co-invest LLC so-called "drag-along" rights with respect to proposed sales of a majority of the capital stock of InSight Holdings and (3) all stockholders certain registration rights with respect to the capital stock of InSight Holdings. Furthermore, the stockholders agreement contains put and call features on capital stock and stock options held by InSight management which are triggered upon termination of such individual's employment with InSight and InSight Holdings. The stockholders agreement also obligates InSight Holdings and the stockholders to take all necessary action to appoint, as directors of InSight Holdings, up to eight nominees designated by J.W. Childs Equity Partners II (as would constitute a majority of InSight Holdings' entire board of directors) and two nominees designated by Halifax Capital Partners. 87 DESCRIPTION OF NEW SENIOR CREDIT FACILITIES Concurrently with the closing of the acquisition, we entered into new senior credit facilities for up to $275 million of senior loans, arranged by Banc of America Securities LLC, with Bank of America, N.A. and a syndicate of other financial institutions. The new senior credit facilities consist of: - a $50 million six-year revolving credit facility; - a $75 million seven-year delayed-draw term loan facility (which is available for draw for two years following the closing of the acquisition); and - a $150 million seven-year term loan B facility. REVOLVING CREDIT FACILITY The new senior credit facilities include a $50 million six-year revolving credit facility, none of which was drawn on the consummation of the acquisition. DELAYED-DRAW TERM LOAN FACILITY The new senior credit facilities include a $75 million seven-year delayed-draw term loan facility available from time to time until October 17, 2003. The delayed-draw term facility will be amortized with 1% of the initial aggregate delayed-draw term loan facility advances outstanding as of October 17, 2003 to be payable in each of years three through six following the initial borrowing under the new senior credit facilities and 96% of the initial aggregate acquisition term loan facility advances outstanding as of October 17, 2003 to be payable in year seven. TERM LOAN B The new senior credit facilities include a seven-year $150 million term loan B facility. The term loan B was drawn in full on the consummation of the acquisition. The term loan B facility will be amortized with 1% of the term loan B to be payable in each of the first six years and 94% of the initial aggregate term loan B to be payable in year seven. INTEREST RATES AND FEES The interest rates per annum applicable to the new senior credit facilities are LIBOR plus the applicable margin (as defined below) or, at the option of the borrower, the alternate base rate which will be the higher of (x) the Bank of America, N.A. prime rate and (y) the federal funds rate plus 0.50%, plus the applicable margin. The applicable margin (1) until March 31, 2002 will be (A) with respect to the revolving credit facility, 3.00% per annum in the case of LIBOR rate advances and 2.00% per annum with respect to alternate base rate advances and (B) with respect to the term loan facilities, 3.50% per annum in the case of LIBOR rate advances and from 2.50% of alternate rate advances and (2) thereafter will be determined in accordance with a performance grid based on our senior leverage ratio agreed to with Bank of America, N.A. The default rate on the new senior credit facilities will be 2% above the otherwise applicable interest rate. In addition, we will pay a commitment fee on the unused portion of the revolving credit facility of (1) until March 31, 2002, 0.50%, and (2) thereafter, a percentage per annum determined in accordance with a performance pricing grid based on our senior leverage ratio to be agreed upon with Bank of America, N.A. We will also be obligated to pay a commitment fee of 2% on the unused portion of the delayed-draw term loan facility. The commitment fees are payable quarterly in arrears and on the date of termination or expiration of the respective commitments. PREPAYMENTS Subject to certain exceptions, loans under the new senior credit facilities are required to be prepaid with: - 100% of the net cash proceeds (1) from certain asset dispositions by us, InSight Holdings or our subsidiaries, (2) of extraordinary receipts which include tax refunds, indemnity payments, pension 88 reversions and certain insurance proceeds and (3) from the issuance or incurrence after the date of the initial borrowing under the new senior credit facilities of debt or equity by us, InSight Holdings or any of our subsidiaries; and - 75% (if the senior leverage ratio is equal to or greater than 2.0 to 1.0) or 50% (if the senior leverage ratio is less than 2.0 to 1.0) of excess cash flow, as defined in the new senior credit facilities. We may prepay the new senior credit facilities at any time in whole or in part without premium or penalty, except that any prepayment of LIBOR rate advances other than at the end of the applicable interest periods therefor shall be made with reimbursement for any funding losses and redeployment costs of the lenders resulting therefrom. COVENANTS AND BORROWING LIMIT The new senior credit facilities contain customary affirmative and negative covenants, including limitations on liens, limitations on sales, transfers and other dispositions of assets, limitations on incurrence of debt, limitations on dividends, stock redemptions and the redemption and/or prepayment of other debt, limitations on investments and acquisitions, limitations on capital expenditures, limitations on granting negative pledges, limitations on amending organizational documents and material agreements and limitations on changing accounting policies and reporting practices. In addition, the credit agreement contains the following financial covenants: (1) a maximum senior leverage ratio, (2) a maximum total leverage ratio, (3) a minimum fixed charge coverage ratio, and (4) a minimum interest coverage ratio. EVENTS OF DEFAULT Events of default under the new senior credit facilities include, among others, nonpayment of principal or interest, covenant defaults, a material inaccuracy in any of the representations and warranties, bankruptcy and insolvency events, cross-defaults and a change of control. SECURITY AND GUARANTEES Our obligations under the new senior credit facilities and any interest rate protection and other hedging agreements with any lender or its affiliates are guaranteed by InSight Holdings and all of its existing and future direct and indirect subsidiaries formed under the laws of the United States, any state thereof or the District of Columbia, except for specified excluded subsidiaries. All obligations under the new senior credit facilities, the guarantees and any interest rate protection and other hedging agreements with any lender or its affiliates are secured by a first priority perfected security interest in (1) all our capital stock and other ownership or profit interests and our existing and future direct and indirect subsidiaries, excluding certain specified excluded subsidiaries and limited, in the case of each foreign subsidiary, to 65% of the voting stock of such entity and (2) all our and the guarantors' other existing and future assets and properties. 89 DESCRIPTION OF NOTES The outstanding notes were, and the exchange notes will be, issued under an indenture, dated as of October 30, 2001, by and among the Guarantors, State Street Bank and Trust Company, as trustee, and us, a copy of which is filed as an exhibit to the registration statement of which this prospectus forms a part. The terms of the notes include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended, as in effect on the date of the indenture. The exchange notes are substantially identical to the terms and provisions of the outstanding notes, except for certain transfer restrictions and registration rights relating to the outstanding notes. The exchange notes represent the same indebtedness as represented by the outstanding notes and are subject to the same terms. We refer you to the indenture and the Trust Indenture Act for a statement of them. The following is a summary of the material terms of the notes. It does not restate the indenture in its entirety. Because this is a summary, we urge you to read the indenture and the relevant portions of the Trust Indenture Act because they, and not this description, define your rights as holders of the notes. You can find definitions to certain capitalized terms under "-- Certain Definitions." In this description, the words the "Company" and "InSight" refer only to InSight Health Services Corp. and not any of its subsidiaries. BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES The Notes The notes: - are general unsecured obligations of the Company; - are subordinated in right of payment to all existing and future Senior Indebtedness of the Company; - are ranked equally in right of payment with any future senior subordinated Indebtedness of the Company; and - are guaranteed by the Guarantors. The Guarantees The notes are guaranteed by the Parent and by all of the Wholly Owned Restricted Subsidiaries of InSight. Each guarantee of the notes are: - a general unsecured obligation of the Guarantor; - subordinated in right of payment to all existing and future Senior Indebtedness of the Guarantor; and - ranked equally in right of payment with any future senior subordinated Indebtedness of the Guarantor. Assuming we had completed the acquisition and the related financing transactions, including this offering, as of September 30, 2001, the Company would have had total Senior Indebtedness of approximately $150 million and $125 million available to be borrowed under the Credit Agreement (all of which would be Senior Indebtedness), and the Guarantors would have had total Senior Indebtedness of approximately $154.1 million. As indicated above and as discussed in more detail below under the caption "-- Subordination," payments on the notes and under the guarantees of the notes are subordinated to the prior payment in full of all Senior Indebtedness. The Indenture permits the Company and the Guarantors to incur additional Senior Indebtedness. PRINCIPAL, MATURITY AND INTEREST The notes will mature on November 1, 2011, will be limited in aggregate principal amount to $225 million and will be senior subordinated unsecured obligations of the Company. The indenture provides for the issuance of up to $100 million aggregate principal amount of additional notes having identical terms and conditions to the notes offered hereby (the "Additional Notes"), subject to compliance with the 90 covenants contained in the indenture. For purposes of this "Description of the Notes," reference to the notes includes Additional Notes unless otherwise indicated; however, no offering of any such Additional Notes is being or shall in any manner be deemed to be made by this prospectus. In addition, there can be no assurance as to when or whether the Company will issue any such Additional Notes or as to the aggregate principal amount of such Additional Notes. Interest on the notes will accrue at the rate of 9 7/8% per annum and will be payable semiannually on each May 1 and November 1, commencing May 1, 2002, to the Holders of record on the immediately preceding April 15 and October 15. Interest on the notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the original date of issuance (the "Issue Date"). Interest will be computed on the basis of a 360-day year comprising twelve 30-day months. The principal of and premium, if any, and interest on the notes will be payable and the notes will be exchangeable and transferable, at the office or agency of the Company in the City of New York maintained for such purposes (which initially will be the office of the Trustee located at 61 Broadway, 15th Floor, New York, New York 10006) or, at the option of the Company, payment of interest may be paid by check mailed to the address of the person entitled thereto as such address appears in the security register. The notes will be issued only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. No service charge will be made for any registration of transfer or exchange or redemption of notes, but the Company may require payment in certain circumstances of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. The notes and any Additional Notes will be treated as a single class of securities under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. The notes will not be entitled to the benefit of any sinking fund. GUARANTEES Each of the Company's Wholly Owned Restricted Subsidiaries is a Subsidiary Guarantor and payment of the principal of, premium, if any and interest on the notes, when and as the same become due and payable, will be guaranteed, jointly and severally, on a senior subordinated and unsecured basis (the "Guarantees") by the Subsidiary Guarantors and by the Parent. In addition, if the Company or any of its Wholly Owned Restricted Subsidiaries acquires or creates another Wholly Owned Subsidiary (other than any Foreign Subsidiary), then such Subsidiary shall be required to execute a Guarantee, in accordance with the terms of the indenture. Each Guarantee is subordinated in right of payment, as set forth in the indenture, to the prior payment in full of Senior Indebtedness of the relevant Guarantor. See "Certain Covenants -- Guarantees of Indebtedness by Restricted Subsidiaries." The obligations of the Guarantors under the Guarantees is limited so as not to constitute a fraudulent conveyance under applicable statutes. See "Risk Factors -- Risks Relating to the Notes -- Federal and state statutes allow courts, under specific circumstances, to void guarantees and require noteholders to return payments received from guarantors." The indenture provides that upon a sale or other disposition to a Person not an Affiliate of the Company of all or substantially all of the assets of any Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition to a Person not an Affiliate of the Company of all of the Capital Stock of any Subsidiary Guarantor, by way of merger, consolidation or otherwise, which transaction is carried out in accordance with the covenants described below under the captions "-- Repurchase at the Option of Holders -- Asset Sales," such Subsidiary Guarantor will be deemed automatically and unconditionally released and discharged from all of its obligations under its Guarantee without any further action on the part of the Trustee or any holder of the notes; provided that any such termination shall occur only to the extent that all obligations of such Subsidiary Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure any, Indebtedness of the Company shall also terminate upon such sale, disposition or release. 91 SUBORDINATION The notes are unsecured senior subordinated obligations of the Company. The payment of principal of, premium, if any, and interest on the notes is subordinated in right of payment, as set forth in the indenture, to the prior payment in full of Senior Indebtedness. The holders of Senior Indebtedness are entitled to receive payment in full of all Obligations due in respect of such Senior Indebtedness (including interest after the commencement of any bankruptcy, reorganization, insolvency, receivership or similar proceeding at the rate specified in the applicable Senior Indebtedness) before the Holders are entitled to receive any payment in respect of any Obligations with respect to the notes (except that Holders may receive securities that are subordinated at least to the same extent as the notes to Senior Indebtedness and any securities issued in exchange for Senior Indebtedness and Holders may recover payments made from the trust described under the caption "Legal Defeasance and Covenant Defeasance"), in the event of any distribution to creditors of the Company: (1) in a liquidation or dissolution of the Company; (2) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property; (3) in an assignment for the benefit of creditors; or (4) in any marshaling of the Company's assets and liabilities. The Company also may not make any payment upon or in respect of the notes (except in such subordinated securities or from the trust described under the caption "Legal Defeasance and Covenant Defeasance") if: (1) a default in the payment of principal of, premium, if any, or interest on Designated Senior Indebtedness occurs and is continuing beyond any applicable period of grace; or (2) any other default occurs and is continuing with respect to Designated Senior Indebtedness which permits holders of the Designated Senior Indebtedness as to which such default relates to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice") from (A) with respect to the Designated Senior Indebtedness arising under the Credit Agreement, the Agent Bank or (B) with respect to any other Designated Senior Indebtedness, the holders or the representative of the holders of any such Designated Senior Indebtedness. Payments on the notes may and shall be resumed: (1) in the case of a payment default, upon the date on which such default is cured or waived; and (2) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received unless the maturity of any Designated Senior Indebtedness has been accelerated. No new period of payment blockage may be commenced by a Payment Blockage Notice unless and until: (1) 360 days have elapsed since the first day of the effectiveness of the immediately prior Payment Blockage Notice; and (2) all scheduled payments of principal of, premium, if any, and interest on the notes that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice, unless such default has been cured or waived for a period of not less than 90 days. If the Trustee or any Holder of the notes receives a payment in respect of the notes (except (i) for securities that are subordinated at least to the same extent as the notes to Senior Indebtedness and any 92 securities issued in exchange for Senior Indebtedness or (ii) from the trust described under "-- Legal Defeasance and Covenant Defeasance") when: (1) the payment is prohibited by these subordination provisions; and (2) the Trustee or the Holder has actual knowledge that the payment is prohibited; the Trustee or the Holder, as the case may be, shall hold the payment in trust for the benefit of the holders of Senior Indebtedness of the Company. Upon the proper written request of the holders of Senior Indebtedness of the Company, the Trustee or the Holder, as the case may be, shall deliver the amounts in trust to the holders of Senior Indebtedness of the Company or their proper representative. The indenture requires that the Company promptly notify holders of Senior Indebtedness if payment of the notes is accelerated because of any Event of Default. As a result of the subordination provisions described above, in the event of an insolvency, bankruptcy, reorganization or liquidation of the Company, creditors of the Company who are holders of Senior Indebtedness and holders of trade payables may recover more, ratably, than the holders of the notes, and assets which would otherwise be available to pay obligations in respect of the notes will be available only after all Senior Indebtedness has been paid in full, and there may not be sufficient assets remaining to pay amounts due on any or all of the notes. See "Risk Factors -- Risks Relating to the Notes -- Your right to receive payments on these notes is junior to the issuer's existing senior indebtedness and possibly all its future borrowings. Further, the guarantees of these notes are junior to all of the guarantors' existing senior indebtedness and possibly to all of their future borrowings." Payments under the Guarantee of each Guarantor is subordinated to the prior payment in full of all Senior Indebtedness of such Guarantor, including Senior Indebtedness of such Guarantor incurred after the date of the indenture, on the same basis as provided above with respect to the subordination of payments on the notes by the Company to the prior payment in full of Senior Indebtedness of the Company. See "Risk Factors -- Risks Relating to the Notes -- Your right to receive payments on these notes is junior to the issuer's existing senior indebtedness and possibly all its future borrowings. Further, the guarantees of these notes are junior to all of the guarantors' existing senior indebtedness and possibly to all of their future borrowings." The terms of the indenture permit the Company and its Restricted Subsidiaries to incur additional Senior Indebtedness, subject to certain limitations, including Indebtedness that may be secured by Liens on property of the Company and its Restricted Subsidiaries. See the discussion below under the captions "Certain Covenants -- Incurrence of Indebtedness and Issuance of Disqualified Stock" and "Certain Covenants -- Liens." See "Risk Factors -- Risks Relating to the Notes -- Your right to receive payments on these notes is junior to the issuer's existing senior indebtedness and possibly all its future borrowings. Further, the guarantees of these notes are junior to all of the guarantors' existing senior indebtedness and possibly to all of their future borrowings." OPTIONAL REDEMPTION The notes are not redeemable at the Company's option prior to November 1, 2006. Thereafter, the notes are redeemable, at the option of the Company, as a whole or from time to time in part, on not less than 30 nor more than 60 days' prior notice to the Holders at the following redemption prices (expressed as percentages of principal amount), together with accrued interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on an interest payment date), if redeemed during the 12-month period beginning on November 1 of the years indicated below. 93
YEAR REDEMPTION PRICE - ---- ---------------- 2006........................................................ 104.938% 2007........................................................ 103.292% 2008........................................................ 101.646% 2009 and thereafter......................................... 100.000%
Notwithstanding the foregoing, at any time or from time to time prior to November 1, 2004, the Company may redeem, on one or more occasions, up to 35% of the aggregate principal amount of the notes issued under the indenture with the net proceeds of the initial Public Equity Offering at a redemption price equal to 109.875% of the principal amount thereof, plus accrued interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on an interest payment date); provided that, immediately after giving effect to such redemption, at least 65% of the aggregate principal amount of the notes issued under the indenture remains outstanding; provided further that such redemptions shall occur within 60 days of the date of closing of each such initial Public Equity Offering. If less than all the notes are to be redeemed, the particular notes to be redeemed will be selected not more than 60 days prior to the redemption date by the Trustee by such method as the Trustee deems fair and appropriate, provided that no Note of $1,000 in principal amount at maturity or less shall be redeemed in part. MANDATORY REDEMPTION Except as set forth below under "Repurchase at the Option of Holders," the Company is not required to make mandatory redemption or sinking fund payments with respect to the notes. REPURCHASE AT THE OPTION OF HOLDERS Change of Control If a Change of Control occurs at any time, then each Holder will have the right to require that the Company purchase such Holder's notes in whole or in part in integral multiples of $1,000, at a purchase price in cash equal to 101% of the principal amount of such notes, plus accrued and unpaid interest, if any, to the date of purchase, pursuant to the offer described below (the "Change of Control Offer") and the other procedures set forth in the indenture. Within 30 days following any Change of Control, the Company will notify the Trustee thereof and give written notice of such Change of Control to each Holder of notes by first-class mail, postage prepaid, at its address appearing in the security register, stating, among other things: (1) the purchase price and the purchase date, which will be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed or such later date as is necessary to comply with the requirements under the Exchange Act; (2) that any note not tendered will continue to accrue interest; (3) that, unless the Company defaults in the payment of the purchase price, any notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control purchase date; and (4) certain other procedures that a Holder must follow to accept a Change of Control Offer or to withdraw such acceptance. If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the purchase price for all of the notes that might be tendered by Holders seeking to accept the Change of Control Offer. The failure of the Company to make or consummate the Change of Control Offer or pay the applicable Change of Control purchase price when due would result in an Event of Default and would give the Trustee and the Holders the rights described under "Events of Default and Remedies." 94 The Credit Agreement provides that certain change of control events with respect to the Company and the Parent would constitute a default thereunder. Any future credit agreements or other agreements relating to Senior Indebtedness to which the Company becomes a party may contain similar restrictions and provisions. If a Change of Control occurs at a time when the Company is prohibited from purchasing notes, the Company could seek the consent of its lenders to the purchase of notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain such a consent or refinance such borrowings, the Company will remain prohibited from purchasing Notes. In such case, the Company's failure to purchase tendered Notes would constitute an Event of Default under the indenture, which would, in turn, constitute a default under the Credit Agreement. In such circumstances, the subordination provisions in the indenture would likely restrict payments to the Holders. One of the events that constitutes a Change of Control under the indenture is the disposition of "all or substantially all" of the Company's assets. This term has not been interpreted under New York law (which is the governing law of the indenture) to represent a specific quantitative test. As a consequence, if Holders elect to require the Company to purchase the Notes and the Company elects to contest such election, there can be no assurance as to how a court interpreting New York law would interpret the phrase in many circumstances. The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the indenture applicable to a Change of Control Offer made by the Company and purchases all the Notes validly tendered and not withdrawn under such Change of Control Offer. The existence of a Holder's right to require the Company to purchase such Holder's Notes upon a Change of Control may deter a third party from acquiring the Company in a transaction that constitutes a Change of Control. The definition of "Change of Control" in the indenture is limited in scope. The provisions of the indenture may not afford Holders the right to require the Company to repurchase such Notes in the event of a highly leveraged transaction or certain transactions with the Company's management or its Affiliates, including a reorganization, restructuring, merger or similar transaction involving the Parent or the Company (including, in certain circumstances, an acquisition of the Parent or the Company by management or its Affiliates) that may adversely affect Holders, if such transaction is not a transaction defined as a Change of Control. See "Certain Definitions" below for the definition of "Change of Control." A transaction involving the Company's management or its Affiliates, or a transaction involving a recapitalization of the Parent or the Company, would result in a Change of Control if it is the type of transaction specified in such definition. The Company will comply with the applicable tender offer rules including Rule 14e-1 under the Exchange Act, and any other applicable securities laws and regulations in connection with a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Change of Control" provisions of the indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Change of Control" provisions of the indenture by virtue thereof. Restrictions in the indenture described herein on the ability of the Company and its Restricted Subsidiaries to incur additional Indebtedness, to grant Liens on its or their property, to make Restricted Payments and to make Asset Sales may also make more difficult or discourage a takeover of the Company, whether favored or opposed by the management of the Company. Consummation of any such transaction in certain circumstances may require redemption or repurchase of the Notes, and there can be no assurance that the Company or the acquiring party will have sufficient financial resources to effect such redemption or repurchase. In certain circumstances, such restrictions and the restrictions on transactions with Affiliates may make more difficult or discourage any leveraged buyout of the Company or any of its Restricted Subsidiaries. While such restrictions cover a variety of arrangements which have traditionally been used to effect highly leveraged transactions, the indenture may not afford the Holders protection in all circumstances from the adverse aspects of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction. 95 Asset Sales The Company will not, and will not permit any Restricted Subsidiary to, engage in any Asset Sale unless: (1) the consideration received by the Company or such Restricted Subsidiary for such Asset Sale is not less than the fair market value of the assets sold as evidenced by a resolution of the board of directors of such entity set forth in an officers' certificate delivered to the Trustee; and (2) the consideration received by the Company or the relevant Restricted Subsidiary in respect of such Asset Sale consists of at least 75% cash or cash equivalents. For purposes of this provision, cash and cash equivalents includes: (a) any liabilities (as reflected in the Company's consolidated balance sheet) of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Note Guarantee) that are assumed by any transferee of any such assets or other property in such Asset Sale, and where the Company or the relevant Restricted Subsidiary is released from any further liability in connection therewith with respect to such liabilities; (b) any securities, notes or other similar obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted within 180 days of the related Asset Sale by the Company or such Restricted Subsidiary into cash or cash equivalents (to the extent of the net cash proceeds or the cash equivalents (net of related costs) received upon such conversion); and (c) any Designated Noncash Consideration received by the Company or any such Restricted Subsidiary in the Asset Sale having an aggregate fair market value, as determined by the Board of the Company, taken together with all other Designated Noncash Consideration received pursuant to this clause that is at that time outstanding, not to exceed the greater of: (A) $10 million; and (B) 15% of Consolidated Tangible Assets at the time of the receipt of such Designated Noncash Consideration (with the fair market value of each item of such Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value). If the Company or any Restricted Subsidiary engages in an Asset Sale, the Company may, at its option, within 12 months after such Asset Sale (i) apply all or a portion of the Net Cash Proceeds to the permanent reduction of amounts outstanding under the Credit Agreement (and to correspondingly reduce the commitments, if any, with respect thereto) or to the repayment of other Senior Indebtedness of the Company or a Restricted Subsidiary, provided that the repayment of any Indebtedness incurred under the Credit Agreement in connection with the acquisition of any Facility with the proceeds of any subsequent Sale and Leaseback Transaction relating to such Facility shall not be required to result in the permanent reduction of the amounts outstanding under the Credit Agreement or correspondingly permanently reduce the commitments thereunder, or (ii) invest (or enter into a legally binding agreement to invest) all or a portion of such Net Cash Proceeds in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in businesses of the Company or its Restricted Subsidiaries, as the case may be, existing on the Reference Date or in businesses the same, similar or reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical contained in such clause (ii)) above. Pending the final application of any such Net Cash Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Cash Proceeds in a manner that is not prohibited by the indenture. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph constitutes "Excess Proceeds." 96 When the aggregate amount of Excess Proceeds exceeds $10 million, the Company will, within 30 days thereafter, make an offer to purchase (an "Excess Proceeds Offer") from all Holders on a pro rata basis, in accordance with the procedures set forth in the indenture, the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased with the Excess Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued interest, if any, to the date such offer to purchase is consummated. To the extent that the aggregate principal amount of Notes tendered pursuant to such offer to purchase is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the Notes to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset to zero. CERTAIN COVENANTS Restricted Payments The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, take any of the following actions: (a) declare or pay any dividend on, or make any distribution to holders of, any shares of the Capital Stock of the Company or any Restricted Subsidiary, other than (i) dividends or distributions payable solely in Qualified Equity Interests or (ii) dividends or distributions by a Restricted Subsidiary payable to the Company or a Wholly Owned Restricted Subsidiary or to all holders of Capital Stock of such Restricted Subsidiary on a pro rata basis; (b) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any shares of Capital Stock, or any options, warrants or other rights to acquire such shares of Capital Stock, of the Company, any direct or indirect parent of the Company or any Subsidiary of the Company (other than a Wholly Owned Restricted Subsidiary); (c) make any principal payment on, or repurchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, sinking fund payment or maturity, any Subordinated Indebtedness; and (d) make any Investment (other than a Permitted Investment) in any Person (such payments or other actions described in (but not excluded from) clauses (a) through (d) being referred to as "Restricted Payments"), unless at the time of, and immediately after giving effect to, the proposed Restricted Payment: (i) no Default or Event of Default has occurred and is continuing, (ii) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described under the caption "-- Incurrence of Indebtedness and Issuance of Disqualified Stock," and (iii) the aggregate amount of all Restricted Payments made after the Reference Date does not exceed the sum of: (A) 50% of the aggregate Consolidated Net Income of the Company during the period (taken as one accounting period) from the first day of the Company's first fiscal quarter commencing after the Closing Date to the last day of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Net Income is a loss, minus 100% of such amount); plus 97 (B) 100% of the aggregate net cash proceeds received by the Company after the Reference Date as a capital contribution or from the issuance or sale (other than to a Subsidiary) of either (1) Qualified Equity Interests of the Company or (2) debt securities or Disqualified Stock that have been converted into or exchanged for Qualified Stock of the Company, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange. Notwithstanding the foregoing, the Company and its Restricted Subsidiaries may take the following actions, so long as no Default or Event of Default has occurred and is continuing or would occur: (a) the payment of any dividend within 60 days after the date of declaration thereof, if at the declaration date such payment would not have been prohibited by the foregoing provisions; (b) the repurchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company, in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, Qualified Equity Interests of the Company or of the Parent, the proceeds of which are contributed to the Company as a capital contribution on a substantially concurrent basis; (c) the purchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, shares of Qualified Equity Interests of the Company or of the Parent, the proceeds of which are contributed to the Company as a capital contribution on a substantially concurrent basis; (d) the purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Indebtedness in exchange for, or out of the net cash proceeds of a substantially concurrent issuance or sale (other than to a Subsidiary) of, Subordinated Indebtedness, so long as the Company or a Restricted Subsidiary would be permitted to refinance such original Subordinated Indebtedness with such new Subordinated Indebtedness pursuant to clause (4) of the definition of Permitted Indebtedness set forth in the covenant entitled "Incurrence of Indebtedness and Issuance of Disqualified Stock;" (e) the repurchase of any Subordinated Indebtedness at a purchase price not greater than 101% of the principal amount of such Subordinated Indebtedness in the event of a Change of Control in accordance with provisions similar to the "Change of Control" covenant; provided that, prior to or simultaneously with such repurchase, the Company has made the Change of Control Offer as provided in such covenant with respect to the Notes and has repurchased all Notes validly tendered for payment in connection with such Change of Control Offer; (f) the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Company, options on any such shares or related stock appreciation rights or similar securities, or any dividend, distribution or advance to the Parent for the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Parent, options on any such shares or related stock appreciation rights or similar securities, in each case held by officers, directors or employees or former officers, directors or employees (or their estates or beneficiaries under their estates) of the Company, the Parent or any Subsidiary of the Company, as applicable, or by any employee benefit plan of the Company, the Parent or any Subsidiary of the Company, as applicable, upon death, disability, retirement or termination of employment or pursuant to the terms of any employee benefit plan or any other agreement under which such shares of stock or related rights were issued; provided that the aggregate amount of cash applied by the Company for such purchase, redemption, acquisition, cancellation or other retirement of such shares of Capital Stock of the Company or the Parent after the Reference Date does not exceed $7.5 million in the aggregate (excluding for purposes of calculating such amount the aggregate amount received by any Person in connection with such purchase, redemption, acquisition, cancellation or other retirement of such shares that is concurrently used to repay loans made to such Person by the Company pursuant to clause (f) of the definition of "Permitted Investment"); 98 (g) the payment of dividends or other distributions or the making of loans or advances to the Parent in amounts required for the Parent to pay franchise taxes and other fees required to maintain its existence and provide for all other customary operating costs of the Parent to the extent attributable to the ownership and operation of the Company and its Restricted Subsidiaries, including, without limitation, in respect of director fees and expenses, administrative, legal and accounting services provided by third parties and other customary costs and expenses including all costs and expenses with respect to filings with the Commission; (h) the payment of dividends or other distributions by the Company to the Parent in amounts required to pay the tax obligations of the Parent attributable to the Company and its Subsidiaries, determined as if the Company and its Subsidiaries had filed a separate consolidated, combined or unitary return for the relevant taxing jurisdiction; provided that (x) the amount of dividends paid pursuant to this clause (h) to enable the Parent to pay Federal and state income taxes (and franchise taxes based on income) at any time shall not exceed the amount of such Federal and state income taxes (and franchise taxes based on income) actually owing by the Parent at such time to the respective tax authorities for the respective period and (y) any refunds received by the Parent attributable to the Company or any of its Subsidiaries shall promptly be returned by the Parent to the Company through a contribution or purchase of common stock (other than Disqualified Stock) of the Company; (i) the payment of dividends or other distributions or the making of loans or advances to the Parent in amounts required for the Parent to pay to the Equity Sponsors an annual amount not to exceed $500,000 for payment of management consulting or financial advisory services provided to the Company or any of the Subsidiaries; and (j) other Restricted Payments not to exceed $10 million at any one time outstanding. The actions described in clauses (e), (f), (g), (h), (i) and (j) of this paragraph will be Restricted Payments that will be permitted to be taken in accordance with this paragraph but will reduce the amount that would otherwise be available for Restricted Payments under clause (iii) of the first paragraph of this covenant and the actions described in clauses (a), (b), (c) and (d) of the preceding paragraph will be Restricted Payments that will be permitted to be taken in accordance with this paragraph and will not reduce the amount that would otherwise be available for Restricted Payments under clause (iii) of the first paragraph of this covenant. For the purpose of making any calculations under the indenture (i) if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will be deemed to have made an Investment in an amount equal to the greater of the fair market value or net book value of the net assets of such Restricted Subsidiary at the time of such designation as determined by the Board of the Company, and (ii) any property transferred to or from an Unrestricted Subsidiary will be valued at fair market value at the time of such transfer, as determined by the Board of the Company. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of the Company whose resolution with respect thereto shall be delivered to the Trustee, such determination to be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $10 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an officer's certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required under "Certain Covenants -- Restricted Payments" were computed, together with a copy of any fairness opinion or appraisal required by the indenture. If the aggregate amount of all Restricted Payments calculated under the foregoing provision includes an Investment in an Unrestricted Subsidiary or other Person that thereafter becomes a Restricted Subsidiary, the aggregate amount of all Restricted Payments calculated under the foregoing provision will be reduced by the lesser of (x) the net asset value of such Subsidiary at the time it becomes a Restricted Subsidiary and (y) the initial amount of such Investment. 99 If an Investment resulted in the making of a Restricted Payment, the aggregate amount of all Restricted Payments calculated under the foregoing provision will be reduced by the amount of any net reduction in such Investment (resulting from the payment of interest or dividends, loan repayment, transfer of assets or otherwise, other than the redesignation of an Unrestricted Subsidiary or other Person as a Restricted Subsidiary), to the extent such net reduction is not included in the Company's Consolidated Net Income; provided that the total amount by which the aggregate amount of all Restricted Payments may be reduced may not exceed the lesser of (x) the cash proceeds received by the Company and its Restricted Subsidiaries in connection with such net reduction and (y) the initial amount of such Investment. In computing the Consolidated Net Income of the Company for purposes of the foregoing clause (iii)(A) of the first paragraph of this covenant, (i) the Company may use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (ii) the Company will be permitted to rely in good faith on the financial statements and other financial data derived from its books and records that are available on the date of determination. If the Company makes a Restricted Payment that, at the time of the making of such Restricted Payment, would in the good faith determination of the Company be permitted under the requirements of the indenture, such Restricted Payment will be deemed to have been made in compliance with the indenture notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Net Income of the Company for any period. Incurrence of Indebtedness and Issuance of Disqualified Stock The Company will not, and will not permit any Restricted Subsidiary to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Indebtedness (including Acquired Indebtedness and the issuance of Disqualified Stock), except that the Company and any Subsidiary Guarantors may incur Indebtedness if, at the time of such event, the Fixed Charge Coverage Ratio for the immediately preceding four full fiscal quarters for which internal financial statements are available, taken as one accounting period, would have been equal to at least 2.0 to 1.0. In making the foregoing calculation for any four-quarter period that includes the Reference Date, pro forma effect will be given to the acquisition and related financing transactions, as if such transactions had occurred at the beginning of such four-quarter period. In addition (but without duplication), in making the foregoing calculation, pro forma effect will be given to: (i) the incurrence of such Indebtedness and (if applicable) the application of the net proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was incurred and the application of such proceeds occurred at the beginning of such four-quarter period; (ii) the incurrence, repayment or retirement of any other Indebtedness by the Company or its Restricted Subsidiaries since the first day of such four-quarter period as if such Indebtedness was incurred, repaid or retired at the beginning of such four-quarter period; and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred at the beginning of such four-quarter period. In making a computation under the foregoing clause (i) or (ii), (A) the amount of Indebtedness under a revolving credit facility will be computed based on the average daily balance of such Indebtedness during such four-quarter period, (B) if such Indebtedness bears, at the option of the Company, a fixed or floating rate of interest, interest thereon will be computed by applying, at the option of the Company, either the fixed or floating rate, and (C) the amount of any Indebtedness that bears interest at a floating rate will be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness if such Hedging Obligations have a remaining term at the date of determination in excess of 12 months). 100 Notwithstanding the foregoing, the Company may, and may permit its Restricted Subsidiaries to, incur the following Indebtedness ("Permitted Indebtedness"): (1) Indebtedness of the Company or any Subsidiary Guarantor under the Credit Agreement (and the incurrence by any Guarantor of guarantees thereof) in an aggregate principal amount at any one time outstanding not to exceed $375 million, less any amounts applied to the permanent reduction of such credit facilities pursuant to the provisions of the covenant described under the caption "-- Repurchase at the Option of Holders -- Asset Sales;" (2) Indebtedness represented by the notes (other than the Additional Notes) and the Guarantees; (3) Existing Indebtedness; (4) the incurrence by the Company of Permitted Refinancing Indebtedness in exchange for, or the net cash proceeds of which are used to refund, refinance or replace, any Indebtedness that is permitted to be incurred under clause (2) or (3) above; (5) Indebtedness owed by the Company to any Restricted Subsidiary or owed by any Restricted Subsidiary to the Company or a Restricted Subsidiary (provided that such Indebtedness is held by the Company or such Restricted Subsidiary); provided, however, that: (a) any Indebtedness of the Company or any Subsidiary Guarantor owing to any such Restricted Subsidiary is unsecured and subordinated in right of payment from and after such time as the notes shall become due and payable (whether at Stated Maturity, acceleration, or otherwise) to the payment and performance of the Company's obligations under the notes or the Subsidiary Guarantor's obligations under its Guarantee, as the case may be; and (b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof, shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (5); (6) Indebtedness of the Company or any Restricted Subsidiary under Hedging Obligations incurred in the ordinary course of business; (7) Indebtedness of the Company or any Restricted Subsidiary consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock; (8) either (A) Capitalized Lease Obligations of the Company or any Restricted Subsidiary or (B) Indebtedness under purchase money mortgages or secured by purchase money security interests so long as (x) such Indebtedness is not secured by any property or assets of the Company or any Restricted Subsidiary other than the property and assets so acquired and (y) such Indebtedness is created within 90 days of the acquisition of the related property; provided that the aggregate amount of Indebtedness under clauses (A) and (B) does not exceed 15% of Consolidated Tangible Assets at any one time outstanding; (9) Guarantees by any Restricted Subsidiary made in accordance with the provisions of the covenant described under the caption "-- Guarantees of Indebtedness by Restricted Subsidiaries;" (10) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within two business days of incurrence; (11) Indebtedness of the Company or any of its Restricted Subsidiaries represented by letters of credit for the account of the Company or such Restricted Subsidiary, as the case may be, in order to 101 provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; (12) the incurrence of Non-Recourse Indebtedness by Permitted Joint Ventures that are Restricted Subsidiaries; (13) Indebtedness incurred by a Receivables Subsidiary pursuant to a Receivables Program; provided that, after giving effect to any such incurrence of Indebtedness, the aggregate principal amount of all Indebtedness incurred under this clause (13) and then outstanding does not exceed $30 million; and (14) Indebtedness of the Company, any Restricted Subsidiary or any Permitted Joint Venture not permitted by any other clause of this definition, in an aggregate principal amount not to exceed $30 million at any one time outstanding. For purposes of determining compliance with this "Incurrence of Indebtedness and Issuance of Disqualified Stock" covenant, in the event that any proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (14) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company will be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this covenant. Indebtedness under the Credit Agreement incurred on the Reference Date shall be deemed to have been incurred on the Reference Date in reliance on the exception provided by clause (1) above. Liens The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Pari Passu Indebtedness or Subordinated Indebtedness of the Company on or with respect to any of its property or assets, including any shares of stock or Indebtedness of any Restricted Subsidiary, whether owned at the Closing Date or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless (i) in the case of any Lien securing Subordinated Indebtedness, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien and (ii) in the case of any Lien securing Pari Passu Indebtedness, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to or ranks equally with such Lien. The Company will not permit any Subsidiary Guarantor to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Pari Passu Indebtedness or Subordinated Indebtedness of such Subsidiary Guarantor on or with respect to such Subsidiary Guarantor's properties or assets, including any shares of stock or Indebtedness of any other Restricted Subsidiary, whether owned at the date of the indenture or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless (i) in the case of any Lien securing Pari Passu Indebtedness of such Subsidiary Guarantor, each Guarantee of such Subsidiary Guarantor is secured by a Lien on such property, assets or proceeds that is senior in priority to or ranks equally with such Lien and (ii) in the case of any Lien securing Subordinated Indebtedness of such Subsidiary Guarantor, each Guarantee of such Subsidiary Guarantor is secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien. Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to: (1) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock; (2) pay any Indebtedness owed to the Company or any other Restricted Subsidiary; (3) make loans or advances to the Company or any other Restricted Subsidiary; or 102 (4) transfer any of its properties or assets to the Company or any other Restricted Subsidiary. However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (1) any agreement (including the Credit Agreement) in effect on the Reference Date; (2) customary non-assignment provisions of any lease, license or other contract entered into in the ordinary course of business by the Company or any Restricted Subsidiary; (3) the refinancing or successive refinancing of Indebtedness incurred under the agreements in effect on the Reference Date (including the Credit Agreement), so long as such encumbrances or restrictions are no more restrictive, taken as a whole, than those contained in such original agreement; (4) any agreement or other instrument of a Person acquired by the Company or any Restricted Subsidiary in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; (5) purchase money obligations for acquired property permitted under the covenant entitled "-- Incurrence of Indebtedness and Issuance of Disqualified Stock" that impose restrictions of the nature described in clause (4) of the preceding paragraph on the property so acquired; (6) any agreement for the sale of a Restricted Subsidiary or an asset that restricts distributions by that Restricted Subsidiary or transfers of such asset pending its sale; (7) secured Indebtedness otherwise permitted to be incurred pursuant to the provisions of the covenant described above under the caption "-- Liens" that limits the right of the debtor to dispose of the assets securing such Indebtedness; (8) restrictions on cash or other deposits or net worth imposed by leases entered into in the ordinary course of business; (9) Non-Recourse Indebtedness of any Permitted Joint Venture permitted to be incurred under the indenture; (10) applicable law or regulation; (11) a Receivables Program with respect to a Receivables Subsidiary; and (12) customary provisions in joint venture, limited liability company operating, partnership, shareholder and other similar agreements entered into in the ordinary course of business reasonably consistent with past practice by the Company or any Restricted Subsidiary. Limitation on Layering Debt Neither the Company nor any Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness or guarantee, as applicable, that is subordinate or junior in right of payment to any Senior Indebtedness and senior in any respect in right of payment to the notes or such Guarantor's Guarantee, respectively. Merger, Consolidation or Sale of Assets Neither the Company nor the Parent will, in a single transaction or series of related transactions, consolidate or merge with or into (whether or not the Company or the Parent, as the case may be, is the surviving corporation), or directly and/or indirectly through its Subsidiaries, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets (determined on a consolidated 103 basis for the Company or the Parent, as the case may be, and its Subsidiaries, taken as a whole) in one or more related transactions to, another corporation, Person or entity unless: (a) either (i) the Company or the Parent, as the case may be, is the surviving corporation or (ii) the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (the "Surviving Entity") is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia and assumes all the obligations of the Company or the Parent, as the case may be, under the Notes and the indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (b) immediately after giving effect to such transaction and treating any obligation of the Company in connection with or as a result of such transaction as having been incurred as of the time of such transaction, no Default or Event of Default has occurred and is continuing; (c) if such transaction involves the Company, the Company (or the Surviving Entity if the Company is not the continuing obligor under the indenture) could, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the first paragraph of "-- Incurrence of Indebtedness and Issuance of Disqualified Stock;" (d) each Guarantor, unless it is the other party to the transaction described above, has by supplemental indenture confirmed that its Guarantee applies to the Surviving Entity's obligations under the indenture and the Notes; (e) if any of the property or assets of the Company or any of its Restricted Subsidiaries would thereupon become subject to any Lien, the provisions of the covenant described above under the caption "--Liens" are complied with; and (f) the Company or the Parent, as the case may be, delivers, or causes to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an officers' certificate and an opinion of counsel, each stating that such transaction complies with the requirements of the indenture. The indenture will provide that no Subsidiary Guarantor may consolidate with or merge with or into any other Person or convey, sell, assign, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any other Person (other than the Company or another Subsidiary Guarantor) unless: (a) subject to the provisions of the following paragraph, the Person formed by or surviving such consolidation or merger (if other than such Subsidiary Guarantor) or to which such properties and assets are transferred assumes all of the obligations of such Subsidiary Guarantor under the indenture and its Guarantee, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, (b) immediately after giving effect to such transaction, no Default or Event of Default has occurred and is continuing and (c) the Subsidiary Guarantor delivers, or causes to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an officers' certificate and an opinion of counsel, each stating that such transaction complies with the requirements of the indenture. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. In the event of any transaction described in and complying with the conditions listed in the first paragraph of this covenant in which the Company is not the continuing obligor under the indenture, the Surviving Entity will succeed to, and be substituted for, and may exercise every right and power of, the Company under the indenture, and thereafter the Company will, except in the case of a lease, be discharged from all of its obligations and covenants under the indenture and Notes. 104 Transactions with Affiliates The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or suffer to exist any transaction with, or for the benefit of, any Affiliate of the Company ("Interested Persons"), unless (a) such transaction is on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could have been obtained in an arm's-length transaction with third parties who are not Interested Persons and (b) the Company delivers to the Trustee (i) with respect to any transaction or series of related transactions entered into after the Reference Date involving aggregate payments in excess of $5 million, a resolution of the Company's Board set forth in an officers' certificate certifying that such transaction or transactions complies with clause (a) above and that such transaction or transactions have been approved by the Board (including a majority of the Disinterested Directors) of the Company and (ii) with respect to a transaction or series of related transactions involving aggregate payments equal to or greater than $10 million, a written opinion as to the fairness to the Company or such Restricted Subsidiary of such transaction or series of transactions from a financial point of view issued by an accounting, appraisal or investment banking firm, in each case of national standing. The foregoing covenant will not restrict: (A) transactions among the Company and/or its Restricted Subsidiaries; (B) the Company from paying reasonable and customary regular compensation, indemnification, reimbursement and fees to officers of the Company or any Restricted Subsidiary and to directors of the Company or any Restricted Subsidiary who are not employees of the Company or any Restricted Subsidiary; (C) transactions permitted by the provisions of the covenant described under the caption "Certain Covenants--Restricted Payments;" (D) advances to employees for moving, entertainment and travel expenses and similar expenditures in the ordinary course of business and consistent with past practice; (E) any Receivables Program of the Company or a Restricted Subsidiary; (F) the agreements described herein under the caption "Certain Relationships And Related Transactions" and certain other agreements listed on a schedule to the indenture, in each case as in effect as of the Reference Date or any amendment thereto (so long as the amended agreement is not more disadvantageous to the Holders in any material respect than such agreement immediately prior to such amendment) or any transaction contemplated thereby; and (G) sales of Equity Interests to Affiliates. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries The Company (a) will not permit any Restricted Subsidiary to issue any Capital Stock unless after giving effect thereto the Company's percentage interest (direct and indirect) in the Capital Stock of such Restricted Subsidiary is at least equal to its percentage interest prior thereto, and (b) will not, and will not permit any Restricted Subsidiary to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Restricted Subsidiary to any Person (other than the Company or a Wholly Owned Restricted Subsidiary); provided, however, that this covenant will not prohibit (i) the sale or other disposition of all, but not less than all, of the issued and outstanding Capital Stock of a Restricted Subsidiary owned by the Company and its Restricted Subsidiaries in compliance with the other provisions of the indenture, (ii) the sale or other disposition of a portion of the issued and outstanding Capital Stock of a Restricted Subsidiary (other than a Subsidiary Guarantor), whether or not as a result of such sale or disposition such Restricted Subsidiary continues or ceases to be a Restricted Subsidiary, if (A) at the time of such sale or disposition, the Company could make an Investment in the remaining Capital Stock held by it or one of its Restricted Subsidiaries in an amount equal to the amount of its remaining Investment in such Person pursuant to the covenant entitled "Restricted Payments" and (B) such sale or disposition is permitted under, and the Company or such Restricted Subsidiary applies the Net Cash Proceeds of any such sale in accordance with, the "Asset Sales" 105 covenant, or (iii) the ownership by directors of director's qualifying shares or the ownership by foreign nationals of Capital Stock of any Restricted Subsidiary, to the extent mandated by applicable law. The Company will not permit any Restricted Subsidiary to issue any Preferred Stock other than to the Company or any Subsidiary Guarantor. Payments for Consent The indenture will provide that neither the Company nor any of its Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Guarantees of Indebtedness by Restricted Subsidiaries The Company will not permit any Restricted Subsidiary that is not a Subsidiary Guarantor, directly or indirectly, to guarantee, assume or in any other manner become liable for the payment of any Indebtedness of the Company or any Indebtedness of any other Restricted Subsidiary, unless (a) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture providing for a guarantee of payment of the Notes by such Restricted Subsidiary on a senior subordinated basis on the same terms as set forth in the indenture and (b) with respect to any guarantee of Subordinated Indebtedness by a Restricted Subsidiary, any such guarantee is subordinated to such Restricted Subsidiary's guarantee with respect to the Notes at least to the same extent as such Subordinated Indebtedness is subordinated to the Notes, provided that the foregoing provision will not be applicable to any guarantee by any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary. Any guarantee by a Restricted Subsidiary of the Notes pursuant to the preceding paragraph may provide by its terms that it will be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer to any Person not an Affiliate of the Company of all of the Company's and the Restricted Subsidiaries' Capital Stock in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by the indenture) or (ii) the release or discharge of the guarantee that resulted in the creation of such guarantee of the Notes, except a discharge or release by or as a result of payment under such guarantee. Issuances of Guarantees by New Restricted Subsidiaries The Company will provide to the Trustee, on the date that any Person (other than a Foreign Subsidiary) becomes a Wholly Owned Restricted Subsidiary, a supplemental indenture to the indenture, executed by such new Wholly Owned Restricted Subsidiary, providing for a full and unconditional guarantee on a senior subordinated basis by such new Wholly Owned Restricted Subsidiary of the Company's obligations under the Notes and the indenture to the same extent as that set forth in the indenture. Unrestricted Subsidiaries The Board of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as (i) such Subsidiary has no Indebtedness other than Non-Recourse Indebtedness, (ii) no default with respect to any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Indebtedness of the Company or any Restricted Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity, (iii) any Investment in such Subsidiary made as a result of designating such Subsidiary an Unrestricted Subsidiary will not violate the provisions of the covenant described under the caption "-- Restricted Payments," (iv) neither the Company nor any Restricted Subsidiary has a contract, agreement, arrangement, understanding or obligation of any kind, whether written 106 or oral, with such Subsidiary other than those that might be obtained at the time from Persons who are not Affiliates of the Company, (v) neither the Company nor any Restricted Subsidiary has any obligation to subscribe for additional shares of Capital Stock or other equity interests in such Subsidiary, or to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results, and (vi) such Unrestricted Subsidiary has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Notwithstanding the foregoing, the Company may not designate any Subsidiary Guarantor (whether or not existing as of the Closing Date) as an Unrestricted Subsidiary. The Board of the Company may designate any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) no Default or Event of Default has occurred and is continuing following such designation and (ii) the Company would, at the time of making such designation and giving such pro forma effect as if such designation had been made at the beginning of the applicable four quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described under the caption "Incurrence of Indebtedness and Issuance of Disqualified Stock" (treating any Indebtedness of such Unrestricted Subsidiary as the incurrence of Indebtedness by a Restricted Subsidiary). Reports Whether or not the Company is required to file reports with the Commission, the Company will file with the Commission all such annual reports, quarterly reports and other documents that the Company would be required to file if it were subject to Section 13(a) or 15(d) under the Exchange Act. The Company will also be required (a) to supply to the Trustee and each Holder, or supply to the Trustee for forwarding to each such Holder, without cost to such Holder, copies of such reports and other documents within 15 days after the date on which the Company files such reports and documents with the Commission or the date on which the Company would be required to file such reports and documents if the Company were so required and (b) if filing such reports and documents with the Commission is not accepted by the Commission or is prohibited under the Exchange Act, to supply at the Company's cost copies of such reports and documents to any prospective Holder promptly upon written request. Notwithstanding the foregoing, so long as the Parent guarantees the Notes, the reports, information and other documents required to be filed and provided as described above may be those of the Parent, rather than the Company, so long as such filings (i) would satisfy the requirements of the Exchange Act and regulations promulgated thereunder and (ii) disclose the Company's results of operations and financial condition in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in at least such detail as would be required if the Company were filing such report. EVENTS OF DEFAULT AND REMEDIES The following will be "Events of Default" under the indenture: (a) default in the payment of any interest on any note when it becomes due and payable, and continuance of such default for a period of 30 days (whether or not prohibited by the subordination provisions of the indenture); (b) default in the payment of the principal of (or premium, if any, on) any note when due (whether or not prohibited by the subordination provisions of the indenture); (c) failure to perform or comply with the indenture provisions described under the captions "-- Repurchase at the Option of Holders -- Change of Control," "-- Repurchase at the Option of Holders -- Asset Sales," "-- Certain Covenants -- Restricted Payments," "Incurrence of Indebtedness and Issuance of Disqualified Stock" or "-- Merger, Consolidation or Sale of Assets;" (d) default in the performance, or breach, of any covenant or agreement of the Company or any Guarantor contained in the indenture or in any Guarantee (other than a default in the performance, or 107 breach, of a covenant or agreement that is specifically dealt with elsewhere herein), and continuance of such default or breach for a period of 60 days after written notice has been given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; (e) (i) an event of default has occurred under any mortgage, bond, indenture, loan agreement or other document evidencing an issue of Indebtedness of the Company, the Parent or any Restricted Subsidiary, which issue individually or in the aggregate has an aggregate outstanding principal amount of not less than $10 million, and such default has resulted in such Indebtedness becoming, whether by declaration or otherwise, due and payable prior to the date on which it would otherwise become due and payable or (ii) a default in any payment when due at final maturity of any such Indebtedness; (f) failure by the Company, the Parent or any of its Restricted Subsidiaries to pay one or more final judgments the uninsured portion of which exceeds in the aggregate $10 million, which judgment or judgments are not paid, discharged or stayed for a period of 60 days; (g) any Guarantee ceases to be in full force and effect or is declared null and void or any such Guarantor denies that it has any further liability under any Guarantee, or gives notice to such effect (other than by reason of the termination of the indenture or the release of any such Guarantee in accordance with the indenture); or (h) the occurrence of certain events of bankruptcy, insolvency or reorganization with respect to the Company, the Parent or any Significant Subsidiary. If an Event of Default (other than as specified in clause (h) above) occurs and is continuing, the Trustee or the Holders of not less than 25% in aggregate principal amount of the notes then outstanding may, and the Trustee at the request of such Holders will, declare the principal of, and accrued interest on, all of the notes then outstanding immediately due and payable and, upon any such declaration, such principal and such interest will become due and payable immediately. If an Event of Default specified in clause (h) above occurs and is continuing, then the principal of and accrued interest on all of the outstanding notes will ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after a declaration of acceleration under the indenture, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the holders of a majority in aggregate principal amount of the outstanding notes, by written notice to the Company and the Trustee, may rescind such declaration and its consequences if: (i) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all notes, (B) all unpaid principal of (and premium, if any, on) any outstanding notes that has become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the notes, (C) to the extent that payment of such interest is lawful, interest upon overdue interest and overdue principal at the rate borne by the notes and (D) all sums paid or advanced by the Trustee under the indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (ii) all Events of Default, other than the non-payment of amounts of principal of (or premium, if any, on) or interest on the notes that have become due solely by such declaration of acceleration, have been cured or waived. No such rescission will affect any subsequent default or impair any right consequent thereon. No Holder has any right to institute any proceeding with respect to the indenture or any remedy thereunder, unless the Holders of at least 25% in aggregate principal amount of the outstanding notes have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding, the Trustee has failed to institute any such proceeding within 60 days after receipt of such notice, request and offer of indemnity and the Trustee, within such 60-day period, has not received directions inconsistent with such written request by Holders of a majority in aggregate principal amount of the outstanding notes. Such limitations do not apply, however, to a suit instituted by a Holder for the enforcement of the payment of the principal of, premium, if any, or interest on such note on or after the respective due dates expressed in such Note. 108 The Holders of not less than a majority in aggregate principal amount of the notes then outstanding may, on behalf of the Holders of all of the notes waive any past defaults under the indenture, except a default in the payment of the principal of (and premium, if any) or interest on any note, or in respect of a covenant or provision that under the indenture cannot be modified or amended without the consent of the holder of each note outstanding. If a Default or an Event of Default occurs and is continuing and is known to the Trustee, the Trustee will mail to each Holder notice of the Default or Event of Default within 90 days after the occurrence thereof. Except in the case of a Default or an Event of Default in payment of principal of (and premium, if any, on) or interest on any notes, the Trustee may withhold the notice to the Holders if a committee of its trust officers in good faith determines that withholding such notice is in the interests of the Holders. The Company is required to furnish to the Trustee annual statements as to the performance by the Company and the Guarantors of their obligations under the indenture and as to any default in such performance. The Company is also required to notify the Trustee within five days of any Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the notes, the indenture or the Guarantees, as applicable, or any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option and at any time, terminate the obligations of the Company and the Guarantors with respect to the outstanding notes ("legal defeasance"). Such legal defeasance means that the Company will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding notes, except for (i) the rights of Holders of outstanding notes to receive payments in respect of the principal of (and premium, if any, on) and interest on such notes when such payments are due, (ii) the Company's obligations to issue temporary notes, register the transfer or exchange of any notes, replace mutilated, destroyed, lost or stolen notes, maintain an office or agency for payments in respect of the notes and segregate and hold such payments in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee and (iv) the legal defeasance provisions of the indenture. In addition, the Company may, at its option and at any time, elect to terminate the obligations of the Company and any Guarantor with respect to certain covenants set forth in the indenture and described under "Certain Covenants" above, and any omission to comply with such obligations would not constitute a Default or an Event of Default with respect to the notes ("covenant defeasance"). In order to exercise either legal defeasance or covenant defeasance: (a) the Company must irrevocably deposit or cause to be deposited with the Trustee, as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders, money in an amount, or U.S. Government Obligations (as defined in the indenture) that through the scheduled payment of principal and interest thereon will provide money in an amount, or a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge the principal of (and premium, if any, on) and interest on the outstanding notes at maturity (or upon redemption, if applicable) of such principal or installment of interest; (b) no Default or Event of Default has occurred and is continuing on the date of such deposit or, insofar as an event of bankruptcy under clause (h) of "Events of Default" above is concerned, at any time during the period ending on the 91st day after the date of such deposit; (c) such legal defeasance or covenant defeasance may not result in a breach or violation of, or constitute a default under, the indenture, the Credit Agreement or any other material agreement or instrument to which the Company or any Guarantor is a party or by which it is bound; (d) in the case of legal defeasance, the Company must deliver to the Trustee an 109 opinion of counsel stating that the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or since the date hereof, there has been a change in applicable federal income tax law, to the effect, and based thereon such opinion must confirm that, the Holders of the notes will not recognize income, gain or loss for federal income tax purposes as a result of such legal defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such legal defeasance had not occurred; (e) in the case of covenant defeasance, the Company must have delivered to the Trustee an opinion of counsel to the effect that the Holders of the notes will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (f) the Company must have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to either the legal defeasance or the covenant defeasance, as the case may be, have been complied with. TRANSFER AND EXCHANGE A Holder may transfer or exchange notes in accordance with the indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer document and the Company may require a Holder to pay any taxes and fees required by law or permitted by the indenture. The Company is not required to transfer or exchange any note for a period of 15 days before a selection of notes to be redeemed. The registered Holder of a note will be treated as the owner of it for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Modifications and amendments of the indenture and any Guarantee may be made by the Company, any affected Guarantor and the Trustee with the consent of the Holders of a majority in aggregate outstanding principal amount of the notes; provided, however, that no such modification or amendment may, without the consent of the Holder of each outstanding notes affected thereby: (a) change the Stated Maturity of the principal of, or any installment of interest on, any notes, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which any notes or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the redemption date); (b) amend, change or modify the obligation of the Company to make and consummate an Excess Proceeds Offer with respect to any Asset Sale in accordance with the covenant described under the covenant entitled "Repurchase at the Option of Holders -- Asset Sales" or the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control in accordance with the covenant entitled "Repurchase at the Option of Holders -- Change of Control," including, in each case, amending, changing or modifying any definition relating thereto; (c) reduce the percentage in principal amount of notes outstanding, the consent of whose Holders is required for any waiver of compliance with certain provisions of, or certain defaults and their consequences provided for under, the indenture; (d) waive a default in the payment of principal of, or premium, if any, or interest on the notes or reduce the percentage or aggregate principal amount of notes outstanding the consent of whose Holders is necessary for waiver of compliance with certain provisions of the indenture or for waiver of certain defaults; (e) modify the ranking or priority of the notes or the Guarantee of any Guarantor; or (f) release any Guarantor from any of its obligations under its Guarantee or the indenture other than in accordance with the terms of the indenture. 110 The Holders of a majority in aggregate principal amount of the notes outstanding may waive compliance with certain restrictive covenants and provisions of the indenture. Without the consent of any Holders, the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental to the indenture for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company in the indenture and in the notes; or (2) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (3) to add additional Events of Default; or (4) to provide for uncertificated notes in addition to or in place of the certificated notes; or (5) to evidence and provide for the acceptance of appointment under the indenture by a successor Trustee; or (6) to secure the notes; or (7) to cure any ambiguity, to correct or supplement any provision in the indenture that may be defective or inconsistent with any other provision in the indenture, or to make any other provisions with respect to matters or questions arising under the indenture, provided that such actions pursuant to this clause do not adversely affect the interests of the Holders in any material respect; or (8) to comply with any requirements of the Commission in order to effect and maintain the qualification of the indenture under the Trust indenture Act; or (9) to provide for the issuance of Additional notes in accordance with the limitations set forth in the indenture; or (10) to allow any Guarantor to execute a supplemental indenture and a Guarantee with respect to the notes. Notwithstanding the foregoing, neither the Company nor the Trustee may amend any provisions of the indenture or the notes concerning (i) the subordination of the notes and the Guarantees or (ii) legal defeasance or covenant defeasance without, in either case, the prior written consent of the Agent Bank, acting on behalf of the Banks under the Credit Agreement. CONCERNING THE TRUSTEE State Street Bank and Trust Company, N.A., the Trustee under the indenture, is the initial paying agent and registrar for the Notes. The indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the indenture. Under the indenture, the Holders of a majority in outstanding principal amount of the notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. If an Event of Default has occurred and is continuing, the Trustee will exercise such rights and powers vested in it under the indenture and use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. The indenture and provisions of the Trust indenture Act, incorporated by reference therein, contain limitations on the rights of the Trustee thereunder, should it become a creditor of the Company, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Trustee is permitted to engage in other transactions; provided, however, that, if it acquires any conflicting interest (as defined in the Trust indenture Act), it must eliminate such conflict upon the occurrence of an Event of Default or else resign. BOOK-ENTRY, DELIVERY AND FORM The exchange notes will be represented by one or more notes in registered, global form without interest coupons (collectively, the "Global Notes"). The Global Notes will be deposited upon issuance with the Trustee as custodian for The Depository Trust Company ("DTC"), in New York, New York, and registered in the name of Cede & Co., as nominee of DTC, for credit to an account of a direct or indirect participant in DTC, including the Euroclear System ("Euroclear") and Clearstream Banking, S.A. ("Clearstream"). Except as set forth below, the Global Notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for Notes in certificated form except in the limited circumstances described below. See "-- Exchange of Global Notes for Certificated Notes." Except in the limited circumstances described below, 111 owners of beneficial interests in the Global Notes will not be entitled to receive physical delivery of Notes in certificated form. Transfers of beneficial interests in the Global Notes will be subject to the applicable rules and procedures of DTC and its direct or indirect participants (including, if applicable, those of Euroclear and Clearstream), which may change from time to time. Depositary Procedures The following description of the operations and procedures of DTC are provided solely as a matter of convenience. These operations and procedures are solely within the control of DTC and are subject to changes by them. We take no responsibility for these operations and procedures and urges investors to contact the system or its participants directly to discuss these matters. DTC has advised us that DTC is a limited-purpose trust company that was created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the Initial Purchasers), banks and trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Persons who are not Participants may beneficially own securities held by or on behalf of the Depositary only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the Participants or Indirect Participants. DTC has also advised us that pursuant to procedures established by it: (i) upon deposit of the Global Notes, DTC will credit the accounts of Participants designated by the Initial Purchasers with portions of the principal amount of the Global Notes; and (ii) ownership of the Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC, with respect to the Participants, or by the Participants and the Indirect Participants with respect to other owners of beneficial interests in the Global Notes. DTC has advised us that its current practice, upon receipt of any payment in respect of securities such as the exchange notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of exchange notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the Trustee or us. Neither we nor the Trustee will be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the exchange notes, and we may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes. Transfers between Participants in DTC will be effected in accordance with DTC's procedures and will be settled in same day funds. DTC has advised us that it will take any action permitted to be taken by a Holder of notes only at the direction of one or more Participants to whose account DTC has credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount of the notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the notes, DTC reserves the right to exchange the Global Notes for legended notes in certificated form, and to distribute such notes to its Participants. 112 Although DTC has agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among participants in DTC, it is under no obligation to perform or to continue to perform these procedures, and may discontinue them at any time. Neither the Company nor the Trustee nor any of their respective agents will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. Exchange of Global Notes for Certificated Notes A Global Note is exchangeable for definitive notes in registered certificated form ("Certificated Notes") if: (1) DTC (a) notifies the Company that it is unwilling or unable to continue as depositary for the Global Notes and the Company fails to appoint a successor depositary within 90 days or (b) has ceased to be a clearing agency registered under the Exchange Act; (2) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Certificated Notes; or (3) there shall have occurred and be continuing a Default or Event of Default with respect to the notes. In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon prior written notice given to the Trustee by or on behalf of DTC in accordance with the indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures) and will bear an applicable restrictive legend, unless that legend is not required by applicable law. Exchange of Certificated Notes for Global Notes Certificated Notes may be exchanged for beneficial interests in the Global Note. Same-Day Settlement and Payment The indenture requires that payments in respect of the notes represented by the Global Notes (including principal, premium, if any, and interest, if any) be made by wire transfer of immediately available funds to the accounts specified by the Global Note Holder. With respect to Certificated Notes, we will make all payments of principal, premium, if any, and interest, if any, by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to each such Holder's registered address. The notes represented by the Global Notes are expected to be eligible to trade in the PORTAL market and to trade in DTC's Same-Day Funds Settlement System, and any permitted secondary market trading activity in such notes will, therefore, be required by DTC to be settled in immediately available funds. We expect that secondary trading in any Certificated Notes will also be settled in immediately available funds. ADDITIONAL INFORMATION Anyone who receives this prospectus may obtain a copy of the indenture without charge by writing to InSight Health Services Corp., 4400 MacArthur Boulevard, Suite 800, Newport Beach, California 92660, Attention: General Counsel. GOVERNING LAW The Indenture and the notes will be governed by, and in accordance with, the laws of the State of New York. 113 CERTAIN DEFINITIONS "Acquired Indebtedness" means Indebtedness of a Person (a) existing at the time such Person is merged with or into the Company or a Subsidiary or becomes a Subsidiary or (b) assumed in connection with the acquisition of assets from such Person. "Affiliate" means, with respect to any specified person, (a) any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person or (b) any other person that owns, directly or indirectly, 10% or more of such specified person's Capital Stock or any executive officer or director of any such specified person or other person. For the purposes of this definition, "control," when used with respect to any specified person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Bank" means Bank of America, N.A. and its successors under the Credit Agreement, in its capacity as administrative agent. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets (including, without limitation, by way of merger, consolidation or similar arrangement) (collectively, a "transfer") by the Company or any Restricted Subsidiary other than in the ordinary course of business and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Shares of Capital Stock of any of the Company's Restricted Subsidiaries (which shall be deemed to include the sale, grant or conveyance of any interest in the income, profits or proceeds therefrom), in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (x) that have a fair market value in excess of $2 million or (y) for Net Cash Proceeds in excess of $2 million. For the purposes of this definition, the term "Asset Sale" does not include (a) any transfer of properties or assets (i) that is governed by the provisions of the indenture described under the captions "-- Certain Covenants--Merger, Consolidation or Sale of Assets," "-- Limitation on Issuances and sales of Capital Stock of Restricted Subsidiaries" (to the extent of clause (a) thereof) or "-- Restricted Payments," (ii) between or among the Company and its Restricted Subsidiaries pursuant to transactions that do not violate any other provision of the indenture or (iii) representing obsolete or permanently retired equipment and facilities or (b) the sale or exchange of equipment in connection with the purchase or other acquisition of other equipment, in each case used in the business of the Company or its Restricted Subsidiaries as it was in existence on the Reference Date or any business determined by the Board of the Company in its good faith judgment to be reasonably related thereto. Notwithstanding anything to the contrary set forth above, a disposition of Receivables and Related Assets other than pursuant to a Receivables Program contemplated under the provisions described under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Disqualified Stock" shall be deemed to be an Asset Sale. "Banks" means the banks and other financial institutions that from time to time are lenders under the Credit Agreement. "Board" means the Company's Board of Directors or the Parent's Board of Directors, as applicable. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are authorized or obligated by law or executive order to close. "Capital Stock" of any Person means any and all shares, interests, partnership interests, participations, rights in or other equivalents (however designated) of such Person's equity interest (however designated), whether now outstanding or issued after the Closing Date. "Capitalized Lease Obligation" means, with respect to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee which, in accordance with GAAP, is required to be accounted for as a capital lease on the balance sheet of that Person. "Change of Control" means the occurrence of any of the following: (a) the consummation of any transaction (including, without limitation, any merger or consolidation) (a) prior to a Public Equity Offering by the Company or the Parent, the result of which is that the 114 Principals and their Related Parties become the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) of less than 50% of the Voting Stock of the Company or the Parent, as the case may be (measured by voting power rather than the number of shares), or (b) after a Public Equity Offering of the Company or the Parent, any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act), other than the Principals and their Related Parties, become the beneficial owner (as defined above), directly or indirectly, of 35% or more of the Voting Stock of the Company or the Parent, as the case may be, and such person is or becomes, directly or indirectly, the beneficial owner of a greater percentage of the voting power of the Voting Stock of the Company or the Parent, as the case may be, calculated on a fully diluted basis, than the percentage beneficially owned by the Principals and their Related Parties; (b) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Subsidiaries or the Parent and its Subsidiaries, in each case, taken as a whole, to any "person" (as the term is defined in Section 13(d)(3) of the Exchange Act) other than the Principals or Related Parties of the Principals; (c) the first day on which a majority of the members of the Board of the Company or the Parent are not Continuing Directors; or (d) the Company or the Parent is liquidated or dissolved or adopts a plan of liquidation or dissolution, other than in a transaction that complies with the provisions described under "Certain Covenants -- Consolidation, Merger or Sale of Assets." "Closing Date" means the date on which the notes are originally issued under the indenture. "Consolidated EBITDA" means, for any period, the sum of, without duplication, Consolidated Net Income for such period, plus (or, in the case of clause (d) below, plus or minus) the following items to the extent included in computing Consolidated Net Income for such period (a) Fixed Charges for such period, plus (b) the provision for federal, state, local and foreign income taxes of the Company and its Restricted Subsidiaries for such period, plus (c) the aggregate depreciation and amortization expense of the Company and its Restricted Subsidiaries for such period, plus (d) any other non-cash charges for such period, and minus non-cash items increasing Consolidated Net Income for such period, other than non-cash charges or items increasing Consolidated Net Income resulting from changes in prepaid assets or accrued liabilities in the ordinary course of business, plus (e) Minority Interest; provided that fixed charges, income tax expense, depreciation and amortization expense and non-cash charges of a Restricted Subsidiary will be included in Consolidated EBITDA only to the extent (and in the same proportion) that the net income of such Subsidiary was included in calculating Consolidated Net Income for such period. "Consolidated Net Income" means, for any period, the net income (or net loss) of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, adjusted to the extent included in calculating such net income or loss by excluding (a) any net after-tax extraordinary or nonrecurring gains or losses (less all fees and expenses relating thereto), (b) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to Asset Sales or discontinued operations, (c) the portion of net income (or loss) of any Person (other than the Company or a Restricted Subsidiary), including Unrestricted Subsidiaries, in which the Company or any Restricted Subsidiary has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any Restricted Subsidiary in cash during such period, (d) the net income (or loss) of any Person combined with the Company or any Restricted Subsidiary on a "pooling of interests" basis attributable to any period prior to the date of combination, (e) the net income (but not the net loss) of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is at the date of determination restricted, directly or indirectly, except to the extent that such net income is actually paid to the Company or a Restricted Subsidiary thereof by loans, advances, intercompany transfers, principal repayments or otherwise and (f) the cumulative effect of a change in accounting principles. 115 "Consolidated Tangible Assets" means, as of the date of determination, the total assets, less goodwill and other intangibles, shown on the balance sheet of the Company and its Restricted Subsidiaries as of the most recent date for which such a balance sheet is available, determined on a consolidated basis in accordance with GAAP. "Continuing Directors" means, as of any date of determination, any member of the Board of the Company or the Parent, as the case may be, who: (1) was a member of such Board on the Reference Date; (2) was nominated for election or elected to such Board with the approval of the majority of the Continuing Directors who were members of such Board at the time of such nomination or election; or (3) was nominated by one or more of the Principals and the Related Parties. "Credit Agreement" means the credit agreement, to be dated as of the date of the Acquisition, among the Company, the Parent, the Subsidiary Guarantors, the lenders named therein and Bank of America, N.A., as administrative agent, First Union National Bank, as syndication agent, and The CIT Group/Business Credit, Inc., as documentation agent, providing for up to $225 million in term loan borrowings and $50 million of revolving credit borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, as such credit agreement (and related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith) may be amended, restated, supplemented, refinanced, extended or otherwise modified from time to time. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Designated Noncash Consideration" means the fair market value of noncash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as Designated Noncash Consideration pursuant to an officer's certificate, setting forth the basis of such valuation, executed by the principal executive officer and the principal financial officer of the Company, less the amount of cash or cash equivalents received in connection with a sale of such Designated Noncash Consideration. "Designated Senior Indebtedness" means (i) so long as the Senior Bank Debt is outstanding, the Senior Bank Debt and (ii) thereafter, any other Senior Indebtedness permitted under the indenture the principal amount of which is $25 million or more and that has been specifically designated by the Company, in the instrument creating or evidencing such Senior Indebtedness or in an officers' certificate delivered to the Trustee, as "Designated Senior Indebtedness." "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board is required to deliver a resolution of the Board, to make a finding or otherwise take action under the indenture, a member of the Board who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "Disqualified Stock" means any class or series of Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or by contract or otherwise (i) is or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the Notes, (ii) is redeemable at the option of the Holder thereof, at any time prior to such final Stated Maturity or (iii) at the option of the Holder thereof is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity; provided that any Capital Stock that would constitute Disqualified Stock solely as a result of the provisions therein giving holders thereof the right to cause the issuer thereof to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Notes will not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in the covenants described under the captions "Repurchase at the Option of Holders -- Change of Control" and "-- Asset Sales" described herein and such Capital Stock specifically provides that the issuer will not repurchase or redeem any such stock pursuant to such provision prior to the Company's repurchase of such Notes as are required to be repurchased pursuant to 116 the provisions contained in the covenants described under the captions "Repurchase at the Option of Holders--Change of Control" and "-- Asset Sales." "Equity Interests" means Capital Stock and all warrants, options and other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means a public or private offering of Capital Stock (other than Disqualified Stock) of the Parent or the Company. "Equity Sponsors" means J.W. Childs Associates, L.P., J.W. Childs Equity Partners II, L.P., The Halifax Group, L.L.C. and Halifax Capital Partners L.P. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Indebtedness" means the Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreement) outstanding on the Reference Date and listed on a schedule to the indenture, until such amounts are repaid. "Existing Notes" means the 9 5/8% Senior Subordinated Notes due 2008 of the Company. "Facility" means any premises, together with the diagnostic imaging and treatment equipment installed therein, used by the Company in the conduct of the business of providing diagnostic imaging and information, treatment and related management services. "Fixed Charge Coverage Ratio" means, for any period, the ratio of Consolidated EBITDA for such period to Fixed Charges for such period. "Fixed Charges" means, for any period, without duplication, the sum of (a) the amount that, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of operations of the Company and its Restricted Subsidiaries for such period, including, without limitation, (i) amortization of original issue discount, (ii) the net cost of interest rate contracts (including, amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) amortization of debt issuance costs, and (v) the interest component of Capitalized Lease Obligations, plus (b) all dividends and distributions paid (whether or not in cash) on Preferred Stock and Disqualified Stock by the Company or any Restricted Subsidiary (to any Person other than the Company or any of its Restricted Subsidiaries), other than dividends on Equity Interests payable solely in Qualified Equity Interests of the Company, computed on a tax effected basis, plus (c) all interest on any Indebtedness of any Person guaranteed by the Company or any of its Restricted Subsidiaries or secured by a lien on the assets of the Company or any of its Restricted Subsidiaries; provided, however, that Fixed Charges will not include (i) any gain or loss from extinguishment of debt, including the write-off of debt issuance costs, and (ii) the fixed charges of a Restricted Subsidiary to the extent (and in the same proportion) that the net income of such Subsidiary was excluded in calculating Consolidated Net Income pursuant to clause (e) of the definition thereof for such period. "Foreign Subsidiary" means a Restricted Subsidiary that is incorporated in a jurisdiction other than the United States or a state thereof or the District of Columbia and that has no material operations or assets in the United States. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect on the Closing Date. "guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Hedging Obligations" means, with respect to any Person, the obligations of such Person entered into in the ordinary course of business under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and other similar financial agreements or arrangements designed to protect such Person against, or manage the exposure of such Person to, fluctuations in interest rates, and (ii) forward 117 exchange agreements, currency swap, currency option and other similar financial agreements or arrangements designed to protect such Person against, or manage the exposure of such Person to, fluctuations in foreign currency exchange rates. "Holder" means the Person in whose name a Note is, at the time of determination, registered on the Registrar's books. "Indebtedness" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (a) every obligation of such Person for money borrowed, (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services, (e) the attributable value of every Capitalized Lease Obligation of such Person, (f) all Disqualified Stock of such Person valued at its maximum fixed repurchase price, plus accrued and unpaid dividends thereon, (g) all obligations of such Person under or in respect of Hedging Obligations, and (h) every obligation of the type referred to in clauses (a) through (g) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed. For purposes of this definition, the "maximum fixed repurchase price" of any Disqualified Stock that does not have a fixed repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which Indebtedness is required to be determined pursuant to the indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value will be determined in good faith by the board of directors of the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade accounts payable and accrued liabilities arising in the ordinary course of business and any liability for federal, state or local taxes or other taxes owed by such Person will not be considered Indebtedness for purposes of this definition. "Investment" in any Person means, (i) directly or indirectly, any advance, loan or other extension of credit (including, without limitation, by way of guarantee or similar arrangement) or capital contribution to such Person, the purchase or other acquisition of any stock, bonds, notes, debentures or other securities issued by such Person, the acquisition (by purchase or otherwise) of all or substantially all of the business or assets of such Person, or the making of any investment in such Person, (ii) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary and (iii) the fair market value of the Capital Stock (or any other Investment), held by the Company or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to be a Restricted Subsidiary. Investments exclude endorsements for deposit or collection in the ordinary course of business and extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon, or with respect to, any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. A Person will be deemed to own subject to a Lien any property that such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "Minority Interest" means, with respect to any Person, interests in income of such Person's Subsidiaries held by Persons other than such Person or another Subsidiary of such Person, as reflected on such Person's consolidated financial statements. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or cash equivalents, including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed for, cash or cash equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary), net of (a) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (b) provisions for all taxes payable as a result of such Asset Sale, (c) payments made to retire Indebtedness where such Indebtedness is secured by the assets that are the subject of such Asset Sale, (d) amounts required to be paid to any Person (other than the Company or any Restricted 118 Subsidiary) owning a beneficial interest in the assets that are subject to the Asset Sale and (e) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the seller after such Asset Sale, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "Non-Recourse Indebtedness" means Indebtedness of a Person (i) as to which neither the Company nor any of its Restricted Subsidiaries (other than such Person), (a) provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, agreement or instrument that would constitute Indebtedness) or (b) is directly or indirectly liable (as a guarantor or otherwise), and (ii) the obligees of which will have recourse for repayment of the principal of and interest on such Indebtedness and any fees, indemnities, expense reimbursements or other amount of whatsoever nature accrued or payable in connection with such Indebtedness solely against the assets of such Person and not against any of the assets of the Company or its Restricted Subsidiaries (other than such Person). "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Parent" means InSight Health Services Holdings Corp. "Pari Passu Indebtedness" means (a) with respect to the Notes, Indebtedness that ranks pari passu in right of payment to the Notes and (b) with respect to any Guarantee, Indebtedness that ranks pari passu in right of payment to such Guarantee. "Permitted Business" means the business conducted by the Company, its Restricted Subsidiaries and Permitted Joint Ventures as of the Reference Date and any and all diagnostic imaging and information businesses that in the good faith judgment of the Board of the Company are reasonably related thereto. "Permitted Investments" means any of the following: (a) Investments in (i) United States dollars (including such dollars as are held as overnight bank deposits and demand deposits with banks), (ii) securities with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof); (iii) certificates of deposit, Euro-dollar time deposits or acceptances with a maturity of one year or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus of not less than $500,000,000; (iv) any shares of money market mutual or similar funds having assets in excess of $500,000,000; (v) repurchase obligations with a term not exceeding seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above; and (vi) commercial paper with a maturity of one year or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and having a rating (A) from Moody's Investors Service, Inc. of at least P-1 or (B) from Standard & Poor's Ratings Group of at least A-1; (b) Investments by the Company or any Restricted Subsidiary in another Person, if as a result of such Investment (i) such other Person becomes a Restricted Subsidiary or (ii) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a Restricted Subsidiary; (c) Investments by the Company or a Restricted Subsidiary in the Company or a Restricted Subsidiary; (d) Investments in existence on the Reference Date; (e) promissory notes or other evidence of Indebtedness received as a result of Asset Sales permitted under the covenant entitled "Repurchase at the Option of Holders -- Asset Sales;" 119 (f) loans or advances to officers, directors and employees of the Company or any of its Restricted Subsidiaries made (i) in the ordinary course of business in an amount not to exceed $5 million in the aggregate at any one time outstanding or (ii) in connection with the purchase by such Persons of Equity Interests of the Parent so long as the cash proceeds of such purchase received by the Parent are contemporaneously remitted by the Parent to the Company as a capital contribution; (g) any Investment by the Company or any Restricted Subsidiary of the Company in Permitted Joint Ventures made after the Reference Date having an aggregate fair market value, when taken together with all other Investments made pursuant to this clause (g) that are at the time outstanding, not exceeding the greater of (i) $30 million and (ii) 10% of the Consolidated Tangible Assets of the Company as of the last day of the most recent full fiscal quarter ending immediately prior to the date of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (h) any Investment by the Company or any Restricted Subsidiary in a trust, limited liability company, special purpose entity or other similar entity in connection with a Receivables Program; provided that (A) such Investment is made by a Receivables Subsidiary and (B) the only assets transferred to such trust, limited liability company, special purpose entity or other similar entity consists of Receivables and Related Assets of such Receivables Subsidiary; and (i) other Investments that do not exceed $20 million in the aggregate at any one time outstanding. "Permitted Joint Venture" means any joint venture, partnership or other Person designated by the Board of the Company, (i) at least 20% of whose Capital Stock with voting power under ordinary circumstances to elect directors (or Persons having similar or corresponding powers and responsibilities) is at the time owned (beneficially or directly) by the Company and/or by one or more Restricted Subsidiaries of the Company and if the Company owns more than 50% of the Capital Stock of the Permitted Joint Venture, such Permitted Joint Venture is either a Restricted Subsidiary of the Company or has been designated as an Unrestricted Subsidiary of the Company in accordance with the provisions described under the caption "-- Unrestricted Subsidiaries," (ii) (x) if it is an Unrestricted Subsidiary, all Indebtedness of such Person is Non-Recourse Indebtedness or (y) if it is a Person other than an Unrestricted Subsidiary, either all Indebtedness of such Person is Non-Recourse Indebtedness or the only Indebtedness of such Person that is not Non-Recourse Indebtedness is Indebtedness as to which any guarantee provided by the Company or a Restricted Subsidiary complies with the covenants described under the captions "Certain Covenants -- Restricted Payments" and "-- Incurrence of Indebtedness and Issuance of Disqualified Stock" and (iii) which is engaged in a Permitted Business; provided that each of Berwyn Magnetic Resonance Center, LLC, Garfield Imaging Center, Ltd., Tom's River Imaging Associates, L.P., St. John's Regional Imaging Center, LLC, Dublin Diagnostic Imaging, LLC, Connecticut Lithotripsy, LLC, Northern Indiana Oncology Center of Porter Memorial Hospital, LLC, Lockport MRI, LLC, Wilkes-Barre Imaging, LLC, Sun Coast Imaging Center, LLC, Granada Hills Open MRI, LLC, Daniel Freeman MRI, LLC, InSight-Premier Health, LLC, Southern Connecticut Imaging Centers, LLC, Parkway Imaging Center, LLC, Metabolic Imaging of Kentucky, LLC, Maine Molecular Imaging, LLC, Greater Waterbury Imaging Center, L.P. and Central Maine Magnetic Imaging Associates shall be deemed to be a Permitted Joint Venture. Any such designation (other than with respect to the Persons identified in the preceding sentence) shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution giving effect to such designation and an officer's certificate certifying that such designation complied with the foregoing provisions. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries; provided that: (i) the principal amount of such Permitted Refinancing Indebtedness does not exceed the principal amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded plus accrued interest plus the lesser of the amount of any premium required to be paid in connection with such refinancings pursuant to the terms of such indebtedness or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing (in each case plus the amount of reasonable expenses incurred in 120 connection therewith); (ii) such Permitted Refinancing Indebtedness has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date not earlier than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Permitted Refinancing Indebtedness shall not include Indebtedness of a Restricted Subsidiary that refinances Indebtedness of the Company or Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor that refinances Indebtedness of a Subsidiary Guarantor. "Person" means any individual, corporation, limited or general partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Preferred Stock" means, with respect to any Person, any and all shares, interests, partnership interests, participation, rights in or other equivalents (however designated) of such Person's preferred or preference stock, whether now outstanding or issued after the Closing Date, and including, without limitation, all classes and series of preferred or preference stock of such Person. "Principals" means the Equity Sponsors and their respective Affiliates. "Public Equity Offering" means an offer and sale of Capital Stock (other than Disqualified Stock) of the Company or the Parent pursuant to a registration statement that has been declared effective by the Commission pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company). "Qualified Equity Interest" means any Qualified Stock and all warrants, options or other rights to acquire Qualified Stock (but excluding any debt security that is convertible into or exchangeable for Capital Stock). "Qualified Stock" of any Person means any and all Capital Stock of such Person, other than Disqualified Stock. "Receivables and Related Assets" means accounts receivable, instruments, chattel paper, health care insurance receivables, obligations, general intangibles and other similar assets, including interest in merchandise or goods, the sale or lease of which give rise to the foregoing, related contractual rights, guarantees, insurance proceeds, collections, other related assets and proceeds of all the foregoing. "Receivables Program" means with respect to any Person, any securitization program pursuant to which such Person pledges, sells or otherwise transfers or encumbers its Receivables and Related Assets, including a trust, limited liability company, special purpose entity or other similar entity. "Receivables Subsidiary" means a Wholly Owned Subsidiary (i) created for the purpose of financing Receivables and Related Assets created in the ordinary course of business of the Company and its Subsidiaries and (ii) the sole assets of which consist of Receivables and Related Assets of the Company and its Subsidiaries and Permitted Investments. "Reference Date" means October 17, 2001, the date of the consummation of the acquisition. "Related Party" means: (1) any controlling stockholder, partner, member, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Principal; or (2) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Principals and/or such other Persons referred to in the immediately preceding clause. "Restricted Subsidiary" means any Subsidiary other than an Unrestricted Subsidiary. Notwithstanding anything to the contrary herein or in the Notes, Toms River Imaging Associates, L.P. will be deemed a 121 Restricted Subsidiary of the Company so long as the Company, directly or indirectly, owns at least 50% of the Voting Stock thereof. "Sale and Leaseback Transaction" means any transaction or series of related transactions pursuant to which the Company or a Restricted Subsidiary sells or transfers any property or asset in connection with the leasing, or the resale against installment payments, of such property or asset to the seller or transferor. "Senior Bank Debt" means the Obligations outstanding under the Credit Agreement. "Senior Indebtedness" means (i) the Senior Bank Debt and any Hedging Obligations owing by the Company or any Guarantor to any lender which is a party to the Credit Agreement (or to any Affiliate of any such lender), (ii) any other Indebtedness permitted to be incurred by the Company or any Restricted Subsidiary under the terms of the indenture and (iii) any Indebtedness of the Parent, unless, in the case of clauses (ii) and (iii), the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to any Indebtedness for money borrowed. Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness will not include (i) Indebtedness evidenced by the Notes or the Guarantees, (ii) Indebtedness of the Company or any Guarantor that is expressly subordinated in right of payment to any Senior Indebtedness of the Company or such Guarantor or the Notes or such Guarantor's Guarantee, (iii) Indebtedness of the Company that by operation of law is subordinate to any general unsecured obligations of the Company, (iv) Indebtedness of the Company or any Guarantor to the extent incurred in violation of the indenture, (v) any liability for federal, state or local taxes or other taxes, owed or owing by the Company or the Parent, (vi) trade account payables owed or owing by the Company or any Guarantor, (vii) amounts owed by the Company or any Guarantor for compensation to employees or for services rendered to the Company or such Guarantor, (viii) Indebtedness of the Company to any Restricted Subsidiary or any other Affiliate of the Company, (ix) Disqualified Stock of the Company or any Guarantor, and (x) Indebtedness which when incurred and without respect to any election under Section 1111(b) of Title 11 of the United States Code is without recourse to the Company or any Restricted Subsidiary. "Significant Subsidiary" means any Restricted Subsidiary of the Company that, together with its Subsidiaries, (a) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated net revenues of the Company and its Subsidiaries, (b) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the most recently available consolidated financial statements of the Company for such fiscal year or (c) was organized or acquired after the beginning of such fiscal year and would have been a Significant Subsidiary if it had been owned during such entire fiscal year. "Stated Maturity" means, when used with respect to any note or any installment of interest thereon, the date specified in such note as the fixed date on which the principal of such note or such installment of interest is due and payable and, when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness or any installment of interest thereon is due and payable. "Subordinated Indebtedness" means Indebtedness of the Company or a Guarantor that is subordinated in right of payment to the Notes or the Guarantee issued by such Guarantor, as the case may be. "Subsidiary" means any Person a majority of the equity ownership or Voting Stock of which is at the time owned, directly or indirectly, by the Company and/or one or more other Subsidiaries of the Company. Notwithstanding anything to the contrary herein or in the Notes, Toms River Imaging Associates, L.P. will be deemed a Subsidiary of the Company so long as the Company, directly or indirectly, owns at least 50% of the Voting Stock thereof. "Subsidiary Guarantors" means, collectively, all Wholly Owned Restricted Subsidiaries that are incorporated in the United States or a state thereof or the District of Columbia. "Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the Board of the Company as an Unrestricted Subsidiary in accordance with the "Unrestricted Subsidiaries" covenant and (b) any Subsidiary of an Unrestricted Subsidiary. 122 "Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency). "Weighted Average Life" means, as of the date of determination with respect to any Indebtedness or Disqualified Stock, the quotient obtained by dividing (a) the sum of the products of (i) the number of years from the date of determination to the date or dates of each successive scheduled principal or liquidation value payment of such Indebtedness or Disqualified Stock, respectively, multiplied by (ii) the amount of each such principal or liquidation value payment by (b) the sum of all such principal or liquidation value payments. "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all of the outstanding Voting Stock (other than directors' qualifying shares or shares of foreign Restricted Subsidiaries required to be owned by foreign nationals pursuant to applicable law) of which is owned, directly or indirectly, by the Company. "Wholly Owned Subsidiary" means any Subsidiary, all of the outstanding Voting Stock (other than directors' qualifying shares or shares of foreign Subsidiaries required to be owned by foreign nationals pursuant to applicable law) of which is owned, directly or indirectly, by the Company. 123 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS GENERAL The following discussion summarizes certain material U.S. federal income tax considerations generally applicable to holders of the notes. The U.S. federal income tax considerations set forth below are based upon currently existing provisions of the Internal Revenue Code (Code), applicable permanent, temporary and proposed Treasury regulations, judicial authority, and current administrative rulings and pronouncements of the IRS. There can be no assurance that the IRS will not take a contrary view, and no ruling from the IRS has been, or will be, sought on the issues discussed herein. Legislative, judicial, or administrative changes or interpretations may be forthcoming that could alter or modify the statements and conclusions set forth herein. Any such changes or interpretations may or may not be retroactive and could affect the tax consequences discussed below. The summary is not a complete analysis or description of all potential U.S. federal income tax considerations that may be relevant to, or of the actual tax effect that any of the matters described herein will have on, particular holders, and does not address foreign, state, local or other tax consequences. This summary does not purport to address special classes of taxpayers (such as S corporations, mutual funds, insurance companies, financial institutions, small business investment companies, regulated investment companies, broker-dealers and tax-exempt organizations) who are subject to special treatment under the U.S. federal income tax laws, or persons that hold notes that are a hedge against, or that are hedged against, currency risk or that are part of a straddle or conversion transaction, or persons whose functional currency within the meaning of section 985 of the Code is not the U.S. dollar. Furthermore, estate and gift tax consequences are not discussed herein. The following discussion assumes that the exchange notes are held as capital assets within the meaning of section 1221 of the Code. As used herein, the term "U.S. Holder" means a beneficial owner of the notes that is (1) a citizen or resident of the United States for U.S. federal income tax purposes, (2) a corporation or a partnership (or entity treated as a corporation or partnership for U.S. tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof (including the District of Columbia), (3) an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source, or (4) a trust if (a) a U.S. court can exercise primary supervision over the administration of such trust and (b) one or more U.S. fiduciaries has the authority to control all of the substantial decisions of such trust. As used herein the term "Non-U.S. Holder" means a beneficial holder of notes that is not a U.S. Holder. Because individual circumstances may differ, each holder of the notes is strongly urged to consult his or her own tax advisor with respect to his or her particular tax situation and as to any U.S. federal, foreign, state, local or other tax considerations (including any possible changes in tax law) affecting the exchange, holding and disposition of the notes. EXCHANGE OFFER We have obtained an opinion from Kaye Scholer LLP to the effect that, if the exchange offer is consummated in accordance with this prospectus, a U.S. Holder will not recognize taxable gain or loss on the exchange of outstanding notes for exchange notes pursuant to the exchange offer. A U.S. Holder's tax basis and holding period for such exchange notes will be the same as for the outstanding notes immediately before the exchange. FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS This section describes certain U.S. federal income tax considerations applicable to U.S. Holders. Non-U.S. Holders should see the discussion below under the heading "Federal Income Tax Consequences to Non-U.S. Holders" for a discussion of certain tax considerations applicable to them. Interest and OID. Interest on the exchange notes generally will be taxable to a U.S. Holder as ordinary interest income at the time such amounts are accrued or received, in accordance with the U.S. Holder's method of accounting for U.S. federal income tax purposes. 124 In the event that the issue price of the notes is less than the "stated redemption price at maturity" of the notes by more than a de minimis amount, the notes will be considered to have original issue discount (OID). The "stated redemption price at maturity" of a debt instrument is equal to the sum of all payments to be received other than payments of stated interest. The "issue price" of a debt instrument issued for cash is equal to the first price at which a substantial amount of such debt instruments are sold. If the notes are treated as having OID, a U.S. Holder (including a cash basis holder) generally would be required to include the OID on the notes in income for U.S. federal income tax purposes under the accrual method on a constant yield basis resulting in the inclusion of interest in income in advance of the receipt of cash attributable to that income. Amortizable Bond Premium. A U.S. Holder that purchases a note for an amount in excess of the stated redemption price at maturity will be considered to have purchased the note with "amortizable bond premium". Such holder may elect to amortize such premium (as an offset to interest income), using a constant-yield method, over the remaining term of the note. Such election, once made, generally applies to all debt instruments held or subsequently acquired by the U.S. Holder on or after the first day of the first taxable year to which the election applies and may be revoked only with the consent of the IRS. A U.S. Holder that elects to amortize such premium must reduce its tax basis in the note by the amount of the premium amortized during its holding period. With respect to a U.S. Holder that does not elect to amortize bond premium, the amount of such premium will be included in the U.S. Holder's tax basis for purposes of computing gain or loss in connection with taxable disposition of the note. Market Discount on Resale of the Notes. If a U.S. Holder acquires a note (generally other than in an original issue) at a market discount that exceeds a statutorily defined de minimis amount and thereafter recognizes gain upon a disposition (or makes a gift) of the note, the lesser of (1) such gain (or appreciation, in the case of a gift) or (2) the portion of the market discount that accrued while the note was held by such U.S. Holder will be treated as ordinary income at the time of the disposition. For these purposes, market discount equals the excess of the stated redemption price at maturity (or, if the note is issued with OID, its "revised issued price" as defined in the Code) over the basis of the note in the hands of such U.S. Holder immediately after its acquisition. A U.S. Holder of a note may elect to include any market discount in income currently as it accrues, either ratably or on a constant yield basis, rather than upon disposition of the note. This election is revocable only with the consent of the IRS and applies to all market discount bonds acquired by the U.S. Holder on or after the first day of the taxable year in which the holder makes the election. A U.S. Holder of a note who acquired it at a market discount may be required to defer the deduction of all or a portion of any interest paid or accrued on any indebtedness incurred or continued to purchase or carry the note until the market discount is recognizable upon a subsequent disposition of the note. Such a deferral is not required, however, if the U.S. Holder elects to include accrued market discount in income currently. Disposition of the Notes. Unless a nonrecognition provision applies, the sale, exchange, redemption (including pursuant to an offer by InSight) or other disposition of a note will be a taxable event for U.S. federal income tax purposes. In such event, in general, a U.S. Holder of notes will recognize gain or loss equal to the difference between (1) the amount of cash plus the fair market value of property received (except to the extent attributable to any accrued interest on the notes which will be taxable as such) and (2) the U.S. Holder's tax basis in the notes (as increased by any OID and market discount previously included in income by the U.S. Holder and decreased by any amortizable bond premium deducted over the term of the notes). Subject to the market discount rules discussed above, any such gain or loss generally will be long-term capital gain or loss, provided the notes have been held for more than one year. The deductibility of capital losses is subject to limitations. Backup Withholding. Under section 3406 of the Code and applicable Treasury regulations, a noncorporate U.S. Holder of the notes may be subject to backup withholding at the rate of 30% (subject to change in future years) with respect to "reportable payments," which include interest paid on, or, in certain cases, the proceeds of a sale, exchange or redemption of, the notes. The payor will be required to deduct and withhold the prescribed amounts if (1) the payee fails to furnish a taxpayer identification number (TIN) to the payor in the manner required, (2) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (3) there has been a "notified payee underreporting" described in section 3406(c) of the Code or (4) there has been a failure of the payee to certify under penalty of perjury that the payee is not subject to 125 withholding under section 3406(a)(1)(C) of the Code. Amounts paid as backup withholding do not constitute an additional tax and may be refunded (or credited against the holder's U.S. federal income tax liability, if any) so long as the required information is provided to the IRS. The Company will report to the holders of the notes and to the IRS the amount of any "reportable payments" for each calendar year and the amount of tax withheld, if any, with respect to payment on those securities. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS The following information describes the U.S. federal income tax treatment of "Non-U.S. Holders." Interest on the Notes. If the income or gain on the notes is "effectively connected with the conduct of a trade or business within the United States" by a Non-U.S. Holder, and, if a tax treaty applies, the income or gain generally is attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder, such income or gain will be subject to U.S. federal income tax essentially in the same manner as if the notes were held by a U.S. Holder, as described above, and in the case of a Non-U.S. Holder that is a corporation, may also be subject to U.S. branch profits tax. Such Non-U.S. Holder will not be subject to withholding taxes, however, if it provides a properly executed IRS Form W-8ECI. Interest on the notes held by other Non-U.S. Holders may be subject to withholding of up to 30% of each payment made to the holders or other payee unless the "portfolio interest exemption" applies or an applicable income tax treaty reduces the withholding rate. The interest paid on the notes generally will qualify for the portfolio interest exemption. Accordingly, interest paid on the notes to a Non-U.S. Holder will not be subject to withholding if (1) the U.S. person who would otherwise be required to deduct and withhold the tax receives from the Non-U.S. Holder who is the beneficial owner of the notes a statement signed by such person under penalties of perjury, certifying that such owner is not a U.S. person on IRS Form W-8BEN (or successor form); (2) such Non-U.S. Holder does not actually or constructively own 10 percent or more of the total combined voting power of all classes of stock in the Company; (3) such Non-U.S. Holder is not a "controlled foreign corporation" (within the meaning of section 957 of the Code) related to the Company; and (4) the Non-U.S. Holder is not a foreign "bank" receiving the interest on an extension of credit pursuant to a loan agreement entered into in the ordinary course of its trade or business. If you do not claim, or do not qualify for, the benefit of the portfolio interest exemption, you may be subject to a 30% withholding tax on interest payments on the notes. However, you may be able to claim the benefit of a reduced withholding tax rate under an applicable income tax treaty. The required information for claiming treaty benefits is generally submitted, under current regulations, on IRS Form W-8BEN. Sale or Other Disposition of the Notes. A Non-U.S. Holder will generally not be subject to U.S. federal income tax or withholding tax on gain recognized on a sale, exchange, redemption, retirement, or other disposition of the notes. A Non-U.S. Holder may, however, be subject to tax on such gain if: (1) it is an individual who was present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met; (2) it is an individual who is a former citizen or long-term resident of the United States subject to certain U.S. tax rules relevant to such status; or (3) the gain is effectively connected with the conduct of a U.S. trade or business, as provided in applicable U.S. tax rules. Backup Withholding and Information Reporting. Payments of interest or principal may be subject to both backup withholding at a rate of 30% (subject to change in future years) and information reporting. Backup withholding and information reporting generally will not apply to payments on the notes if the Non-U.S. Holder certifies, on a Form W-8BEN, or successor form, that it is not a U.S. person, provided that the payor does not have actual knowledge that the Non-U.S. Holder is, in fact, a U.S. person. Any amounts withheld under the backup withholding rules may be refunded or credited against the Non-U.S. Holder's U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS. The foregoing summary is included herein for general information only and does not discuss all aspects of U.S. federal income taxation that may be relevant to a particular holder of the notes in light of his or her particular circumstances and income tax situation. Holders are urged to consult their own tax advisors as to any tax consequences to them from the exchange, ownership, and disposition of the notes, including the application and effect of state, local, foreign, and other tax laws. 126 PLAN OF DISTRIBUTION Each participating broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a participating broker-dealer in connection with resales of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired as a result of market-making activities or other trading activities. We have agreed that for a period of 180 days after the expiration of the exchange offer, we will make this prospectus, as amended or supplemented, available to any participating broker-dealer for use in connection with any such resale. We will not receive any proceeds from any sales of the exchange notes by participating broker-dealers. Exchange notes received by participating broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such participating broker-dealer and/or the purchasers of any such exchange notes. Any participating broker-dealer that resells the exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of exchange notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a participating broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the expiration of the exchange offer we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any participating broker-dealer that requests such documents in the letter of transmittal. Prior to the exchange offer, there has not been any public market for the outstanding notes. The outstanding notes have not been registered under the Securities Act and will be subject to restrictions on transferability to the extent that they are not exchanged for exchange notes by holders who are entitled to participate in this exchange offer. The holders of outstanding notes who timely notify us under the registration rights agreement, and are not eligible to participate in the exchange offer, are not permitted to resell the exchange notes using this prospectus or is a broker-dealer and holds outstanding notes acquired directly from us or any of our affiliates are entitled to certain registration rights, and we are required to file a shelf registration statement with respect to their outstanding notes. The exchange notes will constitute a new issue of securities with no established trading market. We do not intend to list the exchange notes on any national securities exchange or to seek the admission thereof to trading in the National Association of Securities Dealers Automated Quotation System. In addition, such market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act and may be limited during the exchange offer and the pendency of the shelf registration statements. Accordingly, no assurance can be given that an active public or other market will develop for the exchange notes or as to the liquidity of the trading market for the exchange notes. If a trading market does not develop or is not maintained, holders of the exchange notes may experience difficulty in reselling the exchange notes or may be unable to sell them at all. If a market for the exchange notes develops, any such market may be discontinued at any time. LEGAL MATTERS The validity of the notes offered hereby and certain other legal matters will be passed upon on behalf of InSight by Kaye Scholer LLP, New York, New York. Certain legal matters will be passed upon on behalf of InSight by Hunton & Williams, McLean, Virginia. 127 EXPERTS The consolidated financial statements of InSight as of June 30, 2001 and 2000 and for the three years in the period ended June 30, 2001 and the consolidated financial statements of InSight Holdings as of June 30, 2001 and for the period from inception (June 13, 2001) to June 30, 2001, included in this prospectus and elsewhere in the registration statement, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. AVAILABLE INFORMATION Since the consummation of the acquisition, InSight is no longer subject to the informational requirements of the Securities Exchange Act of 1934. As a result, and until the registration statement filed in connection with the exchange offer described herein for the exchange notes has been declared effective, InSight will not be required to file periodic reports with the SEC. InSight has agreed that, whether or not it is required to do so by the rules and regulations of the SEC, for so long as any of the notes remain outstanding, it will furnish to the holders of the notes and file with the SEC, unless the SEC will not accept such a filing, following the consummation of the exchange offer: (1) all quarterly and annual reports that would be required to be filed with the SEC on Forms 10-Q and 10-K if InSight was required to file such reports and (2) all reports that would be required to be filed with the SEC on Form 8-K if InSight was required to file such reports. So long as InSight Holdings guarantees the notes, InSight's reporting obligations will be satisfied by InSight Holdings. All reports, exhibits to such reports and other information that InSight files with the SEC will be available on the SEC's web site at www.sec.gov. 128 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE NUMBER ----------- Report of Independent Public Accountants.................... F-2 Consolidated Balance Sheets as of June 30, 2001 and 2000.... F-3 Consolidated Statements of Income for the years ended June 30, 2001, 2000 and 1999................................... F-4 Consolidated Statements of Stockholders' Equity for the years ended June 30, 2001, 2000 and 1999.................. F-5 Consolidated Statements of Cash Flows for the years ended June 30, 2001, 2000 and 1999.............................. F-6 Notes to Consolidated Financial Statements.................. F-7 Condensed Consolidated Balance Sheets as of September 30, 2001 and June 30, 2001 (unaudited)........................ F-32 Condensed Consolidated Statements of Income for the three months ended September 30, 2001 and 2000 (unaudited)...... F-33 Condensed Consolidated Statements of Comprehensive Income for the three months ended September 30, 2001 and 2000 (unaudited)............................................... F-34 Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2001 and 2000 (unaudited)............................................... F-35 Notes to Condensed Consolidated Financial Statements........ F-36 Report of Independent Public Accountant for InSight Health Services Holdings Corp. and Subsidiary.................... F-47 Consolidated Balance Sheet as of September 30, 2001 and June 30, 2001 for InSight Health Services Holdings Corp. and Subsidiary................................................ F-48 Consolidated Statement of Stockholders' Equity from Inception (June 13, 2001) to September 30, 2001 of InSight Health Services Holdings Corp. and Subsidiary............. F-49 Notes to Consolidated Financial Statements of InSight Health Services Holdings Corp.................................... F-50
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of InSight Health Services Corp.: We have audited the accompanying consolidated balance sheets of InSight Health Services Corp. (a Delaware corporation) and subsidiaries as of June 30, 2001 and 2000, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended June 30, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of InSight Health Services Corp. and subsidiaries as of June 30, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2001, in conformity with accounting principles generally accepted in the United States. /s/ ARTHUR ANDERSEN LLP Orange County, California August 29, 2001 F-2 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2001 AND 2000 (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
2001 2000 -------- -------- ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 23,254 $ 27,133 Trade accounts receivables, net........................... 43,355 40,598 Other current assets...................................... 5,029 5,811 Deferred income taxes..................................... 3,350 3,350 -------- -------- Total current assets................................... 74,988 76,892 -------- -------- PROPERTY AND EQUIPMENT, net................................. 148,255 148,469 INVESTMENTS IN PARTNERSHIPS................................. 1,783 1,782 OTHER ASSETS................................................ 6,828 7,799 INTANGIBLE ASSETS, net...................................... 89,202 93,930 -------- -------- $321,056 $328,872 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of equipment and other notes.............. $ 21,259 $ 18,813 Current portion of capital lease obligations.............. 12,603 10,652 Accounts payable and other accrued expenses............... 24,335 26,613 -------- -------- Total current liabilities.............................. 58,197 56,078 -------- -------- LONG-TERM LIABILITIES: Equipment and other notes, less current portion........... 150,696 172,379 Capital lease obligations, less current portion........... 43,695 46,388 Other long-term liabilities............................... 2,997 2,540 -------- -------- Total long-term liabilities............................ 197,388 221,307 -------- -------- COMMITMENTS AND CONTINGENCIES (Note 7) STOCKHOLDERS' EQUITY: Preferred stock, $.001 par value, 3,500,000 shares authorized: Convertible Series B preferred stock, 25,000 shares outstanding at June 30, 2001 and 2000, with a liquidation preference of $25,000 as of June 30, 2001.................................................. 23,923 23,923 Convertible Series C preferred stock, 27,953 shares outstanding at June 30, 2001 and 2000, with a liquidation preference of $27,953 as of June 30, 2001.................................................. 13,173 13,173 Common stock, $.001 par value, 25,000,000 shares authorized, 3,011,656 and 2,979,293 shares outstanding at June 30, 2001 and 2000, respectively............... 3 3 Additional paid-in capital................................ 23,926 23,743 Retained earnings (deficit)............................... 4,446 (9,355) -------- -------- Total stockholders' equity............................. 65,471 51,487 -------- -------- $321,056 $328,872 ======== ========
The accompanying notes are an integral part of these consolidated balance sheets. F-3 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED JUNE 30, 2001, 2000 AND 1999 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
2001 2000 1999 -------- -------- ------- REVENUES: Contract services......................................... $103,421 $100,135 $85,491 Patient services.......................................... 107,468 86,838 73,565 Other..................................................... 614 1,601 2,936 -------- -------- ------- Total revenues......................................... 211,503 188,574 161,992 -------- -------- ------- COSTS OF OPERATIONS: Costs of services......................................... 109,216 101,323 85,317 Provision for doubtful accounts........................... 3,594 2,907 2,618 Equipment leases.......................................... 7,928 13,569 18,522 Depreciation and amortization............................. 41,134 33,630 24,886 -------- -------- ------- Total costs of operations.............................. 161,872 151,429 131,343 -------- -------- ------- Gross profit........................................... 49,631 37,145 30,649 CORPORATE OPERATING EXPENSES................................ 10,783 10,946 10,475 PROVISION FOR REORGANIZATION AND OTHER COSTS................ -- -- 3,300 -------- -------- ------- Income from company operations............................ 38,848 26,199 16,874 EQUITY IN EARNINGS OF UNCONSOLIDATED PARTNERSHIPS.............................................. 971 817 548 -------- -------- ------- Operating income.......................................... 39,819 27,016 17,422 INTEREST EXPENSE, net....................................... 23,394 18,696 14,500 -------- -------- ------- Income before income taxes................................ 16,425 8,320 2,922 PROVISION (BENEFIT) FOR INCOME TAXES........................ 2,624 1,131 (3,190) -------- -------- ------- Net income................................................ $ 13,801 $ 7,189 $ 6,112 ======== ======== ======= INCOME PER COMMON AND PREFERRED SHARE: Basic..................................................... $ 1.48 $ 0.78 $ 0.67 ======== ======== ======= Diluted................................................... $ 1.42 $ 0.76 $ 0.65 ======== ======== ======= WEIGHTED AVERAGE NUMBER OF COMMON AND PREFERRED SHARES OUTSTANDING: Basic..................................................... 9,321 9,258 9,158 ======== ======== ======= Diluted................................................... 9,719 9,398 9,376 ======== ======== =======
The accompanying notes are an integral part of these consolidated financial statements. F-4 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JUNE 30, 2001, 2000 AND 1999 (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
PREFERRED STOCK ----------------------------------- SERIES B SERIES C COMMON STOCK ADDITIONAL RETAINED ---------------- ---------------- ------------------ PAID-IN EARNINGS SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) TOTAL ------ ------- ------ ------- --------- ------ ---------- --------- ------- BALANCE AT JUNE 30, 1998.................... 25,000 $23,923 27,953 $13,173 2,824,090 $3 $23,415 $(22,656) $37,858 Stock options exercised... -- -- -- -- 52,596 -- 115 -- 115 Common stock issued....... -- -- -- -- 2,385 -- 21 -- 21 Net income................ -- -- -- -- -- -- -- 6,112 6,112 ------ ------- ------ ------- --------- -- ------- -------- ------- BALANCE AT JUNE 30, 1999.................... 25,000 23,923 27,953 13,173 2,879,071 3 23,551 (16,544) 44,106 Stock options and warrants exercised............... -- -- -- -- 100,222 -- 192 -- 192 Net income................ -- -- -- -- -- -- -- 7,189 7,189 ------ ------- ------ ------- --------- -- ------- -------- ------- BALANCE AT JUNE 30, 2000.................... 25,000 23,923 27,953 13,173 2,979,293 3 23,743 (9,355) 51,487 Stock options and warrants exercised............... -- -- -- -- 32,375 -- 183 -- 183 Adjustment for fractional shares on MHC and IHC exchange................ -- -- -- -- (12) -- -- -- -- Net income................ -- -- -- -- -- -- -- 13,801 13,801 ------ ------- ------ ------- --------- -- ------- -------- ------- BALANCE AT JUNE 30, 2001.................... 25,000 $23,923 27,953 $13,173 3,011,656 $3 $23,926 $ 4,446 $65,471 ====== ======= ====== ======= ========= == ======= ======== =======
The accompanying notes are an integral part of these consolidated financial statements. F-5 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2001, 2000 AND 1999 (AMOUNTS IN THOUSANDS)
2001 2000 1999 ------- -------- -------- OPERATING ACTIVITIES: Net income................................................ $13,801 $ 7,189 $ 6,112 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 41,134 33,630 24,886 Amortization of deferred gain on debt restructure...... -- -- (75) Cash provided by (used in) changes in operating assets and liabilities: Trade accounts receivables, net........................ (2,757) (4,611) (8,324) Other current assets................................... 782 (1,803) (4,106) Accounts payable and other accrued expenses............ (2,278) 6,119 (7,601) ------- -------- -------- Net cash provided by operating activities............ 50,682 40,524 10,892 ------- -------- -------- INVESTING ACTIVITIES: Cash acquired in acquisitions............................. -- -- 850 Acquisition of Centers and Fixed Facilities............... -- (25,346) (28,046) Additions to property and equipment....................... (22,911) (23,170) (18,440) Other..................................................... (531) (554) (1,565) ------- -------- -------- Net cash used in investing activities................ (23,442) (49,070) (47,201) ------- -------- -------- FINANCING ACTIVITIES: Proceeds from stock options and warrants exercised........ 183 192 115 Proceeds from issuance of common stock.................... -- -- 21 Principal payments of debt and capital lease obligations............................................ (31,759) (25,468) (17,495) Proceeds from issuance of debt............................ -- 45,200 23,820 Other..................................................... 457 1,461 (598) ------- -------- -------- Net cash provided by (used in) financing activities........................................ (31,119) 21,385 5,863 ------- -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:........... (3,879) 12,839 (30,446) Cash, beginning of year................................... 27,133 14,294 44,740 ------- -------- -------- Cash, end of year......................................... $23,254 $ 27,133 $ 14,294 ======= ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid............................................. $22,947 $ 18,086 $ 14,923 Income taxes paid......................................... 2,582 452 71 Equipment additions under capital leases.................. 11,780 55,290 1,507
The accompanying notes are an integral part of these consolidated financial statements. F-6 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Nature of Business InSight Health Services Corp. (Company) was incorporated in Delaware in February 1996. The Company's predecessors, InSight Health Corp. (formerly American Health Services Corp.) (IHC), and Maxum Health Corp. (MHC), became wholly owned subsidiaries of the Company on June 26, 1996, pursuant to an Agreement and Plan of Merger among the Company, IHC and MHC (the Merger). The Company provides diagnostic imaging, treatment and related management services in 28 states throughout the United States. The Company has two reportable segments: Eastern Division and Western Division. The Company's services are provided through a network of 82 mobile magnetic resonance imaging (MRI) facilities, four mobile lithotripsy facilities, four mobile positron emission tomography (PET) facilities (collectively Mobile Facilities), 35 fixed-site MRI facilities (Fixed Facilities), 27 multi-modality imaging centers (Centers), one Leksell Stereotactic Gamma Knife treatment center, one PET Fixed Facility, and one radiation oncology center. An additional radiation oncology center is operated by the Company as part of one of its Centers. The Company has a substantial presence in California, Texas, New England, the Carolinas, Florida and the Midwest (Indiana and Ohio). At its Centers, the Company typically offers other services in addition to MRI, including computed tomography (CT), diagnostic and fluoroscopic x-ray, mammography, diagnostic ultrasound, nuclear medicine, bone densitometry, nuclear cardiology, and cardiovascular services. b. Consolidated Financial Statements The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company's investment interests in partnerships or limited liability companies (Partnerships) are accounted for under the equity method of accounting for ownership of 50 percent or less when the Company does not exercise significant control over the operations of the Partnership and does not have primary responsibility for the Partnership's long-term debt. The Company's investment interests in Partnerships are consolidated for ownership of 50 percent or greater owned entities when the Company exercises significant control over the operations and is primarily responsible for the associated long-term debt (Note 12). Significant intercompany balances have been eliminated in consolidation. c. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. d. Revenue Recognition Revenues from contract services (primarily Mobile Facilities) and from patient services (primarily Fixed Facilities and Centers) are recognized when services are provided. Patient services revenues are presented net of related contractual adjustments. Equipment rental revenues, management fees and other revenues are recognized over the applicable contract period. Revenues collected in advance are recorded as unearned revenue. F-7 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) e. Cash Equivalents Cash equivalents are generally composed of liquid investments with original maturities of three months or less, such as certificates of deposit and commercial paper. f. Property and Equipment Property and equipment are depreciated and amortized on the straight-line method using the following estimated useful lives: Vehicles................................. 3 to 8 years Buildings................................ 7 to 20 years Leasehold improvements................... Lesser of the useful life or term of lease Computer and office equipment............ 3 to 5 years Diagnostic and related equipment......... 5 to 8 years Equipment and vehicles under capital Lesser of the useful life or term of leases................................. lease
The Company capitalizes expenditures for improvements and major renewals. Maintenance, repairs and minor replacements are charged to operations as incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations. g. Intangible Assets The Company has classified as goodwill the cost in excess of fair value of the net assets acquired in purchase transactions. Intangible assets are amortized on the straight-line basis over the following periods: Goodwill.................................................... 5 to 20 years Other....................................................... 3 to 7 years
The Company assesses the ongoing recoverability of its intangible assets (including goodwill) by determining whether the intangible asset balance can be recovered over the remaining amortization period through projected undiscounted future cash flows. If projected future cash flows indicate that the unamortized intangible asset balances will not be recovered, an adjustment is made to reduce the net intangible asset to an amount consistent with projected future cash flows discounted at the Company's incremental borrowing rate. Cash flow projections, although subject to a degree of uncertainty, are based on trends of historical performance and management's estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions. h. Income Taxes The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. F-8 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) i. Income Per Common and Preferred Share The Company reports basic and diluted earnings per share (EPS) for common and preferred stock (Note 13). Basic EPS is computed by dividing reported earnings by weighted average common and preferred shares outstanding. Diluted EPS is computed by adding to the weighted average common and preferred shares the dilutive effect of stock options and warrants. j. Fair Value of Financial Instruments The fair value of financial instruments is estimated using available market information and other valuation methodologies. The fair value of the Company's financial instruments is estimated to approximate the related book value, unless otherwise indicated. k. New Pronouncements In the first quarter of fiscal 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities" as amended by SFAS No. 137 and SFAS No. 138 (collectively, SFAS 133). SFAS 133 requires that entities recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. Under SFAS 133 an entity may designate a derivative as a hedge of exposure to either changes in: (i) fair value of a recognized asset or liability or firm commitment, (ii) cash flows of a recognized or forecasted transaction, or (iii) foreign currencies of a net investment in foreign operations, firm commitments, available-for-sale securities or a forecasted transaction. Depending upon the effectiveness of the hedge and/or the transaction being hedged, any change in the fair value of the derivative instrument is either recognized in earnings in the current year, deferred to future periods, or recognized in other comprehensive income. Changes in the fair value of all derivative instruments not recognized as hedge accounting are recognized in current year earnings. The adoption of SFAS 133 on July 1, 2000 did not have a material impact on the Company's financial condition and results of operations. In fiscal 1998, the Company entered into an interest rate swap with a notional amount of $40 million for the purpose of fixing the interest rate of a corresponding amount of $40 million of floating rate debt. This swap had a three year term and was extendable for an additional three years at the option of the bank. Under SFAS 133, extendable swaps do not meet the criteria for hedge accounting and changes in fair value are recognized currently in earnings. During the year ended June 30, 2001, the Company recorded additional interest expense of approximately $0.7 million due to changes in the fair value of the swap. In March 2001, the swap was extended for an additional three years by the bank and the Company expects the swap to qualify for hedge accounting through its maturity. In December 1999, the SEC staff released Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition," to provide guidance on the recognition, presentation and disclosure of revenue in financial statements. SAB 101 explains the SEC staff's general framework for revenue recognition, stating that certain criteria need to be met in order to recognize revenue. The adoption of SAB 101 did not have a material impact on the Company's financial condition and results of operations. In March 2000, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation" (FIN 44). FIN 44 provides guidance for issues arising in applying APB Opinion No. 25, "Accounting for Stock Issued to Employees." FIN 44 applies specifically to new awards, exchanges of awards in a business combination, modifications to outstanding awards and changes in grantee status that occur on or after July 1, 2001, except for the provisions related to repricings and the definition of an employee which apply to awards issued after December 15, 1998. The requirements of FIN 44 did not have a material impact on the Company's financial condition and results of operations. F-9 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In June 2001, the FASB issued SFAS No. 141, "Business Combinations." SFAS 141 addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, "Business Combinations," and FASB Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." All business combinations in the scope of SFAS 141 are to be accounted for using the purchase method of accounting. The Company will adopt SFAS 141 for all business combinations initiated after June 30, 2001. Also in June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." SFAS 142 addresses, among other things, how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Goodwill would no longer be amortized but would be assessed at least annually for impairment using a fair value methodology. The Company will adopt SFAS 142 for all goodwill and other intangible assets acquired after June 30, 2001 and for all existing goodwill and other intangible assets beginning July 1, 2001. The Company expects that upon adoption of SFAS 142 on July 1, 2001 it will cease recording annual goodwill amortization of approximately $5.4 million. For the year ending June 30, 2002, SFAS 142 also changes the methodology and potential timing of impairment charges; however, the effect of these charges (if any) cannot be determined at this time. Under the transition arrangements of SFAS 142, the Company is required to complete a preliminary evaluation of impairment charges by December 31, 2001 and recognize the effects of any impairment charges prior to June 30, 2002. Such amounts would be recorded as a cumulative effect of a change in accounting principle, effective in the first quarter of fiscal 2002. Also in June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset, except for certain obligations of lessees. SFAS 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002 (with earlier application being encouraged). The Company does not expect the adoption of SFAS 143 to have a material impact on the Company's financial condition and results of operations. l. Reclassifications Reclassifications have been made to certain 2000 and 1999 amounts to conform to the 2001 presentation. 2. TRADE ACCOUNTS RECEIVABLES Trade accounts receivables, net are comprised of the following (amounts in thousands):
JUNE 30, ----------------- 2001 2000 ------- ------- Trade accounts receivables.................................. $79,607 $70,907 Less: Allowances for doubtful accounts and contractual adjustments............................................... 26,611 22,291 Allowances for professional fees.......................... 9,641 8,018 ------- ------- Trade accounts receivables, net............................. $43,355 $40,598 ======= =======
The allowance for doubtful accounts and contractual adjustments includes management's estimate of the amounts expected to be written off on specific accounts and for write-offs on other unidentified accounts F-10 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) included in accounts receivables. In estimating the write-offs and adjustments on specific accounts, management relies on a combination of in-house analysis and a review of contractual payment rates from private health insurance programs or under the federal Medicare program. In estimating the allowance for unidentified write-offs and adjustments, management relies on historical experience. The amounts the Company will ultimately realize could differ materially in the near term from the amounts assumed in arriving at the allowance for doubtful accounts and contractual adjustments in the financial statements at June 30, 2001. The Company reserves a contractually agreed upon percentage at several of its Centers and Fixed Facilities, averaging 20 percent of the accounts receivables balance from patients, for payments to radiologists for interpreting the results of the diagnostic imaging procedures. Payments to radiologists are only due when amounts are received. At that time, the balance is transferred from the allowance account to a professional fees payable account. 3. PROPERTY AND EQUIPMENT Property and equipment, net are stated at cost and are comprised of the following (amounts in thousands):
JUNE 30, ------------------- 2001 2000 -------- -------- Vehicles.................................................... $ 2,964 $ 2,426 Land, building and leasehold improvements................... 26,409 24,265 Computer and office equipment............................... 20,161 19,192 Diagnostic and related equipment............................ 118,112 107,639 Equipment and vehicles under capital leases................. 68,573 57,752 -------- -------- 236,219 211,274 Less: Accumulated depreciation and amortization............. 87,964 62,805 -------- -------- Property and equipment, net................................. $148,255 $148,469 ======== ========
4. INTANGIBLE ASSETS Intangible assets consist of the following (amounts in thousands):
JUNE 30, ------------------- 2001 2000 -------- -------- Intangible assets........................................... $107,208 $108,014 Less: Accumulated amortization.............................. 18,006 14,084 -------- -------- Intangible assets, net...................................... $ 89,202 $ 93,930 ======== ======== Net intangible assets: Goodwill.................................................... $ 87,933 $ 92,980 Other....................................................... 1,269 950 -------- -------- $ 89,202 $ 93,930 ======== ========
Amortization of intangible assets was approximately $6.2 million, $5.3 million, and $4.7 million for the years ended June 30, 2001, 2000 and 1999, respectively. F-11 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In 1999, the Company completed two acquisitions as follows: a 70% interest in a partnership which owns four Centers and two Fixed Facilities in Buffalo, New York; and a 100% interest in three Centers and two Fixed Facilities in Phoenix, Arizona. The aggregate purchase price for these two acquisitions was approximately $17.4 million. In 2000, the Company completed two acquisitions as follows: two Fixed Facilities in Indianapolis and Clarksville, Indiana, respectively; and a 90% interest in a partnership which owns a Center in Wilkes-Barre, Pennsylvania. The aggregate purchase price for these two acquisitions was approximately $24.5 million. 5. ACCOUNTS PAYABLE AND OTHER ACCRUED EXPENSES Accounts payable and other accrued expenses are comprised of the following (amounts in thousands):
JUNE 30, ----------------- 2001 2000 ------- ------- Accounts payable............................................ $ 2,202 $ 133 Accrued equipment related costs............................. 3,030 8,526 Accrued payroll and related costs........................... 7,351 4,519 Other accrued expenses...................................... 11,752 13,435 ------- ------- $24,335 $26,613 ======= =======
6. EQUIPMENT AND OTHER NOTES PAYABLE Equipment and other notes payable are comprised of the following (amounts in thousands):
JUNE 30, ------------------- 2001 2000 -------- -------- Notes payable to bank (Bank Financing), bearing interest at LIBOR plus 1.75 percent (5.46 and 6.78 percent at June 30, 2001 and 2000), principal and interest payable quarterly, maturing in June 2004. The notes are secured by substantially all of the Company's assets................. $ 70,663 $ 89,055 Notes payable to General Electric Company (GE), bearing interest at rates which range from 8.60 percent to 8.75 percent, maturing at various dates through May 2005. The notes are primarily secured by certain buildings and diagnostic equipment...................................... 1,234 1,587 Unsecured senior subordinated notes payable (Existing Notes), bearing interest at 9.625 percent, interest payable semi-annually, principal due in June 2008. At June 30, 2001, the fair value of the Existing Notes was approximately $99.5 million............................... 100,000 100,000 Other notes payable......................................... 58 550 -------- -------- Total equipment and other notes payable..................... 171,955 191,192 Less: Current portion....................................... 21,259 18,813 -------- -------- Long-term equipment and other notes payable................. $150,696 $172,379 ======== ========
F-12 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Scheduled maturities of equipment and other notes payable at June 30, 2001, are as follows (amounts in thousands): 2002........................................................ $ 21,259 2003........................................................ 24,132 2004........................................................ 26,379 2005........................................................ 185 2006........................................................ -- Thereafter.................................................. 100,000 -------- $171,955 ========
As part of the Bank Financing, the Company has a $25 million revolving working capital facility, which expires in June 2003. There were no borrowings under the working capital facility as of June 30, 2001. The Company is also required to pay an unused facility fee of 0.375% on unborrowed amounts under the working capital facility. The credit agreement related to the Bank Financing and the indenture related to the Existing Notes contain limitations on additional borrowings, capital expenditures, dividend payments and certain financial covenants. As of June 30, 2001, the Company was in compliance with these covenants. During 1998, the Company entered into an interest rate swap agreement with a bank to hedge against the effects of increases in the interest rates associated with the Company's floating rate debt. The swap agreement initially had a notional amount of $40.0 million and was extended in 2001 for an additional three years and expires in 2004. At June 30, 2001, the estimated fair market value of the interest rate swap, and the effective fixed interest rate due on the remaining notional amount is as follows (amounts in thousands):
NOTIONAL EFFECTIVE MAXIMUM FAIR MARKET AMOUNT INTEREST RATE VALUE - -------- ----------------- ----------- $36,250.................................................. 7.47% $(669)
7. LEASE OBLIGATIONS, COMMITMENTS AND CONTINGENCIES The Company leases diagnostic equipment, certain other equipment and its office, imaging and treatment facilities under various capital and operating leases. Future minimum scheduled rental payments required under these noncancelable leases at June 30, 2001 are as follows (amounts in thousands):
CAPITAL OPERATING ------- --------- 2002........................................................ $17,182 $12,342 2003........................................................ 16,892 10,857 2004........................................................ 15,294 8,220 2005........................................................ 11,756 6,806 2006........................................................ 6,532 5,629 Thereafter.................................................. 229 9,929 ------- ------- Total minimum lease payments................................ 67,885 $53,783 ======= ======= Less: Amounts representing interest......................... 11,587 ------- Present value of capital lease obligations.................. 56,298 Less: Current portion....................................... 12,603 ------- Long-term capital lease obligations......................... $43,695 =======
F-13 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As of June 30, 2001, certain equipment leased by the Company is subject to contingent rental adjustments dependent on certain operational factors. No contingent rental expense was paid for the years ended June 30, 2001, 2000 and 1999. Rental expense for diagnostic equipment and other equipment for the years ended June 30, 2001, 2000 and 1999 was $7.9 million, $13.6 million and $18.5 million, respectively. The Company occupies facilities under lease agreements expiring through June 2007. Rental expense for these facilities for the years ended June 30, 2001, 2000 and 1999 was $5.4 million, $5.1 million, and $3.7 million, respectively. The Company is engaged from time to time in the defense of lawsuits arising out of the ordinary course and conduct of its business and has insurance policies covering such potential insurable losses where such coverage is cost-effective. Management believes that the outcome of any such lawsuits will not have a material adverse impact on the Company's business, financial condition and results of operations. 8. CAPITAL STOCK Preferred Stock: In 1998, the Company consummated a recapitalization (Recapitalization) pursuant to which (a) certain investors affiliated with TC Group, LLC and its affiliates (collectively, Carlyle), a private merchant bank headquartered in Washington, D.C., made a cash investment of $25 million in the Company and received therefor (i) 25,000 shares of newly issued convertible preferred stock, Series B of the Company, par value $0.001 per share (Series B Preferred Stock), initially convertible, at the option of the holders thereof, in the aggregate into 2,985,075 shares of common stock, and (ii) warrants (Carlyle Warrants) to purchase up to 250,000 shares of common stock at an exercise price of $10.00 per share; and (b) GE (i) surrendered its rights previously granted in connection with the Merger and debt restructuring arrangement to receive supplemental service fee payments equal to 14% of pretax income in exchange for (A) the issuance of 7,000 shares of newly issued convertible preferred stock, Series C of the Company, par value $0.001 per share (Series C Preferred Stock), initially convertible, at the option of GE, in the aggregate into 835,821 shares of common stock, and (B) warrants (GE Warrants) to purchase up to 250,000 shares of common stock at an exercise price of $10.00 per share and (ii) exchanged all of its convertible preferred stock, Series A of the Company, for an additional 20,953 shares of Series C Preferred Stock, initially convertible, at the option of GE, in the aggregate into 2,501,760 shares of common stock. The terms of the Series B Preferred Stock and the Series C Preferred Stock (collectively, Preferred Stock) are substantially the same. The Preferred Stock has a liquidation preference of $1,000 per share. It will participate in any dividends paid with respect to the common stock. There is no mandatory or optional redemption provision for the Preferred Stock. The Preferred Stock is convertible into an aggregate of 6,322,656 shares of common stock. For so long as Carlyle and its affiliates own at least 33% of the Series B Preferred Stock or GE and its affiliates own at least 33% of the Series C Preferred Stock, respectively, the approval of at least 67% of the holders of such series of Preferred Stock is required before the Company may take certain actions including, but not limited to, amending its certificate of incorporation or bylaws, changing the number of directors or the manner in which directors are selected, incurring indebtedness in excess of $15 million in any fiscal year, issuing certain equity securities below the then current market price or the then applicable conversion price, acquiring equity interests or assets of entities for consideration equal to or greater than $15 million, and engaging in mergers for consideration equal to or greater than $15 million. The Preferred Stock will vote with the common stock on an as-if-converted basis on all matters except the election of directors, subject to an aggregate maximum Preferred Stock percentage of 37% of all votes entitled to be cast on such matters. Assuming the conversion of all of the Series B Preferred Stock into common stock and the exercise of all of the Carlyle Warrants, Carlyle would own approximately 33% of the then outstanding common stock of the Company. Assuming the conversion of all of the Series C Preferred Stock and the exercise of the GE Warrants, GE would own approximately 37% of the then outstanding common stock of the Company (Note 17). F-14 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) All of the Series B Preferred Stock and the Series C Preferred Stock may be converted into a newly created convertible preferred stock, Series D of the Company, par value $0.001 per share (Series D Preferred Stock). The Series D Preferred Stock allows the number of directors to be automatically increased to a number which would permit each of Carlyle and GE, by filling the newly created vacancies, to achieve representation on the Company's board of directors (Board) proportionate to their respective common stock ownership percentages on an as-if-converted basis but would limit such representation to less than two thirds of the Board for a certain period of time. The Series D Preferred Stock has a liquidation preference of $0.001 per share but no mandatory or optional redemption provision. It will participate in any dividends paid with respect to the common stock and is convertible into 6,323,660 shares of common stock. Holders of the Preferred Stock also have a right of first offer with respect to future sales of common stock in certain transactions or proposed transactions not involving a public offering by the Company of its common stock or securities convertible into common stock. Holders of the Preferred Stock are also entitled to certain demand and "piggyback" registration rights. Warrants: The Company does not have a formal warrant plan. The Board authorizes the issuance of warrants at its discretion. The Board has generally granted warrants in connection with financing transactions. The number of warrants issued and related terms are determined by the Board. All warrants have been issued with an exercise price of at least the fair market value of its common stock on the issuance date. There were no warrants granted or exercised for the year ended June 30, 1999. A summary of the status of the Company's warrants at June 30, 2001, 2000 and 1999 and changes during the years is presented below:
WEIGHTED AVERAGE SHARES EXERCISE PRICE ------- -------------- Outstanding, June 30, 1999.................................. 662,183 $9.00 Granted................................................... 15,000 6.00 Exercised................................................. (35,000) 5.50 ------- ----- Outstanding, June 30, 2000.................................. 642,183 9.12 Granted................................................... 15,000 7.96 Exercised................................................. (15,000) 5.50 ------- ----- Outstanding, June 30, 2001.................................. 642,183 $9.17 ======= =====
Of the 642,183 warrants outstanding at June 30, 2001, the characteristics are as follows:
EXERCISE PRICE WEIGHTED AVERAGE WARRANTS TOTAL WARRANTS REMAINING RANGE EXERCISE PRICE EXERCISABLE OUTSTANDING CONTRACTUAL LIFE - -------------- ---------------- ----------- -------------- ---------------- $4.56 - $ 6.00 $4.92 82,183 82,183 3.68 years $7.25 - $10.00 $9.80 554,584 560,000 5.69 years ------- ------- 636,767 642,183 ======= =======
Stock Options: The Company has five stock option plans, which provide for the granting of incentive and nonstatutory stock options to key employees and non-employee directors. Incentive stock options must have an exercise price of at least the fair market value of its common stock on the grant date. Options become vested cumulatively over various periods up to seven years from the grant date, are exercisable in whole or in installments, and expire ten years from the grant date. In addition, two wholly owned subsidiaries of the Company have two stock option plans, which provided for the granting of incentive or nonstatutory stock options to key employees and non-employee directors. No shares are available for future grants under these plans. F-15 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As of June 30, 2001, the Company has 287,308 shares available for issuance under its plans. A summary of the status of the Company's stock option plans at June 30, 2001, 2000 and 1999 and changes during the years is presented below:
WEIGHTED AVERAGE SHARES EXERCISE PRICE --------- -------------- Outstanding, June 30, 1998.................................. 1,483,378 $ 7.15 Granted................................................... 265,000 8.46 Exercised................................................. (59,800) 1.92 Forfeited................................................. (136,500) 7.28 --------- ------ Outstanding, June 30, 1999.................................. 1,552,078 7.56 Granted................................................... 190,000 8.15 Exercised................................................. (92,970) 2.07 Forfeited................................................. (340,368) 8.08 --------- ------ Outstanding, June 30, 2000.................................. 1,308,740 7.90 Granted................................................... 370,000 8.71 Exercised................................................. (17,375) 5.79 Forfeited................................................. (105,667) 11.33 --------- ------ Outstanding, June 30, 2001.................................. 1,555,698 $ 7.88 ========= ====== Exercisable at: June 30, 1999............................................. 558,838 $ 6.12 June 30, 2000............................................. 751,887 $ 7.61 June 30, 2001............................................. 867,239 $ 7.41
All unvested options and warrants will become fully vested upon consummation of the proposed acquisition (Note 17). Of the 1,555,698 options outstanding at June 30, 2001, the characteristics are as follows:
EXERCISE PRICE WEIGHTED AVERAGE OPTIONS TOTAL OPTIONS REMAINING RANGE EXERCISE PRICE EXERCISABLE OUTSTANDING CONTRACTUAL LIFE - --------------- ---------------- ----------- ------------- ---------------- $ 0.10 - $ 1.25 $ 0.59 98,670 98,670 2.98 years $ 4.56 - $ 7.00 $ 5.58 320,708 343,000 6.49 years $ 8.37 - $12.57 $ 8.98 423,173 1,074,340 8.21 years $15.64 - $17.25 $16.33 24,688 39,688 3.49 years ------- --------- 867,239 1,555,698 ======= =========
As permitted under SFAS No. 123, "Accounting for Stock Based Compensation", the Company accounts for the options and warrants issued to employees and non-employee directors in accordance with APB Opinion No. 25, and no compensation cost has been recognized in the financial statements. SFAS 123 requires that the Company present pro forma disclosures of net income as if the Company had recognized compensation expense equal to the fair value of options granted, as determined at the date of grant. The F-16 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company's net income and earnings per share would have reflected the following pro forma amounts (amounts in thousands, except per share data):
YEARS ENDED JUNE 30, ------------------------- 2001 2000 1999 ------- ------ ------ Net income: As Reported.................................. $13,801 $7,189 $6,112 Pro Forma.................................... 12,458 5,469 4,446 Diluted EPS: As Reported.................................. 1.42 0.76 0.65 Pro Forma.................................... 1.28 0.58 0.47
The fair value of each option grant and warrant issued is estimated on the date of grant or issuance using the Black-Scholes pricing model with the following assumptions used for the grants and issuances in the fiscal years ended June 30, 2001, 2000 and 1999, respectively:
YEARS ENDED JUNE 30, ------------------------------------ ASSUMPTION 2001 2000 1999 - ---------- ---------- ---------- ---------- Risk-free interest rate........................... 5.87% 6.22% 5.08% Volatility........................................ 71.27% 71.23% 64.90% Expected dividend yield........................... 0.00% 0.00% 0.00% Estimated contractual life........................ 9.19 years 9.38 years 9.35 years
9. PROVISION FOR REORGANIZATION AND OTHER COSTS In 1999, the Company recorded a one-time provision for reorganization and other costs of $3.3 million, consisting of the following: The Company realigned its corporate and regional organization to improve financial performance and operating efficiencies and recorded a provision with respect to the related employee severances and office closing costs of approximately $1.8 million. Additionally, in connection with its business strategy, the Company evaluated a number of potential acquisitions in the last six months of fiscal 1999 which it did not complete. The Company recorded a provision of approximately $0.7 million for legal, accounting and consulting costs associated with certain potential acquisitions that the Company determined were no longer consistent with its strategic objectives. Finally, the Company reevaluated its information systems in light of organizational changes and developed a new strategic plan to modify and reimplement its proprietary radiology information system. Accordingly, the Company recorded a provision with respect to related software and other capitalized costs of approximately $0.8 million. 10. INCOME TAXES The provision (benefit) for income taxes for the years ended June 30, 2001, 2000 and 1999 was computed using effective tax rates calculated as follows:
YEARS ENDED JUNE 30, ---------------------- 2001 2000 1999 ----- ----- ------ Federal statutory tax rate.................................. 34.0% 34.0% 34.0% State income taxes, net of federal benefit.................. 6.0 6.0 6.0 Permanent items, including goodwill and non-deductible merger costs.............................................. 5.0 3.7 12.3 Changes in valuation allowance.............................. (29.1) (30.1) (161.5) ----- ----- ------ Net effective tax rate...................................... 15.9% 13.6% (109.2)% ===== ===== ======
The provision (benefit) for income taxes includes income taxes currently payable and those deferred because of temporary differences between the financial statements and tax bases of assets and liabilities. The F-17 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) provision (benefit) for income taxes for the years ended June 30, 2001, 2000 and 1999 consisted of the following (amounts in thousands):
YEARS ENDED JUNE 30, -------------------------- 2001 2000 1999 ------ ------- ------- Current provision: Federal................................................ $2,931 $ 548 $ 60 State.................................................. 1,173 283 100 ------ ------- ------- 4,104 831 160 ------ ------- ------- Deferred taxes arising from temporary differences: State income taxes..................................... (480) (186) (144) Accrued expenses (not currently deductible)............ (198) 769 (706) Reserves............................................... (1,790) (1,110) (958) Depreciation and amortization.......................... 7,920 1,004 1,383 Utilization of net operating losses.................... 836 75 346 Net operating losses reduced due to prior ownership changes............................................. -- 5,111 -- Changes in valuation allowance reducing goodwill....... -- 400 1,300 Changes in valuation allowance......................... (4,044) (5,795) (4,691) Alternative minimum tax credit carryforwards........... (3,038) -- -- Other.................................................. (686) 32 120 ------ ------- ------- (1,480) 300 (3,350) ------ ------- ------- Total provision (benefit) for income taxes............... $2,624 $ 1,131 $(3,190) ====== ======= =======
The components of the Company's net deferred tax asset (including current and noncurrent portions) as of June 30, 2001 and 2000, respectively, which arise due to timing differences between financial and tax reporting and net operating loss (NOL) carryforwards are as follows (amounts in thousands):
JUNE 30, ----------------- 2001 2000 -------- ------ Reserves.................................................... $ 5,754 $3,964 Accrued expenses (not currently deductible)................. 1,214 1,016 Depreciation and amortization............................... (11,248) (3,328) NOL carryforwards........................................... 9,784 10,620 Valuation allowance......................................... (3,683) (7,727) Alternative minimum tax credit carryforwards................ 3,038 -- Other....................................................... 141 (545) -------- ------ $ 5,000 $4,000 ======== ======
As of June 30, 2001, the Company had NOL carryforwards of approximately $29.0 million, expiring on various dates through 2019. The NOLs and related deferred tax components have been reduced to reflect limitations from prior changes in ownership. A valuation allowance is provided against the net deferred tax asset when it is more likely than not that the net deferred tax asset will not be realized. In addition, the Company has alternative minimum tax credit carryforwards of approximately $3.0 million which do not expire. F-18 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 11. RETIREMENT SAVINGS PLANS The Company has a 401(k) profit sharing plan (Plan), which is available to all eligible employees, pursuant to which the Company may match a percentage of employee contributions to the Plan. Company contributions of approximately $0.7 million, $0.7 million and $0.6 million were made for the years ended June 30, 2001, 2000 and 1999, respectively. 12. INVESTMENTS IN AND TRANSACTIONS WITH PARTNERSHIPS The Company has direct ownership in four Partnerships at June 30, 2001, two of which operate Fixed Facilities and two of which operate Centers. The Company owns between 25 percent and 44 percent of these Partnerships, serves as the managing general partner and provides certain management services under agreements expiring in 2010. These Partnerships are accounted for under the equity method since the Company does not exercise significant control over the operations of these Partnerships or does not have primary responsibility for the Partnerships' long-term debt. Set forth below is certain financial data of these Partnerships (amounts in thousands):
JUNE 30, ----------------- 2001 2000 ------- ------- Combined Financial Position: Current assets: Cash...................................................... $ 1,281 $ 1,098 Trade accounts receivables, net........................... 3,250 1,840 Other..................................................... 19 107 Property and equipment, net................................. 7,134 6,957 Intangible assets, net...................................... 543 613 ------- ------- Total assets................................................ 12,227 10,615 Current liabilities......................................... (2,077) (1,455) Due to the Company.......................................... (1,830) (1,194) Long-term liabilities....................................... (4,278) (3,877) ------- ------- Net assets.................................................. $ 4,042 $ 4,089 ======= =======
Set forth below are the combined operating results of the Partnerships and the Company's equity in earnings of the Partnerships (amounts in thousands):
YEARS ENDED JUNE 30, ------------------------- 2001 2000 1999 ------- ------ ------ Operating Results: Net revenues.............................................. $11,344 $7,493 $5,673 Expenses.................................................. 9,211 5,717 4,334 ------- ------ ------ Net income................................................ $ 2,133 $1,776 $1,339 ======= ====== ====== Equity in earnings of partnerships........................ $ 971 $ 817 $ 548 ======= ====== ======
The Company has direct ownership in 50 percent of an additional Partnership, which operates a Center. Since the Company controls the operations and is primarily responsible for the associated long-term debt, the Partnership has been included in the Company's consolidated financial statements. Set forth below is the F-19 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) summarized financial data of the Company's 50 percent controlled entity which is consolidated (amounts in thousands):
JUNE 30, --------------- 2001 2000 ------ ------ Condensed Combined Balance Sheet Data: Current assets............................................ $1,622 $1,490 Total assets.............................................. 1,844 1,706 Current liabilities....................................... 426 623 Minority interest equity.................................. 608 441
YEARS ENDED JUNE 30, ------------------------ 2001 2000 1999 ------ ------ ------ Condensed Combined Statement of Income Data: Net revenues............................................. $5,844 $5,484 $5,551 Expenses................................................. 3,740 3,702 3,973 Provision for center profit distribution................. 1,052 891 789 ------ ------ ------ Net income............................................... $1,052 $ 891 $ 789 ====== ====== ======
13. INCOME PER COMMON AND PREFERRED SHARE The number of shares used in computing EPS is equal to the weighted average number of common and preferred shares outstanding during the respective period. The preferred stock has certain rights, including conversion into common stock on a one-to-one basis, voting rights, no stated dividend rate and participates in any dividends paid with respect to the common stock. Accordingly, the preferred stock is included in the computation of basic EPS only if the effect on EPS is dilutive as required by SFAS No. 128, "Earnings per Share" and Emerging Issues Task Force Topic D-95. The Company uses the as-if converted method in computing EPS. There were no adjustments to net income (the numerator) for purposes of computing EPS. A reconciliation of basic and diluted share computations is as follows (amounts in thousands):
YEARS ENDED JUNE 30, --------------------- 2001 2000 1999 ----- ----- ----- Average common stock outstanding............................ 2,998 2,935 2,835 Effect of preferred stock................................... 6,323 6,323 6,323 ----- ----- ----- Denominator for basic EPS................................... 9,321 9,258 9,158 Dilutive effect of stock options and warrants............... 398 140 218 ----- ----- ----- 9,719 9,398 9,376 ===== ===== =====
14. RELATED PARTY TRANSACTIONS The Company has purchased a majority of its diagnostic imaging equipment from GE. At June 30, 2001, the Company had outstanding notes payable and capital lease obligations to GE totaling approximately $1.2 million and $56.3 million, respectively. In addition, at June 30, 2001 the Company's future operating lease obligations to GE were approximately $28.3 million. GE also provides maintenance services with respect to the Company's diagnostic imaging equipment, totaling approximately $9.9 million for the year ended June 30, 2001. F-20 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company paid $120,000 to Shattuck Hammond Partners, an investment banking firm in which a director of the Company is a managing director, for general strategic advisory and investment banking services during the year ended June 30, 2001. Additionally, the Company paid $85,000 to the chairman of the board for acquisition and financing activities during the year ended June 30, 2001. 15. SEGMENT INFORMATION The Company has two reportable segments: Western Division and Eastern Division. The Company's reportable segments are geographical business units defined by management's division of responsibility between two executive vice presidents -- operations, who are responsible for the Western and Eastern Divisions and who report directly to the Company's chief operating decision maker. Each segment owns and operates Centers, Fixed and Mobile Facilities within their respective geographic areas. The accounting policies of the segments are the same as those described in the "Summary of Significant Accounting Policies" except that the Company does not allocate income taxes to the two Divisions. The Company manages cash flows and assets on a consolidated basis, and not by segment, and does not allocate or report assets and capital expenditures by segment. Information for the fiscal year ended June 30, 2000 and 1999 has been recast, as required by SFAS 131, "Disclosures About Segments of an Enterprise and Related Information." The following tables summarize the operating results by segment for fiscal 2001, 2000 and 1999 (amounts in thousands):
EASTERN WESTERN OTHER CONSOLIDATED -------- ------- -------- ------------ YEAR ENDED JUNE 30, 2001: Contract services revenues................ $ 89,615 $ 6,266 $ 7,540 $103,421 Patient services revenues................. 39,390 66,776 1,302 107,468 Other revenues............................ 321 70 223 614 -------- ------- -------- -------- Total revenues.......................... 129,326 73,112 9,065 211,503 Depreciation and amortization............. 25,021 9,234 6,879 41,134 Total costs of operations................. 93,896 54,299 13,677 161,872 Equity in earnings of unconsolidated partnerships............................ 973 (2) -- 971 Operating income.......................... 36,403 18,811 (15,395) 39,819 Interest expense, net..................... 14,206 3,774 5,414 23,394 Income before income taxes................ 22,197 15,037 (20,809) 16,425
EASTERN WESTERN OTHER CONSOLIDATED -------- ------- -------- ------------ YEAR ENDED JUNE 30, 2000: Contract services revenues................ $ 80,847 $ 7,063 $ 12,225 $100,135 Patient services revenues................. 26,953 58,660 1,225 86,838 Other revenues............................ 562 652 387 1,601 -------- ------- -------- -------- Total revenues.......................... 108,362 66,375 13,837 188,574 Depreciation and amortization............. 20,668 8,191 4,771 33,630 Total costs of operations................. 80,980 52,420 18,029 151,429 Equity in earnings of unconsolidated partnerships............................ 813 4 -- 817 Operating income.......................... 28,195 13,959 (15,138) 27,016 Interest expense, net..................... 11,261 3,533 3,902 18,696 Income before income taxes................ 16,934 10,426 (19,040) 8,320
F-21 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EASTERN WESTERN OTHER CONSOLIDATED -------- ------- -------- ------------ YEAR ENDED JUNE 30, 1999: Contract services revenues................ $ 66,205 $ 6,713 $ 12,573 $ 85,491 Patient services revenues................. 24,323 47,995 1,247 73,565 Other revenues............................ 726 1,588 622 2,936 -------- ------- -------- -------- Total revenues.......................... 91,254 56,296 14,442 161,992 Depreciation and amortization............. 15,504 6,503 2,879 24,886 Total costs of operations................. 71,885 43,618 15,840 131,343 Equity in earnings of unconsolidated partnerships............................ 528 20 -- 548 Operating income.......................... 19,897 12,698 (15,173) 17,422 Interest expense, net..................... 8,904 2,488 3,108 14,500 Income before income taxes................ 10,993 10,210 (18,281) 2,922
16. RESULTS OF QUARTERLY OPERATIONS (UNAUDITED)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL(1) ------- ------- ------- ------- -------- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 2001: Revenues.................................... $52,220 $51,794 $53,815 $53,674 $211,503 Gross profit................................ 11,671 11,452 12,694 13,814 49,631 Net income.................................. 2,757 2,971 3,768 4,305 13,801 Diluted income per common and preferred share..................................... $ 0.29 $ 0.31 $ 0.38 $ 0.43 $ 1.42 ======= ======= ======= ======= ======== 2000: Revenues.................................... $46,166 $46,121 $47,690 $48,597 $188,574 Gross profit................................ 8,070 8,627 9,955 10,493 37,145 Net income.................................. 1,320 1,322 1,990 2,557 7,189 Diluted income per common and preferred share..................................... $ 0.14 $ 0.14 $ 0.21 $ 0.27 $ 0.76 ======= ======= ======= ======= ========
- --------------- (1) Some amounts do not add across due to differences generated from the quarterly and annual weighted average shares calculations. 17. PROPOSED ACQUISITION AND RELATED FINANCING TRANSACTIONS On June 29, 2001, the Company entered into an agreement and plan of merger (Merger Agreement) with InSight Health Services Holdings Corp. (InSight Holdings) and its wholly owned subsidiary InSight Health Services Acquisition Corp. (formerly JWCH Merger Corp.) (Acquisition Corp.). Pursuant to the Merger Agreement, Acquisition Corp. will merge with and into the Company and the Company will become a wholly owned subsidiary of InSight Holdings (Acquisition). At the consummation of the Acquisition, J.W. Childs Equity Partners II and certain of its affiliates and co-investors will own approximately 80% of the outstanding common stock of InSight Holdings and Halifax Capital Partners and certain of its affiliates will own approximately 20% of the outstanding common stock of InSight Holdings. J.W. Childs Equity Partners II and Halifax Capital Partners are collectively known as Equity Sponsors. Certain members of the Company's senior management have agreed to rollover a portion of their existing stock options into InSight Holdings' stock options at the consummation of the Acquisition. Pursuant to the Merger Agreement, the Company's stockholders will be entitled to receive $18.00 in cash for each share of the Company's common stock they own. In addition, holders of stock options and warrants which are exercisable for the Company's common F-22 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) stock will receive the difference between $18.00 and the exercise price for each share of common stock the holder could have acquired pursuant to the terms of the options or warrants. The options and warrants will be terminated pursuant to the Merger Agreement. The Merger Agreement contains customary provisions, including representations and warranties, covenants with respect to the conduct of the business and various closing conditions, including the continued accuracy of representations and warranties, and the completion of the related financing transactions described below. The Company's stockholders, option holders and warrant holders immediately prior to the Acquisition will receive cash consideration of approximately $187.7 million as a result of the Acquisition. The transactions and related fees and expenses will be financed through (i) the sale of $200 million in aggregate principal amount of new senior subordinated notes due 2011; (ii) borrowings of approximately $145 million under the proposed $275 million new senior secured credit facilities; (iii) the investment by the Equity Sponsors of up to $101.5 million less the net value of the management options rollover totaling approximately $1.7 million; and (iv) a portion of the Company's cash on hand of approximately $6.6 million. The Company's Board and the boards of Acquisition Corp. and InSight Holdings have approved the Acquisition. A special meeting of the Company's stockholders to consider and vote upon the Acquisition will be scheduled shortly. Approval of the Acquisition requires the affirmative vote of a majority of the Company's capital stock. Pursuant to voting agreements entered into by InSight Holdings and Acquisition Corp. with each of GE, GE Fund and certain affiliates of The Carlyle Group, the holders of more than a majority of the Company's capital stock have agreed to convert the Preferred Stock which they currently hold into Series D Preferred Stock which they will vote in favor of the Acquisition. Contemporaneously with the Acquisition, Acquisition Corp. will repurchase by tender offer the Existing Notes up to their aggregate principal amount of $100 million. On August 15, 2001, Acquisition Corp. commenced a tender offer to repurchase all of the Existing Notes. 100% of the Existing Notes have been tendered. In connection with the tender offer, Acquisition Corp. has also successfully solicited the requisite consents from the holders of the Existing Notes to eliminate certain restrictive covenants and certain events of default in the indenture relating to the Existing Notes. If InSight Holdings, Acquisition Corp. or the Company elect to terminate the Merger Agreement due to the failure of the Company's stockholders to approve the Merger Agreement at the special meeting or any adjournment or postponement of that meeting, then the Company is obligated to reimburse InSight Holdings for its fees and expenses incurred in connection with the Acquisition and the related financing transactions up to a maximum of $1 million. In addition, if the Company terminates the Merger Agreement and enters into a superior proposal with a third party, the Company is obligated to pay InSight Holdings a termination fee of $7 million, of which $5 million is payable immediately prior to the termination of the Merger Agreement and $2 million is payable upon the earlier of (i) six months from the date of termination of the Merger Agreement and (ii) consummation of a superior proposal with a third party. 18. SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION The Company's payment obligations under the Existing Notes (Note 6) are guaranteed by certain of the Company's wholly owned subsidiaries (the Guarantor Subsidiaries). Such guarantees are full, unconditional and joint and several. The following supplemental financial information sets forth, on an unconsolidated basis, balance sheets, statements of income, and statements of cash flows information for the Company (Parent Company Only), for the Guarantor Subsidiaries and for the Company's other subsidiaries (the Non-Guarantor Subsidiaries). The supplemental financial information reflects the investments of the Company and the Guarantor Subsidiaries in the Guarantor and Non-Guarantor Subsidiaries using the equity method of accounting. F-23 SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET JUNE 30, 2001 (AMOUNTS IN THOUSANDS)
PARENT COMPANY GUARANTOR NON-GUARANTOR ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ ASSETS Current assets: Cash and cash equivalents....... $ -- $ 19,921 $ 3,333 $ -- $ 23,254 Trade accounts receivables, net.......................... -- 32,758 10,597 -- 43,355 Other current assets............ -- 8,273 106 -- 8,379 Intercompany accounts receivable................... 241,016 27,590 -- (268,606) -- -------- -------- ------- --------- -------- Total current assets......... 241,016 88,542 14,036 (268,606) 74,988 Property and equipment, net....... -- 123,579 24,676 -- 148,255 Investments in partnerships....... -- 1,783 -- -- 1,783 Investments in consolidated subsidiaries.................... (4,882) 9,328 -- (4,446) -- Other assets...................... -- 6,828 -- -- 6,828 Intangible assets, net............ -- 84,358 4,844 -- 89,202 -------- -------- ------- --------- -------- $236,134 $314,418 $43,556 $(273,052) $321,056 ======== ======== ======= ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of equipment, capital leases and other notes........................ $ 20,810 $ 12,275 $ 777 $ -- $ 33,862 Accounts payable and other accrued expenses............. -- 23,033 1,302 -- 24,335 Intercompany accounts payable... -- 241,016 27,590 (268,606) -- -------- -------- ------- --------- -------- Total current liabilities.... 20,810 276,324 29,669 (268,606) 58,197 Equipment, capital leases and other notes, less current portion......................... 149,853 42,409 2,129 -- 194,391 Other long-term liabilities....... -- 567 2,430 -- 2,997 Stockholders' equity (deficit).... 65,471 (4,882) 9,328 (4,446) 65,471 -------- -------- ------- --------- -------- $236,134 $314,418 $43,556 $(273,052) $321,056 ======== ======== ======= ========= ========
F-24 SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET JUNE 30, 2000 (AMOUNTS IN THOUSANDS)
PARENT COMPANY GUARANTOR NON-GUARANTOR ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ ASSETS Current assets: Cash and cash equivalents....... $ -- $ 25,375 $ 1,758 $ -- $ 27,133 Trade accounts receivables, net.......................... -- 32,841 7,757 -- 40,598 Other current assets............ -- 8,954 207 -- 9,161 Intercompany accounts receivable................... 253,181 24,776 -- (277,957) -- -------- -------- ------- --------- -------- Total current assets......... 253,181 91,946 9,722 (277,957) 76,892 Property and equipment, net....... -- 129,499 18,970 -- 148,469 Investments in partnerships....... -- 1,782 -- -- 1,782 Investments in consolidated subsidiaries.................... (12,639) 3,284 -- 9,355 -- Other assets...................... -- 7,799 -- -- 7,799 Intangible assets, net............ -- 92,478 1,452 -- 93,930 -------- -------- ------- --------- -------- $240,542 $326,788 $30,144 $(268,602) $328,872 ======== ======== ======= ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of equipment, capital leases and other notes........................ $ 18,393 $ 10,809 $ 263 $ -- $ 29,465 Accounts payable and other accrued expenses............. -- 25,712 901 -- 26,613 Intercompany accounts payable... -- 253,181 24,776 (277,957) -- -------- -------- ------- --------- -------- Total current liabilities.... 18,393 289,702 25,940 (277,957) 56,078 Equipment, capital leases and other notes, less current portion......................... 170,662 47,257 848 -- 218,767 Other long-term liabilities....... -- 2,468 72 -- 2,540 Stockholders' equity (deficit).... 51,487 (12,639) 3,284 9,355 51,487 -------- -------- ------- --------- -------- $240,542 $326,788 $30,144 $(268,602) $328,872 ======== ======== ======= ========= ========
F-25 SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE YEAR ENDED JUNE 30, 2001 (AMOUNTS IN THOUSANDS)
PARENT COMPANY GUARANTOR NON-GUARANTOR ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------- ------------ ------------- ------------ ------------ Revenues........................... $ -- $166,433 $45,070 $ -- $211,503 Costs of operations................ -- 127,329 34,543 -- 161,872 ------- -------- ------- -------- -------- Gross profit....................... -- 39,104 10,527 -- 49,631 Corporate operating expenses....... -- 10,783 -- -- 10,783 ------- -------- ------- -------- -------- Income from company operations..... -- 28,321 10,527 -- 38,848 Equity in earnings of unconsolidated partnerships...... -- 971 -- -- 971 ------- -------- ------- -------- -------- Operating income................... -- 29,292 10,527 -- 39,819 Interest expense, net.............. -- 20,727 2,667 -- 23,394 ------- -------- ------- -------- -------- Income before income taxes......... -- 8,565 7,860 -- 16,425 Provision for income taxes......... -- 2,624 -- -- 2,624 ------- -------- ------- -------- -------- Income before equity in income of consolidated subsidiaries........ -- 5,941 7,860 -- 13,801 Equity in income of consolidated subsidiaries..................... 13,801 7,860 -- (21,661) -- ------- -------- ------- -------- -------- Net income......................... $13,801 $ 13,801 $ 7,860 $(21,661) $ 13,801 ======= ======== ======= ======== ========
F-26 SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE YEAR ENDED JUNE 30, 2000 (AMOUNTS IN THOUSANDS)
PARENT COMPANY GUARANTOR NON-GUARANTOR ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------- ------------ ------------- ------------ ------------ Revenues........................... $ -- $168,884 $19,690 $ -- $188,574 Costs of operations................ -- 134,784 16,645 -- 151,429 ------ -------- ------- ------- -------- Gross profit....................... -- 34,100 3,045 -- 37,145 Corporate operating expenses....... -- 10,946 -- -- 10,946 ------ -------- ------- ------- -------- Income from company operations..... -- 23,154 3,045 -- 26,199 Equity in earnings of unconsolidated partnerships...... -- 817 -- -- 817 ------ -------- ------- ------- -------- Operating income................... -- 23,971 3,045 -- 27,016 Interest expense, net.............. -- 17,730 966 -- 18,696 ------ -------- ------- ------- -------- Income before income taxes......... -- 6,241 2,079 -- 8,320 Provision for income taxes......... -- 1,131 -- -- 1,131 ------ -------- ------- ------- -------- Income before equity in income of consolidated subsidiaries........ -- 5,110 2,079 -- 7,189 Equity in income of consolidated subsidiaries..................... 7,189 2,079 -- (9,268) -- ------ -------- ------- ------- -------- Net income......................... $7,189 $ 7,189 $ 2,079 $(9,268) $ 7,189 ====== ======== ======= ======= ========
F-27 SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE YEAR ENDED JUNE 30, 1999 (AMOUNTS IN THOUSANDS)
PARENT COMPANY GUARANTOR NON-GUARANTOR ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------- ------------ ------------- ------------ ------------ Revenues........................... $ -- $143,205 $18,787 $ -- $161,992 Costs of operations................ -- 115,230 16,113 -- 131,343 ------ -------- ------- ------- -------- Gross profit....................... -- 27,975 2,674 -- 30,649 Provision for reorganization and other costs...................... -- 3,300 -- -- 3,300 Corporate operating expenses....... -- 10,475 -- -- 10,475 ------ -------- ------- ------- -------- Income from company operations..... -- 14,200 2,674 -- 16,874 Equity in earnings of unconsolidated partnerships...... -- 548 -- -- 548 ------ -------- ------- ------- -------- Operating income................... -- 14,748 2,674 -- 17,422 Interest expense, net.............. -- 13,453 1,047 -- 14,500 ------ -------- ------- ------- -------- Income before income taxes......... -- 1,295 1,627 -- 2,922 Provision (benefit) for income taxes............................ -- (3,190) -- -- (3,190) ------ -------- ------- ------- -------- Income before equity in income of consolidated subsidiaries........ -- 4,485 1,627 -- 6,112 Equity in income of consolidated subsidiaries..................... 6,112 1,627 -- (7,739) -- ------ -------- ------- ------- -------- Net income......................... $6,112 $ 6,112 $ 1,627 $(7,739) $ 6,112 ====== ======== ======= ======= ========
F-28 SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2001 (AMOUNTS IN THOUSANDS)
PARENT COMPANY GUARANTOR NON-GUARANTOR ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------- ------------ ------------- ------------ ------------ OPERATING ACTIVITIES: Net income....................... $13,801 $13,801 $ 7,860 $(21,661) $13,801 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.... -- 34,882 6,252 -- 41,134 Equity in income of consolidated subsidiaries.................. (13,801) (7,860) -- 21,661 -- Cash provided by (used in) changes in operating assets and liabilities: Trade accounts receivables....... -- 83 (2,840) -- (2,757) Intercompany receivables, net.... 18,209 (19,207) 998 -- -- Other current assets............. -- 681 101 -- 782 Accounts payable and other accrued expenses.............. -- (2,679) 401 -- (2,278) ------- ------- -------- -------- ------- Net cash provided by operating activities.................. 18,209 19,701 12,772 -- 50,682 ------- ------- -------- -------- ------- INVESTING ACTIVITIES: Additions to property and equipment..................... -- (13,281) (9,630) -- (22,911) Other............................ -- 3,459 (3,990) -- (531) ------- ------- -------- -------- ------- Net cash used in investing activities.................. -- (9,822) (13,620) -- (23,442) ------- ------- -------- -------- ------- FINANCING ACTIVITIES: Proceeds from stock options and warrants exercised............ 183 -- -- -- 183 Principal payments of debt and capital lease obligations..... (18,392) (13,432) 65 -- (31,759) Other............................ -- (1,901) 2,358 -- 457 ------- ------- -------- -------- ------- Net cash provided by (used in) financing activities........ (18,209) (15,333) 2,423 -- (31,119) ------- ------- -------- -------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................. -- (5,454) 1,575 -- (3,879) CASH AND CASH EQUIVALENTS: Cash, beginning of year.......... -- 25,375 1,758 -- 27,133 ------- ------- -------- -------- ------- Cash, end of year................ $ -- $19,921 $ 3,333 $ -- $23,254 ======= ======= ======== ======== =======
F-29 SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2000 (AMOUNTS IN THOUSANDS)
PARENT COMPANY GUARANTOR NON-GUARANTOR ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ OPERATING ACTIVITIES: Net income...................... $ 7,189 $ 7,189 $2,079 $(9,268) $ 7,189 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization............... -- 31,343 2,287 -- 33,630 Equity in income of consolidated subsidiaries............... (7,189) (2,079) -- 9,268 -- Cash provided by (used in) changes in operating assets and liabilities: Trade accounts receivables...... -- (3,907) (704) -- (4,611) Intercompany receivables, net... (27,447) 30,180 (2,733) -- -- Other current assets............ -- (1,849) 46 -- (1,803) Accounts payable and other accrued expenses............. -- 5,853 266 -- 6,119 -------- -------- ------ ------- -------- Net cash provided by (used in) operating activities......... (27,447) 66,730 1,241 -- 40,524 -------- -------- ------ ------- -------- INVESTING ACTIVITIES: Acquisitions of Centers and Fixed Facilities............. -- (25,346) -- -- (25,346) Additions to property and equipment.................... -- (22,635) (535) -- (23,170) Other........................... -- (554) -- -- (554) -------- -------- ------ ------- -------- Net cash used in investing activities................... -- (48,535) (535) -- (49,070) -------- -------- ------ ------- -------- FINANCING ACTIVITIES: Proceeds from stock options and warrants exercised........... 192 -- -- -- 192 Principal payments of debt and capital lease obligations.... (17,945) (7,326) (197) -- (25,468) Proceeds from issuance of debt......................... 45,200 -- -- -- 45,200 Other........................... -- 1,797 (336) -- 1,461 -------- -------- ------ ------- -------- Net cash provided by (used in) financing activities... 27,447 (5,529) (533) -- 21,385 -------- -------- ------ ------- -------- INCREASE IN CASH AND CASH EQUIVALENTS..................... -- 12,666 173 -- 12,839 CASH AND CASH EQUIVALENTS: Cash, beginning of year......... -- 12,709 1,585 -- 14,294 -------- -------- ------ ------- -------- Cash, end of year............... $ -- $ 25,375 $1,758 $ -- $ 27,133 ======== ======== ====== ======= ========
F-30 SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 1999 (AMOUNTS IN THOUSANDS)
PARENT COMPANY GUARANTOR NON-GUARANTOR ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ OPERATING ACTIVITIES: Net income........................... $ 6,112 $ 6,112 $1,627 $(7,739) $ 6,112 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization........ -- 21,976 2,910 -- 24,886 Amortization of deferred gain on debt restructure....................... -- (75) -- -- (75) Equity in income of consolidated subsidiaries...................... (6,112) (1,627) -- 7,739 -- Cash provided by (used in) changes in operating assets and liabilities: Trade accounts receivables........... -- (7,255) (1,069) -- (8,324) Intercompany receivables, net........ (11,936) 6,230 5,706 -- -- Other current assets................. -- (4,291) 185 -- (4,106) Accounts payable and other accrued expenses.......................... -- (7,293) (308) -- (7,601) -------- -------- ------ ------- -------- Net cash provided by (used in) operating activities.............. (11,936) 13,777 9,051 -- 10,892 -------- -------- ------ ------- -------- INVESTING ACTIVITIES: Cash acquired in acquisitions........ -- 850 -- -- 850 Acquisitions of Centers and Fixed Facilities........................ -- (28,046) -- -- (28,046) Additions to property and equipment......................... -- (11,112) (7,328) -- (18,440) Other................................ -- (706) (859) -- (1,565) -------- -------- ------ ------- -------- Net cash used in investing activities...................... -- (39,014) (8,187) -- (47,201) -------- -------- ------ ------- -------- FINANCING ACTIVITIES: Proceeds from stock options and warrants exercised................ 115 -- -- -- 115 Proceeds from issuance of common stock............................. 21 -- -- -- 21 Principal payments of debt and capital lease obligations......... (11,200) (6,124) (171) -- (17,495) Proceeds from issuance of debt....... 23,000 820 -- -- 23,820 Other................................ -- -- (598) -- (598) -------- -------- ------ ------- -------- Net cash provided by (used in) financing activities............ 11,936 (5,304) (769) -- 5,863 -------- -------- ------ ------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......................... -- (30,541) 95 -- (30,446) CASH AND CASH EQUIVALENTS: Cash, beginning of year.............. -- 43,250 1,490 -- 44,740 -------- -------- ------ ------- -------- Cash, end of year.................... $ -- $ 12,709 $1,585 $ -- $ 14,294 ======== ======== ====== ======= ========
F-31 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
SEPTEMBER 30, JUNE 30, 2001 2001 ------------- -------- ASSETS CURRENT ASSETS: Cash and cash equivalents................................... $ 13,684 $ 23,254 Trade accounts receivables, net........................... 43,069 43,355 Other current assets...................................... 10,533 8,379 -------- -------- Total current assets................................... 67,286 74,988 PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of $93,669 and $87,964, respectively......... 154,276 148,255 INVESTMENTS IN PARTNERSHIPS................................. 1,788 1,783 OTHER ASSETS................................................ 6,562 6,828 INTANGIBLE ASSETS, net...................................... 90,373 89,202 -------- -------- $320,285 $321,056 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of equipment, capital leases and other notes.................................................. $ 34,703 $ 33,862 Accounts payable and other accrued expenses............... 26,885 24,335 -------- -------- Total current liabilities.............................. 61,588 58,197 -------- -------- LONG-TERM LIABILITIES: Equipment, capital leases and other notes, less current portion................................................ 185,103 194,391 Other long-term liabilities............................... 3,693 2,997 -------- -------- Total long-term liabilities............................ 188,796 197,388 -------- -------- STOCKHOLDERS' EQUITY Preferred stock, $.001 par value, 3,500,000 shares authorized: Convertible Series B preferred stock, no shares outstanding at September 30, 2001 and 25,000 shares outstanding at June 30, 2001.......................... -- 23,923 Convertible Series C preferred stock, no shares outstanding at September 30, 2001 and 27,953 shares outstanding at June 30, 2001.......................... -- 13,173 Convertible Series D preferred stock, 632,266 shares outstanding at September 30, 2001 and no shares outstanding at June 30, 2001.......................... 37,096 -- Common stock, $.001 par value, 25,000,000 shares authorized: 3,025,567 and 3,011,656 shares outstanding at September 30, 2001 and June 30, 2001, respectively........................................... 3 3 Additional paid-in capital................................ 24,071 23,926 Accumulated other comprehensive loss...................... (682) -- Retained earnings......................................... 9,413 4,446 -------- -------- Total stockholders' equity............................. 69,901 65,471 -------- -------- 320,285 321,056 ======== ========
The accompanying notes are an integral part of these condensed consolidated balance sheets. F-32 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SEPTEMBER 30, ------------------- 2001 2000 -------- -------- REVENUES: Contract services......................................... $24,786 $26,279 Patient services.......................................... 28,165 25,711 Other..................................................... 166 230 ------- ------- Total revenues......................................... 53,117 52,220 ------- ------- COSTS OF OPERATIONS: Costs of services......................................... 26,709 27,084 Provision for doubtful accounts........................... 931 833 Equipment leases.......................................... 2,148 2,292 Depreciation and amortization............................. 8,283 10,340 ------- ------- Total costs of operations.............................. 38,071 40,549 ------- ------- Gross profit........................................... 15,046 11,671 CORPORATE OPERATING EXPENSES................................ 2,660 2,702 ------- ------- Income from company operations............................ 12,386 8,969 EQUITY IN EARNINGS OF UNCONSOLIDATED PARTNERSHIPS........... 334 126 ------- ------- Operating income.......................................... 12,720 9,095 INTEREST EXPENSE, net....................................... 5,336 6,032 ------- ------- Income before income taxes................................ 7,384 3,063 PROVISION FOR INCOME TAXES.................................. 2,417 306 ------- ------- Net income................................................ $ 4,967 $ 2,757 ======= ======= INCOME PER COMMON AND PREFERRED SHARE: Basic..................................................... $ 0.53 $ 0.30 ======= ======= Diluted................................................... $ 0.49 $ 0.29 ======= ======= WEIGHTED AVERAGE NUMBER OF COMMON AND PREFERRED SHARES OUTSTANDING: Basic..................................................... 9,343 9,312 ======= ======= Diluted................................................... 10,168 9,501 ======= =======
The accompanying notes are an integral part of these condensed consolidated financial statements. F-33 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED SEPTEMBER 30, --------------- 2001 2000 ------ ------ Net income.................................................. $4,967 $2,757 Other comprehensive loss, net of tax: ------ ------ Unrealized holding loss arising during the period......... (1,158) -- Less: reclassification adjustment for losses included in net income............................................. 184 -- ------ ------ Total other comprehensive loss, before tax.................. (974) -- Income tax benefit related to items of other comprehensive income................................................. 292 -- ------ ------ Total other comprehensive loss, net of tax.................. (682) -- ------ ------ Comprehensive income........................................ $4,285 $2,757 ====== ======
The accompanying notes are an integral part of these condensed consolidated financial statements. F-34 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED SEPTEMBER 30, ------------------- 2001 2000 -------- -------- OPERATING ACTIVITIES: Net income $ 4,967 $ 2,757 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,283 10,340 Cash provided by (used in) changes in operating assets and liabilities: Trade accounts receivables, net 286 (5,509) Other current assets (2,154) (237) Accounts payable and other accrued expenses 2,550 258 -------- -------- Net cash provided by operating activities 13,932 7,609 -------- -------- INVESTING ACTIVITIES: Additions to property and equipment (14,178) (12,469) Other (1,036) 140 -------- -------- Net cash used in investing activities (15,214) (12,329) -------- -------- FINANCING ACTIVITIES: Proceeds from stock options and warrants exercised 145 81 Principal payments of debt and capital lease obligations (8,447) (7,512) Other 14 286 -------- -------- Net cash used in financing activities (8,288) (7,145) -------- -------- DECREASE IN CASH AND CASH EQUIVALENTS (9,570) (11,865) Cash, beginning of period 23,254 27,133 -------- -------- Cash, end of period $ 13,684 $ 15,268 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 2,831 $ 2,879 Income taxes paid 921 132 Equipment additions under capital leases -- 7,404
The accompanying notes are an integral part of these condensed consolidated financial statements. F-35 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. NATURE OF BUSINESS InSight Health Services Corp. (Company) was incorporated in Delaware in February 1996. The Company's predecessors, InSight Health Corp. (formerly American Health Services Corp.) (IHC), and Maxum Health Corp. (MHC), became wholly owned subsidiaries of the Company on June 26, 1996, pursuant to an Agreement and Plan of Merger among the Company, IHC and MHC. The Company provides diagnostic imaging, treatment and related management services in 28 states throughout the United States. The Company has two reportable segments: Eastern Division and Western Division. The Company's services are provided through a network of 82 mobile magnetic resonance imaging (MRI) facilities, five mobile positron emission tomography (PET) facilities, four mobile lithotripsy facilities (collectively, Mobile Facilities), 38 fixed-site MRI facilities (Fixed Facilities), 27 multi-modality imaging centers (Centers), one Leksell Stereotactic Gamma Knife treatment center, one PET Fixed Facility, and one radiation oncology center. An additional radiation oncology center is operated by the Company as part of one of its Centers. The Company has a substantial presence in California, Texas, New England, the Carolinas, Florida and the Midwest (Indiana and Ohio). At its Centers, the Company typically offers other services in addition to MRI including computed tomography (CT), diagnostic and fluoroscopic x-ray, mammography, diagnostic ultrasound, nuclear medicine, bone densitometry, nuclear cardiology, and cardiovascular services. 2. INTERIM FINANCIAL STATEMENTS The unaudited condensed consolidated financial statements of the Company included herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and do not include all of the information and disclosures required by accounting principles generally accepted in the United States for annual financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and related footnotes for the period ended June 30, 2001, included elsewhere herein. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for fair presentation of results for the period have been included. The results of operations for the three months ended September 30, 2001 are not necessarily indicative of the results to be achieved for the full fiscal year. Certain reclassifications have been made to conform prior year amounts to the current year presentation. 3. INVESTMENTS IN AND TRANSACTIONS WITH PARTNERSHIPS The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company's investment interests in partnerships or limited liability companies (Partnerships) are accounted for under the equity method of accounting for ownership of 50% or less when the Company does not exercise significant control over the operations of the Partnerships and does not have primary responsibility for the Partnerships' long-term debt. The Company's investment interests in Partnerships are consolidated for ownership of 50% or greater owned entities when the Company exercises significant control over the operations and is primarily responsible for the associated long-term debt. F-36 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Set forth below is the summarized combined financial data of the Company's 50 percent controlled entity which is consolidated (amounts in thousands):
SEPTEMBER 30, JUNE 30, 2001 2001 ------------- -------- (UNAUDITED) Condensed Combined Balance Sheet Data: Current assets............................................ $1,687 $1,622 Total assets.............................................. 1,940 1,844 Current liabilities....................................... 411 426 Minority interest equity.................................. 663 608
THREE MONTHS ENDED SEPTEMBER 30, --------------- 2001 2000 ------ ------ (UNAUDITED) Condensed Combined Statement of Income Data: Net revenues.............................................. $1,430 $1,464 Expenses.................................................. 920 1,000 Provision for center profit distribution.................. 255 232 ------ ------ Net income................................................ $ 255 $ 232 ====== ======
The provision for center profit distribution shown above represents the minority interest in the income of this entity. 4. INCOME PER COMMON AND CONVERTED PREFERRED SHARE The number of shares used in computing EPS is equal to the weighed average number of common and preferred shares outstanding during the respective period. The preferred stock has certain rights, including conversion into common stock (Series B and Series C on a one-to-one basis and Series D on a ten-to-one basis), voting rights, no stated dividend rate and participates in any dividends paid with respect to the common stock. Accordingly, the preferred stock is included in the computation of basic EPS only if the effect on EPS is dilutive as required by SFAS No. 128, "Earnings per Share" and Emerging Issues Task Force Topic D-95. The Company uses the as-if converted method in computing EPS. There were no adjustments to net income (the numerator) for purposes of computing EPS. A reconciliation of basic and diluted share computations is as follows:
THREE MONTHS ENDED SEPTEMBER 30, -------------- 2001 2000 ------ ----- (UNAUDITED) Average common stock outstanding............................ 3,020 2,989 Effect of preferred stock................................... 6,323 6,323 ------ ----- Denominator for basic EPS................................... 9,343 9,312 Dilutive effect of stock options and warrants............... 825 189 ------ ----- 10,168 9,501 ====== =====
F-37 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. SEGMENT INFORMATION The Company has two reportable segments: Western Division and Eastern Division. The Company's reportable segments are geographical business units defined by management's division of responsibility between two executive vice presidents-operations, who are responsible for the Western and Eastern Divisions and who report directly to the Company's chief operating decision maker. Each segment owns and operates Centers, Fixed and Mobile Facilities within their respective geographic areas. The Company does not allocate income taxes to the two Divisions. The Company manages cash flows and assets on a consolidated basis, and not by segment, and does not allocate or report assets and capital expenditures by segment. The following tables summarize the operating results by segment for the three months ended September 30, 2001 and 2000 (amounts in thousands) (unaudited):
EASTERN WESTERN OTHER CONSOLIDATED ------- ------- ------- ------------ Three months ended September 30, 2001: Contract services revenues................ $21,901 $ 1,217 $ 1,668 $24,786 Patient services revenues................. 9,840 18,079 246 28,165 Other revenues............................ 120 13 33 166 ------- ------- ------- ------- Total revenues......................... 31,861 19,309 1,947 53,117 Depreciation and amortization............. 4,946 2,170 1,167 8,283 Total costs of operations................. 21,704 13,161 3,206 38,071 Equity in earnings of unconsolidated partnerships........................... 312 22 -- 334 Operating income (loss)................... 10,474 6,165 (3,919) 12,720 Interest expense, net..................... 3,283 880 1,173 5,336 Income (loss) before income taxes......... 7,191 5,285 (5,092) 7,384
EASTERN WESTERN OTHER CONSOLIDATED ------- ------- ------- ------------ Three months ended September 30, 2000: Contract services revenues................ $22,938 $ 1,478 $ 1,863 $26,279 Patient services revenues................. 9,790 15,590 331 25,711 Other revenues............................ 81 13 136 230 ------- ------- ------- ------- Total revenues......................... 32,809 17,081 2,330 52,220 Depreciation and amortization............. 6,332 2,343 1,665 10,340 Total costs of operations................. 22,644 13,172 4,733 40,549 Equity in earnings of unconsolidated partnerships........................... 162 (36) -- 126 Operating income (loss)................... 10,327 3,873 (5,105) 9,095 Interest expense, net..................... 3,618 905 1,509 6,032 Income (loss) before income taxes......... 6,709 2,968 (6,614) 3,063
6. HEDGING ACTIVITIES Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), was issued during the second quarter of 1998 and was adopted by the Company as of July 1, 2000. SFAS 133 requires that all derivatives be recorded at their current fair value on the balance sheet. Certain derivatives may be designated as either cash flow or fair value accounting hedges and qualify for the deferral of all or a part of changes in their fair value in the basis of the item being hedged or F-38 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) in accumulated other comprehensive income. Changes in the fair value of derivatives that are not related to specific financial instruments and do not meet the criteria for hedge accounting are included in net income. The Company has established policies and procedures to permit limited types and amounts of off-balance sheet hedges to help manage interest rate risk. The Company has entered into interest rate swaps to pay a fixed rate of interest to the counterparty and receives a floating rate of interest. Such swaps have the effect of converting variable rate borrowings into fixed rate borrowings. The swap in place at the end of the first quarter of fiscal 2002 is related to the senior credit facilities and qualifies as a cash flow hedge. The notional amount of this swap at September 30, 2001 was $36.0 million with a fair value loss of approximately $1.7 million. 7. COMPREHENSIVE INCOME Components of comprehensive income are changes in equity other than those resulting from investments by owners and distributions to owners. Net income is the primary component of comprehensive income. For the Company, the only component of comprehensive income other than net income is the unrealized gain or loss on derivatives qualifying for hedge accounting, net of income tax. The aggregate amount of such changes to equity that have not yet been recognized in net income are reported in the equity portion of the condensed consolidated balance sheets as accumulated other comprehensive loss. 8. ACQUISITION AND RELATED FINANCING TRANSACTIONS On October 17, 2001, the Company merged with a wholly-owned subsidiary of InSight Health Services Holdings Corp. (InSight Holdings). The Company was the surviving corporation and became a wholly-owned subsidiary of InSight Holdings. The Company is deemed to be the predecessor for future reporting purposes. J.W. Childs Equity Partners II (Childs) and an affiliate own approximately 80% of the outstanding common stock of InSight Holdings and Halifax Capital Partners (Halifax) and an affiliate own approximately 20% of the outstanding common stock of InSight Holdings. In addition, certain members of senior management rolled over a portion of their Company stock options into stock options of InSight Holdings at the consummation of the acquisition. Upon consummation of the acquisition, each of the Company's stockholders became entitled to receive $18.00 in cash for each share of Company common stock that they owned prior to the acquisition. Holders of options and warrants, which prior to the acquisition were exercisable for Company common stock, received the difference between $18.00 and the exercise price for each share of common stock the holder could have acquired pursuant to the terms of the options or warrants, and the options and warrants were terminated. This resulted in a charge of approximately $19.7 million, which will be reflected in the second quarter of fiscal 2002. The Company's stockholders, option holders and warrant holders immediately prior to the acquisition became entitled to receive aggregate cash consideration of approximately $187.7 million as a result of the acquisition. Concurrently with the acquisition, the Company (i) repurchased by tender offer all of its 9 5/8% senior subordinated notes due 2008 (Existing Notes) in an aggregate principal amount of $100 million, (ii) repaid its then outstanding senior credit facilities and certain other indebtedness and (iii) paid fees and expenses relating to the acquisition and related financing transactions. The Company will record a pre-merger extraordinary loss on extinguishment of existing indebtedness of approximately $20.0 million in the second quarter of fiscal 2002. These transactions were financed through: - Borrowings of $150 million under $275 million of new senior credit facilities; - A $200 million senior subordinated bridge financing; - The investment by Childs, Halifax and certain of their affiliates of $98.1 million; management options and common stock rollover with a total net value of approximately $1.9 million as discussed above; and F-39 INSIGHT HEALTH SERVICES CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) - Cash of approximately $3.9 million. The acquisition will be accounted for as a purchase of the Company by InSight Holdings. As such, the recorded amounts of the Company's assets and liabilities will change significantly as a result of the application of purchase accounting. Management is currently in the process of evaluating the appropriate purchase accounting adjustments. On October 30, 2001, the Company issued new 9 7/8% senior subordinated notes due 2011 (New Notes) in the aggregate principal amount of $225 million. The net proceeds from the issuance of the New Notes was approximately $211.5 million, $200 million of which was used to retire in full the senior subordinated bridge financing and the balance of which is being used for general corporate purposes. The Company will record a post-merger extraordinary loss on extinguishment of the senior subordinated bridge financing of approximately $7.8 million in the second quarter of fiscal 2002. Set forth below is an unaudited pro forma condensed consolidated balance sheet as of September 30, 2001, as if the transactions described above had occurred on September 30, 2001 (amounts in thousands):
PRO FORMA ---------------------- AS REPORTED ADJUSTMENTS TOTAL ----------- ----------- -------- (UNAUDITED) Current assets..................................... $ 67,286 $ 15,745 $ 83,031 Property and equipment, net........................ 154,276 -- 154,276 Investment in partnerships......................... 1,788 -- 1,788 Other assets....................................... 6,562 16,225 22,787 Intangible assets.................................. 90,373 137,121 227,494 -------- -------- -------- $320,285 $169,091 $489,376 ======== ======== ======== Current liabilities................................ $ 61,588 $(31,544) $ 30,044 Long-term liabilities.............................. 188,796 192,257 381,053 Stockholders' equity............................... 69,901 8,378 78,279 -------- -------- -------- $320,285 $169,091 $489,376 ======== ======== ========
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2001 gives effect to the investment by the Childs, Halifax and certain of their affiliates of $98.1 million, the draw down of the $150 million term loan and the $200 million senior subordinated bridge financing, and the issuance of the $225 million New Notes, which collectively was used to purchase the outstanding common stock, options and warrants of the Company of approximately $187.7 million, repay approximately $214 million in outstanding indebtedness, repay the $200 million senior subordinated bridge financing and to pay approximately $55 million in transaction costs related to the acquisition and related financing activities. 9. SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION The Company's payment obligations under the Existing Notes are guaranteed by certain of the Company's wholly owned subsidiaries (the Guarantor Subsidiaries). Such guarantees are full, unconditional and joint and several. The following supplemental financial information sets forth, on an unconsolidated basis, balance sheets, statements of income, and statements of cash flows information for the Company (Parent Company Only), for the Guarantor Subsidiaries and for the Company's other subsidiaries (the Non-Guarantor Subsidiaries). The supplemental financial information reflects the investments of the Company and the Guarantor Subsidiaries in the Guarantor and Non-Guarantor Subsidiaries using the equity method of accounting. F-40 SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED) SEPTEMBER 30, 2001 (AMOUNTS IN THOUSANDS)
PARENT NON- COMPANY GUARANTOR GUARANTOR ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents......... $ -- $ 10,521 $ 3,163 $ $ 13,684 Trade accounts receivables, net... -- 32,406 10,663 -- 43,069 Other current assets.............. -- 10,361 172 -- 10,533 Intercompany accounts receivable..................... 235,751 27,496 -- (263,247) -- -------- -------- ------- --------- -------- Total current assets........... 235,751 80,784 13,998 (263,247) 67,286 Property and equipment, net......... -- 130,036 24,240 -- 154,276 Investments in partnerships......... -- 1,788 -- -- 1,788 Investments in consolidated subsidiaries...................... 292 9,120 -- (9,412) -- Other assets........................ -- 6,562 -- -- 6,562 Intangible assets, net.............. -- 85,550 4,823 -- 90,373 -------- -------- ------- --------- -------- $236,043 $313,840 $43,061 $(272,659) $320,285 ======== ======== ======= ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of equipment, capital leases and other notes.......................... $ 21,537 $ 12,371 $ 795 $ -- $ 34,703 Accounts payable and other accrued expenses....................... -- 25,574 1,311 -- 26,885 Intercompany accounts payable..... -- 235,751 27,496 (263,247) -- -------- -------- ------- --------- -------- Total current liabilities...... 21,537 273,696 29,602 (263,247) 61,588 Equipment, capital leases and other notes, less current portion....... 143,923 39,255 1,925 -- 185,103 Other long-term liabilities......... 682 597 2,414 -- 3,693 Stockholders' equity................ 69,901 292 9,120 (9,412) 69,901 -------- -------- ------- --------- -------- $236,043 $313,840 $43,061 $(272,659) $320,285 ======== ======== ======= ========= ========
F-41 SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED) JUNE 30, 2001 (AMOUNTS IN THOUSANDS)
PARENT NON- COMPANY GUARANTOR GUARANTOR ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents......... $ -- $ 19,921 $ 3,333 $ -- $ 23,254 Trade accounts receivables, net... -- 32,758 10,597 -- 43,355 Other current assets.............. -- 8,273 106 -- 8,379 Intercompany accounts receivable..................... 241,016 27,590 -- (268,606) -- -------- -------- ------- --------- -------- Total current assets........... 241,016 88,542 14,036 (268,606) 74,988 Property and equipment, net......... -- 123,579 24,676 -- 148,255 Investments in partnerships......... -- 1,783 -- -- 1,783 Investments in consolidated subsidiaries...................... (4,882) 9,328 -- (4,446) -- Other assets........................ -- 6,828 -- -- 6,828 Intangible assets, net.............. -- 84,358 4,844 -- 89,202 -------- -------- ------- --------- -------- $236,134 $314,418 $43,556 $(273,052) $321,056 ======== ======== ======= ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of equipment, capital leases and other notes.......................... $ 20,810 $ 12,275 $ 777 $ -- $ 33,862 Accounts payable and other accrued expenses....................... -- 23,033 1,302 -- 24,335 Intercompany accounts payable..... -- 241,016 27,590 (268,606) -- -------- -------- ------- --------- -------- Total current liabilities...... 20,810 276,324 29,669 (268,606) 58,197 Equipment, capital leases and other notes, less current portion....... 149,853 42,409 2,129 -- 194,391 Other long-term liabilities......... -- 567 2,430 -- 2,997 Stockholders' equity (deficit)...... 65,471 (4,882) 9,328 (4,446) 65,471 -------- -------- ------- --------- -------- $236,134 $314,418 $43,556 $(273,052) $321,056 ======== ======== ======= ========= ========
F-42 SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 (AMOUNTS IN THOUSANDS)
PARENT NON- COMPANY GUARANTOR GUARANTOR ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------- ------------ ------------ ------------ ------------ Revenues............................. $ -- $41,565 $11,552 $ -- $53,117 Cost of operations................... -- 29,127 8,944 -- 38,071 ------ ------- ------- ------- ------- Gross profit....................... -- 12,438 2,608 -- 15,046 ------ ------- ------- ------- ------- Corporate operating expenses......... -- 2,660 -- -- 2,660 Income from company operations..... -- 9,778 2,608 -- 12,386 ------ ------- ------- ------- ------- Equity in earnings of unconsolidated partnerships....................... -- 334 -- -- 334 Operating income................... -- 10,112 2,608 -- 12,720 ------ ------- ------- ------- ------- Interest expense, net................ -- 4,711 625 -- 5,336 Income before income taxes......... -- 5,401 1,983 -- 7,384 ------ ------- ------- ------- ------- Provision for income taxes........... -- 2,417 -- -- 2,417 Income before equity in income of consolidated subsidiaries....... -- 2,984 1,983 -- 4,967 ------ ------- ------- ------- ------- Equity in income of consolidated subsidiaries....................... 4,967 1,983 -- (6,950) -- ------ ------- ------- ------- ------- Net income......................... $4,967 $ 4,967 $ 1,983 $(6,950) $ 4,967 ====== ======= ======= ======= =======
F-43 SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 (AMOUNTS IN THOUSANDS)
PARENT NON- COMPANY GUARANTOR GUARANTOR ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED ------- ------------ ------------ ----------- ------------ Revenues.............................. $ -- $40,248 $11,972 $ -- $52,220 Cost of operations.................... -- 31,394 9,155 -- 40,549 ------ ------- ------- ------- ------- Gross profit........................ -- 8,854 2,817 -- 11,671 Corporate operating expenses.......... -- 2,702 -- -- 2,702 ------ ------- ------- ------- ------- Income from company operations...... -- 6,152 2,817 -- 8,969 Equity in earnings of unconsolidated partnerships........................ -- 126 -- -- 126 ------ ------- ------- ------- ------- Operating income.................... -- 6,278 2,817 -- 9,095 Interest expense, net................. -- 5,258 774 -- 6,032 ------ ------- ------- ------- ------- Income before income taxes.......... -- 1,020 2,043 -- 3,063 Provision for income taxes............ -- 306 -- -- 306 ------ ------- ------- ------- ------- Income before equity in income of consolidated subsidiaries........ -- 714 2,043 -- 2,757 Equity in income of consolidated subsidiaries........................ 2,757 2,043 -- (4,800) -- ------ ------- ------- ------- ------- Net income.......................... $2,757 $ 2,757 $ 2,043 $(4,800) $ 2,757 ====== ======= ======= ======= =======
F-44 SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 (AMOUNTS IN THOUSANDS)
PARENT NON- COMPANY GUARANTOR GUARANTOR ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------- ------------ ------------ ------------ ------------ OPERATING ACTIVITIES: Net Income......................... $ 4,967 $ 4,967 $ 1,983 $(6,950) $ 4,967 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization... -- 6,857 1,426 -- 8,283 Equity in income of consolidated subsidiaries.................. (4,967) (1,983) -- 6,950 -- Cash provided by (used in) changes in operating assets and liabilities Trade accounts receivables......... -- 352 (66) -- 286 Intercompany receivables, net...... 5,058 (2,773) (2,285) -- -- Other current assets............... -- (2,088) (66) -- (2,154) Accounts payable and other accrued expenses........................ -- 2,541 9 -- 2,550 ------- -------- ------- ------- -------- Net cash provided by operating activities.................... 5,058 7,873 1,001 -- 13,932 ------- -------- ------- ------- -------- INVESTING ACTIVITIES: Additions to property and equipment....................... -- (13,209) (969) -- (14,178) Other.............................. -- (1,036) -- -- (1,036) ------- -------- ------- ------- -------- Net cash used in investing activities.................... -- (14,245) (969) -- (15,214) ------- -------- ------- ------- -------- FINANCING ACTIVITIES: Proceeds from stock options and warrants exercised.............. 145 -- -- -- 145 Principal payments of debt and capital lease obligations....... (5,203) (3,058) (186) -- (8,447) Other.............................. -- 30 (16) -- 14 ------- -------- ------- ------- -------- Net cash used in financing activities.................... (5,058) (3,028) (202) -- (8,288) ------- -------- ------- ------- -------- DECREASE IN CASH AND CASH EQUIVALENTS........................ -- (9,400) (170) -- (9,570) CASH AND CASH EQUIVALENTS: Cash, beginning of period.......... -- 19,921 3,333 -- 23,254 ------- -------- ------- ------- -------- Cash, end of period................ $ -- $ 10,521 $ 3,163 $ -- $ 13,684 ======= ======== ======= ======= ========
F-45 SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 (AMOUNTS IN THOUSANDS)
PARENT NON- COMPANY GUARANTOR SUBSIDIARIES ONLY SUBSIDIARIES GUARANTOR ELIMINATIONS CONSOLIDATED ------- ------------ ------------ ------------ ------------ OPERATING ACTIVITIES: Net Income......................... $2,757 $ 2,757 $2,043 $(4,800) $ 2,757 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization... -- 9,100 1,240 -- 10,340 Equity in income of consolidated subsidiaries.................. (2,757) (2,043) -- 4,800 -- Cash provided by (used in) changes in operating assets and liabilities Trade accounts receivables......... -- (3,299) (2,210) -- (5,509) Intercompany receivables, net...... 4,517 (5,208) 691 -- -- Other current assets............... -- (261) 24 -- (237) Accounts payable and other accrued expenses........................ -- 148 110 -- 258 ------ -------- ------ ------- -------- Net cash provided by operating activities......................... 4,517 1,194 1,898 -- 7,609 ------ -------- ------ ------- -------- INVESTING ACTIVITIES: Additions to property and equipment....................... -- (11,359) (1,110) -- (12,469) Other.............................. -- 140 -- -- 140 ------ -------- ------ ------- -------- Net cash used in investing activities.................... -- (11,219) (1,110) -- (12,329) ------ -------- ------ ------- -------- FINANCING ACTIVITIES: Proceeds from stock options and warrants exercised.............. 81 -- -- -- 81 Principal payments of debt and capital lease obligation........ (4,598) (2,791) (123) -- (7,512) Other -- 115 171 -- 286 ------ -------- ------ ------- -------- Net cash provided by (used in) financing activities.......... (4,517) (2,676) 48 -- (7,145) ------ -------- ------ ------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................ -- (12,701) 836 -- (11,865) CASH AND CASH EQUIVALENTS: Cash, beginning of period.......... -- 25,375 1,758 -- 27,133 ------ -------- ------ ------- -------- Cash, end of period................ $ -- $ 12,674 $2,594 $ -- $ 15,268 ====== ======== ====== ======= ========
F-46 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of InSight Health Services Holdings Corp.: We have audited the accompanying consolidated balance sheet of InSight Health Services Holdings Corp. (a Delaware corporation) and subsidiary as of June 30, 2001 and the related statement of stockholders' equity for the period from inception (June 13, 2001) to June 30, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of InSight Health Services Holdings Corp. and subsidiary as of June 30, 2001 and for the period from inception (June 13, 2001) to June 30, 2001 in conformity with accounting principles generally accepted in the United States. /s/ ARTHUR ANDERSEN LLP Orange County, California September 10, 2001 F-47 INSIGHT HEALTH SERVICES HOLDINGS CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2001 JUNE 30, 2001 ------------------ ------------- (UNAUDITED) ASSETS ASSETS...................................................... $ -- $ -- ==== ==== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES................................................. $ -- $ -- STOCKHOLDERS' EQUITY:....................................... -- -- Preferred stock, $.001 par value; 1,000,000 shares authorized, no shares issued or outstanding............... -- -- Common stock subscription receivable........................ (90) (90) Common stock, $.001 par value; 10,000,000 shares authorized, 5 shares issued and outstanding........................... -- -- Additional paid-in capital.................................. 90 90 ---- ---- Total stockholders' equity............................. -- -- ---- ---- Total liabilities and stockholders' equity................ $ -- $ -- ==== ====
The accompanying notes are an integral part of these consolidated balance sheets. F-48 INSIGHT HEALTH SERVICES HOLDINGS CORP. AND SUBSIDIARY CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FROM INCEPTION (JUNE 13, 2001) TO SEPTEMBER 30, 2001
COMMON COMMON STOCK STOCK ADDITIONAL --------------- SUBSCRIPTION PAID-IN SHARES AMOUNT RECEIVABLE CAPITAL TOTAL ------ ------ ------------ ---------- ----- Balance at Inception (June 13, 2001)............ -- $-- $ -- $-- $-- Issuance of common stock........................ 5 -- (90) 90 -- -- -- ---- --- -- Balance at June 30, 2001........................ 5 $-- $(90) $90 $-- == == ==== === == Balance at September 30, 2001 (unaudited)....... 5 $-- $(90) $90 $-- == == ==== === ==
The accompanying notes are an integral part of these consolidated financial statements. F-49 INSIGHT HEALTH SERVICES HOLDINGS CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. CORPORATE ORGANIZATION AND BUSINESS InSight Health Services Holdings Corp. (Company), a Delaware corporation, was originally incorporated on June 13, 2001 under the name of JWC/Halifax Holdings Corp. On June 29, 2001, the Company's name was changed to InSight Health Services Holdings Corp. The Company was formed for the purpose of consummating an acquisition of InSight Health Services Corp. (InSight), a Delaware corporation, through a merger of the Company's wholly owned subsidiary, InSight Health Services Acquisition Corp. (formerly JWCH Merger Corp.) (Acquisition Corp) with and into InSight whereby InSight would become the wholly-owned subsidiary of the Company. The acquisition was consummated on October 17, 2001. The Company has no prior or current operations or cash activity. Acquisition Corp. was merged out of existence on October 17, 2001 and had no prior operations or cash activity. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany amounts have been eliminated in consolidation. 2. UNAUDITED INTERIM INFORMATION The accompanying financial information as of and for the three months ended September 30, 2001 is unaudited. In the opinion of management, this information has been prepared on substantially the same basis as the consolidated financial statements as of June 30, 2001 and contains all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position as of and for the three months ended September 30, 2001. 3. ACQUISITION AND RELATED FINANCING TRANSACTIONS (SUBSEQUENT EVENT -- UNAUDITED) On October 17, 2001, Acquisition Corp. merged with InSight. InSight was the surviving corporation and became a wholly-owned subsidiary of the Company. InSight is deemed to be the predecessor for future SEC reporting purposes. J.W. Childs Equity Partners II (Childs) and an affiliate own approximately 80% of the outstanding common stock of the Company and Halifax Capital Partners (Halifax) and an affiliate own approximately 20% of the outstanding common stock of the Company. In addition, certain members of senior management rolled over portion of their InSight stock options into stock options of the Company at the consummation of the acquisition. In connection with the Company's acquisition of Insight, the Company's stockholders purchased additional shares of the Company's common stock, resulting in net proceeds as follows (in millions): J.W. Childs Equity Partners II and affiliate................ $ 79.8 Halifax Capital Partners and affiliate...................... 20.0 Net value of rolled management options...................... 1.7 ------ $101.5 ======
Upon consummation of the acquisition, each of InSight's stockholders became entitled to receive $18.00 in cash for each share of InSight common stock that they owned prior to the acquisition. Holders of options and warrants, which prior to the acquisition were exercisable for InSight common stock, received the difference between $18.00 and the exercise price for each share of common stock the holder could have acquired pursuant to the terms of the options or warrants, and the options and warrants were terminated. This resulted in a charge of approximately $19.7 million, which will be reflected in InSight's pre-merger financial statements in the second quarter of fiscal 2002. InSight's stockholders, option holders and warrant holders immediately prior to the acquisition became entitled to receive aggregate cash consideration of approximately $187.7 million as a result of the acquisition. F-50 INSIGHT HEALTH SERVICES HOLDINGS CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Concurrently with the acquisition, (i) Acquisition Corp. repurchased by tender offer all of InSight's 9 5/8% senior subordinated notes due 2008 (Prior Notes) in an aggregate principal amount of $100 million, (ii) InSight repaid its then outstanding senior credit facilities and certain other indebtedness and (iii) InSight paid fees and expenses relating to the acquisition and related financing transactions. InSight will record a pre-merger extraordinary loss on extinguishment of existing indebtedness of approximately $20.0 million in the second quarter of fiscal 2002. These transactions were financed through: - Borrowings of $150 million under $275 million of new senior credit facilities; - A $200 million senior subordinated bridge financing; and - The investment by Childs, Halifax and certain of their affiliates of $98.1 million; management options and common stock rollover with a total net value of approximately $1.9 million as discussed above. The acquisition will be accounted for as a purchase of InSight by the Company. As such, the recorded amounts of InSight's assets and liabilities will change significantly as a result of the application of purchase accounting. Management is currently in the process of evaluating the appropriate purchase accounting adjustments. On October 30, 2001, InSight issued new 9 7/8% senior subordinated notes due 2011 (Outstanding Notes) in the aggregate principal amount of $225 million. The net proceeds from the issuance of the Outstanding Notes was approximately $211.5 million, $200 million of which was used to retire in full the senior subordinated bridge financing and the balance is being used for general corporate purposes. InSight will record a post-merger extraordinary loss on extinguishment of the senior subordinated bridge financing of approximately $7.8 million in the second quarter of fiscal 2002. Upon the completion of the acquisition, InSight and the Company entered into a management agreement with J.W. Childs Advisors II, L.P., the general partner of J.W. Childs Equity Partners II, and Halifax Genpar, L.P., the general partner of Halifax Capital Partners. Under the agreement, InSight paid J.W. Childs Advisors II and Halifax Genpar a transaction fee of $4,500,000 and $1,125,000, respectively, for services rendered in connection with the acquisition. Additionally, J.W. Childs Advisors II and Halifax Genpar will provide business, management and financial advisory services to InSight and the Company in consideration of (1) an annual fee of $240,000 to be paid to J.W. Childs Advisors II and (2) an annual fee of $60,000 to be paid to Halifax Genpar. InSight and the Company will also reimburse such entities for all travel and other out-of-pocket expenses incurred by such entities in connection with their performance of the advisory services under the agreement. The management agreement has an initial term of five years, which term will automatically renew for one year periods thereafter and is subject to earlier termination by the board of directors of InSight and the Company. Furthermore, the Company and InSight have agreed to indemnify and hold harmless J.W. Childs Advisors II and Halifax Genpar and their affiliates, from and against any and all claims, losses, damages and expenses arising out of the acquisition or the performance by J.W. Childs Advisors II and Halifax Genpar of their obligations under the management agreement. F-51 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- $225,000,000 INSIGHT HEALTH SERVICES CORP. OFFER TO EXCHANGE $225,000,000 9 7/8% SENIOR SUBORDINATED NOTES DUE 2011 FOR REGISTERED 9 7/8% SENIOR SUBORDINATED NOTES DUE 2011 ------------------------- PROSPECTUS ------------------------- , 2002 We have not authorized any dealer, salesperson or other person to give any information or represent anything to you other than the information contained in this prospectus. You must not rely on unauthorized information or representations. This prospectus does not offer to sell or ask for offers to buy any of the securities in any jurisdiction where it is unlawful, where the person making the offer is not qualified to do so, or to any person who cannot legally be offered the securities. The information in this prospectus is current only as of the date on its cover, and may change after that date. For any time after the cover date of this prospectus, we do not represent that our business is the same as described or that the information in this prospectus is correct -- nor do we imply those things by delivering this prospectus or selling securities to you. Until , 2002 (90 days after the date of this prospectus), all dealers effecting transactions in the exchange notes, whether or not participating in this distribution, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when selling exchange notes received in exchange for outstanding notes held for their own account. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF DELAWARE CORPORATE REGISTRANTS The following is a summary of the statues, charter and bylaw provisions, contracts or other arrangements under which each of the Registrants' directors and officers are insured or indemnified against liability in their capacities as such. All of the directors and officers of the Registrants are covered by insurance policies maintained and held in effect by InSight against certain liabilities for actions taken in their capacities as such, including liabilities under the Securities Act. REGISTRANTS INCORPORATED UNDER DELAWARE LAW InSight, InSight Holdings, InSight Health Corp., Signal Medical Services, Inc., Open MRI, Inc., Maxum Health Corp., Radiosurgery Centers, Inc., Maxum Health Services Corp., and Diagnostic Solutions Corp. are incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law ("DGCL") provides that a corporation may indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or complete action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Section 145 further provides that a corporation similarly may indemnify any such person serving in any such capacity who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action or suit by or the right of the corporation to procure a judgment in its favor, against expenses actually and reasonably incurred in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court or Chancery or such other court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. InSight's certificate of incorporation limits the liability of its directors and officers to the fullest extent permitted under the DGCL. The certificate of incorporation specifies that the directors and officers will not be personally liable for monetary damages for breach of fiduciary duty as a director or officer, as applicable. This limitation does not apply to actions by a director or officer that do not meet the standards of conduct which make it permissible under the DGCL for InSight Holdings to indemnify such director or officer. InSight has entered into separate indemnification agreements with its executive officers and each of its former directors that could require InSight, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors and executive officers and to advance expenses incurred by them as a result of any proceedings against them as to which they could be indemnified. InSight Holdings's certificate of incorporation limits the liability of its directors and officers to the fullest extent permitted under the DGCL. The certificate of incorporation specifies that the directors and officers will not be personally liable for monetary damages for breach of fiduciary duty as a director or officer. This limitation does not apply to actions by a director or officer that do not meet the standards of conduct which make it permissible under the DGCL for us to indemnify such director or officer. II-1 InSight Health Corp.'s certificate of incorporation limits the personal liability of its directors for monetary damages for breach of fiduciary duty as a director except for liability for any breach of the director's duty of loyalty to the corporation or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, under Section 174 of the DGCL, or for any transaction from which the director derived any improper personal benefit. It also indemnifies its officers, directors, and employees and agents to the extent permitted by the DGCL. The right to indemnification shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition, provided however, that, if the DGCL requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer shall be made only upon delivery to the corporation of an undertaking to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses. Its bylaws provide for indemnification of any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the corporation or any constituent corporation absorbed in a consolidation or merger, or serves or served with another corporation, partnership, joint venture, trust or other enterprise at the request of the corporation or any such constituent corporation and provide such expenses incurred in defending such actions upon receipt of an undertaking by or on behalf of such persons to repay such advances unless it shall be ultimately determined that such person is entitled to indemnification by the corporation. Signal Medical Services, Inc.'s certificate of incorporation limits the personal liability of its directors for monetary damages for breach of fiduciary duty as a director except for liability for any breach of the director's duty of loyalty to the corporation or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, under Section 174 of the DGCL, or for any transaction from which the director derived any improper personal benefit. The corporation also indemnifies its officers, directors, and employees and agents to the extent permitted by the DGCL. Article VII of its bylaws indemnifies to the fullest extent provided by the DGCL each person who was or is made a party or is threatened to be a party to or is involved in any action, suit or proceeding by reason of the fact that he or she, as a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise. The corporation may provide indemnification to employees and agents of the corporation with the same scope and effect as the indemnification for directors and officers. Open MRI, Inc.'s certificate of incorporation limits the liability of its directors to the fullest extent permitted by the DGCL for monetary damages for a breach of fiduciary duty as a director. Article VII of its bylaws indemnifies to the fullest extent provided by the DGCL each person who was or is made a party or is threatened to be a party to or is involved in any action, suit or proceeding by reason of the fact that he or she, as a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise. The corporation may provide indemnification to employees and agents of the corporation with the same scope and effect as the indemnification for directors and officers. Maxum Health Corp.'s certificate of incorporation limits a directors liability to the fullest extent permitted by the DGCL for monetary damages for a breach of fiduciary duty as a director. Article V of its bylaws indemnifies to the fullest extent provided by the DGCL each person who was or is made a party or is threatened to be a party to or is involved in any action, suit or proceeding by reason of the fact that he or she, as a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise. The corporation may provide indemnification to employees and agents of the corporation with the same scope and effect as the indemnification for directors and officers. II-2 Radiosurgery Centers, Inc.'s certificate of incorporation limits the personal liability of its directors for monetary damages for breach of fiduciary duty as a director except for liability for any breach of the director's duty of loyalty to the corporation or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, under Section 174 of the DGCL, or for any transaction from which the director derived any improper personal benefit. Article VII of its bylaws also indemnifies its officers, directors, and employees and agents to the extent permitted by the DGCL. The right to indemnification shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition, provided however, that, if the DGCL requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer shall be made only upon delivery to the corporation of undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses. Maxum Health Services Corp.'s bylaws limit the personal liability of its directors for monetary damages for breach of fiduciary duty as a director except for liability for any breach of the director's duty of loyalty to the corporation or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, under Section 174 of the DGCL, or for any transaction from which the director derived any improper personal benefit. The liability of a director shall be further eliminated or limited to the fullest extent provided by an amendment to the DGCL or any other applicable law authorizing such corporate action. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding by reason of the fact that he or she or a person of whom he or she is a legal representative or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer or employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified by the corporation to the fullest extent authorized by the DGCL. Such right to indemnification includes the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition, provided that if the DGCL or any other applicable law requires the payment of such expenses in advance of the final disposition of a proceeding, payment shall be made only upon delivery to the corporation of an undertaking by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified. REGISTRANTS INCORPORATED UNDER INDIANA LIMITED PARTNERSHIP LAW MRI Associates, L.P. is a limited partnership formed under the laws of the State of Indiana. Under Section 2(9) of Indiana's Limited Liability Partnership Act, a limited partnership may indemnify a person made a party to an action because the person is or was a partner, employee, officer, or agent of the partnership against liability incurred in the action if (1) the person's conduct was in good faith; and (2) the person reasonably believed (a) in the case of conduct in the person's capacity as a partner, that the person's conduct was in the best interests of the partnership; and (b) in all other cases that the person's conduct was at least not opposed to the best interests of the partnership; and (3) in the case of any criminal action, the person either had reasonable cause to believe the person's conduct was lawful or had no reasonable cause to believe the person's conduct was unlawful. These indemnification provisions do not exclude any other rights to indemnification that a partner, employee, officer or agent of the limited partnership may have under the partnership agreement or with the written consent of all partners. MRI Associates, L.P.'s Agreement of Limited Partnership provides for indemnification of the general partner, its agents and employees so long as the acts or omissions were taken in good faith and in a manner reasonably believed by the general partner to be, or not opposed to, the best interests of the partnership. However, no indemnity is made if the conduct was found by a court of competent jurisdiction to be the result of gross negligence or reckless or intentional misconduct or breach of fiduciary duty, unless and only to the extent that the court determines that in view of all circumstances the general partner, agent or employee is entitled to indemnity for such expense as the court deems proper. If the partnership is made a party to a claim as a result of or in connection with any partner's obligations or liabilities unrelated to the partnership business, such partners cumulatively, jointly and severally shall indemnify and reimburse the partnership for all II-3 loss and expense incurred, including reasonable attorney's fees. If the partnership, general partner, or any limited partner is sued as a result of the medical activities of any other limited partner, then the limited partner whose activity resulted in a claim being made shall, jointly and severally, indemnify the partnership, general partner, the other limited partners and all of their officers, directors, agents and employees arising from or related to that claim of medical malpractice. In addition, the partnership agreement also provides that if the Partnership, the General Partner or any Limited Partner is sued as a result of the medical activities of any other Limited Partner, then the Limited Partner whose activity resulted in the claim being made shall, jointly and severally, indemnify the Partnership, the General Partner, the other Limited Partners and all of their officers, directors, agents and employees, if any, from and against any loss, liability, damage, cost or expense arising from or related to that claim of medical malpractice. REGISTRANTS INCORPORATED UNDER TEXAS LAW Maxum Health Services of North Texas, Inc., Maxum Health Services of Dallas, Inc., and NDDC, Inc. are incorporated under the laws of the State of Texas. Article 2.02-1 of the Texas Business Corporation Act ("TBCA") provides that a corporation may indemnify any director or officer who was, is or is threatened to be made a named defendant or respondent in a proceeding because he or she is or was a director or officer, provided that the director or officer (1) conducted himself in good faith, (2) reasonably believed (a) in the case of conduct in his or her official capacity, that his or her conduct was in the corporation's best interests, and/or (b) in other cases, that his or her conduct was at least not opposed to the corporation's best interest, and (3) in the case of any criminal proceeding, has no reasonable cause to believe his or her conduct was unlawful. Subject to certain exceptions, a director or officer may not be indemnified if he or she is found liable to the corporation or if he or she is found liable on the basis that he or she improperly received a personal benefit. Under Texas law reasonable expenses incurred by a director or officer may be paid or reimbursed by the corporation in advance of a final disposition of the proceeding after the corporation receives a written affirmation by the director or officer of his or her good faith belief that he or she has met the standards of conduct necessary for indemnification and a written undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined that the director or officer is not entitled to indemnification by the corporation. Texas law requires a corporation to indemnify a director or officer against reasonable expenses incurred in connection with the proceeding to which such director or officer is named defendant or respondent because he or she is or was a director or officer if he or she is wholly successful in defense of the proceeding. Texas law also permits a corporation to purchase and maintain insurance or another arrangement on behalf of any person who is or was a director or officer against any liability asserted against him and incurred by him in such a capacity or arising out of his or her status as such a director or officer, whether or not the corporation would have the power to indemnify him against liability under Article 2.02-1 of the TBCA. Maxum Health Services of North Texas, Inc.'s certificate of incorporation eliminates the liability of directors to the fullest extent permitted by the provisions of the TBCA and indemnifies any and all persons whom it shall have power to indemnify from and against any and all of the expenses, liabilities or other matters. Article V of the bylaws of Maxum Health Services of North Texas states that the corporation indemnifies, to the fullest extent provided by the TBCA, each person who was or is made a party or is threatened to be a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she, as a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise. The bylaws provide that the corporation may indemnify employees and agents of the corporation with the same scope and effect as the indemnification for directors and officers. Maxum Health Services of Dallas, Inc.'s certificate of incorporation eliminates the liability of directors to the fullest extent permitted by the provisions of the TBCA and indemnifies any and all persons whom it shall have power to indemnify from and against any and all of the expenses, liabilities or other matters. NDDC, Inc.'s certificate of incorporation eliminates the liability of directors to the fullest extent permitted by the provisions of the TBCA and indemnifies any and all persons whom it shall have power to indemnify from and against any and all of the expenses, liabilities or other matters. II-4 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. 2.1 -- Agreement and Plan of Merger dated as of June 29, 2001, by and among InSight Health Services Holdings Corp., JWCH Merger Corp. and InSight, previously filed and incorporated herein by reference from InSight's Current Report on Form 8-K, filed July 2, 2001. 2.2 -- Amendment No. 1 to Agreement and Plan of Merger dated as of June 29, 2001, by and among InSight Health Services Holdings Corp., JWCH Merger Corp. and InSight, previously filed and incorporated by reference from InSight's Annual Report on Form 10-K, filed September 14, 2001. 2.3 -- Amendment No. 2 to Agreement and Plan of Merger, dated as of October 9, 2001, by and among InSight Health Services Holdings Corp., InSight Health Services Acquisition Corp. and InSight Health Corp., previously filed and incorporated herein by reference from InSight's Current Report on Form 8-K, filed October 9, 2001. 2.4 -- Amended and Restated Stockholders Agreement, dated as of October 17, 2001, among InSight Health Services Holdings Corp., the JWC Holders (as defined therein), the Halifax Holders (as defined therein), the Management Holders (as defined therein) and the Additional Holders (as defined therein), as amended, filed herewith. 2.5 -- Management Agreement, dated as of October 17, 2001, by and among J.W. Childs Advisors II., L.P, Halifax Genpar, L.P., InSight Health Services Holdings Corp. and InSight Health Services Corp., filed herewith. 3.1 -- Certificate of Incorporation of InSight, as amended, filed herewith. 3.2 -- Bylaws of InSight, as amended, filed herewith. 3.3 -- Certificate of Incorporation of InSight Health Services Holdings Corp., as amended, filed herewith. 3.4 -- Bylaws of InSight Health Services Holdings Corp., filed herewith. 3.5 -- Certificate of Incorporation of InSight Health Corp., as amended, filed herewith. 3.6 -- Bylaws of InSight Health Corp., as amended, filed herewith. 3.7 -- Certificate of Incorporation of Signal Medical Services, Inc., as amended, filed herewith. 3.8 -- Bylaws of Signal Medical Services, Inc., as amended, filed herewith. 3.9 -- Certificate of Incorporation of Open MRI, Inc., as amended, filed herewith. 3.10 -- Bylaws of Open MRI, Inc., filed herewith. 3.11 -- Certificate of Incorporation of Maxum Health Corp., as amended, filed herewith. 3.12 -- Bylaws of Maxum Health Corp., as amended, filed herewith. 3.13 -- Certificate of Incorporation of Radiosurgery Centers, Inc., filed herewith. 3.14 -- Bylaws of Radiosurgery Centers, Inc., filed herewith. 3.15 -- Certificate of Incorporation of Maxum Health Services Corp., as amended, filed herewith. 3.16 -- Bylaws of Maxum Health Services Corp., filed herewith. 3.17 -- Certificate of Limited Partnership of MRI Associates, L.P., filed herewith. 3.18 -- Agreement of Limited Partnership of MRI Associates, L.P., filed herewith. 3.19 -- Certificate of Incorporation of Maxum Health Services of North Texas, Inc., filed herewith. 3.20 -- Bylaws of Maxum Health Services of North Texas, Inc., filed herewith. 3.21 -- Certificate of Incorporation of Maxum Health Services of Dallas, Inc., filed herewith. 3.22 -- Bylaws of Maxum Health Services of Dallas, Inc., filed herewith. 3.23 -- Certificate of Incorporation of NDDC, Inc., filed herewith. 3.24 -- Bylaws of NDDC, Inc., filed herewith. 3.25 -- Certificate of Incorporation of Diagnostic Solutions Corp., as amended, filed herewith. 3.26 -- Bylaws of Diagnostic Solutions Corp., filed herewith. 4.1 -- Indenture with respect to 9 7/8% Senior Subordinated Notes due 2011 with State Street Bank and Trust Company, N.A., as Trustee, dated October 30, 2001, filed herewith.
II-5 4.2 -- Purchase Agreement, dated October 25, 2001 by and among InSight, Banc of America Securities LLC and First Union Securities, LLC with respect to the 9 7/8% Senior Subordinated Notes due 2011, filed herewith. 4.3 -- Registration Rights Agreement, dated October 30, 2001, by and among InSight, Banc of America Securities LLC and First Union Securities, LLC with respect to the 9 7/8% Senior Subordinated Notes due 2011, filed herewith. * 5.1 -- Opinion of Kaye Scholer LLP. * 5.2 -- Opinion of Hunton & Williams. * 8.1 -- Tax Opinion of Kaye Scholer LLP. 10.1 -- Voting Agreement dated as of June 29, 2001, among InSight Health Services Holdings Corp., JWCH Merger Corp., Carlyle Partners II, L.P., Carlyle Partners III, L.P., Carlyle International Partners II, L.P., Carlyle International Partners III, L.P., C/S International Partners, State Board of Administration of Florida, Carlyle Investment Group, L.P., Carlyle-InSight International Partners, L.P., Carlyle-InSight Partners L.P. and T.C. Group, LLC, previously filed and incorporated herein by reference from InSight's Current Report on Form 8-K, filed July 2, 2001. 10.2 -- Voting Agreement dated as of July 29, 2001, among InSight Health Services Holdings Corp., JWCH Merger Corp. and General Electric Company, previously filed and incorporated herein by reference from InSight's Current Report on Form 8-K, filed July 2, 2001. 10.3 -- Voting Agreement, dated as of June 29, 2001, among InSight Health Services Holdings Corp., JWCH Merger Corp. and GE Fund, previously filed and incorporated herein by reference from InSight's Current Report on Form 8-K, filed July 2, 2001. 10.4 -- Credit Agreement, dated October 17, 2001, by and among InSight, Banc of America Securities LLC and First Union Securities, LLC, filed herewith. 10.5 -- Note Purchase Agreement, dated as of October 17, 2001, by and among InSight Health Services Acquisition Corp., InSight Health Services Corp., InSight Health Services Holdings Corp., the Subsidiary Guarantors (as defined therein), Banc of America Bridge LLC, and Banc of America Securities LLC, filed herewith. 10.6 -- InSight Health Services Holdings Corp. 2001 Stock Option Plan, filed herewith. 10.7 -- InSight Health Services Holdings Corp. 2001 Stock Option Plan Stock Option Agreement, dated June 29, 2001, by and between InSight Health Services Holdings Corp. and Steven T. Plochocki, filed herewith. 10.8 -- InSight Health Services Holdings Corp. 2001 Stock Option Plan Stock Option Agreement, dated June 29, 2001, by and between InSight Health Services Holdings Corp. and Michael A. Boylan, filed herewith. 10.9 -- InSight Health Services Holdings Corp. 2001 Stock Option Plan Stock Option Agreement, dated June 29, 2001, by and between InSight Health Services Holdings Corp. and Thomas V. Croal, filed herewith. 10.10 -- InSight Health Services Holdings Corp. 2001 Stock Option Plan Stock Option Agreement, dated June 29, 2001, by and between InSight Health Services Holdings Corp. and Michael S. Madler, filed herewith. 10.11 -- Executive Employment Agreement, dated June 29, 2001, between InSight Health Services Corp. and Steven T. Plochocki, filed herewith. 10.12 -- Executive Employment Agreement, dated June 29, 2001, between InSight Health Services Corp. and Patricia R. Blank, filed herewith. 10.13 -- Executive Employment Agreement, dated June 29, 2001, between InSight Health Services Corp. and Michael A. Boylan, filed herewith. 10.14 -- Executive Employment Agreement, dated June 29, 2001, between InSight Health Services Corp. and Thomas V. Croal, filed herewith. 10.15 -- Executive Employment Agreement, dated June 29, 2001, between InSight Health Services Corp. and Brian G. Drazba, filed herewith. 10.16 -- Executive Employment Agreement, dated June 29, 2001, between InSight Health Services Corp. and Michael S. Madler, filed herewith.
II-6 10.17 -- Executive Employment Agreement, dated December 7, 2001, between InSight Health Services Corp. and Marilyn U. MacNiven-Young, filed herewith. 10.18 -- Form of InSight Health Services Holdings Corp. Performance Based Option Agreement, filed herewith. 12.1 -- Computation of ratio of earnings to fixed charges * 15 -- Letter regarding unaudited interim financial information. 21 -- Subsidiaries of InSight. 23.1 -- Consent of Independent Public Accountants, filed herewith. * 23.2 -- Consent of Kaye Scholer LLP, included in Exhibit 5.1 hereto. * 23.3 -- Consent of Hunton & Williams, included in Exhibit 5.2 hereto. * 25.1 -- Form T-1 Statement regarding eligibility of State Street Bank and Trust Company, N.A., as Trustee. * 99.1 -- Form of Letter of Transmittal. * 99.2 -- Form of Notice of Guaranteed Delivery. * 99.3 -- Broker Letter. * 99.4 -- Client Letter.
- --------------- * To be filed by Amendment. ITEM 22. UNDERTAKINGS. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrants pursuant to the provisions described under Item 20 or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of a registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned Registrants hereby undertake: (1) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (2) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (A) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933. (B) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. II-7 (C) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (3) That, for the purpose of determining liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (4) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the exchange offer. (5) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form S-4, within one business day of the receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Newport Beach, State of California, on December 27, 2001. INSIGHT HEALTH SERVICES CORP. By: /s/ STEVEN T. PLOCHOCKI ------------------------------------ Name: Steven T. Plochocki Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on December 27, 2001.
SIGNATURE --------- /s/ STEVEN T. PLOCHOCKI President and Chief Executive Officer - ----------------------------------------------------- (principal executive officer) Steven T. Plochocki /s/ THOMAS V. CROAL Executive Vice President and Chief Financial - ----------------------------------------------------- Officer (principal financial and accounting Thomas V. Croal officer) /s/ STEVEN G. SEGAL Director - ----------------------------------------------------- Steven G. Segal /s/ EDWARD D. YUN Director - ----------------------------------------------------- Edward D. Yun /s/ MICHAEL N. CANNIZZARO Director - ----------------------------------------------------- Michael N. Cannizzaro /s/ MARK J. TRICOLLI Director - ----------------------------------------------------- Mark J. Tricolli /s/ DAVID W. DUPREE Director - ----------------------------------------------------- David W. Dupree /s/ KENNETH M. DOYLE Director - ----------------------------------------------------- Kenneth M. Doyle
II-9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Boston, State of Massachusetts, on December 27, 2001. INSIGHT HEALTH SERVICES HOLDINGS CORP. By: /s/ EDWARD D. YUN ------------------------------------ Name: Edward D. Yun Title: President Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on December 27, 2001.
SIGNATURE --------- /s/ EDWARD D. YUN President and Director(principal executive - ----------------------------------------------------- officer) Edward D. Yun /s/ ALAN DOWDS Vice President, Treasurer and Assistant - ----------------------------------------------------- Secretary (principal financial and accounting Alan Dowds officer) /s/ MARK J. TRICOLLI Director - ----------------------------------------------------- Mark J. Tricolli /s/ STEVEN G. SEGAL Director - ----------------------------------------------------- Steven G. Segal /s/ MICHAEL N. CANNIZZARO Director - ----------------------------------------------------- Michael N. Cannizzaro /s/ STEVEN T. PLOCHOCKI Director - ----------------------------------------------------- Steven T. Plochocki /s/ DAVID W. DUPREE Director - ----------------------------------------------------- David W. Dupree /s/ KENNETH M. DOYLE Director - ----------------------------------------------------- Kenneth M. Doyle
II-10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Newport Beach, State of California, on December 27, 2001. INSIGHT HEALTH CORP. By: /s/ STEVEN T. PLOCHOCKI ------------------------------------ Name: Steven T. Plochocki Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on December 27, 2001.
SIGNATURE --------- /s/ STEVEN T. PLOCHOCKI - ----------------------------------------------------- President and Chief Executive Officer and Steven T. Plochocki sole Director (principal executive officer) /s/ THOMAS V. CROAL Executive Vice President and Chief Financial - ----------------------------------------------------- Officer (principal financial and accounting Thomas V. Croal officer)
II-11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Newport Beach, State of California, on December 27, 2001. SIGNAL MEDICAL SERVICES, INC. By: /s/ STEVEN T. PLOCHOCKI ------------------------------------ Name: Steven T. Plochocki Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on December 27, 2001.
SIGNATURE --------- /s/ STEVEN T. PLOCHOCKI - ----------------------------------------------------- President and Chief Executive Officer and Steven T. Plochocki sole Director (principal executive officer) /s/ THOMAS V. CROAL Executive Vice President and Chief Financial - ----------------------------------------------------- Officer (principal financial and accounting Thomas V. Croal officer)
II-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Newport Beach, State of California, on December 27, 2001. OPEN MRI, INC. By: /s/ STEVEN T. PLOCHOCKI ------------------------------------ Name: Steven T. Plochocki Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on December 27, 2001.
SIGNATURE --------- /s/ STEVEN T. PLOCHOCKI - ----------------------------------------------------- President and Chief Executive Officer and Steven T. Plochocki sole Director (principal executive officer) /s/ THOMAS V. CROAL Executive Vice President and Chief Financial - ----------------------------------------------------- Officer (principal financial and accounting Thomas V. Croal officer)
II-13 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Newport Beach, State of California, on December 27, 2001. MAXUM HEALTH CORP. By: /s/ STEVEN T. PLOCHOCKI ------------------------------------ Name: Steven T. Plochocki Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on December 27, 2001.
SIGNATURE --------- /s/ STEVEN T. PLOCHOCKI - ----------------------------------------------------- President and Chief Executive Officer and Steven T. Plochocki sole Director (principal executive officer) /s/ THOMAS V. CROAL Executive Vice President and Chief Financial - ----------------------------------------------------- Officer (principal financial and accounting Thomas V. Croal officer)
II-14 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Newport Beach, State of California, on December 27, 2001. RADIOSURGERY CENTERS, INC. By: /s/ STEVEN T. PLOCHOCKI ------------------------------------ Name: Steven T. Plochocki Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on December 27, 2001.
SIGNATURE --------- /s/ STEVEN T. PLOCHOCKI President and Chief Executive Officer and - ----------------------------------------------------- Sole Director (principal executive officer) Steven T. Plochocki /s/ THOMAS V. CROAL Executive Vice President and Chief Financial - ----------------------------------------------------- Officer (principal financial and accounting Thomas V. Croal officer)
II-15 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Newport Beach, State of California, on December 27, 2001. MAXUM HEALTH SERVICES CORP. By: /s/ STEVEN T. PLOCHOCKI ------------------------------------ Name: Steven T. Plochocki Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on December 27, 2001.
SIGNATURE --------- /s/ STEVEN T. PLOCHOCKI President and Chief Executive Officer and - ----------------------------------------------------- sole Director (principal executive officer) Steven T. Plochocki /s/ THOMAS V. CROAL Executive Vice President and Chief Financial - ----------------------------------------------------- Officer (principal financial and accounting Thomas V. Croal officer)
II-16 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Newport Beach, State of California, on December 27, 2001. MRI ASSOCIATES, L.P. By: InSight Health Corp., its general partner By: /s/ STEVEN T. PLOCHOCKI ------------------------------------ Name: Steven T. Plochocki Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on December 27, 2001.
SIGNATURE --------- /s/ STEVEN T. PLOCHOCKI President and Chief Executive Officer and - --------------------------------------------- sole Director of InSight Health Corp., its Steven T. Plochocki general partner (principal executive officer) /s/ THOMAS V. CROAL Executive Vice President and Chief Financial - --------------------------------------------- Officer (principal financial and accounting Thomas V. Croal officer)
II-17 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Newport Beach, State of California, on December 27, 2001. MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. By: /s/ STEVEN T. PLOCHOCKI ------------------------------------ Name: Steven T. Plochocki Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on December 27, 2001.
SIGNATURE --------- /s/ STEVEN T. PLOCHOCKI President and Chief Executive Officer and - ----------------------------------------------------- sole Director (principal executive officer) Steven T. Plochocki /s/ THOMAS V. CROAL Executive Vice President and Chief Financial - ----------------------------------------------------- Officer (principal financial and accounting Thomas V. Croal officer)
II-18 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Newport Beach, State of California, on December 27, 2001. MAXUM HEALTH SERVICES OF DALLAS, INC. By: /s/ STEVEN T. PLOCHOCKI -------------------------------------- Name: Steven T. Plochocki Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on December 27, 2001.
SIGNATURE --------- /s/ STEVEN T. PLOCHOCKI President and Chief Executive Officer and - ----------------------------------------------------- sole Director (principal executive officer) Steven T. Plochocki /s/ THOMAS V. CROAL Executive Vice President and Chief Financial - ----------------------------------------------------- Officer (principal financial and accounting Thomas V. Croal officer)
II-19 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Newport Beach, State of California, on December 27, 2001. NDDC, INC. By: /s/ STEVEN T. PLOCHOCKI ------------------------------------ Name: Steven T. Plochocki Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on December 27, 2001.
SIGNATURE --------- /s/ STEVEN T. PLOCHOCKI President and Chief Executive Officer and - ----------------------------------------------------- sole Director (principal executive officer) Steven T. Plochocki /s/ STEVEN T. PLOCHOCKI Executive Vice President and Chief Financial - ----------------------------------------------------- Officer (principal financial and accounting Steven T. Plochocki officer)
II-20 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Newport Beach, State of California, on December 27, 2001. DIAGNOSTIC SOLUTIONS CORP. By: /s/ STEVEN T. PLOCHOCKI ------------------------------------ Name: Steven T. Plochocki Title: President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on December 27, 2001.
SIGNATURE - --------- /s/ STEVEN T. PLOCHOCKI President and Chief Executive Officer and - ----------------------------------------------------- sole Director (principal executive officer) Steven T. Plochocki /s/ THOMAS V. CROAL Executive Vice President and Chief Financial - ----------------------------------------------------- Officer (principal financial and accounting Thomas V. Croal officer)
II-21 EXHIBIT INDEX 2.3 -- Amendment No. 2 to Agreement and Plan of Merger, dated as of October 9, 2001, by and among InSight Health Services Holdings Corp., InSight Health Services Acquisition Corp. and InSight Health Corp., previously filed and incorporated herein by reference from InSight's Current Report on Form 8-K, filed October 9, 2001. 2.4 -- Amended and Restated Stockholders Agreement, dated as of October 17, 2001, among InSight Health Services Holdings Corp., the JWC Holders (as defined therein), the Halifax Holders (as defined therein), the Management Holders (as defined therein) and the Additional Holders (as defined therein), as amended, filed herewith. 2.5 -- Management Agreement, dated as of October 17, 2001, by and among J.W. Childs Advisors II, L.P., Halifax Genpar, L.P., InSight Health Services Holdings Corp. and InSight Health Services Corp., filed herewith. 3.1 -- Certificate of Incorporation of InSight, as amended, filed herewith. 3.2 -- Bylaws of InSight, as amended, filed herewith. 3.3 -- Certificate of Incorporation of InSight Health Services Holdings Corp., as amended, filed herewith. 3.4 -- Bylaws of InSight Health Services Holdings Corp., filed herewith. 3.5 -- Certificate of Incorporation of InSight Health Corp., as amended, filed herewith. 3.6 -- Bylaws of InSight Health Corp., as amended, filed herewith. 3.7 -- Certificate of Incorporation of Signal Medical Services, Inc., as amended, filed herewith. 3.8 -- Bylaws of Signal Medical Services, Inc., as amended, filed herewith. 3.9 -- Certificate of Incorporation of Open MRI, Inc., as amended, filed herewith. 3.10 -- Bylaws of Open MRI, Inc., filed herewith. 3.11 -- Certificate of Incorporation of Maxum Health Corp., as amended, filed herewith. 3.12 -- Bylaws of Maxum Health Corp., as amended, filed herewith. 3.13 -- Certificate of Incorporation of Radiosurgery Centers, Inc., filed herewith. 3.14 -- Bylaws of Radiosurgery Centers, Inc., filed herewith. 3.15 -- Certificate of Incorporation of Maxum Health Services Corp., as amended, filed herewith. 3.16 -- Bylaws of Maxum Health Services Corp., filed herewith. 3.17 -- Certificate of Limited Partnership of MRI Associates, L.P., filed herewith. 3.18 -- Agreement of Limited Partnership of MRI Associates, L.P., filed herewith. 3.19 -- Certificate of Incorporation of Maxum Health Services of North Texas, Inc., filed herewith. 3.20 -- Bylaws of Maxum Health Services of North Texas, Inc., filed herewith. 3.21 -- Certificate of Incorporation of Maxum Health Services of Dallas, Inc., filed herewith. 3.22 -- Bylaws of Maxum Health Services of Dallas, Inc., filed herewith. 3.23 -- Certificate of Incorporation of NDDC, Inc., filed herewith. 3.24 -- Bylaws of NDDC, Inc., filed herewith. 3.25 -- Certificate of Incorporation of Diagnostic Solutions Corp., as amended, filed herewith. 3.26 -- Bylaws of Diagnostic Solutions Corp., filed herewith. 4.1 -- Indenture with respect to 9 7/8% Senior Subordinated Notes due 2011 with State Street Bank and Trust Company, N.A., as Trustee, dated October 30, 2001, filed herewith. 4.2 -- Purchase Agreement, dated October 25, 2001 by and among InSight, Banc of America Securities LLC and First Union Securities, LLC with respect to the 9 7/8% Senior Subordinated Notes due 2011, filed herewith. 4.3 -- Registration Rights Agreement, dated October 30, 2001, by and among InSight, Banc of America Securities LLC and First Union Securities, LLC with respect to the 9 7/8% Senior Subordinated Notes due 2011, filed herewith. * 5.1 -- Opinion of Kaye Scholer LLP. * 5.2 -- Opinion of Hunton & Williams. * 8.1 -- Tax Opinion of Kaye Scholer LLP.
10.4 -- Credit Agreement, dated October 17, 2001, by and among InSight, Banc of America Securities LLC and First Union Securities, LLC, filed herewith. 10.5 -- Note Purchase Agreement, dated as of October 17, 2001, by and among InSight Health Services Acquisition Corp., InSight Health Services Corp., InSight Health Services Holdings Corp., the Subsidiary Guarantors (as defined therein), Banc of America Bridge LLC, and Banc of America Securities LLC, filed herewith. 10.6 -- InSight Health Services Holdings Corp. 2001 Stock Option Plan, filed herewith. 10.7 -- InSight Health Services Holdings Corp. 2001 Stock Option Plan Stock Option Agreement, dated June 29, 2001, by and between InSight Health Services Holdings Corp. and Steven T. Plochocki, filed herewith. 10.8 -- InSight Health Services Holdings Corp. 2001 Stock Option Plan Stock Option Agreement, dated June 29, 2001, by and between InSight Health Services Holdings Corp. and Michael A. Boylan, filed herewith. 10.9 -- InSight Health Services Holdings Corp. 2001 Stock Option Plan Stock Option Agreement, dated June 29, 2001, by and between InSight Health Services Holdings Corp. and Thomas V. Croal, filed herewith. 10.10 -- InSight Health Services Holdings Corp. 2001 Stock Option Plan Stock Option Agreement, dated June 29, 2001, by and between InSight Health Services Holdings Corp. and Michael S. Madler, filed herewith. 10.11 -- Executive Employment Agreement, dated June 29, 2001, between InSight Health Services Corp. and Steven T. Plochocki, filed herewith. 10.12 -- Executive Employment Agreement, dated June 29, 2001, between InSight Health Services Corp. and Patricia R. Blank, filed herewith. 10.13 -- Executive Employment Agreement, dated June 29, 2001, between InSight Health Services Corp. and Michael A. Boylan, filed herewith. 10.14 -- Executive Employment Agreement, dated June 29, 2001, between InSight Health Services Corp. and Thomas V. Croal, filed herewith. 10.15 -- Executive Employment Agreement, dated June 29, 2001, between InSight Health Services Corp. and Brian G. Drazba, filed herewith. 10.16 -- Executive Employment Agreement, dated June 29, 2001, between InSight Health Services Corp. and Michael S. Madler, filed herewith. 10.17 -- Executive Employment Agreement, dated December 7, 2001, between InSight Health Services Corp. and Marilyn U. MacNiven-Young, filed herewith. 10.18 -- Form of InSight Health Services Holdings Corp. Performance Based Option Agreement, filed herewith. 12.1 -- Computation of ratio of earnings to fixed charges. * 15 -- Letter regarding unaudited interim financial information. 21 -- Subsidiaries of InSight. 23.1 -- Consent of Independent Public Accountants, filed herewith. * 23.2 -- Consent of Kaye Scholer LLP, included in Exhibit 5.1 hereto. * 23.3 -- Consent of Hunton & Williams, included in Exhibit 5.2 hereto. * 25.1 -- Form T-1 Statement regarding eligibility of State Street Bank and Trust Company, N.A., as Trustee. * 99.1 -- Form of Letter of Transmittal. * 99.2 -- Form of Notice of Guaranteed Delivery. * 99.3 -- Broker Letter. * 99.4 -- Client Letter.
- --------------- * To be filed by Amendment. EX-2.4 3 y55701ex2-4.txt AMENDED AND RESTATED STOCKHOLDERS AGREEMENT Exhibit 2.4 AMENDED AND RESTATED STOCKHOLDERS AGREEMENT THIS AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "AGREEMENT") is entered into as of October 17, 2001 by and among InSight Health Services Holdings Corp., a Delaware corporation (the "COMPANY"), the JWC Holders (as defined below), the Halifax Holders (as defined below), the Management Holders (as defined below) and the Additional Holders (as defined below). RECITALS A. Upon consummation of the transactions contemplated by the Agreement and Plan of Merger, dated as of June 29, 2001 (the "MERGER AGREEMENT"), and of certain related transactions to be consummated concurrently therewith, the Stockholders (as defined below) will own (and may hereafter acquire) certain shares of Common Stock (as defined below) and certain options, warrants, securities and other rights to acquire from the Company, by exercise, conversion, exchange or otherwise, shares of Common Stock or securities convertible into Common Stock. B. All of the Stockholders entered into that certain Stockholders Agreement dated as of June 29, 2001 (the "Existing Agreement") for the purpose of regulating certain aspects of the Stockholders' relationships with one another and with the Company. C. All of the Stockholders now desire to amend and restate the Existing Agreement in the manner set forth below. AGREEMENT In consideration of the premises and the mutual promises, representations, warranties, covenants and conditions set forth in this Agreement, the receipt and sufficiency of which are acknowledged by all parties to this Agreement, the parties to this Agreement mutually agree as follows: ARTICLE I Definitions For the purposes of this Agreement, the following terms shall be defined as follows: "ACTIVE TRADING MARKET" shall mean the New York or American Stock Exchange or the National Association of Securities Dealers, Inc.'s National Market System or Small Capitalization System. "ADDITIONAL HOLDERS" shall mean those Persons listed as Additional Holders on the signature pages hereof and all Persons that became Stockholders as of the date hereof and are designated as Additional Holders pursuant to Section 2.13 hereof. An "AFFILIATE" of a specified Person shall mean a Person who, directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with the specified Person and, when used with respect to the Company or any Subsidiary of the Company, shall include any holder of capital stock holding greater than 5% of the total number of outstanding shares of Common Stock of the Company on a fully-diluted basis or any officer or director of the Company or any Subsidiary of the Company. "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company. "BUSINESS DAY" shall mean any day, other than a Saturday, Sunday or legal holiday, on which banks in New York, New York and Boston, Massachusetts are permitted to be open for business. "CALL EVENT" shall have the meaning set forth in Section 2.5(a). "CALL GROUP" shall have the meaning set forth in Section 2.5(a). "CALL OPTION" shall have the meaning set forth in Section 2.5(a). "CALL PRICE" shall mean, as of any date, with respect to any Subject Securities, a per share price equal to (a) the quotient of (i) the excess of (A) the product of 5.25 times EBITDA, over (B) the aggregate amount of the Consolidated Indebtedness as of the end of the period for which EBITDA is calculated, plus (C) the amount of cash and cash equivalents of the Company and its Subsidiaries as of the end of the period for which EBITDA is calculated which is not required to fund the day-to-day operations of the Company and its Subsidiaries as reasonably determined by the Board of Directors in good faith, divided by (ii) the aggregate number of Common Stock Equivalents at the time of the relevant Call Event or Put Event, as applicable, outstanding, minus, (b) in the case of Vested Options, the per share exercise price payable in connection with such Vested Options. "CALL SECURITIES" shall have the meaning set forth in Section 2.5(a). "CAUSE," with respect to a Management Holder, shall have the meaning attributed to it under the executed written employment agreement between such Management Holder 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 such Management Holder's employment with the Company (or a Subsidiary thereof): (a) such Management Holder has performed his duties negligently; (b) such Management Holder is guilty of misconduct in connection with the performance of such Management Holder's duties; 2 (c) such Management Holder has committed any serious crime or offense; (d) such Management Holder has failed or refused to comply with the oral or written policies or directives of the Board of Directors; or (e) such Management Holder has breached any provision or covenant contained in this Agreement. "COMMON STOCK" shall mean shares of Common Stock, par value $0.001 per share, of the Company. "COMMON STOCK EQUIVALENTS" shall mean, as of any date, (a) all shares of Common Stock outstanding as of such date and (b) all Vested Options, convertible securities, warrants and other securities convertible, exchangeable into or redeemable for Common Stock, which securities are vested and/or exercisable within 60 days of the date of measurement. Solely for the purposes of Section 2.4, Common Stock Equivalents shall mean all shares of Common Stock and all options, convertible securities, warrants and other securities convertible, exchangeable into or redeemable for Common Stock, whether or not vested and/or exercisable. "COMPANY CALL PERIOD" shall have the meaning set forth in Section 2.5(a)(i). "COMPANY EXCLUSIVE FIRST REFUSAL PERIOD" shall have the meaning set forth in Section 2.2(a). "COMPETITOR" shall mean any existing or new firm that competes with the Company in any activity in which the Company is currently engaged, or has plans to be engaged in the future as disclosed or discussed at the meetings of the Board of Directors. "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 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. 3 "COST PRICE" shall mean, with respect to any Subject Securities, the purchase price, if any, per share of Common Stock or per Vested Option, as the case may be, paid to the Company for such Subject Securities by the original holder thereof or, if no shares were so purchased at the Closing (as defined in the Merger Agreement), then the price per share paid by the JWC Holders; provided that the Cost Price with respect to options granted to the Management Holders under the Company's 2001 Stock Option Plan shall equal $18 per share. If at any time the number of shares of Common Stock outstanding is (a) increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock or (b) decreased by a combination of shares of such Common Stock, the Cost Price per share of Common Stock shall be adjusted upward or downward, as appropriate, to reflect the decrease or increase in shares of Common Stock outstanding. "DESIGNATED EMPLOYEE" shall have the meaning set forth in Section 2.5(c). "DISABLED," with respect to a Management Holder, shall have the meaning attributed to it under the executed written employment agreement between such Management Holder and the Company (or a Subsidiary thereof) or, in the absence of such employment agreement, such Management Holder shall be deemed to have become "DISABLED" if, during the term of such Management Holder's employment with the Company (or a Subsidiary thereof), such Management Holder shall become physically or mentally disabled, whether totally or partially, either permanently or so that such Management Holder, in the good faith judgment of the Board of Directors, is unable substantially and competently to perform his duties on behalf of the Company 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 of Directors in making that determination, such Management Holder shall, as reasonably requested by the Board of Directors, (i) make himself available for medical examinations by one or more physicians chosen by the Board and (ii) grant to the Board of Directors and any such physicians access to all relevant medical information concerning him, arrange to furnish copies of his medical records to the Board of Directors and use his best efforts to cause his own physicians to be available to discuss his health with the Board of Directors. "DRAGALONG GROUP" shall have the meaning set forth in Section 2.4. "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 fee paid to JWC Inc., Halifax Capital Partners or any of their respective Affiliates and after deduction of all operating expenses, minority interests expenses and incentive compensation, all as calculated in accordance with GAAP consistently applied, as reflected in the Company's most recently available audited consolidated financial statements for the immediately preceding fiscal year. "EXCLUDED SECURITIES" shall have the meaning set forth in Section 4.1(e). "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute thereto, and the rules and regulations of the SEC promulgated thereunder, all as the same shall be in effect from time to time. 4 "GAAP" shall mean the generally accepted accounting principles in the United States of America, as such principles are changed from time to time, consistent with those applied in the preparation of the financial statements of such Person. "GOOD REASON," with respect to a Management Holder, shall have the meaning attributed to it under the executed written employment agreement between such Management Holder 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 such Management Holder's employment with the Company (or a Subsidiary thereof): (a) such Management Holder's base salary has been reduced, other than in connection with a reduction of executive compensation imposed by the Board of Directors 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 such Management Holder as an employee of the Company and such event has not been rescinded within 10 business days after such Management Holder notifies the Company in writing that he objects thereto. "HALIFAX AFFIRMATIVE BOARD VOTE" shall have the meaning set forth in Section 4.2. "HALIFAX CAPITAL PARTNERS" shall mean Halifax Capital Partners, L.P., a Delaware limited partnership. "HALIFAX DIRECTOR" shall have the meaning set forth in Section 4.1(c). "HALIFAX HOLDER" shall mean each of those Persons listed as Halifax Holders on the signature pages hereof and, after the date hereof, shall mean all such Persons and Permitted Transferees of the Halifax Holders, other than those transferees who qualify as JWC Holders or Management Holders immediately prior to or upon such Transfer. "HALIFAX REPRESENTATIVE" shall have the meaning set forth in Section 6.9. "HOLDER" shall have the meaning set forth in Section 3.1. "INITIATING STOCKHOLDER" shall have the meaning set forth in Section 2.3(a). "INVOLUNTARY TRANSFER" shall have the meaning set forth in Section 2.9. "INVOLUNTARY TRANSFER NOTICE" shall have the meaning set forth in Section 2.9. "INVOLUNTARY TRANSFEREE" shall have the meaning set forth in Section 2.8. 5 "JOINDER AGREEMENT" shall mean a joinder agreement substantially in the form of Exhibit B attached hereto which is entered into pursuant to Section 2.13 hereof. "JWC EQUITY PARTNERS II" shall mean J.W. Childs Equity Partners II, L.P., a Delaware limited partnership. "JWC HOLDERS" shall mean each of those Persons listed as JWC Holders on the signature pages hereof and, after the date hereof, shall mean all such Persons and Permitted Transferees of the JWC Holders, other than those transferees who qualify as Halifax Holders or Management Holders immediately prior to or upon such Transfer. "JWC INC." shall mean J.W. Childs Associates, Inc., a Delaware corporation. "JWC REPRESENTATIVE" shall have the meaning set forth in Section 6.8. "LIEN" shall mean any lien, mortgage, pledge, security interest (as defined in the New York Uniform Commercial Code), claim or other type of charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property and any financing statement filed in respect of any of the foregoing. "MANAGEMENT HOLDERS" shall mean any Person listed as a Management Holder on the signature pages hereof and shall also include (a) any director, officer or employee of the Company or any of its Subsidiaries who hereafter becomes a Stockholder and (b) Permitted Transferees of the Management Holders, unless immediately prior to such Transfer such transferee was a JWC Holder or a Halifax Holder. "MATERIAL TRANSACTION" means any material transaction in which the Company or any of its Subsidiaries proposes to engage or is engaged, including a purchase or sale of assets or securities, financing, merger, consolidation, tender offer or any other transaction that would require disclosure pursuant to the Exchange Act, and with respect to which the Board of Directors reasonably has determined in good faith that compliance with this Agreement may reasonably be expected to either materially interfere with the Company's or such Subsidiary's ability to consummate such transaction in a timely fashion or require the Company to disclose material, non-public information prior to such time as it would otherwise be required to be disclosed. "MERGER AGREEMENT" shall have the meaning set forth in Recital A. "OFFER PERIOD" shall have the meaning set forth in Section 2.2(a). "OFFERED SECURITIES" shall have the meaning set forth in Section 5.1(a). "OFFEREE PERCENTAGE" shall mean, as to each offeree, the fraction, expressed as a percentage, the numerator of which is the total number of shares of Common Stock Equivalents held by such 6 offeree, and the denominator of which is the total number of shares of Common Stock Equivalents held by all of the offerees. "OFFEROR" shall have the meaning set forth in Section 2.2(a). "ORIGINAL HALIFAX HOLDERS" shall mean the Halifax Holders as of the date of this Agreement. "ORIGINAL JWC HOLDERS" shall mean the JWC Holders as of the date of this Agreement. "ORIGINAL MANAGEMENT HOLDERS" shall mean the Management Holders as of the date of this Agreement. "PARTICIPATING OFFEREES" shall have the meaning set forth in Section 2.4(a). "PARTICIPATION NOTICE" shall have the meaning set forth in Section 2.4(a). "PARTICIPATION SECURITIES" shall have the meaning set forth in Section 2.4(a). "PERMITTED TRANSFER" shall mean a Transfer that is not a Prohibited Transfer and is one of the following: (a) a Transfer of any Subject Securities between any JWC Holder, Halifax Holder or Management Holder and such Stockholder's spouse, children (whether natural, step or by adoption), grandchildren (whether natural, step or by adoption) or parents or to a trust, partnership or limited liability company solely for the benefit of one or more of any of such Persons; (b) a Transfer of Subject Securities by a JWC Holder to JWC Inc. or JWC Equity Partners II or to the limited partners, co-investors, officers, employees or consultants of JWC Inc. or JWC Equity Partners II or to a corporation or corporations or to a partnership or partnerships, limited liability company or companies (or other entity for collective investment, such as a fund) which is (and continues to be) an Affiliate of or controlled by, controlling or under common control with JWC Inc. or JWC Equity Partners II (other than the Company and its Subsidiaries); (c) a Transfer of Subject Securities by a Halifax Holder to Halifax Capital Partners or to the limited partners, co-investors, officers, employees or consultants of Halifax Capital Partners or to a corporation or corporations or to a partnership or partnerships, limited liability company or companies (or other entity for collective investment, such as a fund) which is (and continues to be) an Affiliate of or controlled by, controlling or under common control with Halifax Capital Partners; (d) a Transfer of Subject Securities between or among the JWC Holders or the Halifax Holders; 7 (e) a Transfer of Subject Securities between any Stockholder who is a natural person and such Stockholder's guardian or conservator; (f) a bona fide pledge of Subject Securities by a JWC Holder or a Halifax Holder to a bank or financial institution; and (g) a Transfer of Subject Securities by a JWC Holder or a Halifax Holder to a Management Holder who is not an Affiliate (other than as an officer, employee, director or stockholder of the Company and its direct or indirect Subsidiaries) of JWC Inc. or Halifax Capital Partners. No Permitted Transfer shall be effective unless and until the transferee of the Subject Securities so transferred executes and delivers to the Company an executed Joinder Agreement in accordance with Section 2.13 hereof; provided, however, that the Permitted Transfer to a bank or a financial institution pursuant to clause (e) above shall be effective upon delivery of the Subject Securities and such entity shall not execute and deliver an executed Joinder Agreement in accordance with Section 2.13 hereof unless and until foreclosure or similar action by any such pledgee. "PERMITTED TRANSFEREE" shall mean, with respect to any Stockholder, any Person who shall have directly or indirectly acquired and who shall hold any Subject Securities pursuant to a Permitted Transfer from that Stockholder. Notwithstanding the foregoing, a Permitted Transferee shall not include any Person that is in receivership, bankruptcy, insolvency, dissolution, liquidation or any similar proceeding or any Person whose incompetence has been established pursuant to a judicial determination. "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. "PREEMPTIVE OFFER" shall have the meaning set forth in Section 5.1(a). "PREEMPTIVE OFFER ACCEPTANCE NOTICE" shall have the meaning set forth in Section 5.1(b). "PREEMPTIVE OFFER PERIOD" shall have the meaning set forth in Section 5.1(a). "PRIMARY SHARES" shall mean at any time the authorized but unissued shares of Common Stock or shares of Common Stock held by the Company in its treasury. "PROHIBITED TRANSFER" shall mean any Transfer of any Subject Security to a Person which (a) may not be effected without registering the securities involved under the Securities Act of 1933, as amended, (b) would result in the assets of the Company constituting "Plan Assets" as such term is defined in the Department of Labor regulations promulgated under the Employee Retirement Income Security Act of 1974, as amended, (c) would cause the Company to be, be controlled by, or be under common control with an "investment company" for purposes of the Investment Company Act of 1940, as amended, (d) would require any securities of the Company to be registered under the 8 Exchange Act, (e) is a Competitor of the Company (other than Transfers in accordance with Section 2.4) or (f) is in violation of this Agreement. A "PUBLIC OFFERING" shall mean the completion of a sale of shares of Common Stock pursuant to a registration statement which has become effective under the Securities Act, excluding a registration form relating solely to employee benefit plans, or on a registration form which does not permit secondary sales or does not include substantially the same information as would be required in a Form S-1 or Form S-3 Registration Statement (or any successor forms) covering the sale of Registrable Securities. "PUT NOTICE" shall have the meaning set forth in Section 2.6(a). "PUT OPTION" shall have the meaning set forth in Section 2.6(a). "PUT PERIOD" shall have the meaning set forth in Section 2.6(a). "PUT PRICE" shall mean, as of any date, with respect to any Subject Securities, a per share price equal to (a) the quotient of (i) the excess of (A) the product of 4.75 times EBITDA, over (B) the aggregate amount of the Consolidated Indebtedness as of the end of the period for which EBITDA is calculated, plus (C) the amount of cash and cash equivalents of the Company and its Subsidiaries as of the end of the period for which EBITDA is calculated which is not required to fund the day-to-day operations of the Company and its Subsidiaries as reasonably determined by the Board of Directors in good faith, divided by (ii) the aggregate number of Common Stock Equivalents at the time of the relevant Call Event or Put Event, as applicable, outstanding, minus, (b) in the case of Vested Options, the per share exercise price payable in connection with such Vested Options. "PUT SECURITIES" shall have the meaning set forth in Section 2.6(a). "REFUSED SECURITIES" shall have the meaning set forth in Section 5.1(c). "REGISTRABLE SECURITIES" shall mean, as of any date, with respect to any Stockholder, (a) all shares of Common Stock held by such Stockholder as of such date and (b) all shares of Common Stock that may be acquired as of such date by such Stockholder upon exercise of Vested Options; provided that, as to any particular Registrable Security, such security shall cease to be a Registrable Security when (i) a registration statement (other than a registration statement on Form S-8) with respect to the sale or exchange of such security shall have become effective under the Securities Act and such security shall have been disposed of in accordance with such registration statement, (ii) a registration statement on Form S-8 with respect to such security shall have become effective under the Securities Act, (iii) such security shall have been sold or acquired in a Rule 144 Transaction, or (iv) such security (once issued) has ceased to be outstanding. "RULE 144 TRANSACTION" means a transfer of Common Stock complying with Rule 144 under the Securities Act as such rule or a successor thereto is in effect on the date of such transfer. "SALE REQUEST" shall have the meaning set forth in Section 2.4. 9 "SCHEDULE OF STOCKHOLDERS" shall refer to the Schedule of Stockholders attached hereto as EXHIBIT A. "SEC" shall mean the Securities and Exchange Commission or successor agency or commission of the United States federal government. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any successor federal statute thereto, and the rules and regulations of the SEC promulgated thereunder, all as the same shall be in effect from time to time. "STOCKHOLDER" shall mean any party hereto other than the Company, including any Person who hereafter becomes a party to this Agreement pursuant to Section 2.13 hereof. "STOCKHOLDER GROUP" shall mean any of (a) the JWC Holders, taken as a group, (b) the Halifax Holders, taken as a group, (c) the Management Holders, taken as a group, and/or (d) the Additional Holders, taken as a group. The Company shall not in any case be deemed to be a member of any Stockholder Group (whether or not the Company holds or repurchases any Common Stock Equivalents). "STOCK OPTION AGREEMENT" shall mean any stock option agreement between the Company and an employee thereof. "SUBJECT SECURITIES" shall mean any Common Stock or Common Stock Equivalents now or hereafter held by any Stockholder. "SUBSIDIARY" with respect to any Person (the "PARENT") shall mean any Person of which such parent, at the time in respect of which such term is used, (a) owns directly or indirectly more than 50% of the equity or beneficial interest, on a consolidated basis, or (b) owns directly or controls with power to vote, indirectly through one or more Subsidiaries, shares of capital stock or beneficial interest having the power to cast at least a majority of the votes entitled to be cast for the election of directors, trustees, managers or other officials having powers analogous to those of directors of a corporation. Unless otherwise specifically indicated, when used herein, the term Subsidiary shall refer to a direct or indirect Subsidiary of the Company. "THIRD PARTY" shall mean any Person other than the Company. "TRANSFER" shall mean to transfer, sell, assign, pledge, hypothecate, give, grant or create a security interest in or Lien on, place in trust (voting or otherwise), assign an interest in or in any other way encumber or dispose of, directly or indirectly and whether or not by operation of law or for value, any of the Subject Securities. "TRANSFER NOTICE" shall have the meaning set forth in Section 2.2(a). "TRANSFER OFFER" shall have the meaning set forth in Section 2.2(a). 10 "TRANSFER STOCK" shall have the meaning set forth in Section 2.2(a). "TRANSFERRED SECURITIES" shall have the meaning set forth in Section 2.8. "UNMATURED SHARES" shall have the meaning set forth in Section 2.5(f). "VESTED OPTIONS" shall mean, as of any date, options, securities and other rights to acquire from the Company, by exercise, conversion, exchange or otherwise, shares of Common Stock or securities convertible into Common Stock, which are vested and exercisable within 60 days of such date of measurement. "VOTING STOCK" shall mean the Common Stock, Common Stock Equivalents and any other securities of the Company entitled to vote at a meeting of the Stockholders, including, but not limited to, with respect to the election of the Board of Directors. ARTICLE II Rights With Respect To The Subject Securities 2.1 Limited Rights of Transfer. (a) Transfers. Except for the JWC Holders, no Stockholder shall Transfer all or any part of the Subject Securities at the time held by such Stockholder. Subject to Section 2.1(b), no Transfer of or attempt to Transfer any Subject Securities in violation of the preceding sentence shall be effective or valid for any purpose. No Transfer of any Subject Securities shall be effective or valid under this Section 2.1(a) if such Transfer constitutes a Prohibited Transfer, or unless and until the transferee executes and delivers to the Company a Joinder Agreement in accordance with Section 2.13 hereof. (b) Exceptions. Notwithstanding Section 2.1(a), a Transfer may be effectively and validly made hereunder if such Transfer is not a Prohibited Transfer and is either (i) a Permitted Transfer, (ii) made pursuant to the registration rights granted under Article III hereof, (iii) made pursuant to and/or following a Public Offering, (iv) made pursuant to Sections 2.2, 2.3 (as a Participating Offeree), 2.4 or 2.5 or (v) made with the written consent of the holders of a majority of the Common Stock Equivalents at the time held by the JWC Holders (or the JWC Representative) and the holders of a majority of the Common Stock Equivalents at the time held by the Halifax Holders (or the Halifax Representative). No Transfer of any Subject Securities shall be effective or valid under this Section 2.1(b) if such Transfer constitutes a Prohibited Transfer. In addition, no Transfer shall be effective or valid under this Section 2.l(b) unless and until the transferee executes and delivers to the Company a Joinder Agreement in accordance with Section 2.13 hereof. 2.2 Right of First Refusal. (a) Notice of Offer. If (i) at any time any Halifax Holder, Management Holder, Additional Holder or any of their Permitted Transferees (the "OFFERING HOLDER") receives a bona 11 fide offer to purchase any or all of such Offering Holder's Subject Securities (the "TRANSFER STOCK") from any Third Party (other than to a Permitted Transferee) (the "OFFEROR") and (ii) such Offering Holder wishes to accept such offer (a "TRANSFER OFFER"), then the Offering Holder shall cause the Transfer Offer to be reduced to writing and shall provide a notice containing the offer to purchase specified below (the "TRANSFER NOTICE") to the Company and all other Stockholders. The Transfer Notice shall be accompanied by a true and correct copy of the Transfer Offer (which shall identify in reasonable detail all material terms, including, but not limited to, the Offeror, the Transfer Stock, the price contained in the Transfer Offer and all the other terms and conditions of the Transfer Offer). The Transfer Notice shall constitute an irrevocable offer to sell any or all of the Transfer Stock to the Company and to all other Stockholders within 30 days of receipt by the Company of the Transfer Notice (the "OFFER PERIOD"). During the Offer Period, subject to the limitation in the next sentence, any combination of the Company and/or the other Stockholders will have the right and option to purchase all of the Transfer Stock at a price equal to the price contained in the Transfer Offer and upon the same terms as contained in the Transfer Offer. During the first 15 days of the Offer Period (the "COMPANY EXCLUSIVE FIRST REFUSAL PERIOD"), the Company shall have the exclusive right and option to purchase all of the Transfer Stock. Following the expiration of the Company Exclusive First Refusal Period, if the Company has not opted to purchase all of the Transfer Stock, the Company and any combination of the other Stockholders may purchase all of the Transfer Stock. For the avoidance of doubt, unless the Offering Holder shall have consented to the purchase of less than all of the Transfer Stock by the Company and/or the other Stockholders, neither the Company nor any Stockholder, nor any combination of the Company and any Stockholder may purchase any Transfer Stock pursuant to the foregoing provisions unless all of the Transfer Stock is to be so purchased (whether by the Company, the other Stockholders, or any combination thereof). Notwithstanding any other provision of this Agreement, unless otherwise agreed to by at least 50% of the Subject Securities held by the JWC Holders and 50% of the Subject Securities held by the Halifax Holders, no Management Holder or Additional Holder may Transfer their Subject Securities in exchange for consideration other than cash. (b) Closing of Transfer Stock. If, during the Offer Period, the Company, or any combination of the Company and the other Stockholders, has accepted the offer contained in the Transfer Notice, the closing of the purchase of such Transfer Stock shall take place at the principal offices of the Company within 10 days of such acceptance. At such closing, the Company and/or the other Stockholders, as applicable, and/or its or their designees, as the case may be, shall deliver a certified check or checks calculated at the price set forth in the Transfer Notice to the Offering Holder against delivery of certificates and/or other instruments representing the Transfer Stock, together with stock or other appropriate powers duly endorsed with respect to the Transfer Stock, free and clear of all Liens (other than pursuant to securities laws, this Agreement or a Stock Option Agreement). All of the foregoing deliveries will be deemed to be made simultaneously and none shall be deemed completed until all have been completed. (c) Completion of Sale to Third Party. If, during the Offer Period, neither the Company nor any combination of the Company and the other Stockholders has accepted the offer contained in the Transfer Notice in writing as to all the Transfer Stock covered thereby, or within 15 days of acceptance by any combination of the Company and any Stockholder the closing has not occurred, and Section 2.4 does not apply to such Transfer, then during the next 60 days, the Offering 12 Holder may sell the Transfer Stock to the Offeror at the price and on the other terms contained in the Transfer Notice. No sale may be made by the Offering Holder to any Offeror if such sale would constitute a Prohibited Transfer or unless and until such Offeror executes and delivers to the Company a Joinder Agreement in accordance with Section 2.13 hereof. Promptly after any sale pursuant to this Section 2.2, the Offering Holder shall furnish such evidence of the completion (including time of completion) of such sale and of the terms thereof as the Company may reasonably request. If the Offering Holder has not completed the sale of the Transfer Stock during the applicable period referred to above, such Offering Holder shall no longer be permitted to sell such shares pursuant to this Section 2.2 without again fully complying with the provisions of this Section 2.2 and all the restrictions on sale, transfer or assignment contained in this Agreement shall again be in effect with respect to the Transfer Stock. 2.3 Tagalong. No JWC Holder shall Transfer any shares of Subject Securities to a Third Party (other than a Permitted Transferee) in one or a series of related bona fide arm's-length transactions without complying with the terms and conditions set forth in this Section 2.3; provided, however, that the JWC Holders shall be permitted to Transfer up to 5%, in the aggregate, of the number of shares of Subject Securities held by the Original JWC Holders as of the date of this Agreement without compliance with this Section 2.3; provided further, however, that this Section 2.3 shall not in any way limit or affect the restriction contained in the last sentence of Section 2.1(a). (a) Any JWC Holder (the "INITIATING STOCKHOLDER") desiring to Transfer shares of Subject Securities subject to the restriction in Section 2.3 shall give not less than 10 Business Days' prior written notice of such intended Transfer to each other Stockholder ("PARTICIPATING OFFEREES") and to the Company. Such notice (the "PARTICIPATION NOTICE") shall set forth general terms and conditions of such proposed Transfer, including the name of the prospective transferee, the number of Subject Securities proposed to be transferred to the extent known (the "PARTICIPATION SECURITIES") by the Initiating Stockholder, the purchase price per share to the extent known proposed to be paid therefor and the payment terms and type of Transfer to be effectuated. Within 10 Business Days following the delivery of the Participation Notice by the Initiating Stockholder to each Participating Offeree and to the Company, each Participating Offeree shall, by notice in writing to the Initiating Stockholder and to the Company, have the opportunity and right to sell to the purchasers in such proposed Transfer (upon the same terms and conditions as the Initiating Stockholder). If the Halifax Holder is a Participating Offeree, the Halifax Holder shall have the opportunity and right to include in such proposed Transfer an amount of Subject Securities representing the same proportion (i.e., in relation to the aggregate amount at the time held by the Halifax Holders) of the Subject Securities being sold by the Initiating Stockholder (i.e., in relation to the aggregate amount at the time held by the JWC Holders). Other Participating Offerees shall have the opportunity and right to include in such proposed Transfer an amount of Subject Securities up to that number of Subject Securities representing Subject Securities at the time held by such Participating Offeree as shall equal the product of (i) a fraction, the numerator of which is the number of Subject Securities owned by such Participating Offeree as of the date of such proposed Transfer and the denominator of which is the aggregate number of Subject Securities owned as of the date of such Participation Notice by each Initiating Stockholder and by all Participating Offerees so electing to sell Subject Securities pursuant to this Section 2.3(a), multiplied by (ii) the number of Subject Securities proposed to be transferred. 13 (b) At the closing of any proposed Transfer in respect of which a Participation Notice has been delivered, the Initiating Stockholder, together with all Participating Offerees so electing to sell Subject Securities pursuant to Section 2.3(a) shall execute and deliver such documents or instruments reasonably requested by the proposed transferee and deliver to the proposed transferee certificates and/or other instruments representing the Subject Securities to be sold, free and clear of all Liens, together with stock or other appropriate powers duly endorsed therefor, and shall receive in exchange therefor the consideration to be paid or delivered by the proposed transferee in respect of such Subject Securities as described in the Participation Notice. (c) The provisions of this Section 2.3 shall not apply to (i) any Transfer pursuant to a Public Offering or, following a Public Offering, pursuant to a Rule 144 Transaction or (ii) any Transfers pursuant to Section 2.4 hereof. 2.4 Dragalong. (a) If the JWC Holders (the "DRAGALONG GROUP") determine to sell or exchange (in a sale or exchange of securities of the Company or in a merger, consolidation or other business combination or any similar transaction) in one or a series of related bona fide arms-length transactions to an unaffiliated Third Party and not pursuant to a Permitted Transfer, at least 50% of the Subject Securities (which defined term shall, for purposes of this Section 2.4 only, include all Subject Securities regardless of vesting or exercisability) at the time held by the JWC Holders, then upon 10 days' written notice from the Dragalong Group to the other Stockholders, which notice shall include reasonable details and all material terms of the proposed sale or exchange, including the proposed time and place of closing and the form and amount of consideration to be received by the Stockholders (such notice being referred to as the "SALE REQUEST"), each other Stockholder shall be obligated to, and shall, (i) sell, transfer and deliver, or cause to be sold, transferred and delivered, to such Third Party the proportion of such Stockholder's Subject Securities as is being sold by the JWC Holders in the same transaction at the closing thereof (and shall (A) execute and deliver such agreements for the purchase of such Subject Securities and other agreements, instruments and certificates as the members of the Dragalong Group shall execute and deliver in connection with such proposed transaction and (B) deliver certificates and/or other instruments representing the proportion of such Stockholder's Subject Securities being sold, together with stock or other appropriate powers therefore duly executed, at the closing, free and clear of all Liens), and each Stockholder shall receive upon the closing of such transaction the pro rata portion (as defined below) of the consideration to be paid or delivered by the proposed transferee in respect of such Stockholder's Subject Securities as shall be payable to the members of the Dragalong Group in respect of their Subject Securities (in the case of Options, warrants or other Common Stock Equivalents, subject to subtraction of the exercise price) and (ii) if stockholder approval of the transaction is required, vote such Stockholder's Common Stock in favor thereof. The "PRO RATA PORTION" of each Stockholder shall be the number of Subject Securities issued to and owned by such Stockholder multiplied by a fraction, the numerator of which shall be the number of Subject Securities the JWC Holders wish to Transfer, and the denominator of which shall be the aggregate number of Subject Securities issued to or beneficially owned by the JWC Holders participating in the sale. 14 (b) Each Stockholder shall be severally obligated to join on a pro rata basis (based on such Stockholder's pro rata share of the net proceeds paid by such Third Party) in an indemnification that is to be provided in connection with such Sale, other than any such indemnification that relates specifically to a particular Stockholder; provided that no Stockholder shall be obligated in connection with such Sale to agree to indemnify or hold harmless the Third Party with respect to an amount in excess of the net cash proceeds paid to such Stockholder in connection with such Sale. All Stockholders will bear their pro rata share of the costs and expenses incurred in connection with such Sale to the extent such costs are incurred for the benefit of all Stockholders and are not otherwise paid by the Company to the Third Party. (c) Each Stockholder agrees that, in such Stockholder's capacity as a stockholder of the Company, such Stockholder shall, including pursuant to Section 2.4(a) hereof, vote, or grant proxies relating to the Common Stock at the time held by such Stockholder to vote, all of such Stockholder's Common Stock in favor of any sale or exchange of securities of the Company or any merger, consolidation, recapitalization, reorganization or other business combination or any similar transaction, including pursuant to Section 2.4(a) hereof, if, and to the extent that, approval of the Company's stockholders is required in order to effect such transaction. (d) If, at the end of 90 days following the receipt by the Stockholders of a Sale Request, the Dragalong Group has not completed the sale, (i) each Stockholder shall be released from its obligation under the Sale Request, (ii) the Dragalong Group shall return to each Stockholder all certificates evidencing unsold Subject Securities and all related powers of attorney and instruments of transfer, if any, and (iii) it shall be necessary for a new and separate Sale Request to be furnished and the terms and provisions of this Section 2.4 to be separately complied with in order to consummate such sale pursuant to this Section 2.4, unless the failure to complete such sale resulted from any failure by any Stockholder to comply in any material respect with the terms of this Section 2.4. 2.5 Call by the Company. (a) (i) If the employment of a Management Holder with the Company and any of its Subsidiaries shall terminate (a "CALL EVENT") for any reason, then, subject to Section 2.5(a)(ii), the Company shall have the right to purchase (the "CALL OPTION"), by delivery of a written notice (the "CALL NOTICE") to such terminated Management Holder (with a copy thereof to the JWC Representative) no later than 30 days after the date of the Call Event (the "COMPANY CALL PERIOD"), and such Management Holder and such Management Holder's direct and indirect Permitted Transferees (a "CALL GROUP") shall be required to sell any and all of the Subject Securities that are owned by such Call Group on the date of the Call Event (such Subject Securities to be purchased hereunder being referred to collectively as the "CALL SECURITIES") at, except as otherwise provided in Section 2.5(a)(ii) hereof, a price per share equal to the greater of (I) the Call Price of such Call Securities as of the date of the Call Event and (II) the Cost Price of such Call Securities. (ii) Notwithstanding anything set forth in this Section 2.5 to the contrary, in the event a Management Holder resigns, other than upon death or disability, without Good Reason from his employment with the Company and its Subsidiaries, or his employment is terminated for 15 Cause by the Company and its Subsidiaries, then the purchase price per share payable for the Call Securities shall be an amount equal to the Cost Price of such Call Securities; provided, however, that if a Management Holder resigns six or more years from the issuance of the Call Securities (or Common Stock Equivalents that were converted or exercised into such Call Securities), then the purchase price per share payable for the Call Securities shall equal the greater of (I) the Call Price of such Call Securities as of the date of the Call Event and (II) the Cost Price of such Call Securities. (b) The closing of any purchase of Call Securities by the Company from a Call Group pursuant to this Section 2.5 shall take place at the principal office of the Company on such date within 15 days after the expiration of the Company Call Period with respect to such Call Group as the Company shall specify to the members of such Call Group in writing. At such closing, the members of the Call Group shall deliver to the Company, against payment by the Company of the purchase price for the Call Securities in cash (by delivery of a certified check or checks payable to the respective members of the Call Group, as the case may be), certificates and/or other instruments representing, together with stock or other appropriate powers duly endorsed with respect to, the Call Securities, free and clear of all Liens (other than pursuant to securities laws, this Agreement or a Stock Option Agreement). All of the foregoing deliveries will be deemed to be made simultaneously and none shall be deemed completed until all have been completed. (c) Notwithstanding anything set forth in this Section 2.5 to the contrary, prior to the exercise by the Company of its Call Option to purchase Call Securities pursuant to this Section 2.5, one or more prospective or existing employees of the Company or any Subsidiary may be designated by the Board of Directors (individually, a "DESIGNATED EMPLOYEE" and, collectively, "DESIGNATED EMPLOYEES") who shall have the right, but not the obligation, to exercise the Call Option and to acquire, in lieu of the Company, some or all (as determined by the Company) of the Call Securities that the Company is entitled to purchase from the Call Group hereunder, for cash and otherwise on the same terms and conditions as set forth in Section 2.5(b) which apply to the repurchase of Call Securities by the Company. Concurrently with any such purchase of Call Securities by any such Designated Employee, such Designated Employee shall execute a counterpart of this Agreement whereupon such Designated Employee shall be deemed a "Management Holder" and shall have the same rights and be bound by the same obligations as the other Management Holders hereunder. Payment under this Section 2.5(c) and under Section 2.5(d) below shall be made by a certified check or checks payable to the respective members of the Call Group, in an amount equal to the purchase price for such Call Securities under Section 2.5(a) hereof against delivery of certificates and/or other instruments representing, together with stock or other appropriate powers duly endorsed with respect to such Call Securities, free and clear of all Liens (other than pursuant to securities laws, this Agreement or a Stock Option Agreement). All of the foregoing deliveries will be deemed to be made simultaneously and none shall be deemed completed until all have been completed. (d) If and to the extent neither the Company nor any Designated Employee elects to exercise the Call Option and deliver a Call Notice prior to the expiration of the Company Call Period with respect to such Management Holder, then the JWC Holders and the Halifax Holders, pro rata in accordance with the respective Common Stock Equivalents at the time held by the JWC Holders and the Halifax Holders so exercising their rights under this Section 2.5(d), may exercise 16 the Call Option in lieu of the Company and such Designated Employee by delivery of a Call Notice to such terminated Management Holder within the Company Call Period. The closing of any purchase of Call Securities by such JWC Holders and the Halifax Holders shall take place at the principal offices of the Company on such date within 15 days after the expiration of the Company Call Period with respect to such Management Holder as the holders of a majority of the Common Stock Equivalents at the time held by the JWC Holders and the Halifax Holders so exercising their rights under this Section 2.5(d) shall specify to the members of such Call Group in writing, provided that if any such JWC Holder or Halifax Holder fails to purchase all or a portion of the number of Call Securities which such JWC Holder or Halifax Holder may purchase pursuant to this Section 2.5(d), then the other JWC Holders and the Halifax Holders so exercising their rights under this Section 2.5(d) shall be entitled to purchase such Call Securities (pro rata based upon their respective Common Stock Equivalents at the time held, or as otherwise agreed, by such JWC Holders and the Halifax Holders). (e) If and to the extent none of the Company, any Designated Employees, any JWC Holders or any Halifax Holder elects to exercise the Call Option and deliver a Call Notice within the Company Call Period or if the closing of the purchase of all Call Securities does not occur within 15 days after the expiration of the Company Call Period, then the Call Option provided for in this Section 2.5 shall terminate with respect to such Subject Securities not so purchased under this Section, but the parties hereto shall continue to be bound by the remaining provisions of this Agreement. (f) Notwithstanding the foregoing with respect to any shares of Common Stock which, as of the date of the purchase and sale pursuant to this Call Option, (i) were purchased as the result of the exercise of a stock option and (ii) have not been owned by the Call Group for at least 180 days ("UNMATURED SHARES"), the closing with respect to such Unmatured Shares shall be delayed until a date no later than the 10th day after the 180th day following the acquisition by the Call Group of such Unmatured Shares and the purchase price for such Unmatured Shares will be determined at the time of such delayed closing. 2.6 Put by the Management Holders. (a) If a Call Event occurs by reason of a Management Holder terminating his employment with the Company and any of its Subsidiaries for Good Reason or his employment being terminated without Cause by the Company and any of its Subsidiaries, then such Management Holder shall have the right to require the Company to purchase (the "PUT OPTION"), by delivery of a written notice (the "PUT NOTICE") to the Company during the 30-day period after the expiration of the Company Call Period pertaining to such Management Holder (the "PUT PERIOD"), and the Company shall be required to purchase all of the Subject Securities described in the Put Notice (other than Subject Securities purchased under Section 2.5) (such Subject Securities to be purchased hereunder being referred to collectively as the "PUT SECURITIES") at a price per share equal to the Put Price; provided that if a Management Holder exercises a Put Option within 18 months of the date hereof the Company shall be required to purchase all of the Subject Securities described in the Put Notice at a price per share equal to the Call Price. 17 (b) The closing of any purchase of Put Securities by the Company from a Management Holder pursuant to this Section 2.6 shall take place at the principal office of the Company on such date within 15 days after the expiration of the Put Period with respect to such Management Holder as the Company shall specify to such Management Holder in writing. At such closing, the Management Holder shall deliver to the Company, against payment by the Company of the purchase price for the Put Securities in cash (by delivery of a certified check payable to the Management Holder) or, if the Company is required by its senior lenders, by subordinated promissory note with a ten year maturity and interest paid at the prime rate announced from time to time by the Company's senior lenders (such interest payable in kind), certificates and/or other instruments representing, together with stock or other appropriate powers duly endorsed with respect to, the Put Securities, free and clear of all Liens (other than pursuant to securities laws, this Agreement or a Stock Option Agreement). All of the foregoing deliveries will be deemed to be made simultaneously and none shall be deemed completed until all have been completed. (c) If and to the extent a Management Holder elects not to exercise the Put Option and deliver a Put Notice within the Put Period or if the closing of the purchase of all Put Securities does not occur within 15 days after the expiration of the Put Period through the fault of such Management Holder, then the Put Option provided for in this Section 2.6 shall terminate with respect to such Subject Securities not so purchased under this Section, but the parties hereto shall continue to be bound by the remaining provisions of this Agreement. (d) Notwithstanding the foregoing with respect to any shares of Common Stock which, as of the date of the purchase and sale pursuant to this Put Option, were Unmatured Shares, the closing with respect to such Unmatured Shares shall be delayed until a date no later than the 10th day after the 180th day following the acquisition by the Management Holder of such Unmatured Shares and the purchase price for such Unmatured Shares will be determined at the time of such delayed closing. 2.7 Restrictions on Other Agreements. No Stockholder shall grant any proxy or enter into or agree to be bound by any voting trust with respect to any Subject Securities other than as set forth in this Agreement nor shall any Stockholder enter into any stockholders agreements or arrangements of any kind with any Person with respect to any of the Subject Securities on terms which conflict with the provisions of this Agreement (whether or not such agreements and arrangements are with other Stockholders or holders of Common Stock Equivalents that are not parties to this Agreement), including but not limited to, agreements or arrangements with respect to the acquisition, disposition or voting of Subject Securities inconsistent herewith. 2.8 Transfer Subject Hereto. Except as otherwise provided in this Agreement, in the event of an Involuntary Transfer (as defined in the following sentence) of any Subject Securities (the "TRANSFERRED SECURITIES") of any JWC Holder, Halifax Holder, Management Holder or Additional Holder to any Person, the transferee, including, without limitation, any and all transferees and subsequent transferees of the initial transferee (the "INVOLUNTARY TRANSFEREE"), shall take and hold the Transferred Securities subject to this Agreement and to all of the obligations of, and restrictions imposed hereby upon, the transferor holder and shall comply with this Agreement. As used in this Agreement, the term "Involuntary Transfer" shall mean any transaction, proceeding or action by or 18 in which the JWC Holder, Halifax Holder, Management Holder or Additional Holder is involuntarily deprived or divested of any right, title or interest in or to any of such holder's Subject Securities (including, without limitation, a seizure under levy of attachment or execution, a foreclosure under a pledge of Subject Securities, a transfer to a trustee in bankruptcy or receiver or other officer or agency, or a transfer to a state or to a public officer or agency pursuant to a statute pertaining to escheat or abandoned property but specifically excluding death, incapacity, divorce and similar events). 2.9 Provisions in the Event of Involuntary Transfers. In the event of an Involuntary Transfer, the Stockholders and the Company shall not take any action to approve any such involuntary transfer not in accordance with this Section, and the transferor Stockholder (or, if it fails to do so, the Involuntary Transferee) shall forthwith give notice (the "INVOLUNTARY TRANSFER NOTICE") to the Company stating (i) when the involuntary transfer occurred or is to occur, (ii) the circumstances alleged to require such involuntary transfer, (iii) the number and type of securities involved and (iv) the name, address and capacity of the Involuntary Transferee. 2.10 Option. If an Involuntary Transfer of the Subject Securities of any Stockholder occurs, the Company and its designees shall have the same rights of first refusal with respect to the Transferred Shares as if the involuntary transfer had been a proposed voluntary transfer by the transferor Stockholder governed by Section 2.2 except that: (i) the periods within which such right must be exercised shall run from the date the Involuntary Transfer Notice is given in accordance with this Agreement; and (ii) such rights shall be exercised by notice to the Involuntary Transferee rather than to the transferor Stockholder. The closing of any purchase of Transferred Shares pursuant to this Section shall be in accordance with the procedures set forth in Section 2.2. 2.11 (a) Purchase for Investment; Legend on Certificate. Each Stockholder acknowledges that all of the securities of the Company held by such Stockholder are being (or have been) acquired for investment and not with a view to the distribution thereof and that no Transfer, hypothecation or assignment of any such securities (including the Common Stock for which such securities may be exercisable or exchangeable or into which such securities may be convertible) may be made except in compliance with applicable federal and state securities laws. All the certificates or other instruments representing any of such securities (including the Common Stock for which such securities may be exercisable or exchangeable or into which such securities may be convertible) which are now or hereafter held by any Stockholder shall be subject to the terms of this Agreement and shall have endorsed in writing, stamped or printed, thereon the following legends: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF AN AMENDED AND RESTATED STOCKHOLDERS AGREEMENT DATED AS OF OCTOBER 17, 2001, AS AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH AND AVAILABLE FROM THE SECRETARY OF THE COMPANY." "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, 19 ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT." (b) Removal of Legends, Etc. Notwithstanding the provisions of Section 2.11(a) upon the transferability of any Subject Securities, the restrictions thereunder shall cease and terminate when (i) such Subject Securities are sold or otherwise disposed of in accordance with the intended method of disposition by the seller or sellers thereof set forth in a registration statement or are sold or otherwise disposed of in a transaction which does not require that the securities transferred bear the legend set forth in Section 2.11 or (ii) the holder of such Subject Securities has met the requirement of transfer of such Subject Securities pursuant to subparagraph (k) of Rule 144. Whenever the restrictions imposed by Section 2.11(a) shall terminate, as herein provided, the holder of any Subject Securities shall be entitled to receive from the Company, without expense, a new certificate not bearing the restrictive legend set forth in Section 2.11(a) and not containing any other reference to the restrictions imposed by Section 2.11(a). 2.12 Effectiveness of Transfers. Any Subject Securities transferred by a Stockholder (other than pursuant to an effective registration statement under the Securities Act or a Rule 144 Transaction if the Subject Securities are listed or admitted to trading on an Active Trading Market) shall be held by the transferee thereof pursuant to this Agreement. Such transferee shall, except as otherwise expressly stated herein, have all the rights and be subject to all of the obligations of a Stockholder under this Agreement automatically and without requiring any further act by such transferee or by any parties to this Agreement. Without affecting the preceding sentence, if such transferee is not a Stockholder on the dates of such transfer, then such transferee, as a condition to such transfer, shall confirm such transferee's obligations hereunder in accordance with Section 2.13 hereof. No Subject Securities shall be transferred on the Company's books and records, and no transfer thereof shall be otherwise effective, unless any such transfer is made in accordance with the terms and conditions of this Agreement, and the Company is hereby authorized by all of the Stockholders to enter appropriate stop transfer notations on its transfer records to give effect to this Agreement. 2.13 Additional Stockholders. Any Person that is not already a party to this Agreement in the same Stockholder capacity as such Person would be following the Transfer and who is acquiring any Subject Securities (except for any acquisition thereof (a) in an offering registered under the Securities Act or (b) in a Rule 144 Transaction if the Subject Securities are listed or admitted to trading on an Active Trading Market) shall on or before the transfer or issuance to it of such Subject Securities, sign and deliver to the Company a Joinder Agreement and shall thereby become a party to this Agreement. If such Person meets the definition of a JWC Holder, then such Person shall be treated as a JWC Holder hereunder, if such Person meets the definition of a Halifax Holder, such Person shall be treated as a Halifax Holder hereunder, if such Person meets the definition of a Management Holder, such Person shall be treated as a Management Holder hereunder, and if such Person meets none of the foregoing definitions, such Person shall be treated as an Additional Holder hereunder. The Company shall require each Person acquiring an option, warrant or other right to purchase shares of Common Stock under any option or other equity participation plan to execute a Joinder Agreement. 20 2.14 Notice of Transfer. Each JWC Holder, Halifax Holder, Management Holder or Additional Holder agrees, prior to any Transfer of any Subject Securities (except pursuant to an effective registration statement), to give written notice to the Company of such holder's intent to effect such Transfer and agrees to comply in all other respects with the provisions of this Agreement. Each such notice shall describe the manner and circumstances of the proposed Transfer and, unless the proposed Transfer is a Permitted Transfer or unless waived by the Company, shall be accompanied by the written opinion, addressed to the Company, of counsel for the holder of such Subject Securities (which counsel shall be reasonably satisfactory to the Company), stating that in the opinion of such counsel (which opinion shall be reasonably satisfactory to the Company) such proposed Transfer does not involve a transaction requiring registration or qualification of such Subject Securities under the Securities Act or the securities laws of any state of the United States or of any foreign jurisdiction. Subject to complying with the other applicable provisions of this Agreement, such holder of Subject Securities shall be entitled to consummate such Transfer in accordance with the terms of the notice delivered by it to the Company if the Company does not object (on the basis that such Transfer violates this Section 2.14) to such Transfer within 5 Business Days after the delivery of such notice. ARTICLE III Registration Rights 3.1 General. For purposes of this Article III, (a) the terms "REGISTER", "REGISTERED" and "REGISTRATION" refer to a registration effected by preparing and filing a registration statement on Form S-1, S-2 or S-3 in compliance with the Securities Act and the declaration or ordering of effectiveness of such registration statement and (b) the term "HOLDER" means any Stockholder electing to register any Registrable Securities pursuant to Section 3.2 or 3.3. The registration rights granted pursuant to Sections 3.2 and 3.3 shall terminate and expire on the fourth anniversary of the occurrence of a Public Offering. 3.2 Required Registration. If the Company shall be requested, in writing, by the holders of a majority of the Common Stock Equivalents then held by the JWC Holders (or the JWC Representative) to effect a registration statement under the Securities Act of Registrable Securities, the Company shall promptly (i) give written notice of the proposed registration to all other Stockholders and (ii) use its best efforts to effect the registration under the Securities Act of the Registrable Securities which the Company has been so requested to register by the JWC Holders and by other Stockholders in a written request received by the Company within 10 Business Days after the giving of the written notice specified in clause (i) above; provided, however, that the Company shall not be obligated to effect any registration under the Securities Act except in accordance with the following provisions: (a) The Company shall not be obligated to use its best efforts to file and cause to become effective any registration statement during any period in which any other registration statement (other than on Forms S-4, F-4 or S-8 promulgated under the Securities Act or any successor forms thereto) pursuant to which Primary Shares are to be or were sold has been filed and not withdrawn or has been declared effective within the prior 90 days. 21 (b) The Company may delay the filing or effectiveness of any registration statement for a period of up to 90 days after the date of a request for registration pursuant to this Section 3.2 if at the time of such request (i) the Company is engaged, or has fixed plans to engage within 90 days after the date of such request, in a firm commitment underwritten public offering of Primary Shares in which the holders of Registrable Securities may include Registrable Securities pursuant to Section 3.3 or (ii) a Material Transaction exists, provided that the Company may only so delay the filing or effectiveness of its registration statements (if any) once pursuant to this Section 3.2(b). (c) With respect to any registration pursuant to this Section 3.2, the Company may include in such registration any Primary Shares; provided, however, that, if the managing underwriter advises the Company that the inclusion of all Registrable Securities and Primary Shares proposed to be included in such registration would interfere with the successful marketing (including pricing) of the Registrable Securities proposed to be included in such registration, then the number of Registrable Securities and Primary Shares proposed to be included in such registration shall be included in the following order: (i) first, the Registrable Securities requested to be included in such registration (or, if necessary, such Registrable Securities pro rata among the Holders of such Registrable Securities based upon the number of Registrable Securities requested to be included in such registration); and (ii) second, the Primary Shares. (d) If the method of disposition requested by the holders pursuant to this Section 3.2 is an underwritten public offering, Stockholders holding a majority of the Registrable Securities requested to be registered shall have the right to designate the managing underwriter of such offering, subject to the consent of the Company, which consent shall not be unreasonably withheld. (e) At any time before the registration statement covering Registrable Securities becomes effective, the Stockholders holding a majority of the Registrable Securities requested to be registered may request the Company to withdraw or not to file the registration statement. 3.3 Piggyback Registration. (a) If, at any time, the Company determines to register any Common Stock under the Securities Act in connection with a Public Offering of such securities, the Company shall, at each such time, promptly give each Stockholder written notice of such determination no later than 30 days before its intended filing with the SEC. Upon the written request of any Stockholder received by the Company within 10 Business Days after the giving of any such notice by the Company, the Company shall use its best efforts to cause to be registered under the Securities Act all of the Registrable Securities of such Stockholder that such Holder has requested be registered for disposition in accordance with the Company's intended method of disposition as stated in such notice and with the underwriter selected by the Company. If the total amount of Registrable Securities that are to be 22 included by the Company in such registration exceeds the amount of securities that the managing underwriters reasonably believe can be sold in an orderly manner in such offering within a price range acceptable to the Company, then the Company will include in such registration only the number of securities which in the opinion of such underwriters can be sold in the manner described above, in the following order: (i) first, all securities of the Company to be offered for the account of the Company; and (ii) second, the Registrable Securities requested to be included in such registration, (or if necessary, such Registrable Securities pro rata among the Holders of such securities based on the number of Registrable Securities requested to be included in such registration). Notwithstanding the foregoing, the Company shall not be obligated to include in an initial Public Offering any Registrable Securities of any Holder if the JWC Holders do not elect to include their Registrable Securities in such a registration. If any of the Holders disapproves of the terms of any such underwriting, it may elect to withdraw therefrom by written notice to the Company and the underwriter prior to the date of pricing such offer. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. 3.4 Obligations of the Company. (a) Whenever required under Section 3.2 or 3.3 to use its best efforts to effect the registration of any Registrable Securities, the Company shall (provided, that the Company may at any time delay or abandon the underlying registration without any liability to the Holders): (i) prepare and file with the SEC a registration statement (or an amendment to a registration statement) with respect to such Registrable Securities and use its best efforts to cause such registration statement to become and remain effective, including, without limitation, filing of post-effective amendments and supplements to any registration statement or prospectus necessary to keep the registration statement current; (ii) as expeditiously as reasonably possible, prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement and to keep each registration and qualification under this Agreement effective (and in compliance with the Securities Act) by such actions as may be necessary or appropriate for a period of 120 days after the effective date of such registration statement (unless all securities covered by such registration statement are sooner disposed of), all as requested by such Holder or Holders; (iii) as expeditiously as reasonably possible furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with 23 the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them in accordance with the plan of distribution provided for in such registration statement; (iv) as expeditiously as reasonably possible use its best efforts to register and qualify the securities covered by such registration statement under such securities or "blue sky" laws of such jurisdictions as shall be reasonably appropriate for the distribution of the securities covered by the registration statement, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business in any jurisdiction it would not otherwise be required to qualify but for this subsection (iv), to file a general consent to service of process in any such jurisdiction or subject itself to taxation in any such jurisdiction, and further provided that (anything in this Agreement to the contrary notwithstanding with respect to the bearing of expenses) if any jurisdiction in which the securities shall be qualified shall require by law or regulation that expenses incurred in connection with the qualification of the securities in that jurisdiction be borne by selling stockholders, then such expenses shall be payable by selling stockholders pro rata, to the extent required by such jurisdiction; (v) notify each Holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made (provided that upon such notification, each Holder agrees not to sell or otherwise transfer or dispose of any Common Stock (or other securities) of the Company at the time held by such Holder or any interest or future interest therein until such statement or omission has been corrected, and there shall be added to the period during which the Company is obligated to keep such registration effective the number of days for which such sales or other transfers or dispositions were suspended), and at the request of any such Holder promptly prepare and furnish, without charge, to such seller or Holder a reasonable number of copies of a supplement to such prospectus or an amendment of such registration statement as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (vi) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months but not more than 18 months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act or Rule 158 thereunder; and 24 (vii) use its best efforts to list all Registrable Securities covered by such registration statement on any securities exchange on which any class of similar Securities is then listed. (b) If the Company at any time proposes to register any of its securities under the Securities Act subject to the registration rights of the Holders under Section 3.2 or 3.3, and such securities are to be distributed by or through one or more underwriters selected by the Company, then the Company will make reasonable efforts, if requested by any Holder of Registrable Securities who requests such registration, to arrange for such underwriters to include such Registrable Securities among the securities to be distributed by or through such underwriters. (c) In connection with the preparation and filing of each registration statement registering Registrable Securities under this Agreement, the Company will give the Holders of Registrable Securities on whose behalf such Registrable Securities are to be so registered and their underwriters, if any, and their respective counsel and accountants the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the SEC, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers, its counsel and the independent public accountants who have certified its financial statements, as shall be reasonably necessary, in the opinion of such Holders or such underwriters or their respective counsel, in order to conduct a reasonable and diligent investigation within the meaning of the Securities Act. 3.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Article III that each Holder shall furnish to the Company such information regarding such Holder, the Registrable Securities held by such Holder, and the intended method of disposition of such securities as the Company shall reasonably request and as shall be required in connection with the action to be taken by the Company. 3.6 Expenses of Registration. Registration, filing and qualification fees, printers' and accounting fees, fees and expenses of compliance with securities or blue sky laws, fees and expenses relating to filings with the National Association of Securities Dealers, Inc. or any applicable securities exchange, fees of underwriters (excluding discounts, commissions or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals attributable to the Registrable Securities being registered), and fees and disbursements of counsel for the Company incurred in connection with a registration pursuant to Section 3.2 or 3.3 shall be borne by the Company. Each Holder whose shares are being sold will bear, pro rata, underwriters' discounts and brokerage and other commissions, fees and disbursements of its own counsel and all of its other expenses of such registration, offering and sale. 3.7 Underwriting Requirements. In connection with any registration of Registrable Securities under this Agreement, the Holders whose shares are being sold shall, if requested by the Company or the underwriters, enter into an underwriting agreement with such underwriters for such offering, such agreement to contain such terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, including, without limitation, 25 provisions relating to indemnification and contribution. The Holders on whose behalf Registrable Securities are to be distributed shall also complete and execute all questionnaires, powers of attorney and/or other documents required under the terms of such underwriting agreement. 3.8 Indemnification. In the event any Registrable Securities are included in a registration statement pursuant to this Article III: (a) To the fullest extent permitted by law, the Company will indemnify and hold harmless each Holder joining in a registration and its directors and officers, any underwriter (as defined in the Securities Act) for it, and each Person, if any, who controls such Holder or such underwriter within the meaning of the Securities Act, from and against any losses, claims, damages, expenses (including reasonable attorneys' fees and expenses and reasonable costs of investigation) or liabilities, joint or several, to which they or any of them may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages, expenses or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based on any untrue or alleged untrue statement of any material fact contained in such registration statement including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein not misleading in light of the circumstances under which they were made, provided that the indemnity agreement contained in this Section 3.8(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon (i) an untrue statement or omission made in connection with such registration statement, preliminary prospectus, final prospectus or amendments or supplements thereto in reliance upon and in conformity with written information furnished by such Holder, underwriter or control person to the Company specifically for inclusion in the Registration Statement in connection with such registration, or (ii) such Holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such Holder with a sufficient number of copies of the same. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder, underwriter or control person and shall survive the transfer of such securities by such Holder. (b) To the fullest extent permitted by law, each Holder joining in a registration shall indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each Person, if any, who controls the Company within the meaning of the Securities Act, and each agent and any underwriter for the Company and any Person who controls any such agent or underwriter and each other Holder and any Person who controls such Holder (within the meaning of the Securities Act) against any losses, claims, damages, expenses (including reasonable attorney's fees and expenses and reasonable costs of investigation) or liabilities to which the Company or any such director, officer, control person, agent, underwriter or other Holder may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon an untrue statement of any material fact contained in such 26 registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent that such untrue statement or omission was made in such registration statement, preliminary or final prospectus, or amendments or supplements thereto, in reliance upon and in conformity with written information furnished by such Holder in connection with such registration, provided that the indemnity agreement contained in this Section 3.8(b) shall not apply to amounts paid in settlements effected without the consent of such Holder (which consent shall not be unreasonably withheld). Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer, Holder, underwriter or control person and shall survive the transfer of such securities by such Holder. (c) Any Person seeking indemnification under this Section 3.8 will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification, but the failure to give such notice will not affect the right to indemnification hereunder, except to the extent the indemnifying party is actually prejudiced by such failure and (ii) unless in such indemnified party's reasonable judgment a conflict of interest may exist between such indemnified and indemnifying parties with respect to such claim, permit such indemnifying party, and other indemnifying parties similarly situated, jointly to assume the defense of such claim with counsel reasonably satisfactory to the parties. In the event that the indemnifying parties cannot mutually agree as to the selection of counsel, each indemnifying party may retain separate counsel to act on its behalf and at its expense. The indemnified party shall in all events be entitled to participate in such defense at its expense through its own counsel. If such defense is not assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld). No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim. (d) If for any reason the foregoing indemnification is unavailable to any party or insufficient to hold it harmless as and to the extent contemplated by the preceding paragraphs of this Section 3.8, then each indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage expense or liability in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party, on the one hand, and the applicable indemnified party, as the case may be, on the other hand, and also the relative fault of the indemnifying party and any applicable indemnified party, as the case may be, as well as any other relevant equitable considerations. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. 3.9 Market Stand-Off Agreement. If requested by the managing underwriter of the initial Public Offering on behalf of the Company of its Common Stock, or by the managing underwriter 27 of a Public Offering for which Registrable Securities of any Holders have been registered, all Holders (in the case of such initial Public Offering) or such participating Holders (in the case of such other Public Offering) shall not sell or otherwise transfer or dispose of any Registrable Securities held by such Holders (other than pursuant to Permitted Transfers, pursuant to Section 2.3 and other than those Registrable Securities included in the registration) during such period following the effective date of such registration as is usual and customary at such time in similar public offerings of similar securities. ARTICLE IV Corporate Governance 4.1 Board of Directors. (a) The Company and each of the Stockholders shall take all action, including, but not limited to, such Stockholder's voting, or executing proxies or written consents with respect to, the Voting Stock at the time held by such Stockholder as may be from time to time requested by holders of a majority of the Common Stock Equivalents at the time held by the JWC Holders (or the JWC Representative) so that the Board of Directors shall consist of such number of directors, no less than seven and up to a maximum of ten directors, as may be from time to time designated by the holders of a majority of the Common Stock Equivalents at the time held by the JWC Holders (or the JWC Representative). (b) The Company and each of the Stockholders shall take all action, including, but not limited to, such Stockholder's voting, or executing proxies or written consents with respect to, the Voting Stock at the time held by such Stockholder as may be from time to time requested by holders of a majority of the Common Stock Equivalents at the time held by the JWC Holders (or the JWC Representative) so that the Board of Directors shall include such directors as may be from time to time designated by the holders of a majority of the Common Stock Equivalents at the time held by the JWC Holders (or the JWC Representative). The holders of a majority of the Common Stock Equivalents at the time held by the JWC Holders (or the JWC Representative) shall also be entitled to require that any member of the Board of Directors so designated pursuant to this Section 4.1(b) be removed or replaced by another designee of the holders of a majority of the Common Stock Equivalents at the time held by the JWC Holders (or the JWC Representative), in which event the Company and each Stockholder shall take all action, including, but not limited to, such Stockholder's voting, or executing proxies or written consents with respect to, the Voting Stock at the time held by such Stockholder as may be necessary to effect such removal or replacement. (c) Notwithstanding the provisions of Section 4.1(b), the Company and each Stockholder shall take all action, including, but not limited to, such Stockholder's voting, or executing proxies or written consents with respect to, the Voting Stock at the time held by such Stockholder as may be from time to time requested by the holders of a majority of the Common Stock Equivalents at the time held by the Original Halifax Holders and their Permitted Transferees (other than the JWC Holders and Management Holders) or on their behalf by the Halifax Representative, so that the Board of Directors shall include two directors designated by the holders 28 of a majority of the Common Stock Equivalents held by the Original Halifax Holders and their Permitted Transferees (other than the JWC Holders and Management Holders) or on their behalf by the Halifax Representative which directors (the "Halifax Directors") shall initially be David Dupree and Kenneth Doyle; provided that the number of Halifax Directors that the Original Halifax Holders and their Permitted Transferees (other than the JWC Holders and Management Holders) shall be entitled to designate pursuant to this Section 4.1(c) shall be permanently reduced from two to one director at such time as the Original Halifax Holders and their Permitted Transferees (other than the JWC Holders and Management Holders) hold less than 50% of the Common Stock Equivalents held by the Original Halifax Holders as of the date of this Agreement; provided further, that the number of Halifax Directors designated pursuant to this Section 4.1(c) shall be permanently reduced to zero directors at such time as the Original Halifax Holders and their Permitted Transferees (other than the JWC Holders and Management Holders) hold less than 5% of the Common Stock Equivalents outstanding. The holders of a majority of the Common Stock Equivalents at the time held by the Original Halifax Holders and their Permitted Transferees (other than the JWC Holders and Management Holders) or on their behalf by the Halifax Representative shall also be entitled to require that any director so designated pursuant to this Section 4.1(c) be removed or replaced by another designee of the holders of the majority of the Common Stock Equivalents at the time held by the Original Halifax Holders and their Permitted Transferees (other than the JWC Holders and Management Holders) or on their behalf by the Halifax Representative, in which event the Company and each Stockholder shall take all action, including, but not limited to, such Stockholder's voting, or executing proxies or written consents with respect to, the Voting Stock at the time held by such Stockholder as may be necessary to effect such removal or replacement. 4.2 Rights of the Halifax Directors. (a) Notwithstanding that no vote may be required, or that a lesser percentage vote may be specified in the certificate of incorporation or by-laws of the Company, the Company shall not take, and no Stockholder shall cause the Company to take, any of the following actions without the affirmative vote of a majority of the Board of Directors, which majority vote shall include the affirmative vote of the directors, if any, designated pursuant to Section 4.1(c) (the "HALIFAX AFFIRMATIVE BOARD VOTE"): (i) the redemption, purchase or other acquisition of any Common Stock Equivalents other than those redemptions, purchases or acquisitions made (A) pursuant to this Agreement, (B) on a pro rata basis among the holders of a particular class or series of securities of the Company or (C) pursuant to the terms of securities of the Company created after the date hereof which require such redemption, purchase or acquisition; (ii) the declaration or payment of any dividend or other distribution by the Company with respect to any Common Stock Equivalents other than those declarations or payments of dividends or other distributions that are made (A) on pro rata basis among the holders of a particular class or series of securities of the Company or (B) pursuant to the terms of securities of the Company created after the date hereof which require such declaration, payment or other distribution; 29 (iii) the termination of the Chief Executive Officer of the Company without Cause (as defined in such individual's then current employment agreement with the Company or one of its subsidiaries); (iv) any issuance of Common Stock Equivalents in connection with a transaction or series of related transactions involving an acquisition of the equity or assets of a Third Party which results in an aggregate issuance of greater than 20% of the total outstanding Common Stock Equivalents, (v) the entering into of any transaction or agreement, directly or indirectly, by the Company with JWC Inc. or any director, officer or Affiliate of JWC Inc., including any of the portfolio companies held or managed by any such entity (which affirmative vote of the Halifax Directors shall not be unreasonably withheld); or (vi) any significant change in the nature of the Company's business as of the date hereof. Notwithstanding anything to the contrary herein, (x) the Halifax Affirmative Board Vote shall no longer be necessary with respect to the matters set forth in clauses (iii) and (iv) above at such time as the Original Halifax Holders and their Permitted Transferees (other than the JWC Holders and Management Holders) hold less than 50% of the Common Stock Equivalents held by the Original Halifax Holders as of the date of this Agreement and (y) the provisions of this Section 4.2 shall terminate at such time as the Original Halifax Holders and their Permitted Transferees (other than the JWC Holders and Management Holders) hold less than 5% of the Common Stock Equivalents. (b) As long as at least one Halifax Director is a member of the Board of Directors pursuant to Section 4.1(c), there shall be at least one Halifax Director on each committee, if any, established by the Board of Directors. 4.3 Rights Non-Transferable. Notwithstanding anything to the contrary herein, the rights of the Original Halifax Holders and their Permitted Transferees (other than the JWC Holders and Management Holders) and the Halifax Directors under Section 4.1 and 4.2, respectively, may only be exercised by the Original Halifax Holders and their Permitted Transferees (other than the JWC Holders and Management Holders) and Halifax Directors, respectively, and may not be transferred or assigned in connection with any other Transfer of Subject Securities or otherwise. ARTICLE V Preemptive Rights 5.1 Rights to Subscribe for Securities. (a) Except in the case of Excluded Securities (as defined in Section 5.1(e)), the Company shall not, and shall cause its Subsidiaries not to, issue or sell any Common Stock Equivalent, unless the Company shall have first offered or caused such Subsidiary to offer (the 30 "PREEMPTIVE OFFER") to sell such Common Stock Equivalents to the JWC Holders and Halifax Holders (the "OFFERED SECURITIES") by delivery to such JWC Holders and Halifax Holders of written notice of such offer stating that the Company or such Subsidiary proposes to sell such Offered Securities, the number or amount of the Offered Securities proposed to be sold, the proposed purchase price therefor and any other terms and conditions of such offer. The Preemptive Offer shall by its terms remain open and irrevocable for a period of 10 Business Days from the date it is received from the Company (the "PREEMPTIVE OFFER PERIOD"). (b) Each JWC Holder and Halifax Holder shall have the option, exercisable at any time during the Preemptive Offer Period by delivering written notice to the Company or such Subsidiary (a "PREEMPTIVE OFFER ACCEPTANCE NOTICE"), to subscribe for the number or amount of such Offered Securities that would permit such JWC Holders and Halifax Holders to maintain its Offeree Percentage as it existed immediately prior to such issuance, sale or exchange. The Company or such Subsidiary shall notify each JWC Holder and Halifax Holder within five days following the expiration of the Preemptive Offer Period of the number or amount of Offered Securities which such JWC Holder and Halifax Holder has subscribed to purchase. (c) If Preemptive Offer Acceptance Notices are not given by the JWC Holders and Halifax Holders for all of the Offered Securities, the Company or such Subsidiary making such Preemptive Offer shall have 60 days from the expiration of the Preemptive Offer Period to sell all or any part of such Offered Securities as to which Preemptive Offer Acceptances Notices have not been given by the JWC Holders and Halifax Holders (the "Refused Securities") to any other Persons upon the terms and conditions including price, which are no more favorable, in the aggregate, to such other Persons or less favorable to the Company or such Subsidiary than those set forth in the Preemptive Offer. (d) Upon the closing, which shall include full payment to the Company or such Subsidiary, of the sale to such other Persons of all the Refused Securities, such JWC Holders and Halifax Holders shall purchase from the Company or such Subsidiary, and the Company or such Subsidiary shall sell to such JWC Holders and Halifax Holders, the Offered Securities with respect to which Preemptive Offer Acceptance Notices were delivered by such JWC Holders and Halifax Holders, at the terms specified in the Preemptive Offer. (e) The rights of the JWC Holders and Halifax Holders under this Section 5.1 shall not apply to the following securities (the "EXCLUDED SECURITIES"): (i) any Common Stock Equivalents issued or granted pursuant to a stock option or other similar equity incentive plan providing for issuance to employees or consultants of the Company or its Subsidiaries or upon the exercise or conversion of options or other Common Stock Equivalents issued to employees and consultants of the Company or its Subsidiaries; (ii) any Common Stock Equivalents and other derivative securities issued upon the exercise or conversion of outstanding Common Stock Equivalents; 31 (iii) any Common Stock Equivalents issued to any individual or entity which, in connection with the issuance of Common Stock Equivalents to such entity, simultaneously enters into a significant business transaction with the Company which is directly related to the Company's business; (iv) any Common Stock Equivalents issued as part of a Public Offering or any effective registration statement under the Securities Act; and (v) any Common Stock Equivalents issued to the Company or a Subsidiary. ARTICLE VI Certain Miscellaneous Other Provisions 6.1 Remedies. Each of the parties hereto acknowledges and agrees that no remedy at law would be adequate in the event of any breach of this Agreement. Accordingly, if any dispute arises concerning the sale or other disposition of any of the securities of the Company subject to this Agreement or concerning any other provisions hereof or the obligations of the parties hereunder, each party hereto agrees that, in addition to any other remedy to which they may be entitled at law or in equity, the other parties hereto shall be entitled to a decree of specific performance to enforce this Agreement (without bond or other security being required unless the party seeking such remedy fails to demonstrate to an appropriate court having jurisdiction that such party has a likelihood of success on the merits), and each party hereto waives the defense in any action or proceeding brought to enforce this Agreement that there exists an adequate remedy at law. Such remedies shall be cumulative and non-exclusive and shall be in addition to any other rights and remedies the parties may have under this Agreement or otherwise. 6.2 Entire Agreement; Amendment; Termination. (a) This Agreement sets forth the entire understanding of the parties, and supersedes all prior agreements and all other arrangements and communications, whether oral or written, with respect to the subject matter hereof. (b) The Schedule of Stockholders may be amended in writing by the Company to reflect changes in the composition of the Stockholders and changes in their addresses or telecopy numbers that may occur from time to time as a result of Permitted Transfers, Transfers permitted under Article II hereof or any new issuance by the Company of Common Stock or Common Stock Equivalents; provided, however, that no new issuance of Common Stock or Common Stock Equivalents shall be effective unless and until the Person receiving such securities (if not already a party hereto in such capacity) executes and delivers to the Company an executed Joinder Agreement in accordance with Section 2.13 hereof. Amendments to the Schedule of Stockholders reflecting Permitted Transfers or Transfers permitted under Article II hereof shall become effective when the amended Schedule of Stockholders, and a copy of a Joinder Agreement as executed by any new transferee in accordance with Section 2.13, are filed with the Company. 32 (c) Any other amendment to this Agreement shall be in writing and shall require the written consent of (a) the Company, (b) either the JWC Representative or the holders of a majority of Common Stock Equivalents at the time held by the JWC Holders, and, (c) if adverse to the interests of a particular Stockholder or Stockholder Group, then the consent of each particular Stockholder or the holders of a majority of the Common Stock Equivalents at the time held by such particular Stockholder Group, as the case may be, to whose interest such amendment is adverse. (d) Notwithstanding the foregoing provisions of this Section 6.2, this Agreement may be terminated at any time upon the written consent of (i) the Company and (ii) the holders of a majority of the Common Stock Equivalents at the time held by the Management Holders and (iii) the holders of a majority of the Common Stock Equivalents at the time held by the Halifax Holders and (iv) the holders of a majority of the Common Stock Equivalents at the time held by the JWC Holders (or the JWC Representative), each voting separately as a group. 6.3 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties agree that the body making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. 6.4 Notices. All notices, consents and other communications required, or contemplated under this Agreement shall be in writing and shall be delivered in the manner specified herein or, in the absence of such specification, shall be deemed to have been duly given (i) 3 Business Days after mailing by first class certified mail, postage prepaid, (ii) when delivered by hand, (iii) upon confirmation of receipt by telecopy, or (iv) 1 day after sending by overnight delivery service, to the respective addresses or telecopy numbers of the parties set forth below: (a) For notices and communications to the Company: c/o J.W. Childs Associates, L.P. One Federal Street Boston, MA 02110 Attention: Edward D. Yun Telecopy: 617-753-1101 and InSight Health Services Holdings Corp. 33 c/o J.W. Childs Associates, L.P. One Federal Street Boston, MA 02110 Attention: Edward D. Yun Telecopy: 617-753-1101 (b) For notices and communications to the Stockholders, to the respective addresses or telecopy numbers set forth in the Schedule of Stockholders. (c) With a copy in the case of the JWC Holders and the Company to: Kaye Scholer LLP 425 Park Avenue New York, NY 10022 Attention: Stephen C. Koval, Esq. Telecopy: 212-836-8689 (d) With a copy in the case of the Halifax Holders to: The Halifax Group, L.L.C. 1133 Connecticut Avenue, N.W. Suite 700 Washington, D.C. 20036 Attention: David Dupree and Kenneth Doyle Telecopy: 202-296-7133 (e) With a copy in the case of the Management Holders to: InSight Health Services Corp. 4400 MacArthur Blvd., Suite 800 Newport Beach, CA 92660 Attention: General Counsel and President Telecopy: (949) 476-0137 By notice complying with the foregoing provisions of this Section 6.4, each party shall have the right to change the mailing address or telecopy numbers for future notices and communications to such Party. 6.5 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective transferees, successors, assigns, heirs and administrators, provided that the rights under this Agreement may not be assigned except as expressly provided herein. No such assignment shall relieve an assignor of its obligations hereunder. 6.6 Termination. Without affecting any other provision of this Agreement requiring termination of any rights in favor of any Stockholder, Permitted Transferee or any other transferee 34 of Common Stock Equivalents, the provisions of Articles II and III (other than the indemnity and contribution provisions set forth therein) of this Agreement shall terminate as to such Stockholder, Permitted Transferee or other transferee, when, pursuant to and in accordance with this Agreement, such Stockholder, Permitted Transferee or other transferee, as the case may be, no longer owns any Common Stock Equivalents. 6.7 Recapitalizations, Exchanges, etc. The provisions of this Agreement shall apply, to the full extent set forth herein with respect to Common Stock Equivalents, to any and all shares of capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or in substitution of the Common Stock Equivalents, by reason of a stock dividend, stock split, stock issuance, reverse stock split, combination, recapitalization, reclassification, merger, consolidation or otherwise. Upon the occurrence of any such events, amounts (including the Cost Price) hereunder shall be appropriately adjusted. 6.8 JWC Representative. Each JWC Holder hereby designates and appoints (and each Permitted Transferee of each such JWC Holder shall be deemed to have so designated and appointed) Steven G. Segal and Edward D. Yun (so long as they are employees of J.W. Childs Associates, Inc. or its Affiliates or successor entities), or either of them, with full power of substitution (the "JWC REPRESENTATIVE") the representative of each such Person to perform all such acts as are required, authorized or contemplated by this Agreement to be performed by any such Person and hereby acknowledges that the JWC Representative shall be the only Person authorized to take any action so required, authorized or contemplated by this Agreement by each such Person. Each such Person further acknowledges that the foregoing appointment and designation shall be deemed to be coupled with an interest and shall survive the death or incapacity of such Person. Each such Person hereby authorizes (and each Permitted Transferee shall be deemed to have authorized) the other parties hereto to disregard any notice or other action taken by such Person pursuant to this Agreement except for the JWC Representative. The other parties hereto are and will be entitled to rely on any action so taken or any notice given by the JWC Representative and are and will be entitled and authorized to give notices only to the JWC Representative for any notice contemplated by this Agreement to be given to any such Person. A successor to the JWC Representative may be chosen by the holders of a majority of the Common Stock Equivalents at the time held by the JWC Holders, provided that written notice thereof is given by the successor JWC Representative to the Company, the Halifax Holders, the Management Holders, the Additional Holders and the other JWC Holders. 6.9 Halifax Representative. Each Halifax Holder hereby designates and appoints (and each Permitted Transferee of each such Halifax Holder shall be deemed to have so designated and appointed) David Dupree and Kenneth Doyle (so long as they are employees of Halifax Capital Partners or its Affiliates or successor entities), or either of them, with full power of substitution (the "HALIFAX REPRESENTATIVE") the representative of each such Person to perform all such acts as are required, authorized or contemplated by this Agreement to be performed by any such Person and hereby acknowledges that the Halifax Representative shall be the only Person authorized to take any action so required, authorized or contemplated by this Agreement by each such Person. Each such Person further acknowledges that the foregoing appointment and designation shall be deemed to be 35 coupled with an interest and shall survive the death or incapacity of such Person. Each such Person hereby authorizes (and each Permitted Transferee shall be deemed to have authorized) the other parties hereto to disregard any notice or other action taken by such Person pursuant to this Agreement except for the Halifax Representative. The other parties hereto are and will be entitled to rely on any action so taken or any notice given by the Halifax Representative and are and will be entitled and authorized to give notices only to the Halifax Representative for any notice contemplated by this Agreement to be given to any such Person. A successor to the Halifax Representative may be chosen by the holders of a majority of the Common Stock Equivalents at the time held by the Halifax Holders, provided that written notice thereof is given by the successor Halifax Representative to the Company, the JWC Holders, the Management Holders, the Additional Holders and the other Halifax Holders. 6.10 Action Necessary to Effectuate the Agreement. The parties hereto agree to take or cause to be taken all such corporate and other action as may be necessary to effect the intent and purposes of this Agreement. 6.11 No Waiver. No course of dealing and no delay on the part of any party hereto in exercising any right, power or remedy conferred by this Agreement shall operate as waiver thereof or otherwise prejudice such party's rights, powers and remedies. No single or partial exercise of any rights, powers or remedies conferred by this Agreement shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy. 6.12 Counterparts. This Agreement may be executed in two or more counterparts (including Joinder Agreements as counterparts), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, and all signatures need not appear on any one counterpart. 6.13 Headings, etc. All headings and captions in this Agreement are for purposes of references only and shall not be construed to limit or affect the substance of this Agreement. Words used in this Agreement, regardless of the gender and number used, will be deemed and construed to include any other gender, masculine, feminine, or neuter, and any other number, singular or plural, as the context requires. As used in this Agreement, the word "INCLUDING" is not limiting, and the word "OR" is not exclusive. The words "THIS AGREEMENT", "HERETO", "HEREIN", "HEREUNDER", "HEREOF", and words or phrases of similar import refer to this Agreement as a whole, together with any and all Schedules and Exhibits hereto, and not to any particular article, section, subsection, paragraph, clause or other portion of this Agreement. 6.14 Governing Law; Jurisdiction; Service of Process. This Agreement shall, in accordance with section 5-1401 of the General Obligations Law of the State of New York, be governed by the laws of the State of New York, without regard to any conflicts of laws 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 New York, or if it has or can acquire jurisdiction, in the United States District Court for the Southern District of New York, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate 36 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 New York. 6.15 Confidentiality; Public Announcements. No JWC Holder, Halifax Holder, Management Holder or Additional Holder shall disclose or use in any manner whatsoever, in whole or in part, any information concerning the Company or any of its direct or indirect shareholders, or any of their respective employees, directors or Subsidiaries or Affiliates (including, without limitation, the JWC Holders) received on a confidential basis from the Company or any other Person under or pursuant to this Agreement or any other agreement with the Company including without limitation financial terms and financial and organizational information contained in any documents, statements, certificates, materials or information furnished, or to be furnished, by or on behalf of the Company or any other Person in connection with the purchase or ownership of any Common Stock Equivalent; provided, however, that the foregoing shall not be construed, now or in the future, to apply to any information reflected in any recorded document, information which is independently developed by such Stockholder, information obtained from sources other than the Company or any of its direct or indirect shareholders, or any of their respective employees, directors, Subsidiaries or Affiliates (including without limitation the JWC Holders) or any of their respective agents or representatives (including without limitation attorneys, accountants, financial advisors, engineers and insurance brokers) or information that is or becomes in the public domain, nor shall it be construed to prevent such Stockholder from (i) making any disclosure of any information (A) if required to do so by any statute, law, treaty, rule, regulation, order, decree, writ, injunction or determination of any court or other governmental authority, in each case applicable to or binding upon such Stockholder, (B) to any governmental authority having or claiming authority to regulate or oversee any aspect of such Stockholder business or that of the corporate parent or affiliates of such Stockholder in connection with the exercise of such authority or claimed authority, or (C) pursuant to subpoena; or (ii) making, on a confidential basis, such disclosures as such Stockholder deem necessary or appropriate to such Stockholder's legal counsel, accountants (including outside auditors) or general or managing partner; (iii) making such disclosures as such Stockholder reasonably deem necessary or appropriate to any Transferee and/or counsel to or other representatives of such bank or financial institution or other entity, to which such Stockholder in good faith desires to Transfer all or a portion of its interest in any Common Stock Equivalents; provided, however, that such Transferee or counsel to or representative thereof, agree maintain the confidentiality of such disclosures on the terms stated herein; or (iv) making, on a confidential basis, disclosures of such information to current Stockholders. [Signatures on Following Pages] 37 AMENDED AND RESTATED STOCKHOLDERS AGREEMENT COUNTERPART SIGNATURE PAGE IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first set forth above. THE COMPANY: INSIGHT HEALTH SERVICES HOLDINGS CORP. By: /s/ Edward D. Yun ------------------------------- Name: Edward D. Yun Title: President AMENDED AND RESTATED STOCKHOLDERS AGREEMENT CONTINUATION OF COUNTERPART SIGNATURE PAGES MANAGEMENT HOLDER: By: /s/ Steven T. Plochocki --------------------------------------- Name: Steven T. Plochocki Title: President and Chief Executive Officer By: /s/ Michael A. Boylan --------------------------------------- Name: Michael A. Boylan Title: Executive Vice President, Operations, Eastern Division By: /s/ Thomas V. Croal --------------------------------------- Name: Thomas V. Croal Title: Executive Vice President and Chief Financial Officer By: /s/ Michael S. Madler --------------------------------------- Name: Michael S. Madler Title: Executive Vice President, Operations, Western Division AMENDED AND RESTATED STOCKHOLDERS AGREEMENT CONTINUATION OF COUNTERPART SIGNATURE PAGES THE JWC HOLDERS: J.W. CHILDS EQUITY PARTNERS II, L.P. By: J.W. Childs Advisors, L.P. By: J.W. Childs Associates, L.P. By: J.W. Childs Associates, Inc. By: /s/ Edward D. Yun ----------------------------------- Name: Edward D. Yun Title: Vice President JWC-INSIGHT CO-INVEST LLC By: J.W. Childs Associates, Inc. By: /s/ Edward D. Yun ----------------------------------- Name: Edward D. Yun Title: Vice President By executing above, each of the foregoing JWC Holders acknowledges that, pursuant to Section 6.8 of this Amended and Restated Stockholders Agreement, each of the foregoing JWC Holders has designated and appointed Steven G. Segal and Edward D. Yun, or either of them, as its representative to perform all acts as are required, authorized or contemplated by this Amended and Restated Stockholders Agreement. AMENDED AND RESTATED STOCKHOLDERS AGREEMENT CONTINUATION OF COUNTERPART SIGNATURE PAGES THE HALIFAX HOLDERS: HALIFAX CAPITAL PARTNERS, L.P. By: Halifax Genpar, L.P. By: The Halifax Group, L.L.C. By: /s/ David W. Dupree -------------------------------- Name: David W. Dupree Title: Managing Partner DAVID W. DUPREE /s/ David W. Dupree ----------------------------------- AMENDED AND RESTATED STOCKHOLDERS AGREEMENT CONTINUATION OF COUNTERPART SIGNATURE PAGES ADDITIONAL HOLDER: By: ------------------------- Name: EXHIBIT A SCHEDULE OF STOCKHOLDERS J.W. Childs Equity Partners II, L.P. JWC-InSight Co-Invest LLC Halifax Capital Partners, L.P. David W. Dupree EXHIBIT B JOINDER AGREEMENT The undersigned is executing and delivering this Joinder Agreement pursuant to the Amended and Restated Stockholders' Agreement, dated as of October 17, 2001 (the "AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT"), among InSight Health Services Holdings Corp., a Delaware corporation (the "COMPANY"), the JWC Holders, Halifax Holders, Management Holders and Additional Holders named therein. By executing and delivering this Joinder Agreement to the Company, the undersigned hereby agrees to become a party to, to be bound by, and to comply with the provisions of the Amended and Restated Stockholders' Agreement in the same manner as if the undersigned were an original signatory to such agreement. In connection therewith, effective as of the date hereof the undersigned hereby makes the representations and warranties contained in the Amended and Restated Stockholders' Agreement. Accordingly, the undersigned has executed and delivered this Joinder Agreement as of the __ day of ____________, _____. --------------------------------- Signature of Stockholder --------------------------------- Print Name of Stockholder EX-2.5 4 y55701ex2-5.txt MANAGEMENT AGREEMENT Exhibit 2.5 MANAGEMENT AGREEMENT This Management Agreement (the "AGREEMENT") is entered into as of October 17, 2001, by and among J.W. Childs Advisors II, L.P., a Delaware limited partnership ("JWC"), Halifax Genpar, L.P., a Delaware limited partnership ("HALIFAX" and together with JWC, the "CONSULTANTS"), InSight Health Service Holdings Corp., a Delaware corporation ("HOLDINGS"), and InSight Health Services Corp, a Delaware corporation (the "COMPANY"), and is made effective as of the Effective Time (as defined in the Merger Agreement (as defined below)). Holdings and the Company and/or their direct or indirect subsidiaries which receive the services performed by the Consultants, are hereinafter referred to as the "CLIENTS". The Consultants, Holdings and the Company are hereinafter jointly referred to as the "PARTIES". RECITALS A. The Consultants are specifically skilled in corporate finance, strategic corporate planning and other management services. B. Pursuant to that certain Agreement and Plan of Merger, dated as of June 29, 2001 (the "MERGER AGREEMENT"), as amended, by and among Holdings, InSight Health Services Acquisition Corp. (formerly known as JWCH Merger Corp.), a Delaware corporation and wholly-owned subsidiary of Holdings ("ACQUISITION"), and the Company, the Company will become the wholly-owned subsidiary of Holdings as a result of the merger of Acquisition with and into the Company (together with the other transactions contemplated by the Merger Agreement, the "MERGER"). C. Prior to the date hereof, the Consultants rendered substantial and valuable services to the Company, Holdings and Acquisition in connection with the Merger, including services regarding the planning and structuring of the Merger. D. The Clients will continue to require the Consultants' special skills and management advisory services in connection with their general business operations following the consummation of the Merger. E. The Consultants are willing to make such skills available and to provide such services to the Clients on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, the Clients and the Consultants, intending to be legally bound, do hereby agree as follows: 1. Engagement. The Clients hereby engage the Consultants for the Term (as hereinafter defined) and upon the terms and conditions herein set forth to provide consulting and management advisory services to the Clients and/or any of their subsidiaries, as requested from time to time by the Clients and/or any of their subsidiaries. These services will be in the field of financial and strategic corporate planning and such other management areas as the Consultants and the Clients shall mutually agree. In consideration of the compensation to the Consultants herein specified, the Consultants accept such engagement and agree to perform the services specified herein. 2. Term. The engagement hereunder shall be for a term commencing on the Effective Time and expiring on the fifth (5th) anniversary of such Effective Time (the "INITIAL TERM") unless terminated earlier as provided below. Upon expiration of the Initial Term, this Agreement shall automatically extend for successive periods of one (1) year each, unless terminated earlier as provided below or the Consultants or the Company shall give notice to the other at least ninety (90) days prior to the end of the Initial Term (or any annual extension thereof) indicating that it does not intend to extend the term of this Agreement. The Initial Term, together with all such annual extensions of the Initial Term, is referred to herein as the "TERM". Upon termination or final expiration of the Term, all obligations as between the Parties shall be without recourse to one another under this Agreement. 3. Services to be Performed. The Consultants shall devote reasonable time and efforts to the performance of the consulting and management advisory services contemplated by this Agreement. However, no precise number of hours is to be devoted by the Consultants on a weekly or monthly basis. The Consultants may perform services under this Agreement directly, through their respective employees or agents, or with such outside consultants as the Consultants may engage, with the consent of the board of directors of the Company, for such purpose. Each Client acknowledges that such services to them will not be exclusive, and that the Consultants and their affiliates will render similar services to other persons. 4. Confidentiality. The Consultants shall hold in confidence all proprietary and confidential information of the Clients and/or any of their subsidiaries which may come into the Consultants' possession or knowledge as a result of their performance of services hereunder, exercising a degree of care in maintaining such confidence as is used by the respective Consultant to protect its own proprietary or confidential information that it does not wish to disclose. The Consultants shall use all reasonable efforts to ensure that their respective employees, agents and outside consultants similarly maintain the confidentiality of such proprietary and confidential information of the Clients and/or any of their subsidiaries. 5. Compensation; Expense Reimbursement. 5.1 Closing Fee. In consideration of the Consultants' provision of services regarding the planning and structuring of the Merger and the other transactions contemplated by the Merger Agreement, and the Consultant's execution and delivery of this Agreement, the Company shall pay (i) JWC a fee in the amount of $4,500,000 and (ii) Halifax a fee in the amount of $1,125,000, each of which shall be due and payable in immediately available funds immediately upon consummation of the Merger. 2 5.2 Management Fee. In consideration of the management advisory services hereunder, (i) JWC shall be paid an aggregate annual fee (hereinafter the "JWC MANAGEMENT FEE") equal to $240,000, which JWC Management Fee shall be paid to JWC by the Clients (or any one of them) in equal monthly installments of $20,000 per month, and (ii) Halifax shall be paid an aggregate annual fee (hereinafter the "HALIFAX MANAGEMENT FEE") equal to $60,000, which Halifax Management Fee shall be paid to Halifax by the Clients (or any one of them) in equal monthly installments of $5,000 per month (the JWC Management Fee and the Halifax Management Fee together, the "MANAGEMENT FEES"); provided that the monthly installments due to JWC and Halifax in respect of any calendar month during which the Term commences shall be appropriately pro-rated for the number of days in such calendar month for which the Term was in effect. Such Management Fees are to be paid monthly in arrears on the first day of each calendar month, except for the installment which would otherwise be payable with respect to the calendar month in which the Term commences, which shall instead be paid upon consummation of the Merger. The Clients and/or any of their subsidiaries shall allocate the Management Fees among themselves according to the services received. 5.3 Expenses. The Clients shall reimburse the Consultants for all reasonable out-of-pocket expenses incurred in connection with management advisory services to be provided by the Consultants hereunder, including, without limitation, costs in connection with agents or outside consultants described in Section 3, reasonable travel, lodging and similar out-of-pocket costs reasonably incurred by the Consultants in connection with or on account of their performance of services for the Company hereunder. Reimbursement shall be made only upon presentation to the Clients by the Consultants of reasonably itemized documentation therefor. 6. Indemnification. In addition to their agreements and obligations under this Agreement, the Clients agree, jointly and severally, to indemnify and hold harmless the Consultants, and their affiliates, including their officers, directors, stockholders, partners, members, employees and agents (collectively, the "INDEMNITEES") from and against any and all claims, liabilities, losses and damages or actions suits or proceedings in respect thereof (collectively, the "OBLIGATIONS") as and when incurred by the Indemnitees, in any way related to the Merger or arising out of the performance by the Consultants of services under this Agreement, and to reimburse the Indemnitees for reasonable out-of-pocket legal and other expenses ("EXPENSES") as and when incurred by any of them in connection with or relating to investigating, preparing to defend, or defending any actions, claims or other proceedings (including any investigation or inquiry) arising in any manner out of or in connection with the Merger or the Consultants' performance under this Agreement (whether or not such Indemnitee is a named party in such proceeding); provided, however, that the Clients shall not be responsible under this Section 6 for any Obligations or Expenses incurred by an Indemnitee to the extent that it is finally judicially determined (in an action in which such Indemnitee is a party) to result from actions taken by such Indemnitee due to such Indemnitee's gross negligence or willful misconduct. 7. Contribution. If for any reason the indemnity provided for in Section 6 is unavailable or is insufficient to hold harmless any Indemnitee from any Obligations or Expenses, then the Clients shall contribute to the amount paid or payable by such Indemnitees as a result of such Obligations or Expenses in such proportion as is appropriate to reflect (i) the relative fault of the Clients, on the 3 one hand, and such Indemnitee, on the other, in connection with the state of facts giving rise to such Obligations or Expenses, (ii) if such Obligations or Expenses result from, arise out of, are based upon or relate to the Merger or any transaction contemplated hereby, the relative benefits received by the Clients, on the one hand, and such Indemnitee, on the other, from the Merger, and (iii) if required by law, any other relevant equitable considerations. For purposes of this Section 7, the relative fault of the Clients, on the one hand, and of the Indemnitee, on the other, shall be determined by reference to, among other things, their respective relative intent, knowledge, access to information and opportunity to correct the state of facts giving rise to such Obligations or Expenses. For purposes of this Section 7, the relative benefit of the Clients, on the one hand, and of the Indemnitee, on the other, shall be determined by weighing the direct monetary proceeds to the Clients, on the one hand, and such Indemnitees, on the other, from the Merger or such transactions contemplated hereby. The Parties hereto acknowledge and agree that it would not be just and equitable if contributions pursuant to Section 7 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to above. The Clients shall not be liable under this Section 7 for contribution to the amount paid or payable by any Indemnitee except to the extent and under such circumstances that the Clients would have been liable to indemnify, defend and hold harmless such Indemnitee under Section 6, if such indemnity were enforceable under applicable law. No Indemnitee shall be entitled to contribution from the Clients with respect to any Obligations or Expenses in the event that such Indemnitee is finally determined to be guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act of 1933, as amended) in connection with such Obligations or Expenses and the Clients are not guilty of such fraudulent misrepresentation. 8. Third-Party Beneficiaries. All Indemnitees not signatory to this Agreement are intended beneficiaries of Sections 6 and 7 of this Agreement. 9. Notice. All notices hereunder, to be effective, shall be in writing and shall be mailed by first class certified mail, postage prepaid, as follows: (i) If to JWC, addressed to it at: c/o J.W. Childs and Associates, L.P. One Federal Street, 21st floor Boston, Massachusetts 02110 Attention: Edward D. Yun with a copy (which shall not constitute notice) to: Kaye Scholer LLP 425 Park Avenue New York, New York 10022 Attention: Stephen C. Koval, Esq. (ii) If to Halifax, addressed to it at: 4 c/o The Halifax Group, L.L.C. 1133 Connecticut Avenue Washington, D.C. 20036 Attention: David W. Dupree with a copy (which shall not constitute notice) to: _________________________ _________________________ _________________________ Attention: _______________________ (iii) If to the Company, addressed to the Company at: InSight Health Services Corp. 4400 MacArthur Boulevard Suite 800 Newport Beach, California 92660 Attention: General Counsel 10. Modifications. This Agreement constitutes the entire agreement among the Parties hereto with regard to the subject matter hereof, superseding all prior understandings and agreements, whether written or oral. This Agreement may not be amended or revised except by a writing signed by the Parties. 11. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns, but may not be assigned by any Party without the prior written consent of the other Parties hereto. 12. Captions. Captions have been inserted solely for the convenience of reference and in no way define, limit or describe the scope or substance of any provision and shall not affect the validity of any other provision. 13. Governing Law; Jurisdiction; Service of Process. This Agreement shall, in accordance with Section 5-1401 of the General Obligations Law of the State of New York, be governed by the laws of the State of New York, without regard to any conflicts of laws 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 New York, or if it has or can acquire jurisdiction, in the United States District Court for the Southern District of New York, 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 5 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 New York. 14. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. 15. Counterparts. This Agreement may be executed in several counterparts each of which shall be deemed an original and all of which shall together constitute one and the same instrument. [Remainder of Page Intentionally Blank] 6 IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date first above written. J.W. CHILDS ADVISORS II, L.P. INSIGHT HEALTH SERVICES HOLDINGS CORP. By: J.W. Childs Associates, L.P. By: J.W. Childs Associates, Inc. By: /s/ Edward D. Yun By: /s/ Edward D. Yun ------------------------ ---------------------- Name: Edward D. Yun Name: Edward D. Yun Title: Vice President Title: President HALIFAX GENPAR, L.P. INSIGHT HEALTH SERVICES CORP. By: The Halifax Group, L.L.C. By: /s/ David W. Dupree By: /s/ Thomas V. Croal ------------------------ ------------------------ Name: David W. Dupree Name: Thomas V. Croal Title: Managing Partner Title: Executive Vice President & Chief Financial Officer EX-3.1 5 y55701ex3-1.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.1 CERTIFICATE OF MERGER OF INSIGHT HEALTH SERVICES ACQUISITION CORP. INTO INSIGHT HEALTH SERVICES CORP. Pursuant to Section 251 of the General Corporation Law of the State of Delaware (the "Code"), the undersigned corporation organized and existing under and by virtue of the Code, DOES HEREBY CERTIFY: FIRST: That the name and state of incorporation of each of the constituent corporations of the merger is as follows:
Name State of Incorporation ---- ---------------------- InSight Health Services Corp. Delaware InSight Health Services Acquisition Corp. Delaware
SECOND: That the Agreement and Plan of Merger, dated as of June 29, 2001, by and among, InSight Health Services Holdings Corp., InSight Health Services Acquisition Corp. (formerly known as JWCH Merger Corp.) and InSight Health Services Corp., has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of Section 251 of the Code (and with respect to InSight Health Services Acquisition Corp. in accordance with Section 228 of the Code). THIRD: That the name of the surviving corporation of the merger is InSight Health Services Corp. FOURTH: That the certificate of incorporation of InSight Health Services Corp., the surviving corporation, shall be amended to read in its entirety as set forth in Exhibit A attached hereto, and as so amended shall be the certificate of incorporation of the surviving corporation. FIFTH: That the Agreement and Plan of Merger is on file at the principal place of business of the surviving corporation. The address of the principal place of business of the surviving corporation is 4400 MacArthur Blvd., Suite 800, Newport Beach, CA 92660. SIXTH: That the Agreement and Plan of Merger will be furnished by the surviving corporation, on request and without cost to any stockholder of any constituent corporation. IN WITNESS WHEREOF, InSight Health Services Corp. has caused the Certificate to be executed on this 17th day of October, 2001. INSIGHT HEALTH SERVICES CORP. By: /s/ THOMAS V. CROAL ------------------------------------- Thomas V. Croal Executive Vice President and Chief Financial Officer 2 EXHIBIT A CERTIFICATE OF INCORPORATION OF INSIGHT HEALTH SERVICES CORP. Article I. Name. The name of the corporation is InSight Health Services Corp. (the "Corporation"). Article II. Registered Office. The address of the Corporation's registered office in Delaware is 15 East North Street. Dover (Kent County), Delaware 19901. United Corporate Services, Inc. is the Corporation's registered agent at that address. Article III. Purpose. The purpose of the Corporation is to engage in any lawful business, act or activity for which corporations may be organized under the Delaware General Corporation Law (the "DGCL"). Article IV. Capitalization. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 100 shares of Common Stock, $0.001 par value (the "Common Stock"). Article V. Common Stock. The powers, rights and other matters relating to the Common Stock are as follows: (i) Subject to the limitations set forth in this Article V, dividends may be paid on the Common Stock out of any funds legally available for that purpose, when, as and if declared by the Board of Directors. (ii) In the event of any liquidation, dissolution or winding up of the Corporation, after there shall have been paid to or set aside for the holders of outstanding shares having superior liquidation preferences to Common Stock the full preferential amounts to which they are respectively entitled, the holders of outstanding shares of Common Stock shall be entitled to receive pro rata, according to the number of shares held by them, the remaining assets of the Corporation legally available for distribution to the stockholders. (iii) At every meeting of the stockholders every holder of Common Stock shall be entitled to one (1) vote in person or by proxy for each share of Common Stock standing in his name on the stock transfer records of the Corporation provided that, if at A-1 any time there is outstanding more than one class of stock, the Corporation may not effect or consummate (1) any merger or consolidation of the Corporation with or into any other entity; (2) any sale, lease, exchange or other disposition of all or substantially all of the assets of the Corporation to or with any other person; or (3) any dissolution of the Corporation, unless such transaction is authorized by the holders of the Common Stock voting separately as a class (provided that the foregoing shall not apply to any merger or other transaction described above if the other party to the merger or other transaction is a Subsidiary of the Corporation. For purposes hereof, a "Subsidiary" is any person more than 50% of the voting securities of which are owned directly or indirectly by the Corporation; and a "person" is any individual, partnership, corporation or entity.) Article VI. Conduct of Business. The following provisions relate to the management of the business and the conduct of the affairs of the Corporation and are not inserted for the purpose of creating, defining, limiting and regulating the powers of the Corporation and its directors and stockholders: (i) By-Laws. The election of officers may be conducted in any manner the By-Laws provide, and need not be by written ballot. (ii) Amendment of By-Laws. The Board of Directors shall have the power to make, alter, amend or repeal the By-Laws of the Corporation, except to the extent that the By-Laws otherwise provide. Article VII. Indemnification. The Corporation shall indemnify to the full extent authorized by law any person made or threatened to be made a party to an action or proceeding whether criminal, civil, administrative or investigative, by reason of the fact that he is or was a director or officer of the Corporation or serves or served any other enterprise as a director or officer at the request of the Corporation or any predecessor of the Corporation. No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section l74 of the DGCL; or (iv) for any transaction from which the director derived an improper personal benefit. Article VIII. Section 203. The Corporation elects not to be governed by Section 203 of the DGCL. Article XI. Original Incorporator. The original incorporator of the Corporation is J. Kevin Boardman, 1445 Ross Avenue, Suite 4600, Dallas, TX 75202. A-2 EX-3.2 6 y55701ex3-2.txt BY-LAWS Exhibit 3.2 BY-LAWS OF JWCH MERGER CORP. 1. MEETINGS OF STOCKHOLDERS. 1.1 Annual Meeting. The annual meeting of stockholders shall be held on the 15th of May in each year, or as soon thereafter as practicable, and shall be held at a place and time determined by the board of directors (the "Board"). 1.2 Special Meetings. Special meetings of the stockholders may be called by resolution of the Board or by the chairman of the Board or the president and shall be called by the president or secretary upon the written request (stating the purpose or purposes of the meeting) of a majority of the directors then in office or of the holders of 25 % of the outstanding shares entitled to vote. Only business related to the purposes set forth in the notice of the meeting may be transacted at a special meeting. 1.3 Place and Time of Meetings. Meetings of the stockholders may be held in or outside Delaware at the place and time specified by the Board or the directors or stockholders requesting the meeting. 1.4 Notice of Meetings; Waiver of Notice. Written notice of each meeting of stockholders shall be given to each stockholder entitled to vote at the meeting, except that (a) it shall not be necessary to give notice to any stockholder who submits a signed waiver of notice before or after the meeting, and (b) no notice of an adjourned meeting need be given except when required under Section 1.5 of these by-laws or by law. Each notice of a meeting shall be given, personally or by mail, not less than 5 nor more than 60 days before the meeting and shall state the time and place of the meeting, and unless it is the annual meeting, shall state at whose direction or request the meeting is called and the purposes for which it is called. If mailed, notice shall be considered given when mailed to a stockholder at his address on the corporation's records. The attendance of any stockholder at a meeting, without protesting at the beginning of the meeting that the meeting is not lawfully called or convened, shall constitute a waiver of notice by him. 1.5 Quorum. At any meeting of stockholders, the presence in person or by proxy of the holders of a majority of the shares entitled to vote shall constitute a quorum for the transaction of any business. In the absence of a quorum a majority in voting interest of those present or, if no stockholders are present, any officer entitled to preside at or to act as secretary of the meeting, may adjourn the meeting until a quorum is present. At any adjourned meeting at which a quorum is present any action may be taken which might have been taken at the meeting as originally called. No notice of an adjourned meeting need be given if the time and place are announced at the meeting at which the adjournment is taken except that, if adjournment is for more than thirty days or if, after the adjournment, a new record date is fixed for the meeting, notice of the adjourned meeting shall be given pursuant to Section 1.4. 1.6 Voting; Proxies. Each stockholder of record shall be entitled to one vote for every share registered in his name. Corporate action to be taken by stockholder vote, including the election of directors, shall be authorized by a majority of the votes cast at a meeting of stockholders, except as otherwise provided by law or by Section 1.8 of these by-laws. Directors shall be elected in the manner provided in Section 2.1 of these by-laws. Voting need not be by ballot unless requested by a stockholder at the meeting or ordered by the chairman of the meeting; however, all elections of directors shall be by written ballot, unless otherwise provided in the certificate of incorporation. Each stockholder entitled to vote at any meeting of stockholders or to express consent to or dissent from corporate action in writing without a meeting may authorize another person to act for him by proxy. Every proxy must be signed by the stockholder or his attorney-in-fact. No proxy shall be valid after three years from its date unless it provides otherwise. 1.7 List of Stockholders. Not less than 10 days prior to the date of any meeting of stockholders, the secretary of the corporation shall prepare a complete list of stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in his name. For a period of not less than 10 days prior to the meeting, the list shall be available during ordinary business hours for inspection by any stockholder for any purpose germane to the meeting. During this period, the list shall be kept either (a) at a place within the city where the meeting is to be held, if that place shall have been specified in the notice of the meeting, or (b) if not so specified, at the place where the meeting is to be held. The list shall also be available for inspection by stockholders at the time and place of the meeting. 1.8 Action by Consent Without a Meeting. Any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voting. Prompt notice of the taking of any such action shall be given to those stockholders who did not consent in writing. 2. BOARD OF DIRECTORS. 2.1 Number, Qualification, Election and Term of Directors. The business of the corporation shall be managed by the Board, which shall consist of no less than one director and no more than seven directors. The number of directors may be changed by resolution of a majority of the entire 2 Board or by the stockholders, but no decrease may shorten the term of any incumbent director. Directors shall be elected at each annual meeting of stockholders with a majority vote and shall hold office until the next annual meeting of stockholders and until the election and qualification of their respective successors, subject to the provisions of Section 2.9. As used in these by-laws, the term "entire Board" means the total number of directors which the corporation would have if there were no vacancies on the Board. 2.2 Quorum and Manner of Acting. A majority of the entire Board shall constitute a quorum for the transaction of business at any meeting, except as provided in Section 2.10 of these by-laws. Actions of the Board shall be authorized by the vote of a majority of the directors present at the time of the vote if there is a quorum unless otherwise provided by law or these by-laws. In the absence of a quorum a majority of the directors present may adjourn any meeting from time to time until a quorum is present. 2.3 Place of Meetings. Meetings of the Board may be held in or outside Delaware. 2.4 Annual and Regular Meetings. Annual meetings of the Board, for the election of officers and consideration of other matters, shall be held either (a) without notice immediately after the annual meeting of stockholders and at the same place, or (b) as soon as practicable after the annual meeting of stockholders, on notice as provided in Section 2.6 of these by-laws. Regular meetings of the Board may be held without notice at such times and places as the Board determines. If the day fixed for a regular meeting is a legal holiday, the meeting shall be held on the next business day. 2.5 Special Meetings. Special meetings of the Board may be called by the chairman of the board, the president or by a majority of the entire board. Only business related to the purposes set forth in the notice of meeting or raised by the Chairman of the Board may be transacted at a special meeting. 2.6 Notice of Meetings; Waiver of Notice. Notice of the time and place of each special meeting of the Board, and of each annual meeting not held immediately after the annual meeting of stockholders and at the same place, shall be given to each director by mailing it to him at his residence or usual place of business at least three days before the meeting, or by delivering or telephoning, telegraphing or sending facsimile of such notice to him at least one day before the meeting. Notice of a special meeting shall also state the purpose or purposes for which the meeting is called. Notice need not be given to any director who submits a signed waiver of notice before or after the meeting or who attends the meeting without protesting at the beginning of the meeting the transaction of any business because the meeting was not lawfully called or convened. Notice of any adjourned meeting need not be given, other than by announcement at the meeting at which the adjournment is taken. 2.7 Board or Committee Action Without a Meeting. Any action required or permitted to be taken by the Board or by any committee of the Board may be taken without a meeting if all of the 3 members of the Board or of the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents by the members of the Board or the committee shall be filed with the minutes of the proceeding of the Board or of the committee. 2.8 Participation in Board or Committee Meetings by Conference Telephone. Any or all members of the Board or of any committee of the Board may participate in a meeting of the Board or of the committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at the meeting. 2.9 Resignation and Removal of Directors. Any director may resign at any time by delivering his resignation in writing to the president or secretary of the corporation, to take effect at the time specified in the resignation; the acceptance of a resignation, unless required by its terms, shall not be necessary to make it effective. Any or all of the directors may be removed at any time, either with or without cause, by vote of the stockholders. 2.10 Vacancies. Any vacancy in the Board, including one created by an increase in the number of directors, may be filled for the unexpired term by a majority vote of the remaining directors, though less than a quorum. 2.11 Compensation. Directors shall receive such compensation as the Board determines, together with reimbursement of their reasonable expenses in connection with the performance of their duties. A director may also be paid for serving the corporation, its affiliates or subsidiaries in other capacities. 3. COMMITTEES. 3.1 Executive Committee. The Board, by resolution adopted by a majority of the entire Board, may designate an Executive Committee of one or more directors which shall have all the powers and authority of the Board, except as otherwise provided in the resolution, section 141(c) of the Delaware General Corporation Law, or any other applicable law. The members of the Executive Committee shall serve at the pleasure of the Board. All action of the Executive Committee shall be reported to the Board at its next meeting. 3.2 Other Committees. The Board, by resolution adopted by a majority of the entire Board, may designate other committees of directors of one or more directors, which shall serve at the Board's pleasure and have such powers and duties as the Board determines. 3.3 Rules Applicable to Committees. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of a committee, the member or members present at a meeting of the committee and not disqualified, whether or not a 4 quorum, may unanimously appoint another director to act at the meeting in place of the absent or disqualified member. All action of a committee shall be reported to the Board at its next meeting. Each committee shall adopt rules of procedure and shall meet as provided by those rules or by resolutions of the Board. 4. OFFICERS. 4.1 Number; Security. The executive officers of the corporation shall be the chairman of the board, the president, one or more vice presidents (including an executive vice president, if the Board so determines), a secretary and a treasurer. Any two or more offices may be held by the same person, except the offices of president and secretary. The Board may require any officer, agent or employee to give security for the faithful performance of his duties. 4.2 Election; Term of Office. The executive officers of the corporation shall be elected annually by the Board, and each such officer shall hold office until the next annual meeting of the Board and until the election of his successor, subject to the provisions of Section 4.4. 4.3 Subordinate Officers. The Board may appoint subordinate officers (including assistant secretaries and assistant treasurers), agents or employees, each of whom shall hold office for such period and have such powers and duties as the Board determines. The Board may delegate to any executive officer or to any committee the power to appoint and define the powers and duties of any subordinate officers, agents or employees. 4.4 Resignation and Removal of Officers. Any officer may resign at any time by delivering his resignation in writing to the president or secretary of the corporation, to take effect at the time specified in the resignation; the acceptance of a resignation, unless required by its terms, shall not be necessary to make it effective. Any officer appointed by the Board or appointed by an executive officer or by a committee may be removed by the Board either with or without cause, and in the case of an officer appointed by an executive officer or by a committee, by the officer or committee who appointed him or by the president. 4.5 Vacancies. A vacancy in any office may be filled for the unexpired term in the manner prescribed in Sections 4.2 and 4.3 of these by-laws for election or appointment to the office. 4.6 The President. The president shall be the chief executive officer of the corporation and shall preside at all meetings of the Board and of the stockholders. Subject to the control of the Board and the chairman of the board, he shall have general supervision over the business of the corporation and shall have such other powers and duties as presidents of corporations usually have or as the Board assigns to him. 4.7 Vice President. Each vice president shall have such powers and duties as the Board or the president assigns to him. 5 4.8 The Treasurer. The treasurer shall be the chief financial officer of the corporation and shall be in charge of the corporation's books and accounts. Subject to the control of the Board, he shall have such other powers and duties as the Board or the president assigns to him. 4.9 The Secretary. The secretary shall be the secretary of, and keep the minutes of, all meetings of the Board and of the stockholders, shall be responsible for giving notice of all meetings of stockholders and of the Board, and shall keep the seal and, when authorized by the Board, apply it to any instrument requiring it. Subject to the control of the Board, he shall have such powers and duties as the Board or the president assigns to him. In the absence of the secretary from any meeting, the minutes shall be kept by the person appointed for that purpose by the presiding officer. 4.10 Salaries. The Board may fix the officers' salaries, if any, or it may authorize the president to fix the salary of any other officer. 5. SHARES. 5.1 Certificates. The corporation's shares shall be represented by certificates in the form approved by the Board. Each certificate shall be signed by the president or a vice president and by the secretary or an assistant secretary, or the treasurer or an assistant treasurer, and shall be sealed with the corporation's seal or a facsimile of the seal. Any or all of the signatures on the certificate may be a facsimile. 5.2 Transfers. Shares shall be transferable only on the corporation's books, upon surrender of the certificate for the shares, properly endorsed. The Board may require satisfactory surety before issuing a new certificate to replace a certificate claimed to have been lost or destroyed. 5.3 Determination of Stockholders of Record. The Board may fix, in advance, a date as the record date for the determination of stockholders entitled to notice of or to vote at any meeting of the stockholders, or to express consent to or dissent from any proposal without a meeting, or to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action. The record date may not be more than 60 or less than 10 days before the date of the meeting or more than 60 days before any other action. 6. MISCELLANEOUS. 6.1 Seal. The Board shall adopt a corporate seal, which shall be in the form of a circle and shall bear the corporation's name and the year and state in which it was incorporated. 6.2 Fiscal Year. The Board may determine the corporation's fiscal year. Until changed by the Board, the corporation's fiscal year shall end on June 30 of each calendar year. 6 6.3 Voting of Shares in Other Corporations. Shares in other corporations which are held by the corporation may be represented and voted by the president or a vice president of this corporation or by proxy or proxies appointed by one of them. The Board may, however, appoint some other person to vote the shares. 6.4 Amendments. By-laws may be amended, repealed or adopted by the stockholders or by a majority of the entire Board, but any by-law adopted by the Board may be amended or repealed by the stockholders. 7 EX-3.3 7 y55701ex3-3.txt CERTIFICATE OF INCORPORATION Exhibit 3.3 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF JWC/HALIFAX HOLDINGS CORP. The undersigned, an officer of JWC/Halifax Holdings Corp. (the "Corporation"), in order to amend the Certificate of Incorporation, hereby certifies as follows: FIRST: The name of the Corporation is JWC/Halifax Holdings Corp. SECOND: The Certificate of Incorporation is hereby amended by striking out Paragraph 1 thereof and by substituting in lieu of said Paragraph 1 the following new paragraph: "1. Name. The name of the corporation is InSight Health Services Holdings Corp. (the "Corporation")." The Certificate of Incorporation is hereby further amended by inserting Paragraph 11 which shall read as follows: "11. Director Voting. Except as otherwise provided in the By-Laws of the Corporation, each member of the Board of Directors shall have one vote on each matter brought to a vote before the Board of Directors." THIRD: The amendments of the Certificate of Incorporation set forth herein have been duly adopted by the Board of Directors pursuant to Section 141(f) of the General Corporation Law of the State of Delaware (the "DGCL") and written consent of the stockholders has been given in accordance with the provisions of Sections 228 and 242 of the DGCL. Dated: June 29, 2001 /s/ Mark J. Tricolli ---------------------- Name: Mark J. Tricolli Title: Vice President & Secretary CERTIFICATE OF INCORPORATION OF JWC/HALIFAX HOLDINGS CORP. 1. Name. The name of the corporation is JWC/Halifax Holdings Corp. (the "Corporation"). 2. Registered Office. The address of the Corporation's registered office in Delaware is 15 East North Street, Dover (Kent County), Delaware 19901. United Corporate Services, Inc. is the Corporation's registered agent at that address. 3. Purpose. The purpose of the Corporation is to engage in any lawful business, act or activity for which corporations may be organized under the Delaware General Corporation Law. 4. Capitalization. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 11,000,000 shares, consisting of: (i) 1,000,000 shares of Preferred Stock, $0.001 par value (the "Preferred Stock"), and (ii) 10,000,000 shares of Common Stock, $0.001 par value (the "Common Stock"). 5. Preferred Stock. The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions of the Preferred Stock are as follows: (i) The Preferred Stock may be issued from time to time in one or more series, with such distinctive serial designations as shall be stated and expressed in the resolution or resolutions providing for the issue of such shares from time to time adopted by the Board of Directors; and in such resolution or resolutions providing for the issue of shares of each particular series, the Board of Directors is expressly authorized to fix, without limitation: the annual rate or rates of dividends for the particular series; the dividend payment dates for the particular series and the date from which dividends on all shares of such series issued prior to the record date for the first dividend payment date shall be cumulative; the redemption price or prices for the particular series; the voting powers for the particular series; the rights to which the holders of the shares of such series shall be entitled on the voluntary or involuntary liquidation, dissolution or winding up of, or upon any distribution of the assets of, the Corporation, which rights may be different in the case of a voluntary liquidation, dissolution or winding up than in the case of such an involuntary event; the rights, if any, of holders of the shares of the particular series to convert the same into shares of any other series or class or other securities of the Corporation, with any provisions for the subsequent adjustment of such conversion rights; and to classify or reclassify any unissued preferred shares by fixing or altering from time to time any of the foregoing powers, preferences and rights and qualifications, limitations or restrictions. (ii) All the Preferred Stock of any one series shall be identical with each other in all respects, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative; and all shares of Preferred Stock shall be of equal rank, regardless of series, and shall be identical in all respects except as to the particulars fixed by the Board of Directors as hereinabove provided or as fixed herein. 6. Common Stock. The powers, rights and other matters relating to the Common Stock are as follows: (i) Subject to the limitations set forth in this Section 6, dividends may be paid on the Common Stock out of any funds legally available for that purpose, when, as and if declared by the Board of Directors. (ii) In the event of any liquidation, dissolution or winding up of the Corporation, after there shall have been paid to or set aside for the holders of outstanding shares having superior liquidation preferences to Common Stock the full preferential amounts to which they are respectively entitled, the holders of outstanding shares of Common Stock shall be entitled to receive pro rata, according to the number of shares held by them, the remaining assets of the Corporation legally available for distribution to the stockholders. (iii) At every meeting of the stockholders every holder of Common Stock shall be entitled to one (1) vote in person or by proxy for each share of Common Stock standing in his name on the stock transfer records of the Corporation provided that, if at any time there is outstanding more than one class of stock, the Corporation may not effect or consummate (1) any merger or consolidation of the Corporation with or into any other entity; (2) any sale, lease, exchange or other disposition of all or substantially all of the assets of the Corporation to or with any other person; or (3) any dissolution of the Corporation, unless such transaction is authorized by the holders of the Common Stock voting separately as a class (provided that the foregoing shall not apply to any merger or other transaction described above if the other party to the merger or other transaction is a Subsidiary of the Corporation. For purposes hereof, a "Subsidiary" is any person more than 50% of the voting securities 2/3 of which are owned directly or indirectly by the Corporation; and a "person" is any individual, partnership, corporation or entity.) 7. Conduct of Business. The following provisions relate to the management of the business and the conduct of the affairs of the Corporation and are not inserted for the purpose of creating, defining, limiting and regulating the powers of the Corporation and its directors and stockholders: (i) By-Laws. The election of officers may be conducted in any manner the By-Laws provide, and need not be by written ballot. (ii) Amendment of By-Laws. The Board of Directors shall have the power to make, alter, amend or repeal the By-Laws of the Corporation, except to the extent that the By-Laws otherwise provide. 8. Indemnification. The Corporation shall indemnify to the full extent authorized by law any person made or threatened to be made a party to an action or proceeding whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director or officer of the Corporation or serves or served any other enterprise as a director or officer at the request of the Corporation or any predecessor of the Corporation. No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the Delaware General Corporation Law; or (iv) for any transaction from which the director derived an improper personal benefit. 9. Section 203. The corporation elects not to be governed by Section 203 of the Delaware General Corporation Law. 10. Incorporator. The name and address of the sole incorporator is Jon E. Flaute, c/o Kaye Scholer LLP, 425 Park Avenue, New York, New York 10022. June 13, 2001 /s/ Jon E. Flaute --------------------------- Jon E. Flaute Sole Incorporator 3/3 EX-3.4 8 y55701ex3-4.txt BYLAWS OF INSIGHT Exhibit 3.4 AMENDED AND RESTATED BY-LAWS OF INSIGHT HEALTH SERVICES HOLDINGS CORP. 1. MEETINGS OF STOCKHOLDERS. 1.1 Annual Meeting. The annual meeting of stockholders shall be held on the 15th of May in each year, or as soon thereafter as practicable, and shall be held at a place and time determined by the board of directors (the "Board"). 1.2 Special Meetings. Special meetings of the stockholders may be called by resolution of the Board or by the chairman of the Board or the president and shall be called by the president or secretary upon the written request (stating the purpose or purposes of the meeting) of a majority of the directors then in office or of the holders of 25 % of the outstanding shares entitled to vote. Only business related to the purposes set forth in the notice of the meeting may be transacted at a special meeting. 1.3 Place and Time of Meetings. Meetings of the stockholders may be held in or outside Delaware at the place and time specified by the Board or the directors or stockholders requesting the meeting. 1.4 Notice of Meetings; Waiver of Notice. Written notice of each meeting of stockholders shall be given to each stockholder entitled to vote at the meeting, except that (a) it shall not be necessary to give notice to any stockholder who submits a signed waiver of notice before or after the meeting, and (b) no notice of an adjourned meeting need be given except when required under Section 1.5 of these by-laws or by law. Each notice of a meeting shall be given, personally or by mail, not less than 5 nor more than 60 days before the meeting and shall state the time and place of the meeting, and unless it is the annual meeting, shall state at whose direction or request the meeting is called and the purposes for which it is called. If mailed, notice shall be considered given when mailed to a stockholder at his address on the corporation's records. The attendance of any stockholder at a meeting, without protesting at the beginning of the meeting that the meeting is not lawfully called or convened, shall constitute a waiver of notice by him. 1.5 Quorum. At any meeting of stockholders, the presence in person or by proxy of the holders of a majority of the shares entitled to vote shall constitute a quorum for the transaction of any business. In the absence of a quorum a majority in voting interest of those present or, if no stockholders are present, any officer entitled to preside at or to act as secretary of the meeting, may adjourn the meeting until a quorum is present. At any adjourned meeting at which a quorum is present any action may be taken which might have been taken at the meeting as originally called. No notice of an adjourned meeting need be given if the time and place are announced at the meeting at which the adjournment is taken except that, if adjournment is for more than thirty days or if, after the adjournment, a new record date is fixed for the meeting, notice of the adjourned meeting shall be given pursuant to Section 1.4. 1.6 Voting; Proxies. Each stockholder of record shall be entitled to one vote for every share registered in his name. Corporate action to be taken by stockholder vote, including the election of directors, shall be authorized by a majority of the votes cast at a meeting of stockholders, except as otherwise provided by law or by Section 1.8 of these by-laws. Directors shall be elected in the manner provided in Section 2.1 of these by-laws. Voting need not be by ballot unless requested by a stockholder at the meeting or ordered by the chairman of the meeting; however, all elections of directors shall be by written ballot, unless otherwise provided in the certificate of incorporation. Each stockholder entitled to vote at any meeting of stockholders or to express consent to or dissent from corporate action in writing without a meeting may authorize another person to act for him by proxy. Every proxy must be signed by the stockholder or his attorney-in-fact. No proxy shall be valid after three years from its date unless it provides otherwise. 1.7 List of Stockholders. Not less than 10 days prior to the date of any meeting of stockholders, the secretary of the corporation shall prepare a complete list of stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in his name. For a period of not less than 10 days prior to the meeting, the list shall be available during ordinary business hours for inspection by any stockholder for any purpose germane to the meeting. During this period, the list shall be kept either (a) at a place within the city where the meeting is to be held, if that place shall have been specified in the notice of the meeting, or (b) if not so specified, at the place where the meeting is to be held. The list shall also be available for inspection by stockholders at the time and place of the meeting. 1.8 Action by Consent Without a Meeting. Any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voting. Prompt notice of the taking of any such action shall be given to those stockholders who did not consent in writing. 2. BOARD OF DIRECTORS. 2.1 Number, Qualification, Election and Term of Directors. The business of the corporation shall be managed by the Board, which shall consist of no less than one director and no more than ten directors. The number of directors may be changed by resolution of a majority of the entire Board or by the stockholders, but no decrease may shorten the term of any incumbent director. Directors shall be elected at each annual meeting of stockholders with a majority vote and shall hold office until the next annual meeting of stockholders and until the election and qualification of their 2 respective successors, subject to the provisions of Section 2.10. As used in these by-laws, the term "entire Board" means the total number of directors which the corporation would have if there were no vacancies on the Board. 2.2 Quorum and Manner of Acting. A majority of the entire Board (including at least three directors designated by the JWC Holders (as defined by the Amended and Restated Stockholders Agreement dated as of October 17, 2001 by and among InSight Health Services Holdings Corp., J.W. Childs Equity Partners II, L.P., JWC-InSight Co-Invest LLC, Halifax Capital Partners, L.P., David W. Dupree and the other parties named therein)) shall constitute a quorum for the transaction of business at any meeting, except as provided in Section 2.11 of these by-laws. Actions of the Board shall be authorized by the vote of a majority of the directors present at the time of the vote if there is a quorum unless otherwise provided by law or these by-laws. In the absence of a quorum a majority of the directors present may adjourn any meeting from time to time until a quorum is present. 2.3 Voting Rights. Each director on the Board shall have one vote on each matter brought to a vote before the Board. 2.4 Place of Meetings. Meetings of the Board may be held in or outside Delaware. 2.5 Annual and Regular Meetings. Annual meetings of the Board, for the election of officers and consideration of other matters, shall be held either (a) without notice immediately after the annual meeting of stockholders and at the same place, or (b) as soon as practicable after the annual meeting of stockholders, on notice as provided in Section 2.7 of these by-laws. Regular meetings of the Board may be held without notice at such times and places as the Board determines provided that any director who does not attend a regular meeting shall be given prompt notice of any actions or resolutions approved by the Board at such meeting. If the day fixed for a regular meeting is a legal holiday, the meeting shall be held on the next business day. 2.6 Special Meetings. Special meetings of the Board may be called by the chairman of the board, the president or by a majority of the entire board. Only business related to the purposes set forth in the notice of meeting or raised by the Chairman of the Board may be transacted at a special meeting. 2.7 Notice of Meetings; Waiver of Notice. Notice of the time and place of each special meeting of the Board, and of each annual meeting not held immediately after the annual meeting of stockholders and at the same place, shall be given to each director by methods reasonably calculated to give each director notice of such meeting at least one day before the meeting. Notice of a special meeting shall also state the purpose or purposes for which the meeting is called. Notice need not be given to any director who submits a signed waiver of notice before or after the meeting or who attends the meeting without protesting at the beginning of the meeting the transaction of any business because the meeting was not lawfully called or convened. Notice of any adjourned meeting need not be given, other than by announcement at the meeting at which the adjournment is taken. 3 2.8 Board or Committee Action Without a Meeting. Any action required or permitted to be taken by the Board or by any committee of the Board may be taken without a meeting if all of the members of the Board or of the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents by the members of the Board or the committee shall be filed with the minutes of the proceeding of the Board or of the committee. 2.9 Participation in Board or Committee Meetings by Conference Telephone. Any or all members of the Board or of any committee of the Board may participate in a meeting of the Board or of the committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at the meeting. 2.10 Resignation and Removal of Directors. Any director may resign at any time by delivering his resignation in writing to the president or secretary of the corporation, to take effect at the time specified in the resignation; the acceptance of a resignation, unless required by its terms, shall not be necessary to make it effective. Any or all of the directors may be removed at any time, either with or without cause, by vote of the stockholders. 2.11 Vacancies. Any vacancy in the Board, including one created by an increase in the number of directors, may be filled for the unexpired term by a majority vote of the remaining directors, though less than a quorum. 2.12 Compensation. Directors shall receive such compensation as the Board determines, together with reimbursement of their reasonable expenses in connection with the performance of their duties. A director may also be paid for serving the corporation, its affiliates or subsidiaries in other capacities. 3. COMMITTEES. 3.1 Executive Committee. The Board, by resolution adopted by a majority of the entire Board, may designate an Executive Committee of one or more directors which shall have all the powers and authority of the Board, except as otherwise provided in the resolution, section 141(c) of the Delaware General Corporation Law, or any other applicable law. The members of the Executive Committee shall serve at the pleasure of the Board. All action of the Executive Committee shall be reported to the Board at its next meeting. 3.2 Other Committees. The Board, by resolution adopted by a majority of the entire Board, may designate other committees of directors of one or more directors, which shall serve at the Board's pleasure and have such powers and duties as the Board determines. 3.3 Rules Applicable to Committees. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of a committee, the 4 member or members present at a meeting of the committee and not disqualified, whether or not a quorum, may unanimously appoint another director to act at the meeting in place of the absent or disqualified member. All action of a committee shall be reported to the Board at its next meeting. Each committee shall adopt rules of procedure and shall meet as provided by those rules or by resolutions of the Board. 4. OFFICERS. 4.1 Number; Security. The executive officers of the corporation shall be the chairman of the board, the president, one or more vice presidents (including an executive vice president, if the Board so determines), a secretary and a treasurer. Any two or more offices may be held by the same person, except the offices of president and secretary. The Board may require any officer, agent or employee to give security for the faithful performance of his duties. 4.2 Election; Term of Office. The executive officers of the corporation shall be elected annually by the Board, and each such officer shall hold office until the next annual meeting of the Board and until the election of his successor, subject to the provisions of Section 4.4. 4.3 Subordinate Officers. The Board may appoint subordinate officers (including assistant secretaries and assistant treasurers), agents or employees, each of whom shall hold office for such period and have such powers and duties as the Board determines. The Board may delegate to any executive officer or to any committee the power to appoint and define the powers and duties of any subordinate officers, agents or employees. 4.4 Resignation and Removal of Officers. Any officer may resign at any time by delivering his resignation in writing to the president or secretary of the corporation, to take effect at the time specified in the resignation; the acceptance of a resignation, unless required by its terms, shall not be necessary to make it effective. Any officer appointed by the Board or appointed by an executive officer or by a committee may be removed by the Board either with or without cause, and in the case of an officer appointed by an executive officer or by a committee, by the officer or committee who appointed him or by the president. 4.5 Vacancies. A vacancy in any office may be filled for the unexpired term in the manner prescribed in Sections 4.2 and 4.3 of these by-laws for election or appointment to the office. 4.6 The President. The president shall be the chief executive officer of the corporation and shall preside at all meetings of the Board and of the stockholders. Subject to the control of the Board and the chairman of the board, he shall have general supervision over the business of the corporation and shall have such other powers and duties as presidents of corporations usually have or as the Board assigns to him. 4.7 Vice President. Each vice president shall have such powers and duties as the Board or the president assigns to him. 5 4.8 The Treasurer. The treasurer shall be the chief financial officer of the corporation and shall be in charge of the corporation's books and accounts. Subject to the control of the Board, he shall have such other powers and duties as the Board or the president assigns to him. 4.9 The Secretary. The secretary shall be the secretary of, and keep the minutes of, all meetings of the Board and of the stockholders, shall be responsible for giving notice of all meetings of stockholders and of the Board, and shall keep the seal and, when authorized by the Board, apply it to any instrument requiring it. Subject to the control of the Board, he shall have such powers and duties as the Board or the president assigns to him. In the absence of the secretary from any meeting, the minutes shall be kept by the person appointed for that purpose by the presiding officer. 4.10 Salaries. The Board may fix the officers' salaries, if any, or it may authorize the president to fix the salary of any other officer. 5. SHARES. 5.1 Certificates. The corporation's shares shall be represented by certificates in the form approved by the Board. Each certificate shall be signed by the president or a vice president and by the secretary or an assistant secretary, or the treasurer or an assistant treasurer, and shall be sealed with the corporation's seal or a facsimile of the seal. Any or all of the signatures on the certificate may be a facsimile. 5.2 Transfers. Shares shall be transferable only on the corporation's books, upon surrender of the certificate for the shares, properly endorsed. The Board may require satisfactory surety before issuing a new certificate to replace a certificate claimed to have been lost or destroyed. 5.3 Determination of Stockholders of Record. The Board may fix, in advance, a date as the record date for the determination of stockholders entitled to notice of or to vote at any meeting of the stockholders, or to express consent to or dissent from any proposal without a meeting, or to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action. The record date may not be more than 60 or less than 10 days before the date of the meeting or more than 60 days before any other action. 6. MISCELLANEOUS. 6.1 Seal. The Board shall adopt a corporate seal, which shall be in the form of a circle and shall bear the corporation's name and the year and state in which it was incorporated. 6.2 Fiscal Year. The Board may determine the corporation's fiscal year. Until changed by the Board, the corporation's fiscal year shall end on June 30 of each calendar year. 6 6.3 Voting of Shares in Other Corporations. Shares in other corporations which are held by the corporation may be represented and voted by the president or a vice president of this corporation or by proxy or proxies appointed by one of them. The Board may, however, appoint some other person to vote the shares. 6.4 Amendments. By-laws may be amended, repealed or adopted by the stockholders or by a majority of the entire Board, but any by-law adopted by the Board may be amended or repealed by the stockholders. 7 EX-3.5 9 y55701ex3-5.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.5 RESTATED CERTIFICATE OF INCORPORATION OF AMERICAN HEALTH SERVICES CORP. Filed pursuant to Sections 242 & 245 of the Delaware Corporation Law ================================================================================ I, THE UNDERSIGNED, being the duly elected President and Chief Executive Officer of American Health Services Corp., a Delaware corporation formerly known as NMR Centers Inc., whose original certificate of incorporation was filed with the Delaware Secretary of State in October 1982 and whose first restated certificate of incorporation was filed with the Delaware Secretary of State in July 1987, do hereby certify that the following provisions constitute the RESTATED CERTIFICATE OF INCORPORATION of the corporation which was duly adopted by the directors and stockholders of the corporation in accordance with the provisions of Sections 242 & 245 of the Delaware General Corporation Law: FIRST: The name of the corporation is AMERICAN HEALTH SERVICES CORP. SECOND: The registered office of the corporation is located at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, in the County of Newcastle, in the State of Delaware. The name of its registered agent at the address is the Corporation Trust Company. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. Without limiting in any manner the scope and generality of the foregoing, it is hereby provided that the corporation shall have the following purposes, objects and powers: To purchase, manufacture, produce, assemble, receive, lease or in any manner acquire, hold, own, use, operate, install, maintain, service, repair, process, alter, improve, import, export, sell, lease, assign, transfer and generally to trade and deal in and with raw materials, natural or manufactured articles or products, machinery, equipment, devices, systems, parts, supplies, apparatus, goods, wares, merchandise and personal property of every kind, nature or description, tangible or intangible, used or capable of being used for any purpose whatsoever; and to engage and participate in any mercantile, manufacturing or trading business of any kind or character. To improve, manage, develop, sell, assign, transfer, lease, mortgage, pledge or otherwise dispose of or deal with all or any part of the property of the corporation and from time to time to vary any investment or employment of capital of the corporation. To borrow money, and to make and issue notes, bonds, debentures, obligations and evidences of indebtedness of all kinds, whether secured by mortgage, pledge or otherwise, without limit as to amount, and to secure the same by mortgage, pledge or otherwise; and generally to make and perform agreements and contracts of every kind and description, including contracts of guaranty and suretyship. To lend money for its corporate purposes, invest and reinvest its funds, and take, hold and deal with real and personal property as security for the payment of funds so loaned or invested. To the same extent as natural persons might or could do, to purchase or otherwise acquire, and to hold, own, maintain, work, develop, sell, lease, exchange, hire, convey, mortgage or otherwise dispose of and deal in lands and leaseholds, and any interest, estate and rights in real property, and any personal or mixed property, and any franchises, rights, licenses or privileges necessary, convenient or appropriate for any of the purposes herein expressed. To apply for, obtain, register, purchase, lease or otherwise to acquire and to hold, own, use, develop, operate and introduce and to sell, assign, grant licenses or territorial rights in respect 2 to, or otherwise to turn to account or dispose of, any copyrights, trade marks, trade names, brands, labels, patent rights, letters patent of the United States or of any other country or government, inventions, improvements and processes, whether used in connection with or secured under letters patent or otherwise. To participate with others in any corporation, partnership, limited partnership, joint venture, or other association of any kind, or in any transaction, undertaking or arrangement which the participating corporation would have power to conduct by itself, whether or not such participation involves sharing or delegation of control with or to others; and to be an incorporator, promoter or manager of other corporations of any type or kind. To pay pensions and establish and carry out pension, profit sharing, stock option, stock purchase, stock bonus, retirement, benefit, incentive and commission plans, trusts and provisions for any or all of its directors, officers and employees, and for any or all of the directors, officers and employees of its subsidiaries; and to provide insurance for its benefit on the life of any of its directors, officers or employees, or on the life of any stockholder for the purpose of acquiring at his death shares of its stock owned by such stockholders. To acquire by purchase, subscription or otherwise and to hold for investment or otherwise and to use, sell, assign, transfer, mortgage, pledge or otherwise deal with or dispose of stocks, bonds or any other obligations or securities of any corporation or corporations; to merge or consolidate with any corporation in such manner as may be permitted by law; to aid in any manner any corporation whose stock, bonds or other obligations are held or in any manner guaranteed by this corporation, or in which this corporation is in any way interested; and to do any other acts or things for the preservation, protection, 3 improvement or enhancement of the value while owner of any such stock, bonds or other obligations to exercise all the rights, powers and privileges of ownership thereof, and to exercise any and all voting powers thereon; and to guarantee the payment of dividends upon any stock, the principal or interest or both, of any bonds or other obligations, and the performance of any contracts. To do all and everything necessary, suitable and proper for the accomplishment of any of the purpose or the attainment of any of the objects or the furtherance of any of the powers hereinbefore set forth, either alone or in association with other corporations, firms or individuals, and to do every other act or acts, thing or things incidental or appurtenant to or growing out of or connected with the aforesaid business or powers or any part or parts thereof, provided the same be not inconsistent with the laws under which this corporation is organized. The business or purpose of the corporation is from time to time to do any one or more of the acts and things hereinabove set forth, and it shall have power to conduct and carry on its said business, or any part thereof, and to have one or more offices, and to exercise any or all of its corporate powers and rights, in the State of Delaware, and in the various other states, territories, colonies and dependencies of the United States, in the District of Columbia, and in all or any foreign countries. The enumeration herein of the object and purpose of the corporation shall be construed as powers as well as objects and purposes and shall not be deemed to be excluded by interference any powers, objects or purposes which the corporation is empowered to exercise, whether expressly by force of the laws of the State of Delaware now or hereafter in effect, or impliedly by the reasonable construction of the said laws. 4 FOURTH: The corporation is authorized to issue two classes of capital stock, designated Common Stock and Preferred Stock. The amount of total authorized capital stock of the corporation is 30,000,000 shares, divided into 25,000,000 shares of Common shares, par value three cents ($.03) per share, and 5,000,000 shares of Preferred Stock, par value three cents ($.03) per share. The Preferred Stock may be issued in one or more series. The Board of Directors is hereby authorized to issue the shares of Preferred Stock in such series and to fix from time to time before issuance the number of shares to be included in any series and the designation, relative powers, preferences and rights and qualifications, limitations or restrictions of all shares of such series. The authority of the Board of Directors with respect to each series shall include, without limiting the generality of the foregoing, the determination of any or all of the following: (a) The number of shares constituting that series and the distinctive designation of that series; (b) The dividend rate on the shares of that series, whether dividends shall be cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (d) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate upon the happening of certain specified events; (e) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; 5 (f) Whether that series shall have a sinking fund for the redemption of purchase or shares of that series, and, if so, the terms and amount of such sinking fund; (g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment on shares of that series; and (h) Such other designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as it may deem advisable; all as shall be determined from time to time by the Board of Directors and shall be stated in a resolution or resolutions providing for the issuance of such Preferred Stock. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority of the capital stock of the corporation entitled to vote, with all such holders voting as a single class. FIFTH: The following provisions are inserted for the management of the business and for the conduct of the affairs of the corporation, and for further definition, limitation and regulation of the powers of the corporation and of its directors and stockholders: (a) The number of directors of the corporation shall be such as from time to time shall be fixed by, or in the manner provided in the by-laws. Election of directors need not be by ballot unless the by-laws so provide. (b) The Board of Directors shall have power without the assent or vote of the stockholders to make, alter, amend, change, add to or repeal the by-laws of the corporation; to fix and vary the amount to be reserved for any proper purpose; to authorize and cause to be executed mortgages and liens upon all or any part of the property of the corporation; to determine the use and disposition of any surplus or 6 net profits; and to fix the times for the declaration and payment of dividends. (c) Subject to the provisions of Article Twelfth, the directors in their discretion may submit any contract or act of approval or ratification at any annual meeting of the stockholders or at any meeting of the stockholders called or the purpose of considering any such act or contract, and any contract or act that shall be approved or be ratified by the vote of the holders of a majority of the stock of the corporation which is represented in person or by proxy at such meeting and entitled to vote thereat (provided that a lawful quorum of stockholders by there represented in person or by proxy) shall be as valid and as binding upon the corporation and upon all the stockholders as though it had been approved or ratified by every stockholder of the corporation, whether or not the contract or act would otherwise be open to legal attack because of directors' interest, or for any other reason. (d) In addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the corporation; subject, nevertheless, to the provisions of the statutes of Delaware, of this certificate, and to any by-laws from time to time made by the stockholders; provided, however, that no by-laws so made shall invalidate any prior act of the directors which would have been valid if such by-law had been made. SIXTH: Section 1. A director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of the fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. 7 Any repeal or modification of the foregoing paragraph by the stockholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. Section 2. (a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a director, officer or employee of the corporation or is or was serving at the request of the corporation as a director, officer or employee of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Delaware General Corporation Law against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof with respect to proceedings to enforce rights to indemnification, the corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of directors of the corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee) shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise (hereinafter an "undertaking"). 8 (b) Right of Indemnitee to Bring Suit. If a claim under paragraph (a) of this Section is not paid in full by the corporation within sixty (60) days after a written claim has been received by the corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit or in a suit brought by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the corporation shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met the applicable standard of conduct set forth in the Delaware General corporation Law. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General corporation Law, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right hereunder, or by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified or to such advancement of expenses under this Section or otherwise shall be on the corporation. (c) Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, this Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. (d) Insurance. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would 9 have the power to indemnify such person against such expense, liability or loss under the Delaware General corporation Law. (e) Indemnification of Agents of the Corporation. The corporation may, to the extent authorized from time to time by the board of directors, grant rights to indemnification and to the advancement of expenses, to any agent of the corporation to the fullest extent of the provisions of this Section with respect to the indemnification and advancement of expenses of directors, officers and employees of the corporation. SEVENTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise as consequence of such compromise of arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. EIGHTH: Subject to the provisions of Article Thirteenth hereof, the corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders, directors and officers are subject to this reserved power. NINTH: New Bylaws may be adopted or the Bylaws of the corporation may be amended or repealed by the affirmative vote of the holders of not less than sixty-six and two-thirds percent (66-2/3%) of the outstanding Voting Stock (as defined below), unless one or more Related Persons (as defined below) exist, in which case the required vote shall be by holders of not less than sixty-six and two-thirds percent (66-2/3%) of the Disinterested Shares (as defined below). Bylaws may also be adopted, amended or 10 repealed by the Board of Directors as provided in Article Fifth hereof or as permitted by law. TENTH: Section 1. Classified Board. The directors in office, other than those who may be elected by the holders of any series of Preferred Stock under specified circumstances, shall be divided, with respect to the time for which they severally hold office, into three classes: Class I, Class II and Class III. The term of office of the Class I directors will expire at the 1989 annual meeting of stockholders, the term of office of the Class II directors will expire at the 1990 annual meeting of stockholders, and the term of office of the Class III directors will expire at the 1991 annual meeting of stockholders, with each director to hold office until his or her successor shall have been duly elected and qualified. At each annual meeting of stockholders, commencing with the 1989 annual meeting, directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the third succeeding annual stockholders meeting following their election, and shall hold office until their successors have been duly elected and qualified. Section 2. Removal. Subject to the rights of the holders of any series of Preferred Stock, any director, or the entire Board, may be removed from office at any time, with or without cause, but only by the affirmative vote of the holders of a majority of the corporation's outstanding Voting Stock; provided, however, that if a proposal to remove a director is made by or on behalf of a Related Person or a director affiliated with a Related Person, then in addition to such affirmative vote such removal shall require the affirmative vote of the holders of not less than sixty-six and two-thirds percent (66-2/3%) of the Disinterested Shares. Section 3. Notice of Stockholder Nominees. Nominations of persons for election to the board of directors of the corporation shall be made only at a meeting of stockholders and only (1) by or at the direction of the Board or (2) by any stockholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 3. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the corporation not less than sixty (60) days nor more than ninety (90) days prior to the meeting; provided, however, that in the event that less than forty (40) days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting 11 was mailed or such public disclosure was made. For purposes of this Section 3, any adjournment(s) or postponement(s) of the original meeting whereby the meeting will reconvene within thirty (30) days from the original date shall be deemed for purposes of notice to be a continuation of the original meeting and no nominations by a stockholder of persons to be elected directors of the corporation may be made at any such reconvened meeting unless pursuant to a notice which was timely for the meeting on the date originally scheduled. Such stockholder's notice shall set forth: (i) as to each person whom the stockholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to the Securities Exchange Act of 1934 (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) as to the stockholder giving the notice (A) the name and address, as they appear on the corporation's books, of such stockholder, and (B) the class, series and number of shares of the corporation which are beneficially owned by such stockholder. Notwithstanding the foregoing, nothing in this Section 3 shall be interpreted or construed to require the inclusion of information about any such nominee in any proxy statement distributed by, at the direction of, or on behalf of the Board. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by this Section 3, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. ELEVENTH: Subject to the right of the holders of any series of Preferred Stock, any election or other action by stockholders of this corporation must be effected at an annual or special meeting of stockholders, and may not be effected by written consent without a meeting. TWELFTH: Section 1: Definitions. For the purposes of this Article Twelfth and Articles Ninth, Tenth, Eleventh and Thirteenth: A. "Affiliate" and "Associate" have the meanings set forth in Rule 12b-2 under the Securities Exchange Act of 1934 as in effect on December 31, 1987. B. "Beneficially Owns" has the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934 as in effect on December 31, 1987. 12 C. "Business Combination" means (a) any merger, consolidation, combination or reorganization of the corporation or a Subsidiary with or into a Related Person or of a Related Person with or into the corporation or a Subsidiary, (b) any sale, lease, exchange, transfer, liquidation or other disposition, including without limitation a mortgage or any other security device, of assets of the corporation and/or one or more Subsidiaries (including, without limitation, any voting securities of a Subsidiary) constituting a Substantial Part of the corporation, to a Related Person, (c) any sale, lease, exchange, transfer, liquidation or other disposition, including without limitation, a mortgage or any other security device, of assets of a Related Person (including, without limitation, any voting securities of a subsidiary of such Related Person but excluding the Affiliates and Associates of such Related Person), or of any Affiliate or Associate of such Related Person, constituting a Substantial Part of such Related Person, to the corporation and/or one or more Subsidiaries, (d) the issuance or transfer of any securities (other than by way of a pro rata distribution to all stockholders) of the corporation or a Subsidiary to a Related Person which, when aggregated with all prior issuances and transfers to such Related Person of securities of the corporation or such Subsidiary during the preceding 365 days, constitutes five percent (5%) or more of the outstanding class or series of securities of the corporation or such Subsidiary, (e) the acquisition by the corporation or a Subsidiary of any securities issued by a Related Person if, after giving effect thereto, the corporation and its Subsidiaries would own an aggregate of one percent (1%) or more of (i) the outstanding shares of any class or series of any equity security issued by the Related Person or (ii) the outstanding principal amount of any class or series of any debt security issued by the Related Person (for purposes of such calculation, the corporation and its Subsidiaries shall be deemed to own at the time of such calculation any such equity or debt securities of the Related Person that may then or thereafter be acquired (x) upon the exercise of any options, warrants or other rights then owned by the corporation or a Subsidiary or (y) upon the conversion or exchange of any other security then owned by the corporation or a Subsidiary); (f) any recapitalization or reorganization that would have the effect, directly or indirectly, of increasing the voting power of a Related Person and (g) any agreement, contract or other arrangement providing for any of the transactions described in this definition of a Business Combination. D. "Continuing Director" means a director who (a) is not a Related Person or affiliated with a Related Person and (b) either (i) was a director on April 30, 1988, or (ii) became a director subsequent to such date and was recommended, elected or nominated by a majority of the Continuing Directors. 13 E. "Disinterested Shares" means, as to any Related Person, shares of Voting Stock Beneficially Owned by stockholders other than such Related Person. F. "Related Person" means and includes any individual, corporation, partnership or other person or entity, or any group of two or more of the foregoing that have agreed to act together, which, together with its Affiliates and Associates, Beneficially Owns, in the aggregate, fifteen percent (15%) or more of the outstanding Voting Stock, and any Affiliate or Associate of any such individual, corporation, partnerships or other person or entity; provided, however, that the term "Related Person" shall not include any individual, corporation, partnership or other person, entity or group, or any Affiliate or Associate thereof, which Beneficially Owned on December 23, 1987 fifteen percent (15%) or more of the outstanding Voting Stock of the corporation. C. "Subsidiary" means any corporation in which the corporation owns, directly or indirectly, securities which entitle the corporation to elect a majority of the board of directors of such corporation or which otherwise give to the corporation the power to control such corporation. H. "Substantial Part" means more than ten percent (10%) of the fair market value of the total consolidated assets of the corporation in question and its subsidiaries as of the end of its most recent fiscal year ending prior to the time the determination is being made. I. "Voting Stock" means all outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors of the corporation, and each reference to a percentage or portion of shares of Voting Stock shall refer to such percentage or portion of the votes entitled to be cast by such shares. Section 2. Vote Required for Certain Business Combinations. Except as otherwise expressly provided in Section 3 of this Article Twelfth, in addition to any affirmative vote required by law or by any other provision of this Restated Certificate of Incorporation, the approval or authorization of any Business Combination shall require the affirmative vote of the holders of not less than sixty-six and two-thirds percent (66-2/3%) of the Disinterested Shares. Section 3. Exception. Section 2 of this Article Twelfth shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as may be required by law and by any other provision of this Restated Certificate of Incorporation, if the Business Combination shall have been approved by a majority of the Continuing Directors. 14 Section 4. Determination of Compliance. A majority of the total number of Continuing Directors shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article Twelfth, including, without limitation, (a) whether a person is a Related Person, (b) the number of shares of capital stock Beneficially Owned by any person, (c) whether a person is an Affiliate or Associate of another and (d) whether the proposed transaction is a Business Combination. THIRTEENTH: In addition to any affirmative vote required by applicable law, any alteration, amendment, repeal or rescission (any "Change") of any provision of this Restated Certificate of Incorporation must be approved by a majority of the directors of the corporation then in office and by the affirmative vote of the holders of a majority of the outstanding Voting Stock of the corporation; provided, however, that if any such Change relates to Articles Ninth, Tenth, Eleventh or Twelfth hereof or to this Article Thirteenth, such Change must be approved (i) by a majority of the Continuing Directors, or (ii) by the affirmative vote of the holders of not less than sixty-six and two-thirds percent (66-2/3%) of the outstanding Voting Stock of the corporation and, if the Change is proposed by or on behalf of a Related Person or a director affiliated with a Related Person, by the affirmative vote of the holders of not less than sixty-six and two-thirds percent (66-2/3%) of the Disinterested Shares. IN WITNESS WHEREOF, American Health Services Corp. has caused this Certificate to be signed and attested by its duly authorized officers, this 21st day of July, 1988. AMERICAN HEALTH SERVICES CORP. By: /s/ S. LEWIS MEYER ----------------------------- S. Lewis Meyer, President and Chief Executive Officer ATTEST: /s/ CLARKE J. UNDERWOOD - ------------------------------ Clarke J. Underwood, Secretary 15 EX-3.6 10 y55701ex3-6.txt BYLAWS EXHIBIT 3.6 BY-LAWS OF NMR CENTERS INC. (A Delaware Corporation) ---------- ARTICLE I Meetings of Stockholders Section 1. Place of Meeting. Each meeting of the stockholders of the Corporation shall be held at such place within or without the State of Delaware, as shall be fixed by the Board of Directors or as provided in Section 3 of this Article I. Section 2. Annual Meetings. The annual meeting of stockholders of the Corporation for the election of directors and for the transaction of such other business as may come before the meeting shall be held in each year on such business day and at such hour as shall be fixed by the Board of Directors. Section 3. Special Meetings. A special meeting of the stockholders of the Corporation for any purpose or purposes, unless otherwise prescribed by law, may be called at any time by the Chairman of the Board, if any, or the President or by order of the Board of Directors or by order of the Executive Committee of the Board of Directors, if any, and shall be called by the Chairman of the Board, if any, or the President or Secretary at the request in writing of a stockholder or stockholders holding of record at least twenty percent (20%) of all the shares of the Corporation then outstanding and entitled to vote thereat. Special meetings shall be called by means of a notice as provided for in Section 4 of this Article I. Each special meeting shall be held at the principal place of business of the Corporation unless otherwise fixed by the Board of Directors. Section 4. Notice of Meetings. Except as otherwise provided by law, not less than ten (10) nor more than sixty (60) days before the day on which each meeting of the stockholders, whether annual or special, is to be held, written notice thereof shall be given to each stockholder of record entitled to vote thereat by delivering such notice to such stockholder personally, or by mailing such notice in a postage prepaid envelope addressed to such stockholder at such stockholder's post-office address furnished by such 2 stockholder to the Secretary of the Corporation for such purpose, or, if such stockholder shall not have furnished such stockholder's address to the Secretary of the Corporation for such purpose, then at such stockholder's post-office address as it appears on the records of the Corporation, or by transmitting such notice to such stockholder at such address by telex, telegraph or cable. Every such notice shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Notice of any adjourned meeting shall not be required to be given, except when expressly required by these By-Laws or by law. As provided in Article VIII of these By-Laws, any stockholder may waive the requirements of notice provided for herein. Section 5. Quorum. The holders of shares of stock entitling them to exercise a majority of the voting power of the Corporation, present in person or by proxy at any meeting of the stockholders, shall constitute a quorum. Section 6. Adjournments. At any annual or special meeting, the holders of shares of stock entitling them to exercise a majority of the voting power which is present in person or by proxy at such meeting, although less than a quorum, may adjourn the meeting from time to time without further notice (except as is otherwise required by law) other than 3 by announcement at the meeting at which such adjournment is taken of the time and place of the adjourned meeting, until a quorum shall be present. At any such adjourned meeting, at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting. Section 7. Organization. At every meeting of the stockholders, the Chairman of the Board, if any, or in such Chairman's absence, the President or, in the President's absence, any other officer of the Corporation chosen to act as chairman of the meeting by a majority of the votes cast by the stockholders present in person or by proxy and entitled to vote thereat, shall act as chairman of the meeting and the Secretary or, if the Secretary has been chosen to act as chairman of the meeting or is absent, an Assistant Secretary shall act as secretary of the meeting. In the absence or inability to act of the Secretary or an Assistant Secretary, the chairman of the meeting may appoint any person present to act as secretary of the meeting. Section 8. List of Stockholders. It shall be the duty of the Secretary or other officer of the Corporation who shall have charge of its stock ledger, either directly or through another officer of the Corporation designated by him or her or through a transfer agent or transfer clerk 4 appointed by the Board of Directors, to prepare, at least ten days before every meeting of the stockholders at which directors of the Corporation are to be elected, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder, which list shall be open throughout such ten-day period, at the place where the meeting is to be held or at another place within the city where the meeting is to be held if such other place is specified in the notice of the meeting, to the examination of any stockholder for any purpose germane to the meeting, and shall be produced at and for the duration of the meeting for inspection by any stockholder who shall be present thereat. The original or duplicate stock ledger shall be exclusive evidence of the stockholders entitled to examine such list or the books of the Corporation, or to vote in person or by proxy at such election. Section 9. Voting. Except as otherwise provided by law or by the Certificate of Incorporation of the Corporation, at each meeting of stockholders, each stockholder of record as of the record date fixed for such meeting in accordance with Article V, Section 4 of these By-Laws shall be entitled at such meeting to one vote for each share of voting stock of the Corporation registered in such stockholder's 5 name on the books of the Corporation. Shares of stock of the Corporation owned by the Corporation shall not be voted. Directors shall be elected by a plurality of the votes cast by the stockholders present in person or by proxy and entitled to vote in the election, a quorum being present. At all meetings of the stockholders, all matters (except for election of directors and in special cases where other provision is made by law or in the Certificate of Incorporation of the Corporation or in these By-Laws) shall be decided by a majority of the votes cast by the stockholders present in person or by proxy and entitled to vote thereat, a quorum being present. Neither the election of directors nor any other action need be by ballot. Section 10. Inspectors. The chairman may, and at the request of a majority of the stockholders present in person or by proxy and entitled to vote thereat shall, appoint one or more inspectors of election for each meeting of stockholders. The inspectors shall decide upon the qualification of voters and the validity of ballots, count the votes and declare the results. Inspectors need not be stockholders. Section 11. Proxies. Every stockholder entitled to vote at a meeting of stockholders or to express consent or dissent without a meeting may authorize another person or 6 persons (who need not be a stockholder) to act for such stockholder by proxy. Every proxy must be signed by the stockholder or such stockholder's attorney-in-fact. No proxy shall be valid after the expiration of three years from the date thereof unless otherwise expressly provided therein. The authority of the holder of a proxy to act shall not be revoked by the incompetence or death of the stockholder who executed the proxy unless, before the authority is exercised, written notice of an adjudication of such incompetence or of such death is received by the corporate officer or agent responsible for maintaining the list of stockholders. Section 12. Consent of Stockholders in Lieu of Meeting. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, the meeting and vote of stockholders may be dispensed with and the action may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of stock entitled to vote thereon were present and voting. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. 7 ARTICLE II Board of Directors Section 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, which may exercise all such authority and powers of the Corporation to do all such lawful acts and things as are not by law, the Certificate of Incorporation of the Corporation or these By-Laws directed or required to be exercised or done by the stockholders. Section 2. Number and Term of Office. The Board of Directors shall consist of one or more members. The number of directors shall be fixed from time to time by the Board of Directors or stockholders and unless and until so fixed, the number shall be seven. Directors need not be stockholders of the Corporation. Each director shall hold office until the annual meeting of the stockholders next following his or her election and until his or her successor shall have been elected and shall qualify, or until his or her earlier death, resignation or removal in the manner hereinafter provided. Section 3. Quorum and Manner of Acting. A majority of the directors (but in no event less than one-third of the entire Board of Directors) shall constitute a quorum for the 8 transaction of business at any meeting, and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. A majority of the directors present may adjourn any meeting from time to time. Notice of any adjourned meeting shall be given in the manner provided in Section 7 of this Article II. As used in these By-Laws, the term "entire Board of Directors" or "entire Board" means the total number of directors which the Corporation would have if there were no vacancies. Section 4. Place of Meeting. The Board of Directors may hold its meetings at such place or places, within or without the State of Delaware, as the Board may from time to time determine or as shall be specified or fixed in the respective notices or waivers of notice thereof. Section 5. Regular Meetings. The Board of Directors shall hold a regular meeting for the purpose of organization, the election of the Executive Committee of the Board of Directors, if any, and the transaction of other business as soon as practicable after each annual meeting of stockholders and on the date and at the place as may be fixed by the Board. Other regular meetings of the Board of Directors may be held at such time and place as may be fixed from time to 9 time by the Board. No notice of any regular meeting shall be required. Section 6. Special Meetings. Special meetings of the Board of Directors shall be called by the Secretary or an Assistant Secretary on the request of the Chairman of the Board, if any, or the President, or on the request in writing of one-third of the directors stating the purpose of such meeting. Section 7. Notice of Special Meeting. Written, oral or any other mode of notice of the time and place of each special meeting shall be given to each director in sufficient time for the convenient assembly thereat. Such notice need not state the purpose or purposes, of the meeting. As provided in Article VIII of these By-Laws, any director may waive the notice requirements provided for herein. Section 8. Organization. At each meeting of the Board of Directors, the Chairman of the Board, if any, or in his or her absence, the President, or in his or her absence, a director chosen by a majority of the directors present, shall act as chairman of the meeting. The Secretary, or in his or her absence any person appointed by the chairman of the meeting, shall act as secretary of the meeting. 10 Section 9. Consent of Directors in Lieu of Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all directors consent thereto in writing and the writing or writings evidenced such consent are filed with the minutes of proceedings of the Board. Section 10. Resignations. Any director of the Corporation may resign at any time by giving written notice to the Board of Directors. The resignation of any director shall take effect at the date of receipt of such notice or at any later date specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 11. Removal of Directors. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares of the Corporation then entitled to vote at an election of directors. Section 12. Vacancies. Any vacancy in the Board of Directors caused by death, resignation, disqualification, removal, an increase in the number of directors, or any other cause, may be filled by vote of a majority of the remaining directors then in office (although less than a 11 quorum), or by the sole remaining director, and each director so elected shall hold office until the annual meeting of stockholders next following his or her election and until his or her successor shall have been elected and shall qualify, or until his or her earlier death, resignation or removal in the manner hereinabove provided. Section 13. Meetings by Conference Telephone. The members of the Board of Directors or any committee elected or designated by such Board may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 13 shall constitute presence in person at such a meeting. ARTICLE III Executive and Other Committees Section 1. Appointment and Powers. The Board of Directors by resolution adopted by a majority of the entire Board, may designate annually not less than three of its members to constitute an Executive Committee. Except as otherwise provided in the resolution constituting the same or by law, the Executive Committee shall have and may exercise in the 12 intervals between the meetings of the Board of Directors any and all of the powers and authority of the Board. Any member of the Executive Committee may be removed at any time, and any vacancy on the Executive Committee may be filled, by vote of a majority of the entire Board of Directors. Section 2. Procedure; Meetings; Quorum. Except as otherwise provided in these By-Laws, the Executive Committee shall fix its own rules of procedure and shall meet at such time, at such place or places and on such notice as it may determine. At every meeting of the Executive Committee, a majority of all the members shall constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of the Committee. The Executive Committee shall keep minutes of its acts and proceedings which shall be submitted at the next regular or special meeting of the Board of Directors, and any action taken by the Board with respect thereto shall be entered in the minutes of the Board of Directors. Section 3. Resignations. Any member of the Executive Committee may resign at any time by giving written notice to the Chairman of the Board, if any, or the President or, in the case of the resignation therefrom by the President, to the Board of Directors. Such resignation shall take effect 13 at the date of receipt of such notice or at any later date specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 4. Other Committees. From time to time the Board of Directors by resolution may create such other committee or committees to advise the Board, the Executive Committee, if any, and the officers and employees of the Corporation with respect to such matters as the Board shall deem advisable and to have and exercise such additional functions, powers and authority as the Board shall by resolution prescribe. A majority of all the members of any such committee may fix its own rules of procedure and may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board of Directors shall have power to change the number of members or the personnel of any such committee at any time, to fill vacancies, and to discharge any such committee, either with or without cause, at any time, provided however, that such committee or committees shall consist of at least one member of the Board of Directors. Each such committee shall keep minutes of its act and proceedings. Section 5. Consent of Members of Committee in Lieu of Meeting; Meetings by Conference Telephone. Any action 14 required or permitted to be taken at any meeting of any committee contemplated by these By-Laws may be taken without a meeting if all members of the committee consent thereto in writing, and the writing or writings evidencing such consent are filed with the minutes of proceedings of the committee. Meetings of any such committee may be held by means of conference telephone or similar equipment as provided in Section 13 of Article II of these By-Laws. ARTICLE IV Officers Section 1. Number. The officers of the Corporation shall be a President, one or more Vice Presidents as the Board of Directors shall determine (any one or more of whom the Board of Directors may designate Executive Vice President or Senior Vice President or similar title), a Secretary, a Treasurer and such other officers, including a Chairman of the Board, as the Board of Directors may deem desirable. One person may hold the offices and perform the duties of any two or more of said offices. Section 2. Election; Term of Office; Qualifications; Duties. The officers shall be chosen by the Board of Directors. Each officer shall hold office until his or her successor is chosen and shall have qualified or until his or her death, 15 or until he or she shall have resigned or shall have been removed in the manner hereinafter provided. Officers need not be stockholders or directors of the Corporation. The officers shall each have such powers and duties as are set forth in these By-Laws and as generally pertain to their respective offices, and as from time to time may be conferred upon them by the Board of Directors. The Chairman of the Board, if any, shall be a member of the Board of Directors and shall preside at all meetings of the Board of Directors and have such other powers and perform such other duties as from time to time may be assigned to him by the Board of Directors. In the absence or disability of the Chairman of the Board, or if there be no Chairman, The President shall preside at all meetings of stockholders, in the absence or disability of the Chairman (or if there be no Chairman), of the Board of Directors, and of the Executive Committee, if any. He or she shall have the powers and authority which ordinarily are inherent in such office in addition to those which the Board of Directors may from time to time prescribe. Each Vice President shall have such powers and perform such duties as from time to time may be assigned to him or her by the Board of Directors or the President. The Secretary shall keep or cause to be kept in the corporate minute books the minutes of the meetings of the stockholders, the Board of Directors, and all committees created by the Board of Directors and shall have such other 16 powers and authority which ordinarily are inherent in such office in addition to those which the Board of Directors may from time to time prescribe. The Treasurer shall have charge and custody of, and be responsible for, all funds and securities of the Corporation and shall have such other powers and authority which ordinarily are inherent in such office in addition to those which the Board of Directors from time to time may prescribe. Section 3. Removal. Any officer may be removed, either with or without cause, at any time, by the Board of Directors. Section 4. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors. Any such resignation shall take effect at the date of receipt of such notice or at any later date specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5. Vacancies. A vacancy in any office because of death, resignation, removal or any other cause shall be filled for the unexpired portion of the term in the manner prescribed in these By-Laws for election to such office. 17 ARTICLE V Shares of Stock and Their Transfer Section 1. Certificates for Shares of Stock. Certificates for shares of stock of the Corporation shall be in such form as shall be approved by the Board of Directors. They shall be issued in consecutive order and shall be numbered in the order of their issue, and shall be signed by the Chairman of the Board, if any, or the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Corporation, and sealed with the seal of the Corporation or a facsimile thereof, and each shall certify the number and class of shares of stock held by the person named therein as a stockholder. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any such certificate or certificates shall have ceased to be such officer, transfer agent or registrar of the Corporation for any reason before such certificate or certificates shall have been issued by the Corporation, such certificate or certificates may nevertheless be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The stock record books and the blank stock certificate books shall be kept by the Secretary or by a transfer agent or by a transfer clerk or by any other officer 18 or agent designated by the Board of Directors. Any restrictions on the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously on the certificate or certificates representing such shares of stock. Section 2. Transfer of Shares of Stock. Transfers of shares of stock of the Corporation shall be recorded on the books of the Corporation by the Secretary of the Corporation or a transfer agent or a transfer clerk of the Corporation, if any, upon surrender of the certificate or certificates for such shares of stock properly endorsed by the holder thereof or accompanied by a stock power relating thereto duly executed by such holder. Subject to any applicable provisions of law, transfers of stock may be restricted in accordance with the provisions of the Certificate of Incorporation of the Corporation, any agreement among stockholders, or as may otherwise be determined by the Board of Directors from time to time. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes insofar as the Corporation is concerned. Section 3. Lost, Destroyed and Mutilated Certificates. The holder of any shares of stock of the Corporation shall immediately notify the Corporation of the loss, destruction or mutilation of any certificate therefor, and, unless the 19 Board of Directors shall by resolution have otherwise provided, there shall be issued to such holder a new certificate or certificates for shares of stock, upon the surrender of the mutilated certificate or, in the case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate or his legal representative to give the Corporation a bond in such sum and with such surety or sureties as it may direct to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate. Section 4. Record Date. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to or dissent from any corporate action in writing without a meeting, or for the purpose of determining stockholders entitled to receive payment of any dividend or other distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock, or for the purpose of any other lawful action, the directors may fix, in advance, a date as the record date for any such determination of stockholders. Such date shall not be more than sixty days nor less than ten days before the date of such meeting, nor 20 more than sixty days prior to any other action. If no record date is fixed, the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; the record date for determining stockholders for any other purpose shall be at the close of business on the date on which the Board of Directors adopts the resolution relating thereto. When a determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders has been made as provided in this Section 4, such determination shall apply to any adjournment thereof; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE VI Seal The Board of Directors shall adopt a corporate seal, which shall bear the name of the Corporation and the words and figures indicating the state and year in which the Corporation was incorporated or such other words or figures as the Board of Directors may approve and adopt. 21 ARTICLE VII Fiscal Year The fiscal year of the Corporation shall be as determined by the Board of Directors from time to time. ARTICLE VIII Waiver of Notice Whenever any notice is required to be given by these By-Laws or the Certificate of Incorporation of the Corporation or the laws of the State of Delaware, the person entitled thereto may, in person or by attorney thereunto authorized, in writing or by telegraph, telex or cable, waive such notice whether before or after the meeting or other matter in respect of which such notice is to be given, and in such event such notice need not be given to such person and such waiver shall be deemed equivalent to such notice. Neither the purpose of nor the business to be transacted at such meeting need be specified in any written waiver of notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. 22 ARTICLE IX Indemnification of Directors, Officers, Employees and Agents The Corporation, to the full extent permitted by the laws of the State of Delaware as in effect at the time of the adoption of this Article IX or as such laws may be amended from time to time, shall (i) indemnify any person (and the heirs and legal representatives of such person) made or threatened to be made a party to any threatened, pending or completed action, suits or proceeding, whether civil, criminal, or administrative or investigative, by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation or any constituent corporation absorbed in a consolidation or merger, or serves or served with another corporation, partnership, joint venture, trust or other enterprise at the request of the Corporation or any such constituent corporation and (ii) provide to any such person (and the heirs and legal representatives of such person) advances for expenses incurred in defending any such action, suit or proceeding, upon receipt of an undertaking by or on behalf of such person (and the heirs and legal representatives of such person) to repay such advances unless it shall ultimately be determined that such person is entitled to indemnification by the Corporation. 23 ARTICLE X Amendments These By-Laws, or any of them, may be altered, amended or repealed, and new By-Laws may be made, upon the affirmative vote given at a meeting, or the written consent without a meeting, of the holders of record of a majority of the total number of the outstanding shares of the Corporation having voting power, or by the Board of Directors. By-Laws made, altered or amended by the Board of Directors shall be subject to alteration, amendment of repeal by the holders of record of a majority of the total number of the outstanding shares of the Corporation having voting power. THIS IS TO CERTIFY: That I am the duly elected, qualified and acting Secretary of NMR Centers Inc. and that the foregoing By-Laws were adopted as the By-Laws of said corporation on the 12 day of Oct., 1983. /s/ JAMES A. RICE ------------------------ James A. Rice, Secretary 24 EX-3.7 11 y55701ex3-7.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.7 [STAMP] CERTIFICATE OF INCORPORATION OF MDI ACQUISITION COMPANY 1. The name of the corporation is MDI Acquisition Company. 2. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 3. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. 4. The total number of shares of stock which the corporation shall have authority to issue is One Thousand (1,000), all of which shall have the par value of $.001 per share. 5. The name and mailing address of the sole incorporator is: M.A. Spencer Corporation Trust Center 1209 Orange Street Wilmington, Delaware 19801 6. The board of directors is authorized to make, alter or repeal the by-laws of the corporation. Election of directors need not be by written ballot. 7. A director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. 8. The corporation shall indemnify its officers, directors, employees and agents to the extent permitted by the General Corporation Law of Delaware. I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 27th day of March, 1998. /s/ M.A. SPENCER ------------------------- Sole Incorporator M.A. Spencer [STAMP] CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION BEFORE PAYMENT OF CAPITAL OF MDI ACQUISITION COMPANY I the undersigned, being the sole director of MDI Acquisition Company, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, do hereby certify: FIRST: That Article One of the Certificate of Incorporation of the Corporation be and it hereby is amended to read as follows: "SMSI Acquisition Company is the name of the Corporation." SECOND: That the Corporation has not received any payment for any of its stock. THIRD: That the amendment was duly adopted in accordance with the provisions of section 241 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, MDI Acquisition Company has caused this Certificate to be signed by E. Larry Atkins, its sole director, on March 31, 1998. /s/ E. LARRY ATKINS --------------------------------- E. Larry Atkins CERTIFICATE OF MERGER MERGING SIGNAL MEDICAL SERVICES, INC. INTO SMSI ACQUISITION COMPANY PURSUANT TO SECTION 251 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE SMSI ACQUISITION COMPANY, a corporation organized and existing under the laws of the State of Delaware, does hereby certify: FIRST: That the name and state of incorporation of each of the constituent corporations of the merger are as follows:
State of Name Incorporation ---- ------------- Signal Medical Services, Inc. Delaware SMSI Acquisition Company Delaware
SECOND: That an Agreement and Plan of Merger (the "Merger Agreement") has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of Section 251 of the General Corporation Law of the State of Delaware. THIRD: That the name of the surviving corporation of the merger is SMSI Acquisition Company, a Delaware corporation. FOURTH: That the Certificate of Incorporation of SMSI Acquisition Company, a Delaware corporation which is surviving the merger, shall be the Certificate of Incorporation of the surviving corporation, and shall remain the same in all respects, except that ARTICLE FIRST of the Certificate of Incorporation of SMSI Acquisition Company is hereby amended and restated in its entirety to read as follows: The name of the corporation is Signal Medical Services, Inc. [STAMP] FIFTH: That the executed Merger Agreement is on file at the principal place of business of the surviving corporation. The address of said principal place of business is 4400 MacArthur Blvd., Suite 800, Newport Beach, California 92660. SIXTH: That a copy of the Merger Agreement will be furnished by the surviving corporation, on request and without cost, to any stockholder of any constituent corporation. SEVENTH: That the effective time of the merger is 11:59 p.m., Eastern Standard Time, on the date this Certificate of Merger is filed. IN WITNESS WHEREOF, SMSI Acquisition Company has caused this Certificate to be signed by its President and CEO this 18th day of May, 1998. SMSI ACQUISITION COMPANY By: /s/ E. LARRY ATKINS ------------------------------- Name: E. Larry Atkins Title: President and CEO EX-3.8 12 y55701ex3-8.txt BYLAWS EXHIBIT 3.8 BYLAWS OF SIGNAL MEDICAL SERVICES, INC. (FORMERLY SMSI ACQUISITION COMPANY) A Delaware Corporation TABLE OF CONTENTS ARTICLE 1: OFFICES.......................................................... 1 1.1 Registered Office and Agent................................ 1 1.2 Other Offices.............................................. 1 ARTICLE 2: MEETINGS OF STOCKHOLDERS......................................... 1 2.1 Annual Meeting............................................. 1 2.2 Special Meeting............................................ 1 2.3 Place of Meetings.......................................... 2 2.4 Notice..................................................... 2 2.5 Voting List................................................ 2 2.6 Quorum..................................................... 2 2.7 Required Vote: Withdrawal of Quorum........................ 3 2.8 Method of Voting: Proxies.................................. 3 2.9 Record Date................................................ 3 2.10 Conduct of Meeting......................................... 4 2.11 Inspectors................................................. 4 2.12 Action by Written Consent.................................. 5 ARTICLE 3: DIRECTORS....................................................... 5 3.1 Management................................................ 5 3.2 Number: Qualification: Election: Term..................... 5 3.3 Change in Number.......................................... 5 3.4 Removal................................................... 5 3.5 Vacancies................................................. 5 3.6 Meetings of Directors..................................... 6 3.7 First Meeting............................................. 6 3.8 Election of Officers...................................... 6 3.9 Regular Meetings.......................................... 6 3.10 Special Meetings.......................................... 6 3.11 Notice.................................................... 6 3.12 Quorum: Majority Vote..................................... 6 3.13 Compensation.............................................. 6 3.14 Telephone Meetings........................................ 7 3.15 Waiver of Notice and Presumption of Assent................ 7 3.16 Action by Written Consent................................. 7 ARTICLE 4: COMMITTEES...................................................... 7 4.1 Designation............................................... 7
i 4.2 Number: Qualification: Term.............................. 7 4.3 Authority................................................ 7 4.4 Committee Changes........................................ 7 4.5 Alternate Members of Committees.......................... 8 4.6 Regular Meetings......................................... 8 4.7 Special Meetings......................................... 8 4.8 Quorum: Majority Vote.................................... 8 4.9 Minutes.................................................. 8 4.10 Compensation............................................. 8 4.11 Responsibility........................................... 8 4.12 Committee Rules.......................................... 8 ARTICLE 5: NOTICE........................................................ 9 5.1 Method................................................... 9 5.2 Waiver................................................... 9 ARTICLE 6: OFFICERS...................................................... 9 6.1 Number: Titles: Term of Office........................... 9 6.2 Removal.................................................. 9 6.3 Vacancies................................................ 10 6.4 Authority................................................ 10 6.5 Compensation............................................. 10 6.6 Duties of President...................................... 10 6.7 Duties of the Vice Presidents............................ 10 6.8 Duties of the Secretary.................................. 10 6.9 Duties of the Treasurer.................................. 10 6.10 Other Officers, Assistant Officers and Agents............ 11 6.11 Absence or Disability of Officers........................ 11 ARTICLE 7: INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS............. 11 7.1 Nature of Indemnity...................................... 11 7.2 Procedure for Indemnification of Directors and Officers.. 11 7.3 Article Not Exclusive.................................... 12 7.4 Insurance................................................ 12 7.5 Expenses................................................. 12 7.6 Employees and Agents..................................... 12 7.7 Contract Rights.......................................... 12 7.8 Merger or Consolidation.................................. 12 ARTICLE 8: CERTIFICATES AND STOCKHOLDERS................................. 13 8.1 Certificates for Shares.................................. 13 8.2 Replacement of Lost or Destroyed Certificates............ 13
ii 8.3 Transfer of Shares....................................... 13 8.4 Registered Stockholders.................................. 13 8.5 Regulations.............................................. 14 8.6 Legends.................................................. 14 8.7 Subscriptions for Stock.................................. 14 ARTICLE 9: MISCELLANEOUS PROVISIONS...................................... 14 9.1 Dividends................................................ 14 9.2 Reserves................................................. 14 9.3 Books and Records........................................ 14 9.4 Checks, Drafts or Orders................................. 15 9.5 Contracts................................................ 15 9.6 Loans.................................................... 15 9.7 Fiscal Year.............................................. 15 9.8 Seal..................................................... 15 9.9 Resignations............................................. 15 9.10 Voting Securities Owned by the Corporation............... 15 9.11 Mortgages, etc........................................... 16 9.12 Headings................................................. 16 9.13 References............................................... 16 9.14 Inconsistent Provisions.................................. 16 9.15 Amendments............................................... 16
iii BYLAWS OF SIGNAL MEDICAL SERVICES, INC. (FORMERLY SMSI ACQUISITION COMPANY) A Delaware Corporation PREAMBLE These bylaws are subject to, and governed by, the General Corporation Law of the State of Delaware (the "Delaware General Corporation Law") and the certificate of incorporation of SMSI Acquisition Company, a Delaware corporation (the "Corporation"). In the event of a direct conflict between the provisions of these bylaws and the mandatory provisions of the Delaware General Corporation Law or the provisions of the certificate of incorporation of the Corporation, such provisions of the Delaware General Corporation Law or the certificate of incorporation of the Corporation, as the case may be, will be controlling. ARTICLE 1: OFFICES 1.1 Registered Office and Agent. The registered office of the Corporation in the state of Delaware shall be located at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The name of the Corporation's registered agent at such address shall be The Corporation Trust Company. The registered office and registered agent of the Corporation shall be as designated from time to time by action of the board of directors and by the appropriate filing by the Corporation in the office of the Secretary of State of the State of Delaware. 1.2 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the board of directors may from time to time determine or as the business of the Corporation may require. ARTICLE 2: MEETINGS OF STOCKHOLDERS 2.1 Annual Meeting. An annual meeting of stockholders of the Corporation shall be held each calendar year on such date and at such time as shall be designated from time to time by the board of directors and stated in the notice of the meeting or in a duly executed waiver of notice of such meeting. At such meeting, the stockholders shall elect directors and transact such other business as may properly be brought before the meeting. 2.2 Special Meeting. A special meeting of the stockholders may be called at any time by the board of directors, the chairman of the board, or the president, and shall be called by the president or the secretary at the request in writing of the stockholders of record of not less than ten percent (10%) of all shares entitled to vote at such meeting or as otherwise provided by the certificate of incorporation of the Corporation. A special meeting shall be held on such date and at such time as shall be designated by the person(s) calling the meeting and stated in the notice of the meeting or in a 1 duly executed waiver of notice of such meeting. Only such business shall be transacted at a special meeting as may be stated or indicated in the notice of such meeting or in a duly executed waiver of notice of such meeting. 2.3 Place of Meetings. An annual meeting of stockholders may be held at any place within or without the State of Delaware designated by the board of directors. A special meeting of stockholders may be held at any place within or without the State of Delaware designated in the notice of the meeting or a duly executed waiver of notice of such meeting. Meetings of stockholders shall be held at the principal office of the Corporation unless another place is designated for meetings in the manner provided herein. 2.4 Notice. Written or printed notice stating the place, day, and time of each meeting of the stockholders and, in case of a special meeting, the purpose or purposes for which the meeting is called shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the president, the secretary or the officer or person(s) calling the meeting, to each stockholder of record entitled to vote at such meeting. If such notice is to be sent by mail, it shall be directed to such stockholder at his address as it appears on the records of the Corporation, unless he shall have filed with the secretary of the Corporation a written request that notices to him be mailed to some other address, in which case it shall be directed to him at such other address. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy and shall not, at the beginning of such meeting, object to the transaction of any business because the meeting is not lawfully called or convened, or who shall, either before or after the meeting, submit a signed waiver of notice, in person or by proxy. 2.5 Voting List. At least ten (10) days before each meeting of stockholders, the secretary or other officer of the Corporation who has charge of the Corporation's stock ledger, either directly or through another officer appointed by him or through a transfer agent appointed by the board of directors, shall prepare a complete list of stockholders entitled to vote thereat, arranged in alphabetical order and showing the address of each stockholder and number of shares registered in the name of each stockholder. For a period of ten (10) days prior to such meeting, such list shall be kept on file at a place within the city where the meeting is to be held, which place shall be specified in the notice of meeting or a duly executed waiver of notice of such meeting or, if not so specified, at the place where the meeting is to be held and shall be open to examination by any stockholder during ordinary business hours. Such list shall be produced at such meeting and kept at the meeting at all times during such meeting and may be inspected by any stockholder who is present. 2.6 Quorum. The holders of a majority of the outstanding shares entitled to vote on a matter, present in person or by proxy, shall constitute a quorum at any meeting of stockholders, except as otherwise provided by law, the certificate of incorporation of the Corporation, or these bylaws. If a quorum shall not be present, in person or by proxy, at any meeting of stockholders, the stockholders entitled to vote thereat who are present, in person or by proxy, or, if no stockholder entitled to vote is present, any officer of the Corporation may adjourn the meeting from time to time, without notice other than announcement at the meeting (unless the board of directors, after such adjournment, fixes a new record date for the adjourned meeting), until a quorum shall be present, in person or by proxy. At any adjourned meeting at which a quorum shall be present, in person or by 2 proxy, any business may be transacted which may have been transacted at the original meeting had a quorum been present; provided that, if the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting. 2.7 Required Vote; Withdrawal of Quorum. When a quorum is present at any meeting, the vote of the holders of at least a majority of the outstanding shares entitled to vote who are present, in person or by proxy, shall decide any question brought before such meeting, unless the question is one on which, by express provision of statute, the certificate of incorporation of the Corporation, or these bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. The stockholders present at a duly constituted meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. 2.8 Method of Voting; Proxies. Except as otherwise provided in the certificate of incorporation of the Corporation or by law, each outstanding share, regardless of class, shall be entitled to one (1) vote on each matter submitted to a vote at a meeting of stockholders. Elections of directors need not be by written ballot. At any meeting of stockholders, every stockholder having the right to vote may vote either in person or by a proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. Each such proxy shall be filed with the secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after three (3) years from the date of its execution, unless otherwise provided in the proxy. If no date is stated in a proxy, such proxy shall be presumed to have been executed on the date of the meeting at which it is to be voted. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power or unless otherwise made irrevocable by law. 2.9 Record Date. (a) For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, for any such determination of stockholders, such date in any case to be not more than sixty (60) days and not less than ten (10) days prior to such meeting nor more than sixty (60) days prior to any other action. If no record date is fixed: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. 3 (iii) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by law or these bylaws, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office in the State of Delaware or principal place of business shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by law or these bylaws, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. 2.10 Conduct of Meeting. The chairman of the board shall preside at all meetings of stockholders. The secretary shall keep the records of each meeting of stockholders. In the absence or inability to act of any such officer, such officer's duties shall be performed by the officer given the authority to act for such absent or non-acting officer under these bylaws or by some person appointed by the meeting. 2.11 Inspectors. The board of directors may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If any of the inspectors so appointed shall fail to appear or act, the chairman of the meeting shall, or if inspectors shall not have been appointed, the chairman of the meeting may, appoint one or more inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge, request, or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders. 4 2.12 Action by Written Consent. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken and bearing the dates of signature of the stockholders who signed the consent or consents, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, or the Corporation's principal place of business, or an officer or agent of the Corporation having custody of the book or books in which proceedings of meetings of the stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. All consents properly delivered in accordance with this section shall be deemed to be recorded when so delivered. No written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered to the Corporation as required by this section, written consents signed by the holders of a sufficient number of shares to take such corporate action are so recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Any action taken pursuant to such written consent or consents of the stockholders shall have the same force and effect as if taken by the stockholders at a meeting thereof. ARTICLE 3: DIRECTORS 3.1 Management. The business and property of the Corporation shall be managed by the board of directors. Subject to the restrictions imposed by law, the certificate of incorporation of the Corporation, or these bylaws, the board of directors may exercise all the powers of the Corporation. 3.2 Number; Qualification; Election; Term. The number of directors shall be not less than one (1) nor more than ten (10). The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the board of directors pursuant to a resolution adopted by a majority of the entire board of directors. At all meetings of stockholders for the election of directors, a plurality of the votes cast shall be sufficient to elect any nominee. 3.3 Change in Number. No decrease in the number of directors constituting the entire board of directors shall have the effect of shortening the term of any incumbent director. 3.4 Removal. Any director or the entire board of directors may be removed only for cause, and only by the affirmative vote of the holders of a majority of the combined voting power of the outstanding shares of the Corporation entitled to vote. 3.5 Vacancies. Newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the board of directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the directors then in office, although less than a quorum, or by a sole remaining director. Directors chosen pursuant to any of the foregoing provisions shall hold office for a term expiring at the annual 5 meeting of stockholders at which the term to which they have been elected expires and until their successors are duly elected and have qualified or until their earlier resignation or removal. 3.6 Meetings of Directors. The directors may hold their meetings and may have an office and keep the books of the Corporation, except as otherwise provided by statute, in such place or places within or without the State of Delaware as the board of directors may from time to time determine or as shall be specified in the notice of such meeting or duly executed waiver of notice of such meeting. 3.7 First Meeting. Each newly elected board of directors shall hold its first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after and at the same place as the annual meeting of stockholders, and no notice of such meeting shall be necessary. 3.8 Election of Officers. At the first meeting of the board of directors after each annual meeting of stockholders at which a quorum shall be present, the board of directors shall elect the officers of the Corporation. 3.9 Regular Meetings. Regular meetings of the board of directors shall be held at such times and places as shall be designated from time to time by resolution of the board of directors. Notice of such regular meetings shall not be required. 3.10 Special Meetings. Special meetings of the board of directors shall be held whenever called by or at the request of the chairman of the board, the president, any director, or as designated from time to time by resolution of the board of directors. 3.11 Notice. The secretary shall give notice of each special meeting to each director at least twenty-four (24) hours before the meeting, either personally, by telephone, mail, overnight courier service, telegram or facsimile. Notice of any such meeting need not be given to any director who shall, either before or after the meeting, submit a signed waiver of notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice to him. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. 3.12 Quorum; Majority Vote. A majority of the total number of directors then in office shall constitute a quorum for the transaction of business. The vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation or these bylaws a different vote is required, in which case such express provision shall govern and control the decision of such question. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. 3.13 Compensation. The board of directors shall have the authority to fix the compensation, including fees and reimbursement of expenses, paid to directors for attendance at regular or special meetings of the board of directors or any committee thereof; provided, that nothing 6 contained herein shall be construed to preclude any director from serving the Corporation in any other capacity or receiving compensation therefor. 3.14 Telephone Meetings. Members of the board of directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this Section shall constitute presence in person at the meeting. 3.15 Waiver of Notice and Presumption of Assent. Any member of the board of directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his dissent shall be entered in the minutes of the meeting or unless his written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. 3.16 Action by Written Consent. Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. ARTICLE 4: COMMITTEES 4.1 Designation. The board of directors may, by resolution adopted by a majority of the entire board of directors, designate one or more committees. 4.2 Number: Qualification; Term. Each committee shall consist of one or more directors appointed by resolution adopted by a majority of the entire board of directors. The number of committee members may be increased or decreased from time to time by resolution adopted by a majority of the entire board of directors. Each committee member shall serve as such until the earliest of (i) the expiration of his term as director, (ii) his resignation as a committee member or as a director, or (iii) his removal as a committee member or as a director. 4.3 Authority. Each committee, to the extent expressly provided in the resolution establishing such committee, shall have and may exercise all of the authority of the board of directors in the management of the business and property of the Corporation except to the extent expressly restricted by law, the certificate of incorporation of the Corporation, or these bylaws. 4.4 Committee Changes. The board of directors shall have the power at any time to fill vacancies in, to change the membership of, and to discharge any committee. 7 4.5 Alternate Members of Committees. The board of directors may designate one or more directors as alternate members of any committee. Any such alternate member may replace any absent or disqualified member at any meeting of the committee. If no alternate committee members have been so appointed to a committee or each such alternate committee member is absent or disqualified, the member or members of such committee present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. 4.6 Regular Meetings. Regular meetings of any committee may be held without notice at such time and place as may be designated from time to time by the committee and communicated to all members thereof. 4.7 Special Meetings. Special meetings of any committee may be held whenever called by any committee member. The committee member calling any special meeting shall cause notice of such special meeting, including therein the time and place of such special meeting, to be given to each committee member at least two (2) days before such special meeting. Neither the business to be transacted at, nor the purpose of, any special meeting of any committee need be specified in the notice or waiver of notice of any special meeting. 4.8 Quorum; Majority Vote. At meetings of any committee, a majority of the number of members designated by the board of directors shall constitute a quorum for the transaction of business. If a quorum is not present at a meeting of any committee, a majority of the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. The act of a majority of the members present at any meeting at which a quorum is in attendance shall be the act of a committee, unless the act of a greater number is required by law, the certificate of incorporation of the Corporation, or these bylaws. 4.9 Minutes. Each committee shall cause minutes of its proceedings to be prepared and shall report the same to the board of directors upon the request of the board of directors. The minutes of the proceedings of each committee shall be delivered to the secretary of the Corporation for placement in the minute books of the Corporation. 4.10 Compensation. Committee members may, by resolution of the board of directors, be allowed a fixed sum and expenses of attendance, if any, for attending any committee meetings or a stated salary. 4.11 Responsibility. The designation of any committee and the delegation of authority to it shall not operate to relieve the board of directors or any director of any responsibility imposed upon it or such director by law. 4.12 Committee Rules. Each committee of the board of directors may fix its own rules or procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the board of directors designating such committee. In the event that a member and that member's alternate, if alternates are designated by the board of directors as provided in Section 4.5 of this Article 4, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or nor such member or 8 members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member. ARTICLE 5: NOTICE 5.1 Method. Whenever by statute, the certificate of incorporation of the Corporation, or these bylaws, notice is required to be given to any committee member, director, or stockholder and no provision is made as to how such notice shall be given, personal notice shall not be required and any such notice may be given (a) in writing, by mail, postage prepaid, addressed to such committee member, director, or stockholder at his address as it appears on the books or (in the case of a stockholder) the stock transfer records of the Corporation, or (b) by any other method permitted by law (including but not limited to overnight courier service, telegram, telex, or facsimile). Any notice required or permitted to be given by mail shall be deemed to be delivered and given at the time when the same is deposited in the United States mail as aforesaid. Any notice required or permitted to be given by overnight courier service shall be deemed to be delivered and given at the time delivered to such service with all charges prepaid and addressed as aforesaid. Any notice required or permitted to be given by telegram, telex, or facsimile shall be deemed to be delivered and given at the time transmitted with all charges prepaid and addressed as aforesaid. 5.2 Waiver. Whenever any notice is required to be given to any stockholder, director, or committee member of the Corporation by statute, the certificate of incorporation of the Corporation, or these bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Attendance of a stockholder, director, or committee member at a meeting shall constitute a waiver of notice of such meeting, except where such person attends for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE 6: OFFICERS 6.1 Number: Titles: Term of Office. The officers of the Corporation shall be a president, a secretary, and such other officers as the board of directors may from time to time elect or appoint, including one or more vice presidents (with each vice president to have such descriptive title, if any, as the board of directors shall determine) and a treasurer. The officers of the Corporation shall be elected annually by the board of directors at its first meeting held after each annual meeting of stockholders, or as soon thereafter as conveniently may be. Each officer shall hold office until his successor shall have been duly elected and shall have qualified, until his death, or until he shall resign or shall have been removed in the manner hereinafter provided. Any two or more offices may be held by the same person. None of the officers need be a stockholder or a director of the Corporation or a resident of the state of Delaware. In its discretion, the board of directors may choose not to fill any office for any period of time as it may deem advisable. 6.2 Removal. Any officer or agent elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. 9 6.3 Vacancies. Any vacancy occurring in any office of the Corporation because of by death, resignation, removal, disqualification or otherwise may be filled by the board of directors for the unexpired portion of the term by the board of directors then in office. 6.4 Authority. Officers shall have such authority and perform such duties in the management of the Corporation as are provided in these bylaws or as may be determined by resolution of the board of directors not inconsistent with these bylaws. 6.5 Compensation. The compensation, if any, of officers and agents shall be fixed from time to time by the board of directors. No officer shall be prevented from receiving such compensation by virtue of his also being a director of the Corporation. 6.6 Duties of President. The president shall preside at all meetings of the board of directors. The president shall be the chief executive officer of the Corporation. The president shall be responsible for the general and active management of the business of the Corporation and shall ensure that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except when required or permitted by law to be otherwise signed and executed and except when the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the Corporation. The president shall perform such other duties and have such other duties as may be prescribed from time to time by the board of directors of the Corporation. 6.7 Duties of the Vice Presidents. The vice presidents shall, in the order of their organizational ranking, in the absence or disability, or in the event of a vacancy in the office, of the president, perform the duties and exercise the powers of the president, and shall perform such other duties and have such other powers as may from time to time be prescribed by the board of directors of the Corporation. 6.8 Duties of the Secretary. The secretary shall keep, or cause to be kept, in books provided for that purpose, the minutes of the meetings of the stockholders, the board of directors, or any committee thereof, and shall see that all notices are duly given in accordance with the provisions of these Bylaws. As required by law, the secretary shall be the custodian of the records of the Corporation. The secretary shall keep the seal of the Corporation in safe custody and, when authorized by the board, affix such seal to any document requiring it, and when so affixed, it shall be attested by his signature or by the signature of the treasurer or an assistant secretary. The secretary shall perform such other duties and have such other powers as may be prescribed from time to time by the Corporation's board of directors. 6.9 Duties of the Treasurer. The treasurer shall have charge and custody of, and shall be responsible for, all funds and securities of the Corporation and shall deposit such funds in the name of the Corporation in such banks, trust companies and other depositories as shall be designated by the board of directors. The treasurer shall perform such other duties and have such other powers as may be prescribed from time to time by the Corporation's board of directors. 10 6.10 Other Officers, Assistant Officers and Agents. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these bylaws, shall have such authority and perform such duties as may from time to time be prescribed by the board of directors. 6.11 Absence or Disability of Officers. In the case of the absence or disability of any officer of the Corporation and of any person hereby authorized to act in such officer's place during such officer's absence or disability, the board of directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select. ARTICLE 7: INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS 7.1 Nature of Indemnity. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he, or a person of whom he is the legal representative, is or was a director or officer, of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise, may be indemnified and held harmless by the Corporation to the fullest extent which it is empowered to do so by the Delaware General Corporation Law, as the same exists or may hereafter by amended against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such proceeding) and such indemnification shall inure to the benefit of his heirs, executors and administrators; provided, however, that, except as provided in Section 7.2 hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the Corporation. The Corporation may, by action of its board of directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. 7.2 Procedure for Indemnification of Directors and Officers. Any indemnification of a director or officer of the Corporation under Section 7.2 of this Article 7 or advance of expenses under Section 7.5 of this Article 7 shall be made promptly, and in any event within thirty (30) days, upon the written request of the director or officer. If a determination by the Corporation that the director or officer is entitled to indemnification pursuant to this Article 7 is required, and the Corporation fails to respond within sixty (60) days to a written request for indemnity, the Corporation shall be deemed to have approved the request. If the Corporation denies a written request for indemnification or advantage of expenses, in whole or in part, or if payment in full pursuant to such request is not made within thirty (30) days, the right to indemnification or advances as granted by this Article 7 shall be enforceable by the director or officer in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the Corporation. Neither the failure of the Corporation (including its board of directors, independent legal counsel, or its 11 stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the Delaware General Corporation Law, not an actual determination by the Corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. 7.3 Article Not Exclusive. The rights to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article 7 shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation, bylaws, agreement, vote of stockholders or disinterested directors or otherwise. 7.4 Insurance. The Corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the Corporation or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, whether or not the Corporation would have the power to indemnify such person against such liability under this Article 7. 7.5 Expenses. Expenses incurred by any person described in Section 7.1 of this Article 7 in defending a proceeding shall be paid by the Corporation in advance of such proceeding's final disposition upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. 7.6 Employees and Agents. Persons who are not covered by the foregoing provisions of this Article 7 and who are or were employees or agents of the Corporation, or who are or were serving at the request of the Corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the board of directors. 7.7 Contract Rights. The provisions of this Article 7 shall be deemed to be a contract right between the Corporation and each director or officer who serves in any such capacity at any time while this Article 7 and the relevant provisions of the Delaware General Corporation Law or other applicable law are in effect, and any repeal or modification of this Article 7 or any such law shall not affect any rights or obligations then existing with respect to any state of facts or proceeding then existing. 7.8 Merger or Consolidation. For purposes of this Article 7, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent 12 corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article 7 with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. ARTICLE 8: CERTIFICATES AND STOCKHOLDERS 8.1 Certificates for Shares. Certificates for shares of stock of the Corporation shall be in such form as shall be approved by the board of directors. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by or in the name of the Corporation. The certificates shall be signed by the chairman of the board, the president or a vice president and also by the secretary or an assistant secretary or by the treasurer or an assistant treasurer. Any and all signatures on the certificate may be a facsimile and may be sealed with the seal of the Corporation or a facsimile thereof. If any officer, transfer agent, or registrar who has signed, or whose facsimile signature has been placed upon, a certificate has ceased to be such officer, transfer agent, or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. The certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued and shall exhibit the holder's name and the number of shares. 8.2 Replacement of Lost or Destroyed Certificates. The board of directors may direct a new certificate or certificates to be issued in place of a certificate or certificates theretofore issued by the Corporation and alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate or certificates representing shares to be lost or destroyed. When authorizing such issue of a new certificate or certificates the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond with a surety or sureties satisfactory to the Corporation in such sum as it may direct as indemnity against any claim, or expense resulting from a claim, that may be made against the Corporation with respect to the certificate or certificates alleged to have been lost or destroyed. 8.3 Transfer of Shares. Shares of stock of the Corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, the Corporation or its transfer agent shall issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. The board of directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the Corporation. 8.4 Registered Stockholders. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other 13 person, whether or nor it shall have express or other notice thereof, except as otherwise provided by law. 8.5 Regulations. The board of directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer, and registration or the replacement of certificates for shares of stock of the Corporation. 8.6 Legends. The board of directors shall have the power and authority to provide that certificates representing shares of stock bear such legends as the board of directors deems appropriate to assure that the Corporation does not become liable for violations of federal or state securities laws or other applicable law. 8.7 Subscriptions for Stock. Unless otherwise provided for in any subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors. Any call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the Corporation may proceed to collect the amount due in the same manner as any debt due the Corporation. ARTICLE 9: MISCELLANEOUS PROVISIONS 9.1 Dividends. Subject to provisions of law and the certificate of incorporation of the Corporation, dividends upon the capital stock of the Corporation, may be declared by the board of directors at any regular or special meeting and may be paid in cash, in property, or in shares of the capital stock of the Corporation. Such declaration and payment shall be at the discretion of the board of directors. 9.2 Reserves. There may be created by the board of directors out of funds of the Corporation legally available therefor such reserve or reserves as the directors from time to time, in their discretion, consider proper to provide for contingencies, to equalize dividends, or to repair or maintain any property of the Corporation, or for such other purpose as the board of directors shall consider beneficial to the Corporation, and the board of directors may modify or abolish any such reserve in the manner in which it was created. 9.3 Books and Records. The Corporation shall keep correct and complete books and records of account, shall keep minutes of the proceedings of its stockholders and board of directors and shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of the shares held by each. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours of business to inspect for any proper purpose the Corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath 14 shall be directed to the Corporation at its registered office in the State of Delaware or at its principal place of business. 9.4 Checks, Drafts or Orders. All checks, drafts, or other orders for the payment of money by or to the Corporation and all notes and other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner, as shall be determined by resolution of the board of directors or a duly authorized committee thereof. 9.5 Contracts. The board of directors may authorize any officer or officers, or any agent or agents, of the Corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. 9.6 Loans. The Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Corporation or any of its subsidiaries, including any officer or employee who is a director of the Corporation or any of its subsidiaries, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Corporation at common law or under any statute. 9.7 Fiscal Year. The fiscal year of the Corporation shall be fixed by the board of directors; provided, that if such fiscal year is not fixed by the board of directors and the selection of the fiscal year is not expressly deferred by the board of directors, the fiscal year shall be the calendar year. 9.8 Seal. The board of directors of the Corporation shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the Corporation and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. 9.9 Resignations. Any director, committee member, or officer may resign by so stating at any meeting of the board of directors or by giving written notice to the board of directors, the president or the secretary. Such resignation shall take effect at the time specified therein or, if no time is specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 9.10 Voting Securities Owned By the Corporation. Voting securities in any other corporation held by the Corporation shall be voted by the president, unless the board of directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution. 15 9.11 Mortgages, etc. With respect to any deed, deed of trust, mortgage, or other instrument executed by the Corporation through its duly authorized officer or officers, the attestation to such execution by the secretary of the Corporation shall not be necessary to constitute such deed, deed of trust, mortgage, or other instrument a valid and binding obligation against the Corporation unless the resolutions, if any, of the board of directors authorizing such execution expressly state that such attestation is necessary. 9.12 Headings. The headings used in these bylaws have been inserted for administrative convenience only and shall not be given any substantive effect in limiting or otherwise construing any provision herein. 9.13 References. Whenever herein the singular number is used, the same shall include the plural where appropriate, and words of any gender should include each other gender where appropriate. 9.14 Inconsistent Provisions. In the event that any provision of these bylaws is or becomes inconsistent with any provision of the certificate of incorporation, the Delaware General Corporation Law or any other applicable law, the provision of these bylaws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect. 9.15 Amendments. These bylaws may be altered, amended, or repealed or new bylaws may be adopted by the stockholders or by the board of directors at any regular meeting of the stockholders or the board of directors or at any special meeting of the stockholders or the board of directors if notice of such alteration, amendment, repeal, or adoption of new bylaws be contained in the notice of such special meeting. The undersigned, the secretary of the Corporation, hereby certifies that the foregoing bylaws were adopted by the written consent of the sole director of the Corporation as of April 2, 1998. /s/ THOMAS V. CROAL -------------------------- Thomas V. Croal, Secretary 16 EX-3.9 13 y55701ex3-9.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.9 CERTIFICATE OF INCORPORATION OF INSIGHT-SUB CORP. I, the undersigned natural person acting as an incorporator of a corporation (hereinafter called the "Corporation") under the General Corporation Law of the state of Delaware, do hereby adopt the following Certificate of Incorporation for the Corporation: ARTICLE ONE InSight-Sub Corp. is the name of the Corporation. ARTICLE TWO The address of the registered office of the Corporation in the state of Delaware is 1209 Orange Street in the city of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE THREE The nature of the business or purposes of the Corporation to be conducted or promoted by it is to engage in any and all lawful acts or activities for which corporations may be organized under the General Corporation Law of the state of Delaware. ARTICLE FOUR The total number of shares of stock which the Corporation shall have authority to issue is one thousand (1,000), consisting of one thousand shares of common stock with a par value of one-tenth of one cent ($0.001) per share ("Common Stock"). Except as otherwise required by applicable law, the holders of shares of Common Stock shall be entitled to one (1) vote per share with respect to all matters voted on by the stockholders of the Corporation. ARTICLE FIVE The duration of the Corporation shall be perpetual. ARTICLE SIX (a) NUMBER OF DIRECTORS The business and affairs of the Corporation shall be managed by a Board of Directors which will consist of the number of members specified in the Bylaws of the Corporation. The exact number of directors shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors. (b) INITIAL DIRECTORS The number of directors constituting the initial Board of Directors is one (1), and the name and mailing address of the person who is to serve as director until the first annual meeting of stockholders and until his successor is elected and qualified, or, if earlier, until such director's death, resignation or removal as director, is as follows: Name Address ---- ------- E. Larry Atkins 4400 MacArthur Blvd., Suite 800 Newport Beach, California 92660 (c) WRITTEN BALLOT Directors of the Corporation need not be elected by written ballot unless the Bylaws of the Corporation otherwise provide. (d) VOTE TO ELECT DIRECTORS At all meetings of the stockholders for the election of directors, a plurality of the votes cast shall be sufficient to elect any nominee. ARTICLE SEVEN The directors of the Corporation shall have the power to adopt, amend and repeal the Bylaws of the Corporation. ARTICLE EIGHT Meetings of the stockholders may be held within or without the state of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the state of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation. -2- ARTICLE NINE To the fullest extent permitted by the General Corporation Law of the state of Delaware as the same exists or may hereafter be amended, a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director. Any repeal or modification of this ARTICLE NINE shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. ARTICLE TEN The Corporation expressly elects not to be governed by Section 203 of the General Corporation Law of the state of Delaware. ARTICLE ELEVEN The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed herein and by the laws of the state of Delaware, and all rights conferred upon stockholders herein are granted subject to this reservation. I, the undersigned, for the purpose of forming the Corporation under the laws of the state of Delaware, do make, file and record this Certificate of Incorporation and do certify that this is my act and deed and that the facts stated herein are true and, accordingly, I do hereunder set my hand on this 3rd day of September, 1996. /s/ E. L. KINSLER ------------------------ E. L. Kinsler 1209 Orange Street Wilmington, DE 19801 -3- PAGE 1 State of Delaware Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "INSIGHT-SUB CORP.", CHANGING ITS NAME FROM "INSIGHT-SUB CORP." TO "OPEN MRI, INC.", FILED IN THIS OFFICE ON THE SIXTEENTH DAY OF SEPTEMBER, A.D. 1996, AT 9 O'CLOCK A.M. [SEAL] /s/ EDWARD J. FREEL ----------------------------------- Edward J. Freel, Secretary of State AUTHENTICATION: 2659258 8100 8537274 DATE: 971216720 06-30-97 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 09/16/l996 960267305 - 2659258 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF INSIGHT-SUB CORP. INSIGHT-SUB CORP., a corporation organized and existing under and by virtue of the General Corporation Law of the state of Delaware, does hereby certify: FIRST: The amendment to the Certificate of Incorporation of InSight-Sub Corp. set forth in the following resolution was duly approved and adopted by the written consent of the sole director of InSight-Sub Corp. in accordance with the provisions of Section 242 of the General Corporation Law of the state of Delaware; and SECOND: The amendment to the Certificate of Incorporation of InSight-Sub Corp. was approved by the written consent of the sole stockholder of InSight-Sub Corp. in accordance with the provisions of Section 228 of the General Corporation Law of the state of Delaware; "ARTICLE ONE: OPEN MRI, INC. is the name of the Corporation." THIRD: The amendment to the Certificate of Incorporation of InSight-Sub Corp. was duly adopted in accordance with the provisions of Sections 242 and 228 of the General Corporation Law of the state of Delaware. IN WITNESS WHEREOF, InSight-Sub Corp. has caused this Certificate to be signed by its duly authorized officer on this 13th day of September, 1996. INSIGHT-SUB CORP. By: /s/ E. LARRY ATKINS ---------------------------------- E. Larry Atkins,President and Chief Executive Officer EX-3.10 14 y55701ex3-10.txt BYLAWS EXHIBIT 3.10 BYLAWS OF INSIGHT-SUB CORP. A Delaware Corporation TABLE OF CONTENTS ARTICLE 1: OFFICES ........................................................................... 1 1.1 Registered Office and Agent .................................................... 1 --------------------------- 1.2 Other Offices .................................................................. 1 ------------- ARTICLE 2: MEETINGS OF STOCKHOLDERS .......................................................... 1 2.1 Annual Meeting ................................................................. 1 -------------- 2.2 Special Meeting ................................................................ 2 --------------- 2.3 Place of Meetings .............................................................. 2 ----------------- 2.4 Notice ......................................................................... 2 ------ 2.5 Voting List .................................................................... 2 ----------- 2.6 Quorum ......................................................................... 3 ------ 2.7 Required Vote: Withdrawal of Quorum ............................................ 3 ----------------------------------- 2.8 Method of Voting: Proxies ...................................................... 3 ------------------------- 2.9 Record Date .................................................................... 4 ----------- 2.10 Conduct of Meeting ............................................................. 5 ------------------ 2.11 Inspectors ..................................................................... 5 ---------- 2.12 Action by Written Consent ...................................................... 5 ------------------------- ARTICLE 3: DIRECTORS ......................................................................... 6 3.1 Management ..................................................................... 6 ---------- 3.2 Number: Qualification: Election: Term .......................................... 6 ------------------------------------- 3.3 Change in Number ............................................................... 6 ---------------- 3.4 Removal ........................................................................ 6 ------- 3.5 Vacancies ...................................................................... 6 --------- 3.6 Meetings of Directors .......................................................... 6 --------------------- 3.7 First Meeting .................................................................. 7 ------------- 3.8 Election of Officers ........................................................... 7 -------------------- 3.9 Regular Meetings ............................................................... 7 ---------------- 3.10 Special Meetings ............................................................... 7 ---------------- 3.11 Notice ......................................................................... 7 ------ 3.12 Quorum: Majority Vote .......................................................... 7 --------------------- 3.13 Compensation ................................................................... 8 ------------ 3.14 Telephone Meetings ............................................................. 8 ------------------ 3.15 Waiver of Notice and Presumption of Assent ..................................... 8 ------------------------------------------ 3.16 Action by Written Consent ...................................................... 8 ------------------------- ARTICLE 4: COMMITTEES ........................................................................ 8 4.1 Designation .................................................................... 8 -----------
i 4.2 Number: Qualification: Term .................................................... 8 --------------------------- 4.3 Authority ...................................................................... 9 --------- 4.4 Committee Changes .............................................................. 9 ----------------- 4.5 Alternate Members of Committees ................................................ 9 ------------------------------- 4.6 Regular Meetings ............................................................... 9 ---------------- 4.7 Special Meetings ............................................................... 9 ---------------- 4.8 Quorum: Majority Vote .......................................................... 9 --------------------- 4.9 Minutes ........................................................................ 9 ------- 4.10 Compensation ................................................................... 10 ------------ 4.11 Responsibility ................................................................. 10 -------------- 4.12 Committee Rules ................................................................ 10 --------------- ARTICLE 5: NOTICE ............................................................................ 10 5.1 Method ......................................................................... 10 ------ 5.2 Waiver ......................................................................... 10 ------ ARTICLE 6: OFFICERS .......................................................................... 11 6.1 Number: Titles: Term of Office ................................................. 11 ------------------------------ 6.2 Removal ........................................................................ 11 ------- 6.3 Vacancies ...................................................................... 11 --------- 6.4 Authority ...................................................................... 11 --------- 6.5 Compensation ................................................................... 11 ------------ 6.6 Duties of President ............................................................ 11 ------------------- 6.7 Duties of the Vice Presidents .................................................. 12 ----------------------------- 6.8 Duties of the Secretary ........................................................ 12 ----------------------- 6.9 Duties of the Treasurer ........................................................ 12 ----------------------- 6.10 Other Officers. Assistant Officers and Agents .................................. 12 --------------------------------------------- 6.11 Absence or Disability of Officers .............................................. 12 --------------------------------- ARTICLE 7: INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS ................................. 12 7.1 Nature of Indemnity ............................................................ 13 ------------------- 7.2 Procedure for Indemnification of Directors and Officers ........................ 13 ------------------------------------------------------- 7.3 Article Not Exclusive .......................................................... 14 --------------------- 7.4 Insurance ...................................................................... 14 --------- 7.5 Expenses ....................................................................... 14 -------- 7.6 Employees and Agents ........................................................... 14 -------------------- 7.7 Contract Rights ................................................................ 14 --------------- 7.8 Merger or Consolidation ........................................................ 14 ----------------------- ARTICLE 8: CERTIFICATES AND SHAREHOLDERS ..................................................... 15 8.1 Certificates for Shares ........................................................ 15 ----------------------- 8.2 Replacement Of Lost or Destroyed Certificates .................................. 15 --------------------------------------------- 8.3 Transfer of Shares ............................................................. 15 ------------------
ii 8.4 Registered Stockholders ........................................................ 16 ----------------------- 8.5 Regulations .................................................................... 16 ----------- 8.6 Legends ........................................................................ 16 ------- 8.7 Subscriptions for Stock ........................................................ 16 ----------------------- ARTICLE 9: MISCELLANEOUS PROVISIONS .......................................................... 16 9.1 Dividends ...................................................................... 16 --------- 9.2 Reserves ....................................................................... 16 -------- 9.3 Books and Records .............................................................. 17 ----------------- 9.4 Checks, Drafts or Orders ....................................................... 17 ------------------------ 9.5 Contracts ...................................................................... 17 --------- 9.6 Loans .......................................................................... 17 ----- 9.7 Fiscal Year .................................................................... 17 ----------- 9.8 Seal ........................................................................... 18 ---- 9.9 Resignations ................................................................... 18 ------------ 9.10 Voting Securities Owned By Corporation ......................................... 18 -------------------------------------- 9.11 Mortgages. etc ................................................................. 18 -------------- 9.12 Headings ....................................................................... 18 -------- 9.13 References ..................................................................... 18 ---------- 9.14 Inconsistent Provisions ........................................................ 18 ----------------------- 9.15 Amendments ..................................................................... 18 ----------
iii BYLAWS OF INSIGHT-SUB CORP. A Delaware Corporation PREAMBLE These bylaws are subject to, and governed by, the General Corporation Law of the State of Delaware (the "Delaware General Corporation Law") and the certificate of incorporation of InSight-Sub Corp., a Delaware corporation (the "Corporation"). In the event of a direct conflict between the provisions of these bylaws and the mandatory provisions of the Delaware General Corporation Law or the provisions of the certificate of incorporation of the Corporation, such provisions of the Delaware General Corporation Law or the certificate of incorporation of the Corporation, as the case may be, will be controlling. ARTICLE 1: OFFICES 1.1 Registered Office and Agent. The registered office of the Corporation in the state of Delaware shall be located at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The name of the Corporation's registered agent at such address shall be The Corporation Trust Company. The registered office and registered agent of the Corporation shall be as designated from time to time by action of the board of directors and by the appropriate filing by the Corporation in the office of the Secretary of State of the State of Delaware. 1.2 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the board of directors may from time to time determine or as the business of the Corporation may require. ARTICLE 2: MEETINGS OF STOCKHOLDERS 2.1 Annual Meeting. An annual meeting of stockholders of the Corporation shall be held each calendar year on such date and at such time as shall be designated from time to time by the board of directors and stated in the notice of the meeting or in a duly executed waiver of notice of such meeting. At such meeting, the stockholders shall elect directors and transact such other business as may properly be brought before the meeting. 2.2 Special Meeting. A special meeting of the stockholders may be called at any time by the board of directors, the chairman of the board, or the president, and shall be called by the president or the secretary at the request in writing of the stockholders of record of not less than ten percent (10%) of all shares entitled to vote at such meeting or as otherwise provided by the certificate of incorporation of the Corporation. A special meeting shall be held on such date and at such time as shall be designated by the person(s) calling the meeting and stated in the notice of the meeting or in a 1 duly executed waiver of notice of such meeting. Only such business shall be transacted at a special meeting as may be stated or indicated in the notice of such meeting or in a duly executed waiver of notice of such meeting. 2.3 Place of Meetings. An annual meeting of stockholders may be held at any place within or without the State of Delaware designated by the board of directors. A special meeting of stockholders may be held at any place within or without the State of Delaware designated in the notice of the meeting or a duly executed waiver of notice of such meeting. Meetings of stockholders shall be held at the principal office of the Corporation unless another place is designated for meetings in the manner provided herein. 2.4 Notice. Written or printed notice stating the place, day, and time of each meeting of the stockholders and, in case of a special meeting, the purpose or purposes for which the meeting is called shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the president, the secretary or the officer or person(s) calling the meeting, to each stockholder of record entitled to vote at such meeting. If such notice is to be sent by mail, it shall be directed to such stockholder at his address as it appears on the records of the Corporation, unless he shall have filed with the secretary of the Corporation a written request that notices to him be mailed to some other address, in which case it shall be directed to him at such other address. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy and shall not, at the beginning of such meeting, object to the transaction of any business because the meeting is not lawfully called or convened, or who shall, either before or after the meeting, submit a signed waiver of notice, in person or by proxy. 2.5 Voting List. At least ten (10) days before each meeting of stockholders, the secretary or other officer of the Corporation who has charge of the Corporation's stock ledger, either directly or through another officer appointed by him or through a transfer agent appointed by the board of directors, shall prepare a complete list of stockholders entitled to vote thereat, arranged in alphabetical order and showing the address of each stockholder and number of shares registered in the name of each stockholder. For a period of ten (10) days prior to such meeting, such list shall be kept on file at a place within the city where the meeting is to be held, which place shall be specified in the notice of meeting or a duly executed waiver of notice of such meeting or, if not so specified, at the place where the meeting is to be held and shall be open to examination by any stockholder during ordinary business hours. Such list shall be produced at such meeting and kept at the meeting at all times during such meeting and may be inspected by any stockholder who is present. 2.6 Quorum. The holders of a majority of the outstanding shares entitled to vote on a matter, present in person or by proxy, shall constitute a quorum at any meeting of stockholders, except as otherwise provided by law, the certificate of incorporation of the Corporation, or these bylaws. If a quorum shall not be present, in person or by proxy, at any meeting of stockholders, the stockholders entitled to vote thereat who are present, in person or by proxy, or, if no stockholder entitled to vote is present, any officer of the Corporation may adjourn the meeting from time to time, without notice other than announcement at the meeting (unless the board of directors, after such adjournment, fixes a new record date for the adjourned meeting), until a quorum shall be present, in person or by proxy. At any adjourned meeting at which a quorum shall be present, in person or by 2 proxy, any business may be transacted which may have been transacted at the original meeting had a quorum been present; provided that, if the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting. 2.7 Required Vote: Withdrawal of Quorum. When a quorum is present at any meeting, the vote of the holders of at least a majority of the outstanding shares entitled to vote who are present, in person or by proxy, shall decide any question brought before such meeting, unless the question is one on which, by express provision of statute, the certificate of incorporation of the Corporation, or these bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. The stockholders present at a duly constituted meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. 2.8 Method of Voting: Proxies. Except as otherwise provided in the certificate of incorporation of the Corporation or by law, each outstanding share, regardless of class, shall be entitled to one (1) vote on each matter submitted to a vote at a meeting of stockholders. Elections of directors need not be by written ballot. At any meeting of stockholders, every stockholder having the right to vote may vote either in person or by a proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. Each such proxy shall be filed with the secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after three (3) years from the date of its execution, unless otherwise provided in the proxy. If no date is stated in a proxy, such proxy shall be presumed to have been executed on the date of the meeting at which it is to be voted. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power or unless otherwise made irrevocable by law. 2.9 Record Date. (a) For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, for any such determination of stockholders, such date in any case to be not more than sixty (60) days and not less than ten (10) days prior to such meeting nor more than sixty (60) days prior to any other action. If no record date is fixed: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. 3 (iii) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by law or these bylaws, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office in the State of Delaware or principal place of business shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by law or these bylaws, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. 2.10 Conduct of Meeting. The chairman of the board shall preside at all meetings of stockholders. The secretary shall keep the records of each meeting of stockholders. In the absence or inability to act of any such officer, such officer's duties shall be performed by the officer given the authority to act for such absent or non-acting officer under these bylaws or by some person appointed by the meeting. 2.11 Inspectors. The board of directors may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If any of the inspectors so appointed shall fail to appear or act, the chairman of the meeting shall, or if inspectors shall not have been appointed, the chairman of the meeting may, appoint one or more inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge, request, or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders. 4 2.12 Action by Written Consent. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken and bearing the dates of signature of the stockholders who signed the consent or consents, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, or the Corporation's principal place of business, or an officer or agent of the Corporation having custody of the book or books in which proceedings of meetings of the stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. All consents properly delivered in accordance with this section shall be deemed to be recorded when so delivered. No written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered to the Corporation as required by this section, written consents signed by the holders of a sufficient number of shares to take such corporate action are so recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Any action taken pursuant to such written consent or consents of the stockholders shall have the same force and effect as if taken by the stockholders at a meeting thereof ARTICLE 3: DIRECTORS 3.1 Management. The business and property of the Corporation shall be managed by the board of directors. Subject to the restrictions imposed by law, the certificate of incorporation of the Corporation, or these bylaws, the board of directors may exercise all the powers of the Corporation. 3.2 Number: Qualification: Election: Term. The number of directors shall be not less than one (1) nor more than ten (10). The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the board of directors pursuant to a resolution adopted by a majority of the entire board of directors. At all meetings of stockholders for the election of directors, a plurality of the votes cast shall be sufficient to elect any nominee. 3.3 Change in Number. No decrease in the number of directors constituting the entire board of directors shall have the effect of shortening the term of any incumbent director. 3.4 Removal. Any director or the entire board of directors may be removed only for cause, and only by the affirmative vote of the holders of a majority of the combined voting power of the outstanding shares of the Corporation entitled to vote. 3.5 Vacancies. Newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the board of directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the directors then in office, although less than a quorum, or by a sole remaining director. Directors chosen pursuant to any of the foregoing provisions shall hold office for a term expiring at the annual 5 meeting of stockholders at which the term to which they have been elected expires and until their successors are duly elected and have qualified or until their earlier resignation or removal. 3.6 Meetings of Directors. The directors may hold their meetings and may have an office and keep the books of the Corporation, except as otherwise provided by statute, in such place or places within or without the State of Delaware as the board of directors may from time to time determine or as shall be specified in the notice of such meeting or duly executed waiver of notice of such meeting. 3.7 First Meeting. Each newly elected board of directors shall hold its first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after and at the same place as the annual meeting of stockholders, and no notice of such meeting shall be necessary. 3.8 Election of Officers. At the first meeting of the board of directors after each annual meeting of stockholders at which a quorum shall be present, the board of directors shall elect the officers of the Corporation. 3.9 Regular Meetings. Regular meetings of the board of directors shall be held at such times and places as shall be designated from time to time by resolution of the board of directors. Notice of such regular meetings shall not be required. 3.10 Special Meetings. Special meetings of the board of directors shall be held whenever called by or at the request of the chairman of the board, the president, any director, or as designated from time to time by resolution of the board of directors. 3.11 Notice. The secretary shall give notice of each special meeting to each director at least twenty-four (24) hours before the meeting, either personally, by telephone, mail, overnight courier service, telegram or facsimile. Notice of any such meeting need not be given to any director who shall, either before or after the meeting, submit a signed waiver of notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice to him. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. 3.12 Quorum: Majority Vote. A majority of the total number of directors then in office shall constitute a quorum for the transaction of business. The vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation or these bylaws a different vote is required, in which case such express provision shall govern and control the decision of such question. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. 3.13 Compensation. The board of directors shall have the authority to fix the compensation, including fees and reimbursement of expenses, paid to directors for attendance at regular or special meetings of the board of directors or any committee thereof; provided, that nothing 6 contained herein shall be construed to preclude any director from serving the Corporation in any other capacity or receiving compensation therefor. 3.14 Telephone Meetings. Members of the board of directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this Section shall constitute presence in person at the meeting. 3.15 Waiver of Notice and Presumption of Assent. Any member of the board of directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his dissent shall be entered in the minutes of the meeting or unless his written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. 3.16 Action by Written Consent. Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. ARTICLE 4: COMMITTEES 4.1 Designation. The board of directors may, by resolution adopted by a majority of the entire board of directors, designate one or more committees. 4.2 Number: Qualification: Term. Each committee shall consist of one or more directors appointed by resolution adopted by a majority of the entire board of directors. The number of committee members may be increased or decreased from time to time by resolution adopted by a majority of the entire board of directors. Each committee member shall serve as such until the earliest of (i) the expiration of his term as director, (ii) his resignation as a committee member or as a director, or (iii) his removal as a committee member or as a director. 4.3 Authority. Each committee, to the extent expressly provided in the resolution establishing such committee, shall have and may exercise all of the authority of the board of directors in the management of the business and property of the Corporation except to the extent expressly restricted by law, the certificate of incorporation of the Corporation, or these bylaws. 4.4 Committee Changes. The board of directors shall have the power at any time to fill vacancies in, to change the membership of, and to discharge any committee. 7 4.5 Alternate Members of Committees. The board of directors may designate one or more directors as alternate members of any committee. Any such alternate member may replace any absent or disqualified member at any meeting of the committee. If no alternate committee members have been so appointed to a committee or each such alternate committee member is absent or disqualified, the member or members of such committee present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. 4.6 Regular Meetings. Regular meetings of any committee may be held without notice at such time and place as may be designated from time to time by the committee and communicated to all members thereof. 4.7 Special Meetings. Special meetings of any committee may be held whenever called by any committee member. The committee member calling any special meeting shall cause notice of such special meeting, including therein the time and place of such special meeting, to be given to each committee member at least two (2) days before such special meeting. Neither the business to be transacted at, nor the purpose of, any special meeting of any committee need be specified in the notice or waiver of notice of any special meeting. 4.8 Quorum: Majority Vote. At meetings of any committee, a majority of the number of members designated by the board of directors shall constitute a quorum for the transaction of business. If a quorum is not present at a meeting of any committee, a majority of the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. The act of a majority of the members present at any meeting at which a quorum is in attendance shall be the act of a committee, unless the act of a greater number is required by law, the certificate of incorporation of the Corporation, or these bylaws. 4.9 Minutes. Each committee shall cause minutes of its proceedings to be prepared and shall report the same to the board of directors upon the request of the board of directors. The minutes of the proceedings of each committee shall be delivered to the secretary of the Corporation for placement in the minute books of the Corporation. 4.10 Compensation. Committee members may, by resolution of the board of directors, be allowed a fixed sum and expenses of attendance, if any, for attending any committee meetings or a stated salary. 4.11 Responsibility. The designation of any committee and the delegation of authority to it shall not operate to relieve the board of directors or any director of any responsibility imposed upon it or such director by law. 4.12 Committee Rules. Each committee of the board of directors may fix its own rules or procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the board of directors designating such committee. In the event that a member and that member's alternate, if alternates ate designated by the board of directors as provided in Section 4.5 of this Article 4, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or 8 members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member. ARTICLE 5: NOTICE 5.1 Method. Whenever by statute, the certificate of incorporation of the Corporation, or these bylaws, notice is required to be given to any committee member, director, or stockholder and no provision is made as to how such notice shall be given, personal notice shall not be required and any such notice may be given (a) in writing, by mail, postage prepaid, addressed to such committee member, director, or stockholder at his address as it appears on the books or (in the case of a stockholder) the stock transfer records of the Corporation, or (b) by any other method permitted by law (including but not limited to overnight courier service, telegram, telex, or facsimile). Any notice required or permitted to be given by mail shall be deemed to be delivered and given at the time when the same is deposited in the United States mail as aforesaid. Any notice required or permitted to be given by overnight courier service shall be deemed to be delivered and given at the time delivered to such service with all charges prepaid and addressed as aforesaid. Any notice required or permitted to be given by telegram, telex, or facsimile shall be deemed to be delivered and given at the time transmitted with all charges prepaid and addressed as aforesaid. 5.2 Waiver. Whenever any notice is required to be given to any stockholder, director, or committee member of the Corporation by statute, the certificate of incorporation of the Corporation, or these bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Attendance of a stockholder, director, or committee member at a meeting shall constitute a waiver of notice of such meeting, except where such person attends for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE 6: OFFICERS 6.1 Number: Titles: Term of Office. The officers of the Corporation shall be a president, a secretary, and such other officers as the board of directors may from time to time elect or appoint, including one or more vice presidents (with each vice president to have such descriptive title, if any, as the board of directors shall determine) and a treasurer. The officers of the Corporation shall be elected annually by the board of directors at its first meeting held after each annual meeting of stockholders, or as soon thereafter as conveniently may be. Each officer shall hold office until his successor shall have been duly elected and shall have qualified, until his death, or until he shall resign or shall have been removed in the manner hereinafter provided. Any two or more offices may be held by the same person. None of the officers need be a stockholder or a director of the Corporation or a resident of the state of Delaware. In its discretion, the board of directors may choose not to fill any office for any period of time as it may deem advisable. 6.2 Removal. Any officer or agent elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. 9 6.3 Vacancies. Any vacancy occurring in any office of the Corporation because of by death, resignation, removal, disqualification or otherwise may be filled by the board of directors for the unexpired portion of the term by the board of directors then in office. 6.4 Authority. Officers shall have such authority and perform such duties in the management of the Corporation as are provided in these bylaws or as may be determined by resolution of the board of directors not inconsistent with these bylaws. 6.5 Compensation. The compensation, if any, of officers and agents shall be fixed from time to time by the board of directors. No officer shall be prevented from receiving such compensation by virtue of his also being a director of the Corporation. 6.6 Duties of President. The president shall preside at all meetings of the board of directors. The president shall be the chief executive officer of the Corporation. The president shall be responsible for the general and active management of the business of the Corporation and shall ensure that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except when required or permitted by law to be otherwise signed and executed and except when the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the Corporation. The president shall perform such other duties and have such other duties as may be prescribed from time to time by the board of directors of the Corporation. 6.7 Duties of the Vice Presidents. The vice presidents shall, in the order of their organizational ranking, in the absence or disability, or in the event of a vacancy in the office, of the president, perform the duties and exercise the powers of the president, and shall perform such other duties and have such other powers as may from time to time be prescribed by the board of directors of the Corporation. 6.8 Duties of the Secretary. The secretary shall keep, or cause to be kept, in books provided for that purpose, the minutes of the meetings of the stockholders, the board of directors, or any committee thereof, and shall see that all notices are duly given in accordance with the provisions of these Bylaws. As required by law, the secretary shall be the custodian of the records of the Corporation. The secretary shall keep the seal of the Corporation in safe custody and, when authorized by the board, affix such seal to any document requiring it, and when so affixed, it shall be attested by his signature or by the signature of the treasurer or an assistant secretary. The secretary shall perform such other duties and have such other powers as may be prescribed from time to time by the Corporation's board of directors. 6.9 Duties of the Treasurer. The treasurer shall have charge and custody of, and shall be responsible for, all funds and securities of the Corporation and shall deposit such funds in the name of the Corporation in such banks, trust companies and other depositories as shall be designated by the board of directors. The treasurer shall perform such other duties and have such other powers as may be prescribed from time to time by the Corporation's board of directors. 10 6.10 Other Officers, Assistant Officers and Agents. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these bylaws, shall have such authority and perform such duties as may from time to time be prescribed by the board of directors. 6.11 Absence or Disability of Officers. In the case of the absence or disability of any officer of the Corporation and of any person hereby authorized to act in such officer's place during such officer's absence or disability, the board of directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select. ARTICLE 7: INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS 7.1. Nature of Indemnity. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he, or a person of whom he is the legal representative, is or was a director or officer, of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise, may be indemnified and held harmless by the Corporation to the fullest extent which it is empowered to do so by the Delaware General Corporation Law, as the same exists or may hereafter by amended against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such proceeding) and such indemnification shall inure to the benefit of his heirs, executors and administrators; provided, however, that, except as provided in Section 7.2 hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the Corporation. The Corporation may, by action of its board of directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. 7.2 Procedure for Indemnification of Directors and Officers. Any indemnification of a director or officer of the Corporation under Section 7.2 of this Article 7 or advance of expenses under Section 7.5 of this Article 7 shall be made promptly, and in any event within thirty (30) days, upon the written request of the director or officer. If a determination by the Corporation that the director or officer is entitled to indemnification pursuant to this Article 7 is required, and the Corporation fails to respond within sixty (60) days to a written request for indemnity, the Corporation shall be deemed to have approved the request. If the Corporation denies a written request for indemnification or advancing of expenses, in whole or in part, or if payment in fall pursuant to such request is not made within thirty (30) days, the right to indemnification or advances as granted by this Article 7 shall be enforceable by the director or officer in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the Corporation. Neither the failure of the Corporation (including its board of directors, independent legal counsel, or its 11 stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. 7.3 Article Not Exclusive. The rights to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article 7 shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation, bylaws, agreement, vote of stockholders or disinterested directors or otherwise. 7.4 Insurance. The Corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the Corporation or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, whether or not the Corporation would have the power to indemnify such person against such liability under this Article 7. 7.5 Expenses. Expenses incurred by any person described in Section 7.1 of this Article 7 in defending a proceeding shall be paid by the Corporation in advance of such proceeding's final disposition upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. 7.6 Employees and Agents. Persons who are not covered by the foregoing provisions of this Article 7 and who are or were employees or agents of the Corporation, or who are or were serving at the request of the Corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the board of directors. 7.7 Contract Rights. The provisions of this Article 7 shall be deemed to be a contract right between the Corporation and each director or officer who serves in any such capacity at any time while this Article 7 and the relevant provisions of the Delaware General Corporation Law or other applicable law are in effect, and any repeal or modification of this Article 7 or any such law shall not affect any rights or obligations then existing with respect to any state of facts or proceeding then existing. 7.8 Merger or Consolidation. For purposes of this Article 7, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent 12 corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article 7 with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. ARTICLE 8: CERTIFICATES AND SHAREHOLDERS 8.1 Certificates for Shares. Certificates for shares of stock of the Corporation shall be in such form as shall be approved by the board of directors. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by or in the name of the Corporation. The certificates shall be signed by the chairman of the board, the president or a vice president and also by the secretary or an assistant secretary or by the treasurer or an assistant treasurer. Any and all signatures on the certificate may be a facsimile and may be sealed with the seal of the Corporation or a facsimile thereof. If any officer, transfer agent, or registrar who has signed, or whose facsimile signature has been placed upon, a certificate has ceased to be such officer, transfer agent, or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. The certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued and shall exhibit the holder's name and the number of shares. 8.2 Replacement Of Lost or Destroyed Certificates. The board of directors may direct a new certificate or certificates to be issued in place of a certificate or certificates theretofore issued by the Corporation and alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate or certificates representing shares to be lost or destroyed. When authorizing such issue of a new certificate or certificates the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond with a surety or sureties satisfactory to the Corporation in such sum as it may direct as indemnity against any claim, or expense resulting from a claim, that may be made against the Corporation with respect to the certificate or certificates alleged to have been lost or destroyed. 8.3 Transfer of Shares. Shares of stock of the Corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, the Corporation or its transfer agent shall issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. The board of directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the Corporation. 8.4 Registered Stockholders. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other 13 person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. 8.5 Regulations. The board of directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer, and registration or the replacement of certificates for shares of stock of the Corporation. 8.6 Legends. The board of directors shall have the power and authority to provide that certificates representing shares of stock bear such legends as the board of directors deems appropriate to assure that the Corporation does not become liable for violations of federal or state securities laws or other applicable law. 8.7 Subscriptions for Stock. Unless otherwise provided for in any subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors. Any call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the Corporation may proceed to collect the amount due in the same manner as any debt due the Corporation. ARTICLE 9: MISCELLANEOUS PROVISIONS 9.1 Dividends. Subject to provisions of law and the certificate of incorporation of the Corporation, dividends upon the capital stock of the Corporation, may be declared by the board of directors at any regular or special meeting and may be paid in cash, in property, or in shares of the capital stock of the Corporation. Such declaration and payment shall be at the discretion of the board of directors. 9.2 Reserves. There may be created by the board of directors out of funds of the Corporation legally available therefor such reserve or reserves as the directors from time to time, in their discretion, consider proper to provide for contingencies, to equalize dividends, or to repair or maintain any property of the Corporation, or for such other purpose as the board of directors shall consider beneficial to the Corporation, and the board of directors may modify or abolish any such reserve in the manner in which it was created. 9.3 Books and Records. The Corporation shall keep correct and complete books and records of account, shall keep minutes of the proceedings of its stockholders and board of directors and shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of the shares held by each. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours of business to inspect for any proper purpose the Corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath 14 shall be directed to the Corporation at its registered office in the State of Delaware or at its principal place of business. 9.4 Checks, Drafts or Orders. All checks, drafts, or other orders for the payment of money by or to the Corporation and all notes and other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner, as shall be determined by resolution of the board of directors or a duly authorized committee thereof. 9.5 Contracts. The board of directors may authorize any officer or officers, or any agent or agents, of the Corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. 9.6 Loans. The Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Corporation or any of its subsidiaries, including any officer or employee who is a director of the Corporation or any of its subsidiaries, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Corporation at common law or under any statute. 9.7 Fiscal Year. The fiscal year of the Corporation shall be fixed by the board of directors; provided, that if such fiscal year is not fixed by the board of directors and the selection of the fiscal year is not expressly deferred by the board of directors, the fiscal year shall be the calendar year. 9.8 Seal. The board of directors of the Corporation shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the Corporation and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. 9.9 Resignations. Any director, committee member, or officer may resign by so stating at any meeting of the board of directors or by giving written notice to the board of directors, the president or the secretary. Such resignation shall take effect at the time specified therein or, if no time is specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 9.10 Voting Securities Owned By Corporation. Voting securities in any other corporation held by the Corporation shall be voted by the president, unless the board of directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution. 15 EX-3.11 15 y55701ex3-11.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.11 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF MAXUM HEALTH CORP. MAXUM HEALTH CORP., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), pursuant to a certificate of incorporation duly filed with the Secretary of State of Delaware on June 26, 1989, as amended, DOES HEREBY CERTIFY: FIRST: That the name under which the Corporation was originally incorporated was MHC Holding Corp., Inc., which name was changed by a filing of a Certificate of Amendment with the Delaware Secretary of State on July 24, 1991 to MAXUM HEALTH CORP. SECOND: That on September 15, 1991, resolutions were adopted by unanimous written consent of the Board of Directors of the Corporation proposing and declaring advisable certain amendments and the amendment and restatement in its entirety of the Corporation's Certificate of Incorporation as follows: "RESOLVED that the Board of Directors hereby determines and declares it advisable that the Certificate of Incorporation of this Corporation be amended and restated in its entirety to read as set forth in the Amended and Restated Certificate of Incorporation attached hereto as Exhibit A." THIRD: That thereafter, pursuant to resolution of its Board of Directors, a consent of the stockholders of the Company was duly adopted in accordance with the General Corporation Law of the State of Delaware in which the necessary number of shares as required by statute were voted in favor of the Amended and Restated Certificate of Incorporation. FOURTH: That said Amended and Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware and that any notice required to be given under said Section 228 has been given. FIFTH: That the effective time of the Amended and Restated Certificate of Incorporation shall be September 26, 1991. IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be executed and attested by its duly authorized officers this 25th day of September, 1991. MAXUM HEALTH CORP. By: /s/ WILLIAM L. MacKNIGHT ------------------------ William L. MacKnight President ATTEST: By: /s/ MARK A. SOLLS - --------------------- Mark A. Solls Secretary EXHIBIT A AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF MAXUM HEALTH CORP. ARTICLE ONE Maxum Health Corp. is the name of the Corporation. ARTICLE TWO The address of the registered office of the Corporation in the State of Delaware is 32 Loockerman Square, Suite L-100, in the City of Dover, County of Kent. The name of its registered agent at such address is The Prentice-Hall Corporation System, Inc. ARTICLE THREE The nature of the business or purposes of the Corporation to be conducted or promoted by it is to engage in any and all lawful acts or activities for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE FOUR The total number of shares of stock which the Corporation shall have authority to issue is 10,056,000, consisting of (i) 10,000,000 shares of Common Stock with a par value of one cent ($.01) per share, and (ii) 56,000 shares of Series Preferred Stock with a par value of one cent ($0.01) per share, of which 35,000 shall be designated as Series A Senior Cumulative Preferred Stock with a par value of one cent ($.0l) per share ("Series A Preferred"), and 21,000 shall be subject to designation in one or more series by the Corporation's Board of Directors as provided below (collectively, the "Series Preferred"). (a) COMMON STOCK Section 1. Dividends. To the extent permitted under the General Corporation Law of Delaware, dividends may be paid on the Common Stock as and when declared by the Corporation's Board of Directors, subject to the rights of the holders of the Series Preferred. Section 2. Liquidation. Upon any liquidation, dissolution or winding up of the Corporation, the holders of Common Stock shall be entitled to receive any amounts remaining after payment to the holders of the Series Preferred. Section 3. Voting Rights. Except as otherwise required by applicable law, the holders of shares of Common Stock shall be entitled to one vote per share with respect to all matters voted on by the stockholders of the Corporation. (b) SERIES PREFERRED Shares of the Series Preferred shall be issued from time to time in one or more series, and the Board of Directors of the Corporation is hereby authorized to determine and alter all rights, preferences and privileges and qualifications, limitations and restrictions thereof (including, without limitation, voting rights and the limitation and exclusion thereof) granted to or imposed upon any wholly unissued series of Series Preferred and the number of shares constituting any such series and the designation thereof, and to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series then outstanding. (c) SERIES A PREFERRED Section 1. Designation. Thirty-five thousand shares of the Series Preferred shall be designated as the "Series A Senior Cumulative Series Preferred" (the "Series A Preferred"). Section 2. Dividends 2A. General Obligation. When and as declared by the Corporation's Board of Directors and to the extent permitted under the General Corporation Law of Delaware, the Corporation shall pay preferential dividends to the holders of the Series A Preferred as provided in this section 2. Except as otherwise provided herein, dividends on each share of the Series A Preferred (a "Share") shall accrue on a daily basis at the Base Rate (as defined in Section 8 below) on the sum of the Liquidation Value of such Share plus all accumulated and unpaid dividends thereon, from and including the date of issuance of such Share to and including the date on which the Liquidation Value of such Share (plus all accrued and unpaid dividends thereon) is paid. Such dividends shall accrue whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. The date on which the Corporation initially issues any Share shall be deemed to be its "date of issuance" regardless of the number of times transfer of such Share is made on the stock records maintained by or for -2- the Corporation and regardless of the number of certificates which may be issued to evidence such Share. 2B. Dividend Reference Dates. To the extent not paid on March 31, June 30, September 30 and December 31 of each year, beginning June 30, 1991 (the "Dividend Reference Dates"), all dividends which have accrued on each Share outstanding during the three-month period (or other period in the case of the initial Dividend Reference Date) ending upon each such Dividend Reference Date shall be accumulated and shall remain accumulated dividends with respect to such Share until paid. 2C. Distribution of Partial Dividend Payments. Except as otherwise provided herein, if at any time the Corporation pays less than the total amount of dividends then accrued with respect to the Series A Preferred, such payment shall be distributed ratably among the holders thereof based upon the aggregate number of the Shares held by each such holder. Section 3. Liquidation. Upon any liquidation, dissolution or winding up of the Corporation, each holder of Series A Preferred shall be entitled to be paid, before any distribution or payment is made upon any Junior Securities, an amount in cash equal to the aggregate Liquidation Value (plus all accrued and unpaid dividends) of all Shares held by such holder, and the holders of Series A Preferred shall not be entitled to any further payment. If upon any such liquidation, dissolution or winding up of the Corporation, the Corporation's assets to be distributed among the holders of the Series A Preferred are insufficient to permit payment to such holders of the aggregate amount which they are entitled to be paid, then the entire assets to be distributed shall be distributed ratably among such holders based upon the aggregate Liquidation Value (plus all accrued and unpaid dividends) of the Series A Preferred held by each such holder. The Corporation shall mail written notice of such liquidation, dissolution or winding up, not less than 30 days prior to the payment date stated therein, to each record holder of Series A Preferred. Neither the consolidation or merger of the Corporation into or with any other entity or entities, nor the sale or transfer by the Corporation of all or any part of its assets, nor the reduction of the capital stock of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 3. Section 4. Priority of Series A Preferred. So long as any Series A Preferred remains outstanding, neither the Corporation nor any Subsidiary shall redeem, purchase or otherwise acquire directly or indirectly any Junior Securities, nor shall the Corporation directly or indirectly -3- pay or declare any dividend or make any distribution upon any Junior Securities. Section 5. Redemptions. 5A. Optional Redemptions. The Corporation may at any time redeem all or any portion of Series A Preferred then outstanding. On any such redemption, the Corporation shall pay a price per share equal to the Liquidation Value thereof plus all accrued and unpaid dividends thereon. No redemption pursuant to this paragraph 5A may be made for less than 100 shares (or such lesser number of shares then outstanding). 5B. Redemption Payments. For each Share which is to be redeemed, the Corporation shall be obligated on the Redemption Date to pay to the holder thereof (upon surrender by such holder at the Corporation's principal office of the certificate representing such Share) an amount in immediately available funds equal to the Liquidation Value of such Share (plus all accrued and unpaid dividends thereon). If the funds of the Corporation legally available for redemption of Shares on any Redemption Date are insufficient to redeem the total number of Shares to be redeemed on such date, those funds which are legally available shall be used to redeem the maximum possible number of Shares ratably among the holders of the Shares to be redeemed based upon the aggregate number of Shares held by each such holder. At any time thereafter when additional funds of the Corporation are legally available for the redemption of Shares, such funds shall immediately be used to redeem the balance of the Shares which the Corporation has become obligated to redeem on any Redemption Date but which it has not redeemed. 5C. Notice of Redemption. Except as otherwise provided herein, the Corporation shall mail written notice of each redemption of the Series A Preferred to each record holder thereof not more than 30 nor less than 10 days prior to the date on which such redemption is to be made. Upon mailing any notice of redemption, the Corporation shall become obligated to redeem the total number of Shares specified in such notice at the time of redemption specified therein. In case fewer than the total number of Shares represented by any certificate are redeemed, a new certificate representing the number of unredeemed Shares shall be issued to the holder thereof without cost to such holder within three business days after surrender of the certificate representing the redeemed Shares. 5D. Determination of the Number of Each Holder's Shares to be Redeemed. The number of Shares of Series A Preferred to be redeemed from each holder thereof in redemptions hereunder shall be the number of Shares -4- determined by multiplying the total number of Shares to be redeemed times a fraction, the numerator of which shall be the total number of Shares then held by such holder and the denominator of which shall be the total number of Shares then outstanding. 5E. Dividends After Redemption Date. No Share is entitled to any dividends accruing after the date on which the Liquidation Value of such Share (plus all accrued and unpaid dividends thereon) is paid to the holder thereof. On such date all rights of the holder of such Share shall cease, and such Share shall not be deemed to be outstanding. 5F. Redeemed or Otherwise Acquired Shares. Any Shares which are redeemed or otherwise acquired by the Corporation shall be canceled and shall not be reissued, sold or transferred. 5G. Other Redemptions or Acquisitions. Neither the Corporation nor any Subsidiary shall redeem or otherwise acquire any Series A Preferred, except as expressly authorized herein or pursuant to a purchase offer made pro-rata to all holders of Series A Preferred on the basis of the number of Shares owned by each such holder. Section 6. Event of Noncompliance. If the Corporation fails to pay on any three Dividend Reference Dates during any twelve-month period commencing after January 1, 1993, the full amount of dividends then accrued on the Series A Preferred, whether or not such payments are legally permissible or are prohibited by any agreement to which the Corporation is subject, the dividend rate on the Series A Preferred shall increase immediately by an increment of .5 percentage point over the dividend rate then in effect, and thereafter, until such time as all accrued dividends on the Series A Preferred have been paid in full, the dividend rate shall increase automatically at the end of each succeeding six-month period by an additional increment of .5 percentage point (but in no event shall the dividend rate exceed 20%). Any increase of the dividend rate resulting from the operation of this Section 6 shall terminate as of the close of business on the date on which all accrued dividends on the Series A Preferred have been paid, subject to subsequent increases pursuant hereto. Section 7. Voting Rights. Except as otherwise provided herein or as otherwise required by law, the holders of the Series A Preferred will have no voting rights. Section 8. Definitions. "Base Rate" means the per annum rate set forth below which corresponds to the relevant calendar year: -5-
Calendar Year Dividend Rate - ------------- ------------- 1991 10% 1992 11% 1993 12% 1994 13% 1995 14% 1996 15% 1997 16% 1998 17% 1999 and thereafter 18%
"Junior Securities" means with respect to the Series A Preferred any of the Corporation's equity securities other than the Series A Preferred. "Liquidation Value" of any Share as of any particular date shall be equal to $100. "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "Redemption Date" as to any Share means the date specified in the notice of any redemption; provided that no such date shall be a Redemption Date unless the Liquidation Value of such Share (plus all accrued and unpaid dividends thereon) is actually paid in full on such date, and if not so paid in full, the Redemption Date shall be the date on which such amount is fully paid. "Subsidiary" means, with respect to any Person, any corporation, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that person or a -6- combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership, association or other business entity if such Person or Persons shall be allocated a majority of partnership, association or other business entity gains or losses or shall be or control the managing general partner of such partnership, association or other business entity. Section 9. Amendment and Waiver. No amendment, modification or waiver will be binding or effective with respect to any provision of this Part (c) of Article Four, or Part (d) of Article Four, without the prior written consent of the holders of at least 66-2/3% of the Series A Preferred outstanding at the time such action is taken. (d) PROVISIONS APPLICABLE TO ALL SERIES PREFERRED Section 1. Registration of Transfer. The Corporation will keep at its principal office a register for the registration of Series Preferred. Upon the surrender of any certificate representing Series Preferred at such place, the Corporation will, at the request of the record holder of such certificate, execute and deliver (at the Company's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares of the same class represented by the surrendered certificate. Each such new certificate will be registered in such name and will represent such number of Series Preferred of the same class as is requested by the holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate, and dividends will accrue on the Series Preferred represented by such new certificate from the date to which dividends have been fully paid on such Series Preferred represented by the surrendered certificate. Section 2. Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of any class of Series Preferred and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the holder is an institutional investor its own agreement will be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Corporation will (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends will accrue on the Series Preferred represented by -7- such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate. Section 3. Notices. Except as otherwise expressly provided, all notices referred to herein will be in writing and will be delivered by registered or certified mail, return receipt requested, postage prepaid and will be deemed to have been given when so mailed (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder's address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder). ARTICLE FIVE The duration of the Corporation shall be perpetual. ARTICLE SIX (a) NUMBER OF DIRECTORS The business and affairs of the Corporation shall be managed by a Board of Directors which will consist of not less than five (5) nor more than nine (9) members. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors and at least one director from each class of directors. The directors shall be divided into three classes as nearly equal in number as possible, with the term of office of the first class to expire at the first Annual Meeting of Stockholders held after the initial election of the directors in such class, the term of office of the second class to expire at the second Annual Meeting of Stockholders held after the initial election of the directors in such class and the term of office of the third class to expire at the third Annual Meeting of Stockholders after the initial election of the directors in such class. At each Annual Meeting of Stockholders after such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding Annual Meeting of Stockholders after their election. (b) VOTE TO ELECT DIRECTORS A nominee to be a director of the Corporation may be elected only by the affirmative vote of more than fifty percent (50%) of the Corporation's outstanding shares entitled to vote for the election of directors. -8- (c) FILLING VACANCIES Subject to the rights of the holders of any series of Series Preferred then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the directors then in office, although less than a quorum, or by a sole remaining director. Directors chosen pursuant to any of the foregoing provisions shall hold office for a term expiring at the Annual Meeting of Stockholders at which the term of the class to which they have been elected expires and until their successors are duly elected and have qualified or until their earlier resignation or removal. Additional directorships resulting from an increase in the number of directors pursuant to paragraph A of this ARTICLE SIX shall be apportioned among the three terms of directors as equally as possible. No decrease in the number of directors constituting the board shall shorten the term of any incumbent director. (d) REMOVAL Any director or the entire Board of Directors may be removed only for cause. ARTICLE SEVEN No action required or permitted to be taken at any annual or special meeting of the stockholders of the Corporation may be taken without a meeting and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. ARTICLE EIGHT (a) STOCKHOLDER VOTE FOR MERGERS ETC. NOT APPROVED BY BOARD Except as otherwise expressly provided in Part (b) of this ARTICLE EIGHT, the affirmative vote of not less than eighty percent (80%) of the outstanding shares of the Corporation entitled to vote shall be required for any of the following actions or transactions to be effected by this Corporation, or approved by this Corporation as stockholder of any subsidiary of this Corporation, if, as of the record date for the determination of the stockholders entitled to vote thereon or consent thereto, any other corporation, person or entity referred to below beneficially owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of this Corporation entitled to vote: -9- (1) any merger or consolidation of this Corporation or any of its subsidiaries with or into such other corporation, person or entity; or (2) any sale, lease, exchange or other disposition of all or any substantial part of the assets of this Corporation or any of its subsidiaries to or with such other corporation, person or entity; or (3) the issuance or delivery of any voting securities of this Corporation or any of its subsidiaries to such other corporation, person or entity in exchange for cash, other assets or securities, or a combination thereof; or (4) any dissolution or liquidation of this Corporation. (b) MERGERS ETC. APPROVED BY BOARD The vote of stockholders specified in Part (a) of this ARTICLE EIGHT shall not apply to any action or transaction described in such paragraph, if at least two-thirds of the authorized number of directors of this Corporation shall have approved the action or transaction. (c) DETERMINATION OF SHARE OWNERSHIP For purpose of this ARTICLE EIGHT, (1) a corporation, person or entity shall be deemed to own or control, directly or indirectly, any outstanding shares of stock of this Corporation (A) which it has the right to acquire pursuant to any agreement, or upon the exercise of conversion rights, warrants or options, or otherwise, or (B) which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (A) above), by any other corporation, person or other entity (x) with which it or its "affiliate" or "associate" (as defined below) has any agreement, arrangement, or understanding for the purpose of acquiring, holding, voting or disposing of stock of this Corporation or (y) which is its "affiliate" or "associate" as those terms are defined under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder,; and (2) "outstanding shares of this Corporation entitled to vote" and "voting securities" shall mean such shares as are entitled to vote generally in the execution of directors, considered as one class. (d) DETERMINATION OF 5 PERCENT HOLDER The Board of Directors of this Corporation shall have the power and duty to determine for the purposes of this ARTICLE EIGHT, on the basis of information then known -10- to the Board of Directors, whether (1) any corporation, person or other entity beneficially owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of this Corporation entitled to vote, or is an "affiliate" or an "associate" (as defined above) of another, and (2) any proposed sale, lease, exchange, or other disposition involves a substantial part of the assets of this Corporation or any of its subsidiaries. Any such determination by the Board shall be conclusive and binding for all purposes. ARTICLE NINE The by-laws of the Corporation may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the Board of Directors at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such special meeting; provided, however, that such alteration, amendment, repeal or adoption of new by-laws shall not be effected by the stockholders by less than the affirmative vote of the holders of at least eighty percent (80%) of the outstanding shares of the Corporation entitled to vote in the election of directors, voting as one class, and any required vote of Series Preferred. ARTICLE TEN Meetings of stockholders may be held within or without the State of Delaware, as the by-laws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the by-laws of the corporation. Election of directors need not be by written ballot unless the by-laws of the Corporation so provide. ARTICLE ELEVEN To the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended, a director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director. Any repeal or modification of this ARTICLE ELEVEN shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. -11- ARTICLE TWELVE The Corporation expressly elects not to be governed by Section 203 of the General Corporation Law of the State of Delaware. ARTICLE THIRTEEN The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed herein and by the laws of the State of Delaware, and all rights conferred upon stockholders herein are granted subject to this reservation; provided, however, that notwithstanding any other provision contained in this Certificate of Incorporation or the by-laws of the Corporation, the amendment, alteration, change or repeal of ARTICLES SIX, SEVEN, EIGHT AND NINE of this Certificate of Incorporation shall require the approval of the holders of shares representing at least eighty percent (80%) of the shares of this Corporation entitled to vote in the election of directors, voting as one class. -12- EX-3.12 16 y55701ex3-12.txt BYLAWS EXHIBIT 3.12 September 26, 1991 AMENDED AND RESTATED BY-LAWS OF MAXUM HEALTH CORP. ARTICLE I OFFICES Section 1. Registered Office. The registered office of the corporation in the State of Delaware shall be located at the Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle. The name of the corporation's registered agent at such. address shall be The Corporation Trust Company. The registered office and/or registered agent of the corporation may be changed from time to time by action of the board of directors. Section 2. Other Offices. The corporation may also have offices at such other places, both within and without the State of Delaware, as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Place and Time of Meetings. An annual meeting of the stockholders shall be held each year within one hundred twenty (120) days after the close of the immediately preceding fiscal year of the corporation for the purpose of electing directors and conducting such other proper business as may come before the meeting. The date, time and place of the annual meeting shall be determined by the president of the corporation; provided, that if the president does not act, the board of directors shall determine the date, time and place of such meeting. Section 2. Special Meetings. Special meetings of stockholders may be called for any purpose and may be held at such time and place, within or without the State of Delaware, as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. Such meetings may be called at any time by the board of directors or the president. Page 1 of 15 Section 3. Place of Meetings. The board of directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal executive office of the corporation. Section 4. Notice. Whenever stockholders are required or permitted to take action at a meeting, written or printed notice stating the place, date, time, and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each stockholder entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. All such notices shall be delivered, either personally or by mail, by or at the direction of the board of directors, the president or the secretary, and if mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at his, her or its address as the same appears on the records of the corporation. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Section 5. Stockholders List. The officer having charge of the stock ledger of the corporation shall make, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting; during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present Section 6. Quorum. The holders of a majority of the outstanding shares of capital stock, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by statute or by the certificate of incorporation. If a quorum is not present, the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time and/or place. Section 7. Adjourned Meetings. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Page 2 of 15 Section 8. Vote Required. When a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation or of these by-laws a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 9. Voting Rights. Except as otherwise provided by the General Corporation Law of the State of Delaware or by the certificate of incorporation of the corporation or any amendments thereto and subject to Section 3 of Article VI hereof; every stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of common stock held by such stockholder. Section 10. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Section 11. Action by Written Consent. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporations or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken and bearing the dates of signature of the stockholders who signed the consent or consents, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the state of Delaware, or the corporation's principal place of business, or an officer or agent of the corporation having custody of the book or books in which proceedings of meetings of the stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. All consents properly delivered in accordance with this section shall be deemed to be recorded when so delivered. No written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered to the corporation as required by this section, written consents signed by the holders of a sufficient number of shares to take such corporate action are so recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Any action taken pursuant to such written consent or consents Of the stockholders shall have the same force and effect as if taken by the stockholders at a meeting thereof. Page 3 of 15 ARTICLE III DIRECTORS Section 1. General Powers. The business and affairs of the corporation shall be managed by or under the direction of the board of directors. Section 2. Number, Election and Term of Office. The number of directors shall be not less than five (5) nor more than nine (9). The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors and at least one director from each class of directors. The directors shall be divided into three classes as nearly equal in number as possible, with the term of office of the first class to expire at the first Annual Meeting of Stockholders held after the initial election of the directors in such class, the term of office of the second class to expire at the second Annual Meeting of Stockholders held after the initial election of the directors in such class and the term of office of the third class to expire at the third Annual Meeting of Stockholders after the initial election of the directors in such class. At each Annual Meeting of Stockholders after such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding Annual Meeting of Stockholders after their election. A nominee to be a director of the Corporation may be elected only by the affirmative vote of more than fifty percent (50%) of the Corporation's outstanding shares entitled to vote for the election of directors. Section 3. Removal and Resignation. Any director or the entire Board of Directors may be removed only for cause. Any director may resign at any time upon written notice to the Corporation. Section 4. Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding pursuant to the Corporation's Certificate of Incorporation, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the directors then in office, although less than a quorum, or by a sole remaining director. Directors chosen pursuant to any of the foregoing provisions shall hold office for a term expiring at the Annual Meeting of Stockholders at which the term of the class to which they have been elected expires and until their successors are duly elected and have qualified or until their earlier resignation or removal. Additional directorships resulting from an increase in the number of directors pursuant to Section 2 of this Article III shall be apportioned among the three terms of directors as equally as possible. No decrease in the number of directors constituting the board shall shorten the term of any incumbent director. Page 4 of 15 Section 5. Annual Meetings. The annual meeting of each newly elected board of directors shall be held without other notice than this by-law immediately after, and at the same place as, the annual meeting of stockholders. Section 6. Other Meetings and Notice. Regular meetings, other than the annual meeting, of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the board. Special meetings of the board of directors may be called by or at the request of the president on at least 24 hours notice to each director, either personally by telephone, by mail, or by telegraph;, in like manner and on like notice the president must call a special meeting on the written request of at least a majority of the directors. Section 7. Quorum, Required Vote and Adjournment. A majority of the total number of directors then in office shall constitute a quorum for the transaction of business, provided, that in no event shall a quorum consist of less than one third of the total number of directors established by the stockholders pursuant to Section 2 of this Article III. The vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation or these by-laws a different vote is required, in which case such express provision shall govern and control the decision of such question. Any director may authorize another person or persons to act for him or her by proxy and such proxy shall count for purposes of determining a quorum and for voting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 8. Committees. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation which to the extent provided in such resolution or these by-laws shall have and may exercise the powers of the board of directors in the management and affairs of the corporation except as otherwise limited by law. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. Section 9. Committee Rules. Each committee of the board of directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the board of directors designating such committee. In the event that a member and that member's alternate, if alternates are designated by the board of directors as provided in Section 8 of this Article III, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not Page 5 of 15 disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting place of any such absent or disqualified member. Section 10. Communications Equipment. Members of the board of directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting. Section 11. Waiver of Notice and Presumption of Assent. Any member of the board of directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. Section 12. Action by Written Consent. Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. ARTICLE IV OFFICERS Section 1. Number. The officers of the corporation shall be elected by the board of directors and may consist of a chairman of the board, a president, one or more vice-presidents, a secretary, a treasurer, and such other officers and assistant officers as may be deemed necessary or desirable by the board of directors. Any number of offices may be held by The same person. In its discretion, the board of directors may choose not to fill any office for any period as it may deem advisable. Section 2. Election and Term of Office. The officers of the corporation shall be elected annually by the board of directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold Page 6 of 15 office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. Section 3. Removal. Any officer or agent elected by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Section 4. Vacancies. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term by the board of directors then in office. Section 5. Compensation. Compensation of all officers shall be fixed by the board of directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the corporation. Section 6. Chairman of the Board and Chief Executive Officer. The chairman of the board shall be the chief executive officer of the corporation, and shall have the powers and perform the duties incident to that position. Subject to the powers of the board of directors, he or she shall be in the general and active charge of the entire business and affairs of the corporation, and shall be its chief policy making officer. He or she shall preside at all meetings of the board of directors and stockholders and shall have such other powers and perform such other duties as may be prescribed by the board of directors or provided in these by-laws. Whenever the president is unable to serve, by reason of sickness, absence or otherwise, the chairman of the board shall perform all the duties and responsibilities and exercise all the powers of the president. Section 7. The President. The president shall, subject to the powers of the board of directors and the chairman of the board, have general charge of the business, affairs and property of the corporation, and control over its officers, agents and employees; and shall see that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. The president shall have such other powers and perform such other duties as may be prescribed by the chairman of the board or the board of directors or as may be provided in these by-laws. Section 8. Chief Operating Officer. The chief operating officer of the corporation, subject to the powers of the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. The chief operating officer shall have such other powers and perform such other duties as may be prescribed by the chairman of the board., the chief executive officer or the board of directors or as may be provided in these by-laws. Page 7 of 15 Section 9. Vice-presidents. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the board of directors, shall, in the absence or disability of the president, act with all of the powers and be subject to all the restrictions of the president. The vice-presidents shall also perform such other duties and have such other powers as the board of directors, the chairman of the board, the president or these by-laws may, from time to time, prescribe. Section 10. The Secretary and Assistant Secretaries. The secretary shall attend all meetings of the board of directors, all meetings of the committees thereof and all meetings of the stockholders and record all the proceedings of the meetings in a book or books to be kept for that purpose. Under the president's supervision, the secretary shall give, or cause to be given, all notices required to be given by these by-laws or by law shall have such powers and perform such duties as the board of directors, the chairman of the board, the president or these by-laws may, from time to time, prescribe; and shall have custody of the corporate seal of the corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors, the chairman of the board, the president, or secretary may, from time to time, prescribe. Section 11. The Treasurer and Assistant Treasurer. The treasurer shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation; shall deposit all monies and other valuable effects in the name and to the credit of the corporation as may be ordered by the board of directors; shall cause the funds of the corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the president and the board of directors, at its regular meeting or when the board of directors so requires, an account of the corporation; shall have such powers and perform such duties as the board of directors, the chairman of the board, the president or these by-laws may, from time to time, prescribe. If required by the board of directors, the treasurer shall give the corporation a bond (which shall be rendered every six years) in such sums and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the office of treasurer and for the restoration to the corporation, in case of death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in the possession or under the control of the treasurer belonging to the corporation. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. The assistant treasurers shall perform such other duties and have such other Page 8 of 15 powers as the board of directors, the chairman of the board, the president or treasurer may, from time to time, prescribe. Section 12. Other Officers, Assistant Officers and Agents. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these by-laws, shall have such authority and perform such duties as may from time to time be prescribed by resolution of the board of directors. Section 13. Absence or Disability of Officers. In the case of the absence or disability of any officer of the corporation and of any person hereby authorized to act in such officer's place during such officer's absence or disability, the board of directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select. ARTICLE V INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS Section 1. Nature of Indemnity. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the corporation to the fullest extent which it is empowered to do so by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such proceeding) and such indemnification shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 2 hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the corporation. The corporation may, by action of its board of directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers. Section 2. Procedure for Indemnification of Directors and Officers. Any indemnification of a director or officer of the corporation under Section 1 of this Article V or advance of expenses under Section 5 of this Article V shall be made promptly, and in any event within 30 days, upon the written request of the director or officer. If a determination by the corporation that the director or officer is entitled to indemnification pursuant to this Article V is required, and the corporation fails to respond within sixty days to a written Page 9 of 15 request for indemnity, the corporation shall be deemed to have approved the request. if the corporation denies a written request for indemnification or advancing of expenses, in whole or in part, or if payment in full pursuant to such request is not made within 30 days, the right to indemnification or advances as granted by this Article V shall be enforceable by the director or officer in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 3. Article Not Exclusive. The rights to indemnification and-the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article V shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. Section 4. Insurance. The corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the corporation or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, whether or not the corporation would have the power to indemnify such person against such liability under this Article V. Section 5. Expenses. Expenses incurred by any person described in Section 1 of this Article V in defending a proceeding shall be paid by the corporation in advance of such proceeding's final disposition upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. Page 10 of 15 Section 6. Employees and Agents. Persons who are not covered by the foregoing provisions of this Article V and who are or were employees or agents of the corporation, or who are or were serving at the request of the corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the board of directors. Section 7. Contract Rights. The provisions of this Article V shall be deemed to be a contract right between the corporation and each director or officer who serves in any such capacity at any time while this Article V and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law are in effect, and any repeal or modification of this Article V or any such law shall not affect any rights or obligations then existing with respect to any state of facts or proceeding then existing. Section 8. Merger or Consolidation. For purposes of this Article V, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article V with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. ARTICLE VI CERTIFICATES OF STOCK Section 1. Form. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by the chairman of the board, president or a vice-president and the secretary or an assistant secretary of the corporation, certifying the number of shares owned by such holder in the corporation. If such a certificate is countersigned (1) by a transfer agent or an assistant transfer agent other than the corporation or its employee or (2) by a registrar, other than the corporation or its employee, the signature of any such chairman of the board, president, vice-president, secretary, or assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation. All certificates for shares shall be consecutively numbered or otherwise Page 11 of 15 identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation. Shares of stock of the corporation shall only be transferred on the books of the corporation by the holder of record thereof or by such holder's attorney duly authorized in writing, upon surrender to the corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization, and other matters as the corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates, and record the transaction on its books. The board of directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the corporation. Section 2. Lost Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his or her legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against the corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 3. Fixing a Record Date for Stockholder Meetings. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. Section 4. Fixing a Record Date for Action by Written Consent. in order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten days after the date upon which the Page 12 of 15 resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by statute, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by statute, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. Section 5. Fixing a Record Date for Other Purposes. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such -action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. Section 6. Registered Stockholders. Prior to the surrender to the corporation of the certificate or certificates for a share or shares of stock with a request to record the transfer of such share or shares, the corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. Section 7. Subscriptions for Stock. Unless otherwise provided for in the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors. Any call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation. ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of Page 13 of 15 directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created. Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders for the payment of money by or to the corporation and all notes and other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner, as shall be determined by resolution of the board of directors or a duly authorized committee thereof. Section 3. Contracts. The board of directors may authorize any officer or officers, or any agent or agents, of the corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. Section 4. Loans. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the board of directors. Section 6. Corporate Seal. The board of directors shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 7. Voting Securities Owned By Corporation. Voting securities in any other corporation held by the corporation shall be voted by the president, unless the board of directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution. Page 14 of 15 Section 8. Inspection of Books and Records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in the State of Delaware or at its principal place of business. Section 9. Section Headings. Section headings in these by-laws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein. Section 10. Inconsistent Provisions. In the event that any provision of these by-laws is or becomes inconsistent with any provision of the certificate of incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these by-laws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect. ARTICLE VIII AMENDMENTS These by-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the Board of Directors at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such special meeting; provided, however, that such alteration, amendment, repeal or adoption of new by-laws shall not be effected by the stockholders by less than the affirmative vote of the holders of at least eighty percent (80%) of the outstanding shares of the Corporation entitled to vote in the election of directors, voting as one class, and any required vote of Preferred Stock. Page 15 of 15 November 20, 1991 AMENDED AND RESTATED BY-LAWS OF MAXUM HEALTH CORP. ARTICLE I OFFICES Section 1. Registered Office. The registered office of the corporation in the State of Delaware shall be located at the Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle. The name of the corporation's registered agent at such. address shall be The Corporation Trust Company. The registered office and/or registered agent of the corporation may be changed from time to time by action of the board of directors. Section 2. Other Offices. The corporation may also have offices at such other places, both within and without the State of Delaware, as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Place and Time of Meetings. An annual meeting of the stockholders shall be held each calendar year on such date and at such time and place as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice of such meeting. The purpose of the meeting shall be to elect Directors and to conduct such other proper business as may come before the meeting. Section 2. Special Meetings. Special meetings of stockholders may be called for any purpose and may be held at such time and place, within or without the State of Delaware, as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. Such meetings may be called at any time by the board of directors or the president. Page 1 of 15 Section 3. Place of Meetings. The board of directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal executive office of the corporation. Section 4. Notice. Whenever stockholders are required or permitted to take action at a meeting, written or printed notice stating the place, date, time, and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each stockholder entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. All such notices shall be delivered, either personally or by mail, by or at the direction of the board of directors, the president or the secretary, and if mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at his, her or its address as the same appears on the records of the corporation. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Section 5. Stockholders List. The officer having charge of the stock ledger of the corporation shall make, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting; during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 6. Quorum. The holders of a majority of the outstanding shares of capital stock, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by statute or by the certificate of incorporation. If a quorum is not present, the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time and/or place. Section 7. Adjourned Meetings. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Page 2 of 15 Section 8. Vote Required. When a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation or of these by-laws a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 9. Voting Rights. Except as otherwise provided by the General Corporation Law of the State of Delaware or by the certificate of incorporation of the corporation or any amendments thereto and subject to Section 3 of Article VI hereof, every stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of common stock held by such stockholder. Section 10. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Section 11. Action by Written Consent. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken and bearing the dates of signature of the stockholders who signed the consent or consents, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the state of Delaware, or the corporation's principal place of business, or an officer or agent of the corporation having custody of the book or books in which proceedings of meetings of the stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. All consents properly delivered in accordance with this section shall be deemed to be recorded when so delivered. No written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered to the corporation as required by this section, written consents signed by the holders of a sufficient number of shares to take such corporate action are so recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Any action taken pursuant to such written consent or consents Of the stockholders shall have the same force and effect as if taken by the stockholders at a meeting thereof. Page 3 of 15 ARTICLE III DIRECTORS Section 1. General Powers. The business and affairs of the corporation shall be managed by or under the direction of the board of directors. Section 2. Number, Election and Term of Office. The number of directors shall be not less than five (5) nor more than nine (9). The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors and at least one director from each class of directors. The directors shall be divided into three classes as nearly equal in number as possible, with the term of office of the first class to expire at the first Annual Meeting of Stockholders held after the initial election of the directors in such class, the term of office of the second class to expire at the second Annual Meeting of Stockholders held after the initial election of the directors in such class and the term of office of the third class to expire at the third Annual Meeting of Stockholders after the initial election of the directors in such class. At each Annual Meeting of Stockholders after such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding Annual Meeting of Stockholders after their election. A nominee to be a director of the Corporation may be elected only by the affirmative vote of more than fifty percent (50%) of the Corporation's outstanding shares entitled to vote for the election of directors. Section 3. Removal and Resignation. Any director or the entire Board of Directors may be removed only for cause. Any director may resign at any time upon written notice to the Corporation. Section 4. Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding pursuant to the Corporation's Certificate of Incorporation, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the directors then in office, although less than a quorum, or by a sole remaining director. Directors chosen pursuant to any of the foregoing provisions shall hold office for a term expiring at the Annual Meeting of Stockholders at which the term of the class to which they have been elected expires and until their successors are duly elected and have qualified or until their earlier resignation or removal. Additional directorships resulting from an increase in the number of directors pursuant to Section 2 of this Article III shall be apportioned among the three terms of directors as equally as possible. No decrease in the number of directors constituting the board shall shorten the term of any incumbent director. Page 4 of 15 Section 5. Annual Meetings. An annual meeting of the Board of Directors shall be the first scheduled meeting of the Board of Directors following the annual meeting of the stockholders. The meeting shall be on such date and at such time and place as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice of such meeting. The purpose of the meeting shall be to conduct such proper business as may come before the meeting. Section 6. Other Meetings and Notice. Regular meetings, other than the annual meeting, of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the board. Special meetings of the board of directors may be called by or at the request of the president on at least 24 hours notice to each director, either personally, by telephone, by mail, or by telegraph;, in like manner and on like notice the president must call a special meeting on the written request of at least a majority of the directors. Section 7. Quorum, Required Vote and Adjournment. A majority of the total number of directors then in office shall constitute a quorum for the transaction of business, provided, that in no event shall a quorum consist of less than one third of the total number of directors established by the stockholders pursuant to Section 2 of this Article III. The vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation or these by-laws a different vote is required, in which case such express provision shall govern and control the decision of such question. Any director may authorize another person or persons to act for him or her by proxy and such proxy shall count for purposes of determining a quorum and for voting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 8. Committees. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation, which to the extent provided in such resolution or these by-laws shall have and may exercise the powers of the board of directors in the management and affairs of the corporation except as otherwise limited by law. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. Page 5 of 15 Section 9. Committee Rules. Each committee of the board of directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the board of directors designating such committee. In the event that a member and that member's alternate, if alternates are designated by the board of directors as provided in Section 8 of this Article III, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member. Section 10. Communications Equipment. Members of the board of directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting. Section 11. Waiver of Notice and Presumption of Assent. Any member of the board of directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. Section 12. Action by Written Consent. Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. ARTICLE IV OFFICERS Section 1. Number. The officers of the corporation shall be elected by the board of directors and may consist of a chairman of the board, a president, one or more vice-presidents, a secretary, a treasurer, and such other officers and assistant officers as may be deemed necessary or desirable by the board of directors. Any number of offices may be held by the same person. In its discretion, the board of directors may choose not to fill any office for any period as it may deem advisable. Page 6 of 15 Section 2. Election and Term of Office. The officers of the corporation shall be elected annually by the board of directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. Section 3. Removal. Any officer or agent elected by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Section 4. Vacancies. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term by the board of directors then in office. Section 5. Compensation. Compensation of all officers shall be fixed by the board of directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the corporation. Section 6. Chairman of the Board and Chief Executive Officer. The chairman of the board shall be the chief executive officer of the corporation, and shall have the powers and perform the duties incident to that position. Subject to the powers of the board of directors, he or she shall be in the general and active charge of the entire business and affairs of the corporation, and shall be its chief policy making officer. He or she shall preside at all meetings of the board of directors and stockholders and shall have such other powers and perform such other duties as may be prescribed by the board of directors or provided in these by-laws. Whenever the president is unable to serve, by reason of sickness, absence or otherwise, the chairman of the board shall perform all the duties and responsibilities and exercise all the powers of the president. Section 7. The President. The president shall, subject to the powers of the board of directors and the chairman of the board, have general charge of the business, affairs and property of the corporation, and control over its officers, agents and employees; and shall see that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. The president shall have such other powers and perform such other duties as may be prescribed by the chairman of the board or the board of directors or as may be provided in these by-laws. Page 7 of 15 Section 8. Chief Operating Officer. The chief operating officer of the corporation, subject to the powers of the board of directors, shall have general and active management of the business of the corporation; and shall see that all orders and resolutions of the board of directors are carried into effect. The chief operating officer shall have such other powers and perform such other duties as may be prescribed by the chairman of the board., the chief executive officer or the board of directors or as may be provided in these by-laws. Section 9. Vice-presidents. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the board of directors, shall, in the absence or disability of the president, act with all of the powers and be subject to all the restrictions of the president. The vice-presidents shall also perform such other duties and have such other powers as the board of directors, the chairman of the board, the president or these by-laws may, from time to time, prescribe. Section 10. The Secretary and Assistant Secretaries. The secretary shall attend all meetings of the board of directors, all meetings of the committees thereof and all meetings of the stockholders and record all the proceedings of the meetings in a book or books to be kept for that purpose. Under the president's supervision, the secretary shall give, or cause to be given, all notices required to be given by these by-laws or by law; shall have such powers and perform such duties as the board of directors, the chairman of the board, the president or these by-laws may, from time to time, prescribe; and shall have custody of the corporate seal of the corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors, the chairman of the board, the president, or secretary may, from time to time, prescribe. Section 11. The Treasurer and Assistant Treasurer. The treasurer shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation; shall deposit all monies and other valuable effects in the name and to the credit of the corporation as may be ordered by the board of directors; shall cause the funds of the corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the president and the board of directors, at its regular meeting or when the board of directors so requires, an account of the corporation; shall have such powers and perform such duties as the board of directors, the chairman of the board, the president or these by-laws may, from time to time, prescribe. If required by the board of directors, the treasurer shall give the corporation a bond (which shall be rendered every six years) in such sums and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the office of treasurer and for the restoration to the Page 8 of 15 corporation, in case of death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in the possession or under the control of the treasurer belonging to the corporation. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. The assistant treasurers shall perform such other duties and have such other powers as the board of directors, the chairman of the board, the president or treasurer may, from time to time, prescribe. Section 12. Other Officers, Assistant Officers and Agents. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these by-laws, shall have such authority and perform such duties as may from time to time be prescribed by resolution of the board of directors. Section 13. Absence or Disability of Officers. In the case of the absence or disability of any officer of the corporation and of any person hereby authorized to act in such officer's place during such officer's absence or disability, the board of directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select. ARTICLE V INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS Section 1. Nature of Indemnity. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the corporation to the fullest extent which it is empowered to do so by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such proceeding) and such indemnification shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 2 hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the corporation. The corporation may, by action of its board of directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers. Page 9 of 15 Section 2. Procedure for Indemnification of Directors and Officers. Any indemnification of a director or officer of the corporation under Section 1 of this Article V or advance of expenses under Section 5 of this Article V shall be made promptly, and in any event within 30 days, upon the written request of the director or officer. If a determination by the corporation that the director or officer is entitled to indemnification pursuant to this Article V is required, and the corporation fails to respond within sixty days to a written request for indemnity, the corporation shall be deemed to have approved the request. if the corporation denies a written request for indemnification or advancing of expenses, in whole or in part, or if payment in full pursuant to such request is not made within 30 days, the right to indemnification or advances as granted by this Article V shall be enforceable by the director or officer in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 3. Article Not Exclusive. The rights to indemnification and-the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article V shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. Section 4. Insurance. The corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the corporation or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, whether or not the corporation would have the power to indemnify such person against such liability under this Article V. Page 10 of 15 Section 5. Expenses. Expenses incurred by any person described in Section 1 of this Article V in defending a proceeding shall be paid by the corporation in advance of such proceeding's final disposition upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. Section 6. Employees and Agents. Persons who are not covered by the foregoing provisions of this Article V and who are or were employees or agents of the corporation, or who are or were serving at the request of the corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the board of directors. Section 7. Contract Rights. The provisions of this Article V shall be deemed to be a contract right between the corporation and each director or officer who serves in any such capacity at any time while this Article V and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law are in effect, and any repeal or modification of this Article V or any such law shall not affect any rights or obligations then existing with respect to any state of facts or proceeding then existing. Section 8. Merger or Consolidation. For purposes of this Article V, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article V with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. ARTICLE VI CERTIFICATES OF STOCK Section 1. Form. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by the chairman of the board, president or a vice-president and the secretary or an assistant secretary of the corporation, certifying the number of shares owned by such holder in the corporation. If such a certificate is countersigned (1) by a transfer agent or an assistant transfer agent other than the corporation or its employee or (2) by a registrar, other than the corporation or its employee, the signature of any such chairman of the board, president, vice-president, secretary, or assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates Page 11 of 15 shall cease to be such officer or officers of the corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation. Shares of stock of the corporation shall only be transferred on the books of the corporation by the holder of record thereof or by such holder's attorney duly authorized in writing, upon surrender to the corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization, and other matters as the corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates, and record the transaction on its books. The board of directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the corporation. Section 2. Lost Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his or her legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against the corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 3. Fixing a Record Date for Stockholder Meetings. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. Page 12 of 15 Section 4. Fixing a Record Date for Action by Written Consent. in order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by statute, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by statute, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. Section 5. Fixing a Record Date for Other Purposes. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such -action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. Section 6. Registered Stockholders. Prior to the surrender to the corporation of the certificate or certificates for a share or shares of stock with a request to record the transfer of such share or shares, the corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. Section 7. Subscriptions for Stock. Unless otherwise provided for in the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors. Any call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation. Page 13 of 15 ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created. Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders for the payment of money by or to the corporation and all notes and other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner, as shall be determined by resolution of the board of directors or a duly authorized committee thereof. Section 3. Contracts. The board of directors may authorize any officer or officers, or any agent or agents, of the corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. Section 4. Loans. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the board of directors. Section 6. Corporate Seal. The board of directors shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Page 14 of 15 Section 7. Voting Securities Owned By Corporation. Voting securities in any other corporation held by the corporation shall be voted by the president, unless the board of directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution. Section 8. Inspection of Books and Records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in the State of Delaware or at its principal place of business. Section 9. Section Headings. Section headings in these by-laws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein. Section 10. Inconsistent Provisions. In the event that any provision of these by-laws is or becomes inconsistent with any provision of the certificate of incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these by-laws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect. ARTICLE VIII AMENDMENTS These by-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the Board of Directors at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such special meeting; provided, however, that such alteration, amendment, repeal or adoption of new by-laws shall not be effected by the stockholders by less than the affirmative vote of the holders of at least eighty percent (80%) of the outstanding shares of the Corporation entitled to vote in the election of directors, voting as one class, and any required vote of Preferred Stock. Page 15 of 15 EX-3.13 17 y55701ex3-13.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.13 CERTIFICATE OF INCORPORATION OF RADIOSURGERY CENTERS, INC. THE UNDERSIGNED, a natural person, for the purpose of forming a corporation pursuant to the laws of the State of Delaware, does hereby adopt the following Certificate of Incorporation for such corporation. FIRST: The name of the corporation is Radiosurgery Centers, Inc. SECOND: The registered office and the registered agent of the corporation is as follows: Name Address - ---- ------- The Prentice-Hall Corporation 32 Loockerman Square System, Inc. Suite L-100 Dover, Delaware 19901 Kent County THIRD: The purpose for which the Corporation is organized is to conduct any lawful business, to promote any lawful purpose, and to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The Corporation shall be authorized to issue one class of stock called Common Stock. The total number of shares of Common Stock that the Corporation shall have the authority to issue is one hundred (100) having a par value of one cent ($0.01) per share. All or any part of such shares may be issued by the Corporation from time to time, as may be determined by the Board of Directors, as provided by law. FIFTH: The name and mailing address of the Incorporator is: Name Address - ---- ------- Anna C. Mastroianni Green, Stewart & Farber, P.C. 2600 Virginia Avenue, N.W. Suite 1111 Washington, D.C. 20037 SIXTH: The name and mailing address of the persons who are to serve as directors until the first annual meeting of stockholders or until their successors are elected and shall qualify are: Name Address - ---- ------- E. Larry Atkins American Health Services Corp. 4440 Von Karman Avenue Suite 320 Newport Beach, CA 92660 Thomas V. Croal American Health Services Corp. 4440 Von Karman Avenue Suite 320 Newport Beach, CA 92660 SEVENTH: The Board of Directors shall have the right to adopt, amend or repeal bylaws, subject to the power of the shareholders to change such action. EIGHTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) the unlawful payment of dividends or unlawful stock purchases or redemptions pursuant to Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of this Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. IN WITNESS WHEREOF, the undersigned, as the Incorporator, has executed the foregoing Certificate of Incorporation as of this 10th day of April, 1992. /s/ ANNA MASTROIANNI -------------------------------- Anna C. Mastroianni Incorporator -2- STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 04:00 PM 7/09/1992 921925089 - 2294342 CERTIFICATE OF CHANGE OF REGISTERED AGENT AND REGISTERED OFFICE ***** Radiosurgery Centers, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: The present registered agent of the corporation is The Prentice-Hall Corporation System, Inc. and the present registered office of the corporation is in the county of Kent. The Board of Directors of Radiosurgery Centers, Inc. adopted the following resolution on the l9th day of June, 1992 -By Unanimous Written Consent Resolved, that the registered office of Radiosurgery Centers, Inc. in the state of Delaware be and it hereby is changed to Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, and the authorization of the present registered agent of this corporation be and the same is hereby withdrawn, and THE CORPORATION TRUST COMPANY, shall be and is hereby constituted and appointed the registered agent of this corporation at the address of its registered office. IN WITNESS WHEREOF, Radiosurgery Centers, Inc. has caused this statement to be signed by E. Larry Atkins, its President and attested by Thomas V. Croal, its Secretary this 19th day of June, 1992 By /s/ E. LARRY ATKINS ----------------------------------------- President ATTEST: By /s/ THOMAS V. CROAL --------------------- Secretary EX-3.14 18 y55701ex3-14.txt BYLAWS EXHIBIT 3.14 BYLAWS OF RADIOSURGERY CENTERS, INC. TABLE OF CONTENTS
Page ---- ARTICLE I - OFFICES AND PURPOSE ................................. 1 Section 1.1. Registered Office ............................. 1 Section 1.2. Other Offices ................................. 1 ARTICLE II - MEETINGS OF STOCKHOLDERS ........................... 1 Section 2.1. Place of Meetings ............................. 1 Section 2.2. Annual Meeting ................................ 1 Section 2.3. Special Meetings .............................. 2 Section 2.4. Notice ........................................ 2 Section 2.5. Quorum ........................................ 2 Section 2.6. Voting ........................................ 3 Section 2.7. Proxies ....................................... 3 Section 2.8. Presiding Officer ............................. 3 Section 2.9. Written Consent in Lieu of a Meeting .......... 4 ARTICLE III - BOARD OF DIRECTORS ................................ 4 Section 3.1. Composition of the Board of Directors ......... 4 Section 3.2. Removal from Office; Vacancies ................ 5 Section 3.3. Powers of the Board of Directors .............. 5 Section 3.4. Voting ........................................ 6 Section 3.5. Resignation of Director ....................... 6 Section 3.6. Power to Fix Compensation ..................... 6 Section 3.7. Place of Meetings ............................. 6 Section 3.8. Regular Meetings .............................. 6 Section 3.9. Special Meetings .............................. 7 Section 3.10. Quorum ........................................ 7 Section 3.11. Presiding Officer ............................. 7 Section 3.12. Unanimous Written Consent ..................... 7 Section 3.13. Conference Telephone .......................... 8 ARTICLE IV - COMMITTEES OF THE BOARD OF DIRECTORS ............... 8 Section 4.1. Executive Committee; Other Committees ......... 8 Section 4.2. Quorum ........................................ 8 Section 4.3. Unanimous Written Consent ..................... 9 Section 4.4. Minutes ....................................... 9 Section 4.5. Other Committees .............................. 9 Section 4.6. Conference Telephone .......................... 10 ARTICLE V - NOTICES ............................................. 10 Section 5.1. Notices ....................................... 10 Section 5.2. Written Notice of Stockholders' Meeting ....... 10 Section 5.3. Waiver of Notice .............................. 10 Section 5.4. Waiver of Notice by Attendance ................ 11
- i - ARTICLE VI - OFFICERS ........................................... 11 Section 6.1. Designation of Officers ....................... 11 Section 6.2. Election of Officers .......................... 12 Section 6.3. Other Officers ................................ 12 Section 6.4. Compensation .................................. 13 Section 6.5. Removal ....................................... 12 Section 6.6. Resignation ................................... 13 Section 6.7. Vacancy ....................................... 13 Section 6.8. Duties of Officers ............................ 13 ARTICLE VII - INDEMNIFICATION AND INSURANCE ..................... 16 Section 7.1. Right to Indemnification ...................... 16 Section 7.2. Right of Indemnitee to Bring Suit ............. 18 Section 7.3. Non-exclusivity of Rights ..................... 19 Section 7.4. Insurance ..................................... 20 Section 7.5. Indemnification of Agents of the Corporation .. 20 ARTICLE VIII - CONFLICTS OF INTEREST ............................ 21 ARTICLE IX - CERTIFICATES FOR SHARES ............................ 21 Section 9.1. Certificates for Shares ....................... 21 Section 9.2. Facsimile Signatures .......................... 22 Section 9.3. Lost Certificates ............................. 22 Section 9.4. Fixing Record Date ............................ 23 Section 9.5. Registered Stockholders ....................... 25 ARTICLE X - AMENDMENTS .......................................... 25 ARTICLE XI -GENERAL PROVISIONS .................................. 25 Section 11.1. Dividends ..................................... 25 Section 11.2. Reserves ...................................... 26 Section 11.3. Checks; Signatures Required ................... 26 Section 11.4. Fiscal Year ................................... 26 Section 11.5. Corporate Seal ................................ 27 Section 11.6. Voting of Stock ............................... 27
- ii - BYLAWS OF RADIOSURGERY CENTERS, INC. --------------------------- ARTICLE I OFFICES AND PURPOSE SECTION 1.1. REGISTERED OFFICE. The registered office of the Corporation shall be in the state of Delaware. SECTION 1.2. OTHER OFFICES. The Corporation may also have offices at such other places, both within and without the state of Delaware, as the Board of Directors may from time to time determine or the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 2.1. PLACE OF MEETINGS. Meetings of stockholders may be held either within or without the state of Delaware as set forth in the notice of the meeting. SECTION 2.2. ANNUAL MEETING. The Corporation shall hold an annual meeting of its stockholders for the election of directors and for the transaction of general business on the first day of March of each year at a time and place designated by the Board of Directors or on such other date and at such time and place as shall be designated by the Board of Directors in its sole discretion. If the day fixed for the annual meeting is a legal holiday, the meeting shall be held on the next succeeding day not a legal holiday. SECTION 2.3. SPECIAL MEETINGS. Special meetings of the stockholders may be called at any time for any purpose or purposes by the president, the Board of Directors or the holders of not less than twenty-five percent of all votes entitled to be cast at the special meeting. SECTION 2.4. NOTICE. Written or printed notice stating the place, day and hour of a stockholders' meeting, and (i) in the case of the annual meeting, those matters which the Board of Directors, at the time of the mailing of the notice, intends to present for action by the stockholders, or (ii) in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date set for the meeting, either personally or by mail, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to each stockholder at his or her address as it appears on the stock transfer books of the Corporation, with the postage thereon prepaid. SECTION 2.5. QUORUM. At any meeting of stockholders the presence in person or by proxy of the holders of a majority of the outstanding shares entitled to vote shall constitute a quorum, except as otherwise may be provided in the Certificate of Incorporation or by statute. If less than a quorum is initially in attendance, then the meeting may be adjourned to a fixed time and place. 2 SECTION 2.6. VOTING. Each stockholder shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the vote of a greater number is required by statute, the Certificate of Incorporation or these Bylaws, and except that in elections of directors those receiving the greatest number of votes shall be deemed elected even though not receiving a majority. SECTION 2.7. PROXIES. A stockholder may vote either in person or by proxy executed in writing by the stockholder or by such stockholder's duly authorized attorney-in-fact. Every proxy shall be filed with the secretary of the Corporation. Notwithstanding any provision in a proxy or agreement to the contrary, a proxy shall be revocable at will, unless coupled with an interest (i.e., given in exchange for contractually sufficient consideration). To be effective, notice of the revocation of a proxy must be given to the secretary of the Corporation prior to the effective date of revocation. No unrevoked proxy shall be valid after three years from the date of its execution unless otherwise provided in the proxy. SECTION 2.8. PRESIDING OFFICER. All meetings of the stockholders shall be presided over by the president. If the president is not present, a chairman, who shall serve for that meeting only, shall be elected by the stockholders in attendance 3 at the meeting. The secretary of the Corporation shall act as secretary of all the meetings, if present. If the secretary is not present, the president or chairman of the meeting shall appoint a secretary of the meeting. The president or chairman of the meeting may appoint one or more inspectors of election to determine the existence of a quorum, the qualification of voters, the validity of proxies, and the results of ballots. SECTION 2.9. WRITTEN CONSENT IN LIEU OF A MEETING. Except as otherwise required by Delaware General Corporation Law, any action required or permitted to be taken at a meeting of the stockholders may be taken without a meeting if a consent in writing, setting forth the action, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and delivered to the secretary of the Corporation. ARTICLE III BOARD OF DIRECTORS SECTION 3.1. COMPOSITION OF THE BOARD OF DIRECTORS. The number of directors of the Corporation shall be one or such other number as may be designated from time to time by the stockholders of the Corporation. Any change in the number of directors shall not affect the tenure of office of any director. The directors shall be elected, to serve for a term of one year, each year at the annual meeting of stockholders, except as hereinafter 4 provided, and each director shall serve until his or her successor shall be elected and qualified. Directors shall be eligible for reelection without limitation on the number of terms they may serve. SECTION 3.2. REMOVAL FROM OFFICE; VACANCIES. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director. The stockholders at any meeting called expressly for that purpose, at which a quorum is present, by a vote of the holders of a majority of outstanding shares of stock present and entitled to vote for elections of directors, may remove any director for cause or without cause and fill the vacancy. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office. Any vacancy arising among the directors resulting from an increase in the number of directors may be filled by the affirmative vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. SECTION 3.3. POWERS OF THE BOARD OF DIRECTORS. The Board of Directors shall have control of and manage the business and affairs of the Corporation. The Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or these Bylaws directed or required to be exercised and done by the stockholders. 5 SECTION 3.4. VOTING. At all meetings of the Board of Directors, each director shall have one vote, irrespective of the number of shares that such director may hold. SECTION 3.5. RESIGNATION OF DIRECTOR. Any director may resign his or her office at any time by giving written notice to the Board of Directors, the president or the secretary of the Corporation. Unless otherwise specified in the notice, thE resignation shall take effect immediately upon receipt, and the acceptance of the resignation shall not be necessary to make it effective. SECTION 3.6. POWER TO FIX COMPENSATION. The Board of Directors, by the affirmative vote of a majority of the directors then in office and, irrespective of any personal interest of any director, shall have the authority to fix the reasonable compensation, including fees and reimbursement of out-of-pocket expenses, of directors for service to the Corporation. SECTION 3.7. PLACE OF MEETINGS. Meetings of the Board of Directors, regular or special, may be held within or without the state of Delaware as may be provided by resolution adopted by a majority of the Board of Directors. SECTION 3.8. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held at such time and at such place as shall from time to time be determined by the Board of Directors and without notice of each meeting if such meeting is regularly scheduled and the directors have been informed of the schedule. 6 SECTION 3.9. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be called by the president, the secretary or on the written request of any director. The business to be transacted at, or the purpose of, any special meeting of the Board of Directors need not be specified in the notice or waiver of notice of such meeting. Written notice of special meetings of the Board of Directors shall be given to each director at least four days by mail or forty-eight hours if delivered personally or by telephone or telefax or other similar facsimile transmission before the date of the meeting. SECTION 3.10. QUORUM. A majority of the entire Board of Directors, not including vacancies, shall constitute a quorum for the transaction of business, and the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 3.11. PRESIDING OFFICER. All meetings of the Board of Directors shall be presided over by the president. If the president is not present, a chairman who shall serve for that meeting only shall be elected by the directors in attendance at the meeting. The secretary of the Corporation shall act as secretary of all the meetings, if present. If he or she is not present, the chairman of the meeting shall appoint a secretary of the meeting. SECTION 3.12. UNANIMOUS WRITTEN CONSENT. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if a consent in writing, setting 7 forth the action, shall be signed by all the directors and filed with the secretary of the Corporation. Such consent shall have the same force and effect as a unanimous vote of the directors. SECTION 3.13. CONFERENCE TELEPHONE. Any or all directors may participate in a meeting of the Board of Directors by means of a conference telephone, or any means of communication by which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at a meeting. ARTICLE IV COMMITTEES OF THE BOARD OF DIRECTORS SECTION 4.1. EXECUTIVE COMMITTEE; OTHER COMMITTEES. The Board of Directors, by resolution adopted by a majority of the whole Board of Directors, may designate an executive committee and one or more other committees of the Board of Directors, each of which shall be comprised of one of more directors. Each such committee, to the extent provided in such resolution, shall have and may exercise all of the authority of the Board of Directors that is delegated to said committee by the Board of Directors. The designation of an executive committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it, him or her by law. SECTION 4.2. QUORUM. A majority of an entire committee shall constitute a quorum for the transaction of business by the committee and the act of the majority of the committee members 8 present at a meeting at which a quorum is present shall be the act of the committee. If a quorum shall not be present at any meeting of a committee, the committee members present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 4.3. UNANIMOUS WRITTEN CONSENT. Any action required or permitted to be taken at a meeting of the executive committee and any other committee of the Board of Directors may be taken without a meeting if a consent in writing, setting forth the action, shall be signed by all the committee members and filed with the secretary of the Corporation. Such consent shall have the same force and effect as a unanimous vote of the executive committee. SECTION 4.4. MINUTES. The executive committee and any other committee shall keep regular minutes of its proceedings and report the same to the Board of Directors when required. SECTION 4.5. OTHER COMMITTEES. The Board of Directors may establish other committees which may be comprised of individuals who are not members of the Board of Directors. The president, with the concurrence of the majority of the Board of Directors, shall appoint the members of all such committees. Such committees shall make recommendations to the Board of Directors and shall operate under such procedures and guidelines as the Board of Directors may establish. 9 SECTION 4.6. CONFERENCE TELEPHONE. Any or all committee members may participate in a meeting of a committee of the Board of Directors by means of a conference telephone, or any means of communication by which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at a meeting. ARTICLE V NOTICES SECTION 5.1. NOTICES. Notices to directors and stockholders, as required by statute or these Bylaws, shall be in writing and delivered personally or by mail to the directors or stockholders at their addresses appearing on the books of the Corporation or supplied by them for the purpose of notice. Notice by mail shall be deemed to be given as of the date the notice is mailed. Notice to directors may also be given by telegram or telefax or other similar facsimile transmission, such notice deemed to be given as of the date the notice is deposited with a telegraph office for transmission, or when sent after receipt of confirmation, respectively. SECTION 5.2. WRITTEN NOTICE OF STOCKHOLDERS' MEETING. Written notice of every stockholders' meeting shall be given in accordance with Section 2.4 of these Bylaws. SECTION 5.3. WAIVER OF NOTICE. Whenever, under the provisions of these Bylaws, the Certificate of Incorporation or of any statute, a stockholder or director is entitled to any notice, a waiver thereof in writing signed by the person or 10 persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders or of the Board of Directors need be specified in such written waiver of notice of such meeting. SECTION 5.4. WAIVER OF NOTICE BY ATTENDANCE. The attendance of any director or stockholder at a meeting shall constitute a waiver of notice of such meeting, except when the director or stockholder attends the meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE VI OFFICERS SECTION 6.1. DESIGNATION OF OFFICERS. The officers of the Corporation shall consist of a president, a secretary and a treasurer and such other officers as the Board of Directors deems necessary, each of whom shall be elected by a majority vote of the Board of Directors at a meeting at which a quorum is present, in accordance with Section 3.10 of these Bylaws. Unless the Certificate of Incorporation or these Bylaws otherwise provide, there shall be no limitation on the number of offices any one person may hold. 11 SECTION 6.2. ELECTION OF OFFICERS. The officers of the Corporation shall be elected annually by the Board of Directors at its first meeting following the annual meeting of stockholders, except where a longer term is expressly provided in an employment contract duly authorized and approved by the Board of Directors. The president must be a member of the Board of Directors, but no other officer need be a member of the Board of Directors. SECTION 6.3. OTHER OFFICERS. Subject to the approval of the Board of Directors, the president may elect or appoint such other officers, assistant officers and agents as he or she or it shall deem necessary, who shall hold their offices for such terms and shall have such authority and perform such duties as shall be determined from time to time by the Board of Directors. SECTION 6.4. COMPENSATION. The Board of Directors may, in its discretion, establish reasonable salaries for all officers and agents of the Corporation; provided, however, that the Board of Directors may delegate this authority to the president or to the executive committee of the Board of Directors, except that the Board of Directors may not delegate this authority with respect to the compensation of the president. SECTION 6.5. REMOVAL. The officers of the Corporation shall hold office until their successors are chosen and qualified. Any officer or agent elected or appointed by the Board of Directors may be removed with or without cause by the 12 Board of Directors whenever, in its judgment, the best interests of the Corporation will be served thereby. SECTION 6.6. RESIGNATION. Any officer may resign at any time by giving written notice to the Board of Directors, the president or the secretary of the Corporation. Unless otherwise specified in the notice, the resignation shall take effect immediately upon such receipt, and the acceptance of the resignation shall not be necessary to make it effective. SECTION 6.7. VACANCY. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise shall be filled promptly by the Board of Directors. SECTION 6.8. DUTIES OF OFFICERS. The duties and powers of the officers of the Corporation shall be as follows and as shall hereafter be set by resolution of the Board of Directors: THE PRESIDENT A. The president shall be the chief operating officer and shall have general and active management of the business of the Corporation, shall see that all orders and resolutions of the Board of Directors are carried into effect, shall be an ex officio member without voting power of all committees to which the Board of Directors has not appointed the president as a full voting member, and shall assume all responsibilities as the Board of Directors may from time to time prescribe. 13 B. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. The president shall be one of the officers who may sign checks and drafts of the Corporation. THE SECRETARY AND ASSISTANT SECRETARIES A. The secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all proceedings of the meetings of the stockholders and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the committees, if any, when required. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or president, under whose supervision he or she shall be. The secretary shall keep a register of the mailing address of each stockholder which shall be furnished to the secretary by such stockholder and he or she shall have general charge of the stock ledger books of the Corporation. The secretary shall have custody of the corporate seal of the Corporation and the secretary, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested 14 by his or her signature or by the signature of such assistant secretary. The Board of Directors may, however, give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature. B. The assistant secretary, or if there is more than one, the assistant secretaries, in the order determined by the Board of Directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS A. The treasurer shall be the chief financial officer and have the custody of the corporate funds and securities, shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. B. The treasurer shall disburse the funds of the Corporation as may be required by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and the Board of Directors at its regular meetings, or when the Board of Directors so requests, an account of all his or her transactions as treasurer and of the financial condition of the Corporation. The treasurer shall be one of the officers who may sign checks and drafts of the Corporation. 15 C. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and for the restoration to the Corporation, in the case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the treasurer's possession or under his or her control belonging to the Corporation. D. The assistant treasurer, or, if there is more than one, the assistant treasurers, in the order determined by the Board of Directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VII INDEMNIFICATION AND INSURANCE SECTION 7.1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a director, officer or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or 16 agent of another corporation or a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent, and shall inure to the benefit of the indemnitee's heirs, executors and administrators; provided, however, that, except as provided in Section 7.2 hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that, if the 17 Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee) shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this section or otherwise (hereinafter an "undertaking"). SECTION 7.2. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section 7.1 is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful, in whole or in part, in any such suit or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit by the Corporation to recover an advancement of expenses 18 pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstance because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified or to such advancement of expenses under this section or otherwise shall be on the Corporation. SECTION 7.3. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and to advancement of expenses provided by, or granted pursuant to, this article shall not be deemed exclusive of any other rights to which those seeking indemnification or 19 advancement of expenses may be entitled to or hereafter acquire under any statute, the Certificate of Incorporation, these Bylaws, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. SECTION 7.4. INSURANCE. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expenses, liability or loss incurred in any proceeding and any liabilities asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such expenses or liabilities under the Delaware General Corporation Law. SECTION 7.5. INDEMNIFICATION OF AGENTS OF THE CORPORATION. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses, to any agent of the Corporation to the fullest extent of the provisions of this article with respect to the indemnification and advancement of expenses of directors, officers and employees of the Corporation. 20 ARTICLE VIII CONFLICTS OF INTEREST The Corporation may enter into a contract or transaction with one or more of its directors or officers or a corporation, firm, association or any other entity in which one or more of the Corporation's directors are directors and officers or have a financial interest if: (a) the material facts as to the director's or officer's relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or a committee of the Board of Directors, and the Board of Directors or committee in good faith authorized the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors constitute less than a quorum; or (b) the material facts as to the director's or officer's relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. ARTICLE IX CERTIFICATES FOR SHARES SECTION 9.1. CERTIFICATES FOR SHARES. The shares of stock in the Corporation shall be represented by certificates signed by the president and countersigned by the secretary and sealed with the seal of the Corporation. Such seal may be a facsimile. No certificate shall be issued for any share until full payment is received for such share. All certificates shall be consecutively 21 numbered. The name and address of the stockholders, the number of shares and the date of issue shall be entered on the Corporation's stock transfer books. Each certificate representing shares shall state the name of the Corporation, that the Corporation is organized under the laws of the state of Delaware, the name of the person to whom issued, the number of shares which such certificate represents, and the par value of each share represented by such certificate. SECTION 9.2. FACSIMILE SIGNATURES. Where certificates are countersigned by a transfer agent other than the Corporation itself, or an employee of the Corporation, or by a transfer clerk and registered by a registrar, the signatures of the president and the secretary upon such certificates may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if such officer had not ceased to hold office at the date of its issue. SECTION 9.3. LOST CERTIFICATES. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificates for shares to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition 22 precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or such owner's legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. SECTION 9.4. FIXING RECORD DATE. A. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix in advance a record date not less than ten nor more than sixty days preceding the date on which the particular action requiring such determination of stockholders is to be taken. Only stockholders of record on the date so fixed shall be entitled to such notice and to vote at such meeting notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as herein provided. If no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders, the record date shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. 23 B. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix in advance a record date not before, nor more than ten days after, the date upon which the resolution fixing the record date is adopted. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by Delaware General Corporation Law, shall be the first date on which a signed, written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in Delaware, by hand delivery or registered or certified mail, return receipt requested, or to its principal place of business or to the officer or agent of the Corporation having custody of the book in which proceedings of stockholder meetings are recorded. When prior action by the Board of Directors is required under Delaware General Corporation Law, the record date shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. C. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend, or for the purpose of any other lawful action, the Board of Directors may fix a record date not more than sixty days prior to such action, and not before the date upon which the resolution fixing 24 the record date is adopted. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. SECTION 9.5. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided by Delaware General Corporation Law. ARTICLE X AMENDMENTS These Bylaws may be altered, amended or repealed and new bylaws may be adopted by a majority vote of the directors present at a duly called meeting of the Board of Directors at which a quorum is present except as otherwise required by law or the Certificate of Incorporation. ARTICLE XI GENERAL PROVISIONS SECTION 11.1. DIVIDENDS. The Board of Directors may declare and the Corporation may pay dividends on its outstanding shares in cash, property or its own shares, pursuant to law and subject to the provisions of its Certificate of Incorporation. 25 SECTION 11.2. RESERVES. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall deem conducive to the advancement of the interests of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. SECTION 11.3. CHECKS; SIGNATURES REQUIRED. All bills payable, notes, checks, drafts, warrants or other negotiable instruments of the Corporation shall be made in the name of the Corporation and shall be signed by the president or treasurer or by any other persons as the Board of Directors may from time to time designate. No officer or agent of the Corporation, either singly or jointly with others, shall have the power to make any bill payable, note, check, draft, warrant or other negotiable instrument, or endorse the same in the name of the Corporation, or contract or cause to be contracted any debt or liability in the name and on behalf of the Corporation except as herein expressly prescribed and provided. SECTION 11.4. FISCAL YEAR. The fiscal year of the Corporation shall end on the last day of December. 26 SECTION 11.5. CORPORATE SEAL. The seal of the Corporation shall be a flat-faced circular die of which there may be counterparts, with the word "SEAL" and the name of the Corporation engraved thereon. SECTION 11.6. VOTING OF STOCK. Unless otherwise provided by a vote of the Board of Directors, certified by an officer and filed with the secretary, the Corporation may, pursuant to law, vote any stock of any other corporation owned by the Corporation by a vote cast by the president or another officer designated by the president, or by a proxy appointed by the president or such officer. 27 CERTIFICATION The undersigned officer of the Corporation hereby certifies that the foregoing is a true, complete and accurate copy of the Bylaws of the Corporation, as duly adopted by the Board of Directors of the Corporation as of April 27, 1992. /s/ THOMAS V. CROAL ------------------------------------ Thomas V. Croal Secretary 28 EX-3.15 19 y55701ex3-15.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.15 CERTIFICATE OF OWNERSHIP AND MERGER OF MEDICAL TECHNICAL SERVICES COMPANY BY VHA DIAGNOSTIC SERVICES, INC. Pursuant to Section 253 of the General Corporation Law of the State of Delaware VHA Diagnostic Services, Inc., a corporation formed under the laws of the State of Delaware, desiring to merge Medical Technical Services Company pursuant to the provisions of Section 253 of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows: FIRST: That VHA Diagnostic Services, Inc. is a corporation formed under the laws of the State of Delaware, and its Certificate of Incorporation was filed in the office of the Delaware Secretary of State on January 22, 1986 and that such Certificate of Incorporation was subsequently amended by Certificate of Amendment filed in the office of the Delaware Secretary of State on March 24, 1987. That Medical Technical Services Company, Inc. is a corporation formed under the laws of the State of North Carolina, and its Certificate of Incorporation was filed in the office of the North Carolina Secretary of State on March 26, 1984. SECOND: That the Board of Directors of VHA Diagnostic Services, Inc., by resolutions duly adopted on the 28th day of December, 1988, determined to merge Medical Technical Services Company and to assume all of its obligations; said resolutions being as follows: WHEREAS, the Board of Directors has determined that it is in the best interest of the Corporation to merge Medical Technical Services Company, its wholly-owned subsidiary, pursuant to Section 253 of the Delaware Corporation Law; and WHEREAS, the Corporation has acquired and now lawfully owns all of the stock of Medical Technical Services Company and desires to merge said corporation; NOW THEREFORE, it is hereby RESOLVED, that the Corporation merge and it does hereby merge said Medical Technical Services Company and does hereby assume all of its obligations; and FURTHER RESOLVED, that the Corporation adopt and it does hereby adopt the Plan of Merger of Medical Technical Services Company into Diagnostic Services, Inc. attached hereto and incorporated herein as Exhibit "A"; and FURTHER RESOLVED, that the proper officers of this corporation be, and they hereby are, authorized and directed to make and execute, in its name and under its corporate seal, and to file in the proper public offices, a certificate of such ownership, setting forth a copy of these resolutions; and FURTHER RESOLVED, that the officers of this corporation be, and they hereby are, authorized and directed to take such further action as in their judgment may be necessary or proper to consummate the merger provided for by these resolutions. IN WITNESS WHEREOF, said VHA Diagnostic Services, Inc. has caused this Certificate to be executed by its officers thereunto duly authorized this 28th day of December, 1988. VHA DIAGNOSTIC SERVICES, INC. BY: /s/ WILLIAM L. MACKNIGHT ----------------------------- William L. MacKnight President and CEO ATTEST: /s/ JOE ROBERTSON - ---------------------------- Joe Robertson Vice President, Treasurer and Controller EXHIBIT "A" Plan of Merger of Medical Technical Services Company into VHA Diagnostic Services, Inc. This Plan of Merger, dated as of December 28, 1988, has been adopted by the Board of Directors of VHA Diagnostic Services, Inc. as being in the best interest of the Company. The Board of Directors has determined it to be appropriate that Medical Technical Services Company, its wholly-owned subsidiary, be merged into VHA Diagnostic Services, Inc. pursuant to the Section 253 of the Delaware Corporation Law under the following terms and conditions. 1. Names Medical Technical Services Company, a North Carolina corporation, which is a wholly-owned subsidiary, shall be merged into VHA Diagnostic Services, Inc., a Delaware corporation. VHA Diagnostic Services, Inc. will be the surviving corporation. 2. Stock Medical Technical Services Company has outstanding Six Hundred (600) shares of its Common Stock, with a par value of One Dollar ($1.00) per share, which is its only class of stock, and all of such Six Hundred (600) shares are owned by VHA Diagnostic Services, Inc., the surviving corporation. VHA Diagnostic Services, Inc. has outstanding One Hundred (100) shares of its Common Stock, with a par value of One Cent ($0.01) per share, which is its only class of stock. 3. Cancellation of Shares Upon the effective date of the merger, each share of stock of Medical Technical Services Company shall, by virtue of the merger, forthwith cease to exist and be cancelled. 4. Effective Date of Merger The merger shall be effective on December 31, 1988. ACCEPTED AND AGREED TO on December 28, 1988 by: VHA DIAGNOSTIC SERVICES, INC. MEDICAL TECHNICAL SERVICES COMPANY BY:/s/ WILLIAM L. MACKNIGHT BY: /s/ WILLIAM L. MACKNIGHT ------------------------ ------------------------- William L. MacKnight William L. MacKnight President and CEO President and CEO /s/ JOE ROBERTSON /s/ JOE ROBERTSON ------------------------ ------------------------- Joe Robertson Joe Robertson Vice President, Vice President, Treasurer & Controller Treasurer & Controller CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF VHA DIAGNOSTIC SEVICES, INC. The undersigned, William L. MacKnight and Carol S. Rivers, being the duly elected and qualified President and Assistant Secretary, respectively, of VHA Diagnostic Services, Inc., a corporation duly organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), do hereby certify that: FIRST: The Board of Directors of the Corporation, by unanimous written consent and in accordance with Section 242 of the General Corporation Law of the State of Delaware, duly approved and adopted resolutions proposing that the first paragraph of the Certificate of Incorporation of the Corporation be amended in its entirety to read as set forth below, and further directed that such amendment be submitted to the stockholders of the Corporation for their consideration and approval. 1. The name of the corporation is Maxum Health Corp. SECOND: The foregoing amendment was duly approved and adopted by unanimous written consent signed by the holders of all of the issued and outstanding shares of stock of the Corporation entitled to vote thereon, in accordance with Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the undersigned, hereinabove named, for the purpose of effecting the amendment to the Corporation's Certificate of Incorporation pursuant to the General Corporation Law of the State of Delaware, do hereby certify under penalties of perjury that this is the act and deed of the Corporation and the facts stated herein are true, and accordingly have hereunto signed this Certificate of Amendment as of the 28th day of July, 1989. VHA DIAGNOSTIC SERVICES, INC. By: /s/ WILLIAM L. MACKNIGHT --------------------------------- William L. MacKnight President ATTEST: By: /s/ CAROL S. RIVERS ------------------------------- Carol S. Rivers Assistant Secretary STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 08:59 AM 07/24/1991 681205050 - 2081599 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF MAXUM HEALTH CORP. MAXUM HEALTH CORP., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation") pursuant to a certificate of incorporation duly filed with the Secretary of State of Delaware on January 22, 1986 and amended on July 28, 1989 to change the name of the Corporation from "VHA Diagnostic Services, Inc." to "Maxum Health Corp.", DOES HEREBY CERTIFY: FIRST: That on July 19, 1991, a resolution was adopted by unanimous written consent of the Board of Directors of the Corporation setting forth a proposed amendment of the Certificate of Incorporation, declaring said amendment to be advisable and calling a meeting of the stockholders of the Corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: "NOW, THEREFORE, BE IT RESOLVED that Article One of the Certificate of Incorporation of the Corporation is hereby amended to read in full as follows: '1. Maxum Health Services Corp. is the name of the Corporation.'" SECOND: That thereafter, in lieu of a meeting and vote of stockholders, the stockholders entered into a unanimous written consent pursuant to which said amendment was adopted. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 and 228 of the General Corporation Law of the State of Delaware and that any notice required to be given under said Section 228 has been given. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed and attested by its duly authorized officers on the 22nd day of July, 1991. MAXUM HEALTH CORP. By: /s/ WILLIAM L. MACKNIGHT -------------------------- William L. MacKnight President ATTEST: By: /s/ MARK A. SOLLS ----------------------------- Mark A. Solls Secretary CERTIFICATE OF CHANGE OF REGISTERED AGENT AND REGISTERED OFFICE ***** MAXUM HEALTH SERVICES CORP., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: The present registered agent of the corporation is United States Corporation Company and the present registered office of the corporation is in the county of New Castle. The Board of Directors of MAXUM HEALTH SERVICES CORP. adopted the following resolution on the January 2, 1998. Resolved, that the registered office of MAXUM HEALTH SERVICES CORP. in the state of Delaware be and it hereby is changed to Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, and the authorization of the present registered agent of this corporation be and the same is hereby withdrawn, and THE CORPORATION TRUST COMPANY, shall be and is hereby constituted and appointed the registered agent of this corporation at the address of its registered office. IN WITNESS WHEREOF, MAXUM HEALTH SERVICES CORP. has caused this statement to be signed by Brian C. Drazba, its S.V.P. of Finance & Controller, this 16th day of January, 1998. /s/ BRIAN C. DRAZBA ---------------------------- (DEL. - 264 - 6/15/94) STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 01:00 PM 01/21/1998 981024983 - 2081599 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 10/09/2001 010501371 - 2081599 CERTIFICATE OF OWNERSHIP AND MERGER OF MTS ENTERPRISES, INC. (A TEXAS CORPORATION) INTO MAXUM HEALTH SERVICES CORP. (A DELAWARE CORPORATION) Maxum Health Services Corp., a corporation organized and existing under Laws of the State of Delaware, does hereby certify: 1. Maxum Health Services Corp. (hereinafter sometimes referred to as the "Corporation") is a business corporation of the State of Delaware. 2. The Corporation is the owner of all of the outstanding shares of stock of MTS Enterprises, Inc., which is a business corporation of the State of Texas. 3. The laws of the jurisdiction of organization of Maxum Health Services Corp. permit the merger of a business corporation of that jurisdiction with a business corporation of another jurisdiction. 4. The Corporation hereby merges MTS Enterprises, Inc. into the Corporation. 5. The following is a copy of the resolutions adopted on September 30, 2001 by the Board of Directors of the Corporation to merge MTS Enterprises, Inc. into the Corporation: RESOLVED, that MTS Enterprises, Inc. be merged into this Corporation, and that all of the estate, property, rights, privileges, powers, and franchises of MTS Enterprises, Inc. be vested in and held and enjoyed by this Corporation as fully and entirely and without change or diminution as the same were before held and enjoyed by MTS Enterprises, Inc. in its respective name; RESOLVED FURTHER, that this Corporation assume all of the obligations of MTS Enterprises, Inc.; and RESOLVED FURTHER, that this Corporation shall cause to be executed and filed and/or recorded the documents prescribed by the laws of the State of Delaware, by the laws of the State of Texas, and by the laws of any other appropriate jurisdiction and will cause to be performed all necessary acts within the jurisdiction of organization of MTS Enterprises, Inc. and of this Corporation and in any other appropriate jurisdiction. [Signature Page Follows] Executed on this 4th day of October, 2001. MAXUM HEALTH SERVICES CORP. By: /s/ STEVEN T. PLOCHOCKI ------------------------------------- Steven T. Plochocki President and Chief Executive Officer EX-3.16 20 y55701ex3-16.txt BYLAWS EXHIBIT 3.16 BY LAWS OF MAXUM HEALTH SERVICES CORP. ARTICLE l. AMENDMENTS Section 1.1. Amendment of By-Laws. These by-laws may be altered, amended or repealed, and new by-laws may be adopted by the shareholders or board of directors. ARTICLE 2. OFFICES Section 2.1. Registered Office. The corporation shall continuously maintain in the State of Delaware a registered office which may, but need not be, the same as its place of business, and a registered agent whose business office is identical with such registered office. Section 2.2. Other Offices. The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE 3. STOCK Section 3.1. Form of Stock Certificates. Stock shall be represented by certificates or shall be uncertificated stock. 3.1.1. Signing of Certificates. Certificates representing stock of the corporation shall be signed by the appropriate officers and may be sealed with the seal or a facsimile of the seal of the corporation. If a certificate, is countersigned by a transfer agent or registrar, other than an employee of the corporation, any other signatures may be facsimile. Each certificate representing stock shall be consecutively numbered or otherwise identified, and shall also state the name of the person to whom issued, the number and class of stock (with designation of series, if any), the date of issue, and - 1 - that the corporation is organized under Delaware law. If the corporation is authorized to issue stock of more than one class or of series within a class, the certificate shall also contain such information or statement as may be required by law. 3.1.2. Uncertificated Stock. The board of directors may provide by resolution that some or all of any class or series of stock shall be uncertificated stock. Any such resolution shall not apply to stock represented by a certificate until the certificate has been surrendered to the corporation. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send the registered owner thereof a written notice of all information that would appear on a certificate. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock shall be identical to those of the holders of certificates representing stock of the same class and series. 3.1.3. Identification of Stockholders. The name and address of each stockholder, the number and class of stock held and the date on which the stock was issued shall be entered on the books of the corporation. The person in whose name stock stands on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation. Section 3.2. Lost, Stolen or Destroyed Certificates. If a certificate representing stock has allegedly been lost, stollen or destroyed, the board of directors may in its discretion, except as may be required by law, direct that a new certificate be issued upon such indemnification and other reasonable requirements as it may impose. Section 3.3. Transfers of Stock. Transfer of stock of the corporation shall be recorded on the books of the corporation. Transfer of stock represented by a certificate, except in the case of a lost, stolen or destroyed certificate, shall be made on surrender for cancellation of the certificate for such stock. A certificate presented for transfer must be duly endorsed and accompanied by proper guaranty of signature or other appropriate assurances that the endorsement is effective. Transfer of an uncertificated stock shall be made on receipt by the corporation of an instruction from the registered owner or other appropriate person. The instruction shall be in writing or a communication in such form as may be agreed upon in writing by the corporation. - 2 - ARTICLE 4. STOCKHOLDERS Section 4.1. Annual Meeting. The annual meeting of the stockholders for the election of directors and the transaction of any other proper business shall be held on April 1st of each year at 10:00 a.m., commencing with the year 1986. If the annual meeting has not been held on the date designated by these by-laws, the board of directors may call such meeting to be held as soon after such designated date as is convenient and practicable. Section 4.2. Special Meetings. Special meetings of the stockholders may be called by the president, by the board of directors, or by the holders of not less than one-fifth of all the outstanding stock of the corporation, entitled to vote on the matter for which the meeting is called. Section 4.3. Place of Meeting. The board of directors may designate the place of meeting for any annual or special meeting of stockholders. In the absence of any such designation, the place of meeting shall be the principal place of business of the corporation. Section 4.4. Notice of Meetings. For all meetings of stockholders, a written or printed notice of the meeting shall be delivered, personally or by mail, to each stockholder of record entitled to vote at such meeting, which notice shall state the place, date and hour of the meeting. For all special meetings and when and as otherwise required by law, the notice shall state the purpose or purposes of the meeting. The notice of the meeting shall be given not less than 10 nor more than 60 days before the date of the meeting, or in the case of a meeting involving a merger, consolidation or sale, lease or an exchange of all or substantially all, of the property or assets of the corporation, not less than 20 nor more than 60 days before the date of such meeting. If mailed, such notice shall be deemed to have been delivered when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the records of the corporation. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken unless otherwise required by law. Section 4.5. Quorum of Stockholders. The holders of a majority of the outstanding stock of the corporation entitled to vote on a matter, present in person or represented by proxy, shall constitute a quorum for consideration of such matter at any meeting of stockholders unless a greater or lesser number - 3 - is required by the certificate of incorporation. At any adjourned meeting at which a quorum is present or represented, any business may be transacted which might have been transacted at the original meeting, unless otherwise required by 1aw. Withdrawal of stockholders from any meeting shall not cause failure of a duly constituted quorum at the meeting, unless otherwise required by law. Section 4.6. Manner of Acting. The affirmative vote of a majority of the stock represented at a meeting and entitled to vote on a matter at which a quorum is present shall be the act of the stockholders, unless the vote of a greater number or voting by class is required by law or the certificate of incorporation. Section 4.7. Fixing of Record Date. If no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders, or stockholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the close of business on the day before the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of stockholders. If a record date is specifically set for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or stockholders entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the board of directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than 60 days and, for a meeting of stockholders, not less than 10 days, or in the case of a merger, consolidation or sale, lease or exchange of assets, not less than 20 days, immediately preceding such meeting. when a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this Section, such determination shall apply to any adjournment thereof. Section 4.8. Voting Lists. The officer or agent havinq charge of the transfer book for stock of the corporation shall make, at least 10 days before such meeting, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so - 4 - specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 4.9. Proxies. A stockholder may appoint a proxy to vote or otherwise act for him or her by signing an appointment form and delivering it to the person so appointed. No proxy shall be valid after the expiration of three years from the date thereof unless otherwise provided in the proxy. An appointment of a proxy is revocable by the stockholder unless the appointment form states that it is irrevocable and if, and only so long as, it is coupled with an interest sufficient in law to support an irrevocable power. Section 4.10. Voting of Shares by Certain Holders. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the corporation he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. 4.10.1. Multiple Ownership. If shares or other securities having voting power stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the secretary of the corporation is given written notice to the contrary and is furnished with a copy of the instrument or order apppointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: 4.10.1.1. One Vote. If only one votes, his act binds all; 4.10.1.2. Majority Vote. If more than one vote, the act of the majority so voting binds all; 4.10.1.3. Tie Vote. If more than one vote, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or any person voting the shares, or a beneficiary, if any, may apply to the Court of Chancery of Delaware or such other court as may have jurisdiction to appoint an additional person - 5 - to act with the persons so voting the shares, which shall then be voted as determined by a majority of such persons and the person appointed by the Court. If the instrument so filed shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of this subsection shall be a majority or even-split interest. Section 4.11. Inspectors. At any meeting of stockholders, the chairman of the meeting may, or upon the request of any stockholder shall, appoint one or more persons as inspectors for such meeting. Inspectors shall: 4.11.1. Vote Count and Report. Ascertain and report the number of shares of stock entitled to vote represented at the meeting, based upon their determination of the validity and effect of proxies; count all votes and report the results; and do such other acts as are proper to conduct the election and voting with impartiality and fairness to the stockholders. 4.11.2. Written Reports. Each report shall be in writing and such report shall be signed by the inspector or by a majority of them if there be more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. Section 4.12. Consent of Stockholders in Lieu of a Meeting. Any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Section 4.13. Notice to Stockholders Not Consenting. Prompt notice of the taking of the corporation action without a meeting by less than unanimous consent shall be given in writing to those stockholders who have not consented in writing. In the event that the action which is consented to is such as would have required the filing of a certificate under any Section of the General Corporation Law if such action had - 6 - been voted on by the stockholders at a meeting thereof, the certificate filed under such other Section shall state, in lieu of any statement required by such Section concerning any vote of stockholders, that written consent has been given in accordance with the provisions of said Section and that written notice to non-consenting stockholders has been given as provided in this by-law. ARTICLE 5. DIRECTORS Section 5.1. General Powers. The business and affairs of the corporation shall be managed by or under the direction of its board of directors. Section 5.2. Number, Tenure and Resignation. The number of directors of the corporation shall be set by resolution of the board of directors. The number of directors may be increased or decreased from time to time by amendment to these by-laws, within the limitations prescribed by this Section without further amendment to the by-laws; provided, however, that no decrease in the number of directors shall have the effect of shortening the term of any incumbent director. Each director shall hold office until the last to occur of the next annual meeting of stockholders or until his or her successor is elected and has qualified. A director may resign at any time by written notice to the board, its chairman, or the President or secretary of the corporation. The resignation is effective on the date it bears, or its designated effective date. Section 5.3. Quorum of Directors. A majority of the number of directors fixed in Section 5.2 of this Article shall constitute a quorum for the transaction of business at any meeting of the board of directors; provided, however, that if less than a majority of the number of directors fixed in Section 5.2 of this Article is present at a meeting, a majority of the directors present may adjourn the meeting at any time without further notice, unless otherwise required by law. Section 5.4. Manner of Acting. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by law or these by-laws. Section 5.5. Vacancies. Any vacancy occurring in the board of directors and any directorship to be filled by reason of an increase in the number of directors may be filled by election at an annual meeting or at a special meeting of stockholders called for that purpose. The board of directors may appoint a director to fill a vacancy at any regular or - 7 - special meeting of the board of directors to hold office until a meeting of stockholders is held. A director elected by the stockholders to fill a vacancy shall hold office for the balance of the term for which he or she was elected. Section 5.6. Removal of Directors. One or more of the directors may be removed, with or without cause, at a meeting of stockholders, by the affirmative vote of the holders of a majority of the outstanding stock then entitled to vote at an election of directors, except as follows: 5.6.1. Notice of Meeting. No director shall be removed at a meeting of stockholders unless the notice of such meeting shall state that a purpose of the meeting is to vote upon the removal of one or more directors named in the notice. Only the named director or directors may be removed at such meeting. Section 5.7. Regular Meetings. A regular meeting of the board of directors shall be held without other notice than this by-law, immediately after, and at the same place as, the annual meeting of stockholders. The board of directors may provide, by resolution, the place, date and hour for the holding of additional regular meetings of the board of directors, without other notice than such resolution. Section 5.8. Special Meetings. Special meetings of the board of directors may be called by or at the request of the President or any two directors. The person or persons authorized to call special meetings of the board of directors may fix the place for holding any special meeting of the board of directors called by them. Section. 5.9. Notice. Notice of any special meeting of the board of directors shall be given at least two days prior to the meeting by written notice delivered personally, by mail, telegram, or telex to each director at his or her business address. If mailed, such notice shall be deemed to have been delivered when deposited in the United States mail in a sealed envelope so addressed, with postage prepaid thereon. If notice is given by telegram, such notice shall be deemed to have been delivered when the telegram is delivered to the telegraph company. If notice is given by telex, such notice shall be deemed to have been delivered when the telex message is delivered to the telex operator. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. - 8 - Section 5.10. Presumption of Assent. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken, unless his or her dissent shall be entered in the minutes of the meeting or unless he or she shall file his or her written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof, or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. Section 5.11. Committees. A majority of the directors may, by resolution passed by a majority of the number of directors fixed by the stockholders under Section 5.2 of this Article, create one or more committees and appoint members of the board to serve on the committee or committees. Each committee shall have one or more members, who serve at the Pleasure of the board. 5.11.1. Quorum. A majority of any committee shall constitute a quorum and a majority of a quorum is necessary for committee action. A committee may act by unanimous consent in writing without a meeting and, subject to the Provisions of the by-laws or action by the board of directors, the committee by majority vote of its numbers shall fix the time and place of meetings and the notice required therefor. 5.11.2. Power and Authority. To the extent specified by the board of directors, each committee may exercise the authority of the board of directors, provided, however, a committee may not exercise the power or authority with reference to: 5.11.2.1. Amendment of Certificate of Incorporation. Amending the certificate of incorporation (except that a committee may exercise the power pursuant to Section 151(a) of the General Corporation Law); 5.11.2.2. Merger and Consolidation. Adopting a plan of merger or consolidation; 5.11.2.3. Sale, Lease or Exchange of Assets. Recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets; - 9 - 5.11.2.4. Dissolution. Recommending to stockholders a dissolution of the corporation or a revocation of a dissolution; 5.11.2.5. By-Laws. Amending the by-laws of corporation; 5.11.2.6. Dividends. Declaring a dividend; 5.11.2.7. Issuance of Stock. Authorizing the issuance of stock; or 5.11.2.8. Merger with Subsidiary. Adopting a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law authorizing the issuance of stock. Section 5.12. Informal Action by Directors. Any action required by General Corporation Law to be taken at a meeting of the board of directors of the corporation, or any other action which may be taken at a meeting of the board of directors or a committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof, or by all members of such committee, as the case may be. 5.12.1. Effective Date. The consent shall be evidenced by one or more written approvals, each of which sets forth the action taken and bears the signature of one or more directors. All the approvals evidencing the consent shall be delivered to the secretary to be filed in the corporate records. The action taken shall be effective when all the directors have approved the consent unless the consent specifies a different effective date. Section 5.13. Meeting by Conference Telephone. Members of the board of directors or of any committee of the board of directors may participate in and act at any meeting of the board or committee by means of conference telephone or other similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such a meeting shall constitute attendance and presence in person at the meeting. Section 5.14. Compensation. The board of directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers, or otherwise. - 10 - ARTICLE 6. OFFICERS Section 6.1. Number. The officers of the corporation shall be a president, one or several vice presidents, a treasurer, one or more assistant treasurers (if elected by the board of directors), a secretary, one or more assistant secretaries (if elected by the board of directors), and such other officers as may be elected in accordance with the provisions of this Article. Any two or more offices may be held by the same person. Section 6.2. Election and Term of Office. The officers of the corporation shall be elected annually by the board of directors at the first meeting of the board of directors held after each annual meeting of stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as reasonably Practicable. Subject to the provisions of Section 6.3 hereof; each officer shall hold office until the last to occur of the next annual meeting of the board of directors or until his or her successor is duly elected and has qualified. Election of an officer shall not of itself create contract rights. Section 6.3. Removal of Officers. Any officer elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Section 6.4. Vacancies; New Offices. A vacancy occurring in any office may be filled and new offices may be created and filled, at any time, by the board of directors. Section 6.5. President. The President shall be the chief executive officer of the corporation. He or she shall be in charge of the day to day business and affairs of the corporation, subject to the direction and control of the board of directors. He or she shall preside at all meetings of the board of directors. He or she shall have the power to appoint such agents and employees as in his or her judgment may be necessary or proper for the transaction of the business of the corporation. He or she may sign, with the secretary or other proper officer of the corporation thereunto authorized by the board of directors, stock certificates, deeds, mortgages, bonds, contracts, or other instruments which the board of directors has authorized to be executed. He or she may vote on behalf of the corporation, by proxy or otherwise, all securities which the corporation is entitled to vote, and, in - 11 - general, shall perform all duties incident to the office of president and such other duties as from time to time may be prescribed by the board of directors. Section 6.6. Vice President(s). The vice president (or in the event there is more than one vice president, each of the vice presidents) shall assist the president in the discharge of his or her duties as the president may direct, and shall perform such other duties as from time to time may be assigned to him or her (them) by the president or the board of directors. In the absence of the president, the vice president (or vice presidents, in the order of their election), shall perform the duties and exercise the authority of the president. Section 6.7. Treasurer. The treasurer shall have charge and custody of and be responsible for all funds and securities of the corporation, receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article 8 of these bylaws, have charge of and be responsible for the maintenance of adequate books of account for the corporation, and, in general, perform all duties incident to the office of treasurer and such other duties not inconsistent with these bylaws as from time to time may be assigned to him or her by the president or the board of directors. Section 6.8. Secretary. The secretary shall keep the minutes of the stockholders' and the board of directors' meetings, see that all notices are duly given in accordance with the provisions of these bylaws or as required by law, have general charge of the corporate records and of the seal of the corporation, have general charge of the stock transfer books of the corporation, keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder, sign with the president, or any other officer thereunto authorized by the board of directors, and any contracts, deeds, mortgages, bonds, or other instruments which the board of directors has authorized to be executed, according to the requirements of the form of the instrument, and, in general, perform all duties incident to the office of secretary and such other duties not inconsistent with these bylaws as from time to time may be assigned to him or her by the president or the board of directors. Section 6.9. Assistant Treasurers and Assistant Secretaries. The board of directors may elect one or more assistant treasurers and assistant secretaries. In the absence of the treasurer, or in the event of his or her inability or refusal to act, the assistant treasurers, in the order of their - 12 - election, shall perform the duties and exercise the authority of the treasurer. In the absence of the secretary, or in the event of his or her inability or refusal to act, the assistant secretaries, in the order of their election, shall perform the duties and exercise the authority of the secretary. The assistant treasurers and assistant secretaries, in general, shall perform such other duties not inconsistent with these by-laws as shall be assigned to them by the treasurer or the secretary, respectively, or by the President or the board of directors. Section 6.10. Compensation. The compensation of all directors and officers shall be fixed from time to time by the board of directors. No officer shall be prevented from receiving such compensation by reason of the fact that he or she is also a director of the corporation. All compensation so established shall be reasonable and solely for services rendered to the corporation. 6.10.1. Compensation and Expense Disallowance. All payments made to a director or officer of the corporation, including, but not limited to salary, commission, bonus, interest, travel and entertainment expenses and deferred compensation payments, which shall be disallowed, in whole or in part, as a deductible expense by the Internal Revenue Service, shall be reimbursed by such director or officer of the corporation to the full extent of such disallowance. The proper corporate officers are authorized and directed to effect collection on behalf of the corporation for each amount disallowed. In lieu of a payment by the director or officer, subject to the determination of the board of directors, appropriate amounts may be withheld from future compensation payments paid to such director or officer until the amount owed the corporation is recovered. This by-law shall be considered a term and condition of employment for each director and officer of the corporation, unless specifically waived in writing by the board of directors. ARTICLE 7. INDEMNIFICATION Section 7.1. Indemnification of Directors and Officers. (a) A director of the Corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for - 13 - acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware, or any other applicable law, is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, or any other applicable law, as so amended. Any repeal or modification of this Section (a) by the stockholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. (b) (1) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereafter a "proceeding"), by reason of the fact that he or she or a person of whom he or she is a legal representative or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer or employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware, or any other applicable law, as the same exists may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be an director, officer, employee or agent and shall inure to the benefit to his or her heirs, executors and administrators; provided, however, that except as provided in paragraph (2) of this Section (b) with respect to proceeding seeking to enforce rights to indemnification, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part hereof) initiated by such person only if such proceeding (or part hereof) was authorized by the Board of Directors of the corporation. The right of indemnification - 14 - conferred in this Section (b) shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the General Corporation Law of the State of Delaware, or any other applicable law, requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is render day such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the corporation of an undertaking by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section (b) or otherwise. (2) If a claim under paragraph (1) of this Section (b) is not paid in full by the corporation within thirty days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware, or any other applicable law, for the Corporation to indemnify the claimant of the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, stockholders or independent legal counsel) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, or any other applicable law, nor an actual determination by the corporation (including its Board of Directors, stockholders or independent legal counsel) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (3) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section (b) shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise. - 15 - (4) The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware, or any other applicable law. (5) The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the corporation the expenses incurred in defending any proceeding in advance of its final disposition, to any employee or agent of the corporation to the fullest extent of the provisions of this Section (b) with respect to the indemnification and advancement of expenses of directors and officers of the corporation. (6) Any repeal or modification of this Section (b) by the stockholders of the corporation shall not adversely affect any right or protection of a director, officer, employee or agent of the corporation existing at the time of such repeal or modification. Section 7.2. Contract with the Corporation. The provisions of Section 7.1 of this Article shall be deemed to be a contract between the corporation and each director or officer who serves in any such capacity at any time while said Section 7.1 and the relevant provisions of the General Corporation Law or other applicable laws, if any, are in effect, and any repeal or modification of any such law or of said Section 7.1 shall not affect any state of facts then or theretofore existing or any action, suit or proceeding theretofore existing or thereafter brought or threatened based in whole or in part upon any such state of facts. The corporation further agrees that in the event a person entitled to indemnification under Section 7.1 of this Article claims indemnification, the corporation shall take all required action to bring about a prompt and good faith determination of such person's right to indemnification hereunder. Section 7.3. Indemnification of Employees and Agents. Persons who are not covered by the foregoing provisions of this Article and who are or were employees or agents of the corporation, or are or were serving at the request of the corporation as employees or agents of another corporation, joint venture, partnership, trust or other enterprise, may be indemnified to the extent the corporation is empowered to do so by General Corporation Law or any other applicable laws, when and as authorized at any time from time to time by the board of directors in its sole discretion. - 16 - Section 7.4. Advance of Expenses. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding, as authorized by the board of directors in a specific case, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount, unless it shall ultimately be determined that he or she is entitled to be indemnified by the corporation as authorized in this article. Section 7.5. Other Rights of Indemnification. The indemnification provided or permitted by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled by law, agreement or otherwise and shall continue as to a person who ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. Section 7.6. Liability Insurance. The corporation shall have the power to purchase and maintain insurance on behalf of any Person who is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such whether or not the corporation would have the power to indemnify such person against such liability under the provisions of this Article. ARTICLE 8. FISCAL MATTERS Section 8.1. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the board of directors. Section 8.2. Contracts. The board of directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument, in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. Section 8.3. Loans and Indebtedness. No substantial or material loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the board of directors. Such authority may be general or confined to specific instances. - 17 - Section 8.4. Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes or the evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation as the board of directors shall from time to time designate. Section 8.5. Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may select. ARTICLE 9. GENERAL Section 9.1. Dividends and Distributions. The board of directors may from time to time declare or otherwise authorize, and the corporation may pay, dividends or other distributions on its outstanding stock in the manner and upon the terms, conditions and limitations provided by law or the articles of incorporation. Section 9.2. Corporate Seal. The board of directors may provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. Section 9.3. Waiver of Notice. Whenever any notice is required to be given by law, articles of incorporation or under the Provisions of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Section 9.4. Headings. Section or Paragraph headings are inserted herein only for convenience of reference and shall not be considered in the construction of any provision hereof. - 18 - EX-3.17 21 y55701ex3-17.txt CERTIFICATE OF LIMITED PARTNERSHIP EXHIBIT 3.17 CERTIFICATE OF LIMITED PARTNERSHIP OF MRI ASSOCIATES, L.P. -------------------- THE UNDERSIGNED, American Health Services Corp., a Delaware corporation qualified to do business in Indiana (the "General Partner") and Marilyn U. MacNiven-Young as the initial limited partner (the "Initial Limited Partner"), do hereby adopt the following Certificate of Limited Partnership. 1. The name of the Limited Partnership is MRI Associates, L.P. (the "Limited Partnership"). 2. THE ADDRESS of the office of the Limited Partnership is as follows: APPROVED AND FILED 300 West 61st Avenue FEB 04 1992 Hobart, Indiana 46342 [SIG] SECRETARY OF STATE OF INDIANA The Limited Partnership's agent for service of process required to be maintained by Indiana Code Section 23-16-2-3 is as follows: The Prentice Hall Corporation System, Inc. Circle Tower Indianapolis, Indiana 46204 3. The name and business address of the General Partner is as follows: American Health Services Corp. 4440 Von Karman, Suite 320 Newport Beach, California 92660 4. The latest date upon which the Limited Partnership is to dissolve is February 4, 2002. 5. The Agreement of Limited Partnership of MRI Associates, L.P. is attached hereto and is incorporated herein by reference as if fully set forth. IN WITNESS WHEREOF, the undersigned have executed the foregoing Certificate of Limited Partnership as of this 4th day of February, 1992. GENERAL PARTNER: AMERICAN HEALTH SERVICES CORP. By: /s/ THOMAS V. CROAL ------------------------------ Thomas V. Croal Vice President and Chief Financial Officer INITIAL LIMITED PARTNER: By: /s/ MARILYN U. MacNIVEN-YOUNG --------------------------------- Marilyn U. MacNiven-Young EX-3.18 22 y55701ex3-18.txt AGREEMENT OF LIMITED PARTNERSHIP Exhibit 3.18 AGREEMENT OF LIMITED PARTNERSHIP OF MRI ASSOCIATES, L.P. TABLE OF CONTENTS
Page ---- 1. GENERAL PROVISIONS ............................................................ 1 1.1 Organization ......................................................... 1 1.2 Name ................................................................. 1 1.3 Business ............................................................. 1 1.4 Offices .............................................................. 1 1.5 Filings by Partnership ............................................... 1 1.6 Title to Assets ...................................................... 2 2. PARTNERS ...................................................................... 2 2.1 In General ........................................................... 2 2.2 Management of Partnership Affairs .................................... 3 2.3 Relationship Among the Partners ...................................... 3 3. CAPITAL ....................................................................... 4 3.1 General Partner ...................................................... 4 3.2 Limited Partners ..................................................... 4 3.3 Capital Account ...................................................... 5 3.4 Additional Contributions ............................................. 6 3.5 Return of Contributions .............................................. 6 3.6 Restrictions Relating to Partnership Capital ......................... 6 3.7 Offerings of Additional Interests in the Partnership ................. 6 3.8 Initial Limited Partner .............................................. 7 4. ALLOCATIONS AND DISTRIBUTIONS ................................................. 7 4.1 Determination of Profits and Losses .................................. 7 4.2 Allocation of Income, Gains, Losses, Deductibles and Credits ......... 8 4.3 Retroactive Allocations Not Permitted ................................ 8 4.4 Distributions from Partnership Operations ............................ 9 4.5 Distributions Not in the Ordinary Course ............................. 10 4.6 Distributions on Liquidation of the Partnership ...................... 10 4.7 Qualified Income Offset .............................................. 11 5. THE GENERAL PARTNER'S DUTIES AND COMPENSATION ................................. 12 5.2 Specific Rights and Powers ........................................... 12 5.3 Withdrawal of General Partner ........................................ 14 5.4 Compensation of the General Partner .................................. 15 5.5 Independent Activities ............................................... 16 6. RIGHTS AND LIABILITIES OF LIMITED PARTNERS .................................... 16 6.1 Control .............................................................. 16 6.2 Liability of Limited Partners ........................................ 17 6.3 Loans and Other Business Transactions with the Partnership ........... 17 6.4 Actions Requiring Consent of Limited Partners ........................ 17 6.5 Removal of a General Partner for Cause ............................... 18 6.6 Limited Partner Actions After General Partner Withdrawal ............. 18 6.7 Limited Partner Meetings and Voting .................................. 19
7. RECORDS REQUIRED TO BE MAINTAINED IN THE STATE OF INDIANA ..................... 21 7.1 Records .............................................................. 21 7.2 Other Records ........................................................ 21 7.3 Delivery to Limited Partner and Inspection; Financial Reports ........ 22 7.4 Books of Account ..................................................... 23 7.5 Fiscal Year .......................................................... 23 7.6 Federal Income Tax Elections ......................................... 23 7.7 Election to Adjust Basis ............................................. 23 8. TERM .......................................................................... 24 8.1 Basic Term ........................................................... 24 8.2 Dissolution .......................................................... 24 8.3 Liquidation .......................................................... 24 9. TRANSFERS OF LIMITED PARTNERS' PARTNERSHIP INTERESTS .......................... 25 9.1 Lifetime Transfers of Limited Partners' Partnership Interests ........ 25 9.2 General Partner's Right of First Refusal ............................. 26 9.3 Death, Bankruptcy or Incompetency of a Limited Partner ............... 26 9.4 Substitute Limited Partner ........................................... 27 9.5 Amendment for Transfer ............................................... 27 10. OPTION TO PURCHASE UNITS AT DESIGNATED INTERVALS .............................. 28 10.1 Grant of Options ..................................................... 28 10.2 Exercise of Option ................................................... 29 10.3 Option Price ......................................................... 29 10.4 Closing .............................................................. 29 11. MANDATORY BUY BACK OF LIMITED PARTNER'S INTEREST IN PARTNERSHIP ............... 30 12. ADJUSTED BOOK VALUE OF A PARTNERSHIP INTEREST ................................. 31 12.1 Adjusted Book Value is Agreed Fair Market Value ...................... 31 12.2 Adjusted Book Value of the Partnership ............................... 31 12.3 Value of Partnership Interest ........................................ 33 12.4 Fair Market Value Determination ...................................... 33 12.5 Costs of Determination of Adjusted Book Value ........................ 34 12.6 Miscellaneous ........................................................ 34 13. INDEMNIFICATION ............................................................... 35 13.1 Indemnification of the General Partner ............................... 35 13.2 Indemnification of the Partnership ................................... 36 13.3 Indemnification for Claims Regarding Medical Activities .............. 36 14. POWER OF ATTORNEY ............................................................. 36 14.1 Appointment of Attorney-in-Fact ...................................... 36 14.2 Nature of Power ...................................................... 37
ii
15. MISCELLANEOUS ................................................................. 38 15.1 Notices .............................................................. 38 15.2 Successors and Assigns ............................................... 38 15.3 Governing Law ........................................................ 38 15.4 Amendment ............................................................ 38 15.5 Entire Agreement ..................................................... 39 15.6 Titles and Captions .................................................. 39 15.7 Counterparts ......................................................... 39 15.8 Waiver ............................................................... 39 15.9 Severability ......................................................... 39 15.10 Creditors ............................................................ 39 15.11 Remedies ............................................................. 39 15.12 Authority ............................................................ 40 15.13 Attorneys' Fees ...................................................... 40 15.14 Pronouns ............................................................. 40
iii AGREEMENT OF LIMITED PARTNERSHIP OF MRI ASSOCIATES, L.P. This Agreement of Limited Partnership (this "Agreement") of MRI Associates, L.P., is made and entered into as of February 4, 1992, by and between American Health SERVICES Corp., a Delaware corporation qualified to do business in Indiana (the "General Partner"), and Deborah M. MacFarlane as the initial limited partner (the "Initial Limited Partner"). 1. GENERAL PROVISIONS 1.1 Organization. This limited partnership (the "Partnership") is organized pursuant to the provisions of the Indiana Revised Uniform Limited Partnership Act, Ind. Code Ann. Sections 23-16-1-1 - 23-16-12-6, as amended (the "Act"), and the rights and liabilities of the General Partner and Limited Partners shall be as provided in that law, except as otherwise expressly stated herein. 1.2 Name. The name of the Partnership shall be MRI Associates, L.P. 1.3 Business. The business of the Partnership is to operate and manage a magnetic resonance imaging department (the "MRI Department") at the Diagnostic Outpatient Center (the "Center") located at 300 West 61st Avenue, Hobart, Indiana 46342. 1.4 Offices. The location of the principal place of business of the Partnership shall be 300 West 61st Avenue, Hobart, Indiana 46342, or such other place(s) as the General Partner may at any time or from time to time determine. The General Partner may establish additional places of business of the Partnership when and where required by the Partnership's business. 1.5 Filings by Partnership. (a) Initial Filings. The General Partner shall execute and acknowledge a certificate of limited partnership (the "Certificate of Limited Partnership") and file the Certificate of Limited Partnership in the office of the Indiana Secretary of State. Within a reasonable time following the filing of the Certificate of Limited Partnership, the General Partner shall cause a certified copy of the Certificate of Limited Partnership to be recorded in the office of the Clerk of the Circuit Court of Lake County, Indiana. (b) Amendments to Certificate. The General Partner shall cause the Certificate of Limited Partnership to be amended (and when amended, filed as required) from time to time as required by applicable law or this Agreement. (c) Periodic Filings and Reports. The General Partner and the Limited Partners also shall execute all certificates and other documents and do all filing, recording, publishing and other acts as may be appropriate to comply with the requirements of law for the formation and operation of a limited partnership in all other jurisdictions where the Partnership shall desire to conduct business. Prior to conducting any business in any jurisdiction, the Partnership shall comply with all requirements for the qualification of the Partnership to conduct business as a limited partnership in such jurisdiction. (d) Certificate of Dissolution or Cancellation. Upon dissolution of the Partnership and the completion of the winding up of the affairs of the Partnership, a certificate of cancellation of limited partnership shall be filed in the office of, and on a form prescribed by, the Indiana Secretary of State. 1.6 Title to Assets. Title to any assets acquired to effect the purposes of the Partnership shall be deposited in the Partnership's name in such bank account or accounts as may be designated by the General Partner. Withdrawals of such funds shall be on the signatures of those persons authorized by the General Partner. Funds of the Partnership shall not be commingled with any other funds except that the General Partner may, after the closing of the Offering (as defined herein), commingle funds of the Partnership with other funds belonging to, or under the control of, the General Partner provided that ledger entries with respect to such commingled funds are continuously made such as to clearly and accurately show the interest of, the Partnership in such commingled funds. 2. PARTNERS 2.1 In General. The Term "Partner" or "Partners" includes the General Partner and Limited Partners. 2 (a) General Partner. American Health Services Corp., a Delaware corporation, shall be the General Partner. (b) Limited Partner. The term "Limited Partner" means any person or entity, excluding the Initial Limited Partner, who or which is admitted to the Partnership as a limited partner. Provided, however, only the following persons shall be admitted as Limited Partners: (1) the General Partner or any Indiana subsidiary of the General Partner; (2) individuals approved by the General Partner in the discretion of the General Partner who are residents of Indiana and are able to meet the investor suitability standards established for Limited Partners; or (3) Indiana professional corporations or professional partnerships approved by the General Partner in its discretion, all of the shareholders or partners of which, respectively, are individuals who meet the requirements set forth in (2) above and which organizations were not formed for the purpose of acquiring Units (as defined below). At all times, the Partnership shall keep at its principal place of business a current list of full name and last known business or residence address of each Partner set forth in alphabetical order together with the contributions and the share in profits and losses of each Partner. 2.2 Management of Partnership Affairs. The General Partner shall be responsible for the formation, administration and management of the Partnership. A Limited Partner shall have the right to be involved with respect to the Partnership's affairs and business only as provided in Article 6 hereof; however, no Limited Partner shall have any authority or right to act for or bind the Partnership. Each of the Limited Partners, by execution of this Agreement, consents to the exercise by the General Partner of the rights and powers conferred on the General Partner by this Agreement and, otherwise, by law. 2.3 Relationship Among the Partners. Notwithstanding any other provision contained herein, the relationship among the Partners created by this Agreement shall be limited to the 3 performance of this Agreement and shall not affect any other business or activity of any partner. Except as specifically provided herein, nothing in this Agreement shall be construed to authorize or require any Partner to act as general agent for any other Partner. Nothing in this Agreement shall be construed to require the General Partner or any Limited Partner to offer the Partnership or the other Partners the opportunity to invest in any projects identified by a Partner for investment or development, regardless of whether they may compete with the Partnership or require a portion of the time of the General Partner. 3. CAPITAL 3.1 General Partner. The General Partner's initial capital contribution to the Partnership is One Hundred Dollars ($100.00) in cash upon the formation of the Partnership. 3.2 Limited Partners. (a) The Initial Limited Partner's capital contribution is Ten Dollars ($10.00) in cash upon formation of the Partnership. (b) Upon organization of the Partnership, the Partnership shall make an offering (the "Offering") of units of limited partnership interest in the Partnership (the "Units") in accordance with the Confidential Offering Summary, dated February 4, 1992 (the "Summary"). (1) The Offering will be made under exemptions from registration under applicable federal and state securities laws to no more than twenty-five (25) purchasers who qualify as "Accredited Investors", as that term is defined in Regulation D, C.F.R Section 230.501(a), promulgated under the Securities Act of 1933, as amended, but as further limited by applicable state securities laws, and who, by reason of their business or financial experience, have the capacity to protect their own interests in connection with the investment contemplated by the Offering. (2) The Partnership will offer twenty-five (25) Units at a cash price of $5.000 for each Unit to persons eligible to be Limited Partners, as described in paragraph 4 2.1(b), who (except as hereinafter provided with respect to any Units purchased by the General Partner) purchase each not less than one (1) and not more than five (5) Units, provided, however, the General Partner in its sole discretion may approve a Limited Partner for admission upon the purchase of less than one (1) Unit and fractional Units may be sold at the discretion of the General Partner. (3) Notwithstanding the foregoing, the General Partner may purchase an unlimited number of the Units as a Limited Partner. The General Partner shall in all respects be treated as a Limited Partner with respect to the Units purchased by it and shall have the right to vote and receive profits, losses and cash distributions with respect to the Units purchased by it on the same basis as other Limited Partners. (4) On or before the Expiration Date, as defined in the Summary, the General Partner may elect, in its sole discretion, to terminate the Offering and return all subscription funds to the subscribers. 3.3 Capital Account. A capital account shall be maintained for each Partner in accordance with applicable Regulations of the Internal Revenue Service, in particular Regulation 1.701(b)(2)(iv). In that regard, the account of a Partner shall be: (a) Increased by money contributed, the fair market value of property contributed (minus liabilities secured by the property which are assumed by the Partnership or to which the property in the hands of the Partnership is subject), allocations to the Partner of Partnership income and gain, but excluding the corresponding items of "tax" income and gain, each as described in the applicable Regulations of the Internal Revenue Service; (b) Decreased by money distributed, the fair market value of property distributed (minus liabilities assumed by the Partnership or to which the property remains subject in the hands of the Partnership), allocations of expenditures which are neither deductible nor capitalizable, allocations of partnership loss and deduction, including "book" loss and 5 deduction, but excluding items of "tax". loss and deductions, each as described in the applicable Regulations of the Internal Revenue Service. 3.4 Additional Contributions. No Partner shall be required to make any additional capital contributions to the Partnership. However, a Partner may be required to restore his or its negative capital account, as elsewhere provided herein. 3.5 Return of Contributions. No time is agreed upon as to when the contribution of each Partner is to be returned. No Partner shall have the right to withdraw his or its capital, except upon liquidation of his or its interest in the Partnership, and, then, only in accordance with this Agreement. No Partner shall have the right to demand and receive property other than cash in return for his or its capital contribution on notice to the other Partners or otherwise. 3.6 Restrictions Relating to Partnership Capital. No Partner shall be entitled to interest on his or its capital account. No Limited Partner shall be entitled to a priority on any distribution from, or allocation by, the Partnership over that of any other Limited Partner. No Partner shall have the right to partition Partnership property. Except to the extent paragraph 4.1 is applicable, any Partner who has a negative capital account shall be required to restore the deficit by the end of the fiscal year of liquidation of his or its interest in the Partnership (under any provision of this Agreement, or otherwise), or within ninety (90) days after liquidation of the Partnership interest, if later, or within the time required by applicable Indiana law, if shorter. 3.7 Offerings of Additional Interests in the Partnership. (a) After the termination of the Offering, the General Partner may, from time to time, cause the Partnership to sell additional Limited Partnership interests if the General Partner determines, in its sole discretion, that the Partnership requires additional equity financing. The price of the Units shall be determined by the General Partner, in its sole discretion. Such Units may, to the extent permitted by applicable law, have one or more preferences (i.e., income, distribution or voting preferences) to the Units initially offered by 6 the Partnership. In no event shall a Unit purchased pursuant to the Offering represent less than one percent (1%) of the Partnership. (b) Limited Partners shall have pro rata preemptive rights (non assignable separately from the Units) to purchase UP to one-half (l/2) of any additional Units offered pursuant to this paragraph 3.7 and shall have not more than thirty (30) days after written notice from the General Partner to exercise such pro rata preemptive rights and pay the price for the Units exercised. The notice shall describe the offering of additional Units and shall also describe the method of exercising preemptive rights. (c) Purchasers of such additional Units shall be admitted as Limited Partners upon the execution of an amendment to this Agreement. This Agreement shall be amended as necessary to reflect any sale of additional Units without the necessity of any Limited Partner's consent or signature. 3.8 Initial Limited Partner. The Initial Limited Partner shall withdraw as a Limited Partner upon the closing of the Offering. The Initial Limited Partner's capital contribution shall be returned in cash on the first business day after the filing of an amended Certificate of Limited Partnership and the Initial Limited Partner shall cease to be a limited partner by virtue of having been the Initial Limited Partner. Each Limited Partner admitted to the Partnership, by his or its admission, consents to the Initial Limited Partner's withdrawal and waives and releases the Initial Limited Partner and the General Partner from any right, claim or action that such Limited Partner may have against the Initial Limited Partner or the General Partner as a consequence of such withdrawal and return of capital. 4. ALLOCATIONS AND DISTRIBUTIONS. 4.1 Determination of Profits and Losses. The profits and losses of the Partnership shall be determined for each fiscal year in accordance with the accounting method followed by the Partnership for federal income tax purposes and otherwise in accordance with generally accepted accounting principles and procedures applied in a consistent manner. 7 4.2 Allocation of Income. Gains, Losses, Deductibles and Credits. (a) Allocations after capitalization of Partnership. After the Initial Limited Partner with draws and the new Limited Partners are admitted to the Partnership upon completion of the Offering, the following shall apply for each fiscal year of the Partnership: one percent (1%) of the income, gain, loss and deductions, and each item thereof, shall be allocated to each Limited Partner for each Unit owned by that Limited Partner and the remaining percentage of the income, gain, loss and deductions, and each item thereof, shall be allocated to the General Partner. (b) Allocation before Initial Limited Partner withdraws as PARTNER. FOR THE period of the Partnership ending on the date of the withdrawal of the Initial Limited Partner and the admission of the Limited Partners acquiring Units in the Offering, ninety-nine (99%) percent of the income, gain, loss and deductions, and each item thereof, shall be allocated to the General Partner and one (1%) percent of the income, gain, loss and deductions, and each item thereof, shall be allocated to the Initial Limited Partner. 4.3 Retroactive Allocations Not Permitted. The profits, gains, losses, expenses, deductions and credits of the Partnership are allocable to a Partner only if they are paid or incurred by the Partnership during the portion of the year such Partner is a member of the Partnership. As between a Limited Partner and that Limited Partner's transferee, the General Partner may, in its discretion, allocate all Partnership profit and loss between the transferring Limited Partner and his or its transferee ratably on a daily basis. Notwithstanding the foregoing, the General Partner shall in all events utilize an accounting method for determining the allocable shares of the above items to which the Limited Partners are entitled which complies with Section 706(d) of the Internal Revenue Code and other applicable law, rules and regulations. 8 4.4 Distributions from Partnership Operations. (a) After the admission of the Limited Partners upon completion of the Offering, the following shall apply: (1) Distributions from operations shall be made to the Partners, one percent (1%) to each Limited Partner for each Unit owned by that Limited Partner and the remaining percentage to the General Partner. (2) Distributions from the operations of the Partnership for a fiscal year shall be made during or within ninety (90) days following the end of the fiscal year. Distributions made within ninety (90) days after the end of a fiscal year shall be deemed distributions for the prior fiscal year unless specifically earmarked by the General Partner as distributions for the current fiscal year. (b) With respect to distributions made in accordance with paragraph 4.4(a), such distributions shall only be made to Partners from the "Distributable Cash Flow" of the Partnership. "Distributable Cash Flow" shall be determined by the regularly employed independent accountant of the Partnership using the accrual method of accounting. "Distributable Cash Flow" shall mean, for the fiscal year for which a determination is being made, the gross receipts of the Partnership received in the ordinary course of business less actual payments and expenditures incurred in the ordinary course of business for proper Partnership purposes. Payments and expenditures include, but are not limited to the following: (1) compensation paid to the General Partner under this Agreement; (2) reimbursements to the General Partner, or affiliates, for out-of- pocket Partnership expenses incurred in connection with the operation and management of the Partnership; (3) principal and interest payments made on Partnership indebtedness; 9 (4) contributions, reservations, or allocations, in amounts determined by the General Partner in its discretion, to Partnership working capital, equipment purchases, replacements or repairs and contingency reserves; (5) obligations to third parties incurred in the ordinary course of Partnership business. (c) The General Partner shall use its best efforts to pay Partnership obligations when due and shall not, in any material way, defer or prepay obligations or otherwise engage in activity which would have the effect of materially distorting Distributable Cash Flow for any period. (d) The General Partner shall, in good faith, use its best efforts to distribute to the Partners for each fiscal year of the Partnership the Distributable Cash Flow available for that year, less any amount the General Partner determines, in its sole discretion, should be retained by the Partnership as working capital. No Partner shall have the right to demand distributions. 4.5 Distributions Not in the Ordinary Course. The net cash proceeds resulting from any financing or the refinancing of any loan secured by property of the Partnership or from any voluntary or involuntary conversion of the Partnership's property (other than the sale, exchange or other disposition of all or substantially all of the Partnership's property) or from casualty insurance proceeds or condemnation awards shall be applied to any reasonably necessary restoration or repair of such property, to the repayment of any loan secured by such property, and to reasonable reserves for working capital. The balance of such net cash proceeds shall be distributed as provided in paragraph 4.6, as payments in partial (or if applicable, total), liquidation of the Partnership. 4.6 Distributions on Liquidation of the Partnership. Upon complete or partial liquidation of the Partnership, Partnership property, including the proceeds received by the 10 Partnership from the sale or other disposition of its assets, shall be applied and distributed as follows: (a) First, to the payment of debts and liabilities of the Partnership and the expenses of liquidation in the order of priority as provided by law; (b) Then, to the setting up of such reserves as the person required by law to wind up the Partnership's affairs may reasonably deem necessary for any contingent liabilities or obligations of the Partnership, provided that any such reserves shall be paid over by such person to an independent escrow agent to be held by such agent or his successor for such period as such person shall deem advisable for the purpose of applying such reserves to the payment of such liabilities or obligations and, at the expiration of such period, the balance of such reserves, if any, shall be distributed as provided in paragraphs 4.6(c) through 4.6(e) below in the order named; (c) Then, to the repayment of any loans or advances that may have been made by Limited Partners to the Partnership; (d) Then, to the repayment of any loans or advances that have been made by the General Partner to the Partnership; (e) Then, within ninety (90) days after the date of liquidation of the Partnership, the General Partner, or other liquidating trustee, shall, after allocation of all items of income, gain, expense and deduction in accordance with this Agreement, distribute, in cash or in kind, to each of the Partners who have positive capital accounts the amount thereof. The amounts of the positive capital accounts of the Partners, for purposes of this paragraph, shall be determined after making all adjustments thereto which are applicable for the year in which the liquidation occurs. 4.7 Qualified Income Offset. In the event any Partners unexpectedly receive any adjustments, allocations, or distributions described in subsections (4), (5) or (6) of Treasury Regulation Section 1.704-l(b)(2)(ii)(d), items of Partnership income and gain shall be specially 11 allocated to such Partners in an amount and manner sufficient to eliminate any deficit balances in their capital accounts created by such adjustments, allocations, or distributions as quickly as possible. Any special allocations of items of income or gain pursuant to this paragraph 4.7 shall be taken into account in computing subsequent allocations of profits pursuant to this Article 4, so that the net amount of any items SO allocated and the profits, losses and all other items allocated to each Partner pursuant to this Article 4 shall, to the extent possible, be equal to the net amount that would have been allocated to each such Partner pursuant to the provisions of this Article 4 if such unexpected adjustments, allocations or distributions had not occurred. 5. THE GENERAL PARTNER'S DUTIES AND COMPENSATION 5.1 Powers of the General Partner. Except as restricted by the rights of the Limited Partners as described in this Agreement, the General Partner shall have the exclusive right and power to manage and operate the Partnership and to do all things necessary to carry out the purpose, business and objectives of the Partnership. 5.2 Specific Rights and Powers. In addition to any other rights and powers which it may possess pursuant to the Act, the General Partner shall have, subject to the limitations elsewhere contained in this Agreement, all specific rights and powers required for or appropriate to the operation and management of the Partnership business, which, by way of illustration but not by way of limitation, shall include the following rights and powers to the extent that, in the General Partner's judgment, they are in furtherance of the best interests of the Partnership: (a) To take all action on behalf of the Partnership necessary to accomplish the acquisition or lease of equipment, real property, furniture, fixtures and related interests reasonably necessary to operate the MRI Department, at such price, rental or amount for cash, securities or other property, and upon such terms as it deems, in its sole discretion, to be in the best interest of the Partnership and its purposes, including without limitation to cause the 12 Partnership to enter into an Exclusive Operating Agreement (the form of which is attached hereto as Exhibit A) with the General Partner for the operation of the MRI Department; (b) To borrow money for Partnership purposes in the ordinary course of the Partnership business, including borrowing from the General Partner on market terms, approved by the General Partner, including terms beyond the term of the Partnership; (c) To acquire, enter into, perform or terminate any contract of insurance which it deems necessary and proper for the protection of the Partnership, for the conservation of its assets, or for any purpose convenient or beneficial to the Partnership; (d) To employ from time to time any persons or entities, or whether affiliated with any Partner or not, for the operation and management of the Partnership business, including, without limitation, accountants and attorneys, on such terms and for such reasonable compensation as the General Partner shall determine; (e) To deposit or invest in bank or thrift accounts or brokerage cash accounts such funds of the Partnership as are deemed from time to time to be unnecessary for current operations; (f) To prosecute, defend, settle or compromise any actions or claims at the Partnership's expense as may be deemed necessary or proper to enforce or protect the interest and property of the Partnership and to satisfy any judgment or settlement; (g) To establish and maintain reserve funds consistent with the Partnership's operating and capital budgets or such greater amounts as the General Partner deems is needed from capital and cash flow derived from the Partnership's operations to provide for future maintenance, repair or replacement of the assets of the Partnership and for general working capital purposes: (h) To pay any and all organizational expenses incurred by the General Partner or the Partnership in the creation of the Partnership and the Offering; 13 (i) To pay any and all reasonable out-of-pocket expenses incurred in connection with the operation and management of the Partnership; (j) To enter into, execute, acknowledge, deliver, perform and carry out contracts, bill of sale, assignments of leases and agreements of every kind necessary or incidental to the accomplishment of the foregoing; (k) To cause the Partnership to enter into such medical or consulting services agreements as are appropriate to operate the MRI Department and as described in the Summary; (l) To serve as "Tax Matters Partner," with all attendant rights and duties pertaining thereto as set forth in section 6221 through 6223 of the Internal Revenue Code and Treasury Regulations promulgated thereunder; (m) To establish or modify the hours of operation of the MRI Department; (n) To admit additional limited partners to the Partnership; (o) To establish, approve, and administer, operating and capital budgets for the Partnership each year during the term of the Partnership; and (p) To execute, acknowledge and deliver any and all contracts, agreements, documents, instruments NECESSARY to effectuate the foregoing. Notwithstanding any provision in this Agreement to the contrary, the General Partner is not obligated to acquire, lease, or maintain any particular MRI system, or a state-of-the-art MRI system or any other equipment or software for the Partnership or the MRI Department. 5.3 Withdrawal of General Partner. (a) At any time during the term of this Agreement, the General Partner may, without approval or consent of the Limited Partners, sell, assign, exchange, or otherwise transfer all or a part of its interest in the Partnership ("General Partner Transfer"). (b) The General Partner shall be "deemed" to have withdrawn from the Partnership upon the Partnership's dissolution and cessation to exist, assignment for the benefit of creditors, filing of voluntary petition in bankruptcy, judgment of bankruptcy or insolvency, 14 withdrawal in violation of this agreement, removal for cause, General Partner Transfer of all or a portion of its interest in the Partnership, or other event of withdrawal described in the Act, particularly in section 23-16-5-2 of the Act. (c) Withdrawal of the General Partner in accordance with this Agreement or a deemed withdrawal of the General Partner are referred to hereinafter as "withdrawal." (d) The withdrawal of a General Partner shall not entitle it to be relieved from Partnership liabilities incurred while it was a Partner. (e) The withdrawal of a General Partner shall not affect its status, if any, as a Limited Partner in regard to Units it may hold. 5.4 Compensation of the General Partner. No salary or other compensation shall be paid to the General Partner as compensation for services rendered to the Partnership in its capacity as General Partner except as set forth in this Agreement. (a) The General Partner shall be entitled to reimbursement for all reasonable out-of-pocket costs incurred in connection with the Offering and the formation and establishment of the Partnership, including, without limitation, legal and accounting fees, filing fees, printing, travel and sustenance costs and other out-of-pocket costs and fees, as well as such incurred by it prior to the closing of the Offering (the "Closing Date") in connection with the development of the Partnership's business; and (b) The General Partner shall be reimbursed, as an expense of the Partnership, monthly for all of its reasonable out-of-pocket expenses incurred in connection with the operation and management of the Partnership, including without limitation the rent and other expenses associated with leasing the G.E. Signa 1.5 Telsa MRI system or any other MRI system and any other equipment necessary to the operation of the MRI Department, the rent under the Net Ground Lease between Lakeshore Health System, Inc., d/b/a/ St. Mary Medical Center, and American Health Services Corp. allocable to the MRI Department, and rent payable to the General Partner for the space in the Center in which the MRI Department is located; provided, 15 however, that in the event the Partnership is terminated pursuant to the operation of paragraph 8.2(f) hereof, (1) the General Partner shall not be entitled to reimbursement for any costs or expenses, (2) any such reimbursement made by the Partnership prior to that time shall be returned to the Partnership and (3) the General Partner shall reimburse the Partnership for any expenses incurred by it prior to dissolution. (c) The General Partner shall be entitled to receive, as compensation for the management of the MRI Department and as an expense of the Partnership, each month an amount which is equal to eight percent (8%) of the collected "technical revenue" of the MRI Department. The term "technical revenue" shall mean the gross receipts of the MRI Department, as collected, less and excluding only the sums which may be payable pursuant to medical or consulting services agreements that may be entered into by the Partnership. Payment shall be made at such time or times as the General Partner may determine. 5.5 Independent Activities. The General Partner shall not be required to devote all of its business time to the business of the Partnership but shall devote such time as may be necessary for the discharge of the obligations and duties hereunder. The General Partner may invest in or possess an interest in other business ventures including ventures whose operations are similar to those of the Partnership and the General Partner shall not be required to offer such business ventures or investment opportunities to the Partnership. 6. RIGHTS AND LIABILITIES OF LIMITED PARTNERS. 6.1 Control. A Limited Partner shall not participate in the control of the Partnership's business as the concept of participation in the control of a partnership's business is defined in and interpreted under the Act. (a) VOTING. A Limited Partner shall have the right to vote with respect to the matters set forth in this Agreement, or as otherwise provided in the Act. 16 (b) Unit Voting. Each Limited Partner shall have one vote for each Unit, except as restricted in this Agreement. 6.2 Liability of Limited Partners. The liability of each Limited Partner to the Partnership shall be limited to his or its capital contribution. 6.3 Loans and Other Business Transactions with the Partnership. A Limited Partner may, with the consent of the General Partner, lend money to and transact other business with the Partnership on such terms as the Limited Partner and the General Partner agree. No Limited Partner shall be permitted to make a loan upon the security of Partnership property if, at the time such secured loan is made, the assets of the Partnership are not sufficient to discharge Partnership liabilities to non-Partners. 6.4 Actions Requiring Consent of Limited Partners. (a) The Limited Partners shall have the right to approve or disapprove the following matters, without the vote of the General Partner, upon the affirmative vote or written consent of Limited Partners holding a majority of the Units then outstanding, including Units held by the General Partner in its capacity as Limited Partner, except as further limited by this Agreement: (1) sale, exchange or other transfer of all or substantially all of the Partnership's assets not in the ordinary course of business; (2) when requested by the General Partner, approval of its voluntary withdrawal as General Partner; (3) removal of the General Partner in accordance with this Agreement; (4) change the nature of the Partnership's business; (5) continuation of the business of the Partnership upon the withdrawal of the General Partner; (6) if the business of the Partnership is to be continued upon the withdrawal of the General Partner, admission of any new or substitute general partners. 17 (b) For the purposes hereof, the General Partner shall have no vote of its Limited Partner Units in regard to its removal as General Partner, or in regard to the continuation of Partnership business upon the General Partner's removal or in regard to the selection of a replacement General Partner upon the General Partner's removal. 6.5 Removal of a General Partner for Cause. (a) A General Partner may be removed for cause by the written vote of a majority of the Limited Partner Units, other than Units held by the General Partner as a Limited Partner. Removal for cause shall be deemed to be a withdrawal of the General Partner. Cause for removal of a General Partner shall exist only if the General Partner engages in fraud or willful gross misconduct related to the General Partner's performance of its duties hereunder. (b) American Health Services Corp. may also be removed as General Partner in accordance with Article 5 hereof. (c) The removal of a General Partner hereunder shall be effected by the designee of the Limited Partners sending of written notice thereof to such General Partner and shall be effective ninety-one (91) days after removal unless the notice specifies an earlier date. 6.6 Limited Partner Actions After General Partner Withdrawal. Within ninety (90) days after the withdrawal of the General Partner, the Limited Partners shall elect to continue or terminate the business of the Partnership. If a majority of the Limited Partners' Units (other than those held by the General Partner) do not elect to continue the business, the Partnership shall be dissolved. (a) If the Partnership is to be terminated, the Limited Partners shall elect a liquidating trustee and proceed to have the affairs of the Partnership wound up as provided herein. (b) If the business of the Partnership is to be continued, the Limited Partners shall elect a replacement General Partner under paragraph 6.4 who accepts the designation as of the date of the withdrawal. 18 (1) In that event the Partnership Agreement shall be amended to admit the replacement General Partner and the subsequent agreement shall otherwise be in form and substance similar to this Agreement. (2) The General Partner, the General Partner who has withdrawn, or who has been deemed to have withdrawn as a General Partner, appoints the Limited Partners, and each of them, as its attorney-in-fact, coupled with an interest, to execute and deliver and file on its behalf and on behalf of the Partnership, an amendment to this Agreement and to the Certificate of Limited Partnership, reflecting its withdrawal, the continuation of the Partnership business and the substitution of the replacement General Partner. (c) Prior to the effective date of withdrawal of the General Partner, the successor General Partner shall purchase at least a one percent (1%) interest in the Partnership as a General Partner from the withdrawing General Partner for an amount equal to such General Partner's capital account. Any remaining Partnership interest held by the withdrawing General Partner shall be automatically converted to that of a Limited Partner ("Converted Limited Partner"), effective as of the date of withdrawal. Such Converted Limited Partner shall share in the income, gain, loss, and deductions, and each item thereof, in the same manner as its General Partner interest; provided, however, that such Converted Limited Partner shall have no right to participate in the management and affairs of the Partnership and, further, that such event shall not affect any rights or liabilities of the withdrawn General Partner which matured prior to such withdrawal or the value, if any, at the time of such withdrawal of such withdrawn General Partner's Partnership interest. 6.7 Limited Partner Meetings and Voting. Meetings of the Limited Partners shall be held at any place within Lake County, Indiana, stated in any proper notice of a meeting as the person calling the meeting may designate. (a) Meetings of the Limited Partners to vote on any matters on which the Limited Partners are authorized to take action under this Agreement may be called by either of 19 the General Partner or by one or more Limited Partners holding not less than ten (10%) percent of the outstanding Units. The General Partner shall call at least one meeting of the Limited Partners per year during the term of this Agreement. (b) Upon a request in writing to the General Partner by any person(s) entitled to call a meeting, the General Partner shall cause notice to be given to the Limited Partners that a meeting will be held at a time requested by the person calling the meeting, not less than fifteen (15) nor more than sixty (60) days after notice is given to the General Partner of the request. (c) Written notice of the meeting shall be given to the Limited Partners either personally or by first class mail not less than ten (10) nor more than sixty (60) days before the date of the meeting. The notice shall state the place, date and hour of the meeting and include a detailed statement of the action proposed, including a verbatim statement of the wording of any resolution proposed for adoption by the Limited Partners and of any proposed amendment to this Agreement. (d) The Partnership shall provide for proxies or written consents which specify a choice between approval and disapproval or each matter to be acted upon at the meeting. (e) Limited Partners holding a majority of the Units entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of Partners. Limited Partner decisions shall be made by majority vote of the Units outstanding, except when a higher vote percentage is required by this Agreement. (f) Any action which may be taken at any meeting of the Partners may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by Partners having no less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all entitled to vote thereon were present and voted. 20 (g) In the event the General Partner, or Limited Partners representing more than ten percent (10%) of the Units, request a meeting for the purpose of discussing or voting on the matter, the notice of a meeting shall be given in accordance herewith and no action shall be taken until the meeting is held. (h) Except as otherwise specifically provided in this paragraph, meeting notices and procedures shall be in conformity with the Act, as from time to time amended, or with any successor statutory provision. 7. RECORDS REQUIRED TO BE MAINTAINED IN THE STATE OF INDIANA 7.1 Records. The General Partner shall keep at the Partnership's principal place of business the following Partnership documents: (a) A current list of the full name and last known business address of all Partners, separately identifying, in alphabetical order, the General Partner and the Limited Partners; (b) A copy of the Certificate of Limited Partnership and all certificates of amendment thereto, together with executed copies of any powers of attorney pursuant to which any certificate has been executed; (c) Copies of the Partnership's federal, state, and local income tax returns and reports, if any, for the six (6) most recent years; (d) Copies of the original of this Agreement and all amendments thereto; (e) Copies of any financial statements of the Partnership for the three (3) most recent years; and (f) Any other documents required to be maintained by the Partnership pursuant to the Act 7.2 Other Records. All other books and records, including the books of account, of the Partnership, not required to be maintained at the office of the Partnership under the Act may be maintained at the office of the General Partner at 4440 Van Karman, Suite 320, Newport 21 Beach, California 92660. Provided, however, upon the reasonable request of a Limited Partner, such other records shall be made available for the Limited Partner at the office of the Partnership. 7.3 Delivery to Limited Partner and Inspection: Financial Reports. (a) Upon the request of a Limited Partner, the General Partner shall promptly deliver to the requesting Limited Partner, at the expense of the Partnership, a copy of the information required to be maintained by paragraphs 7.1(a), (b) or (d) hereof. (b) Each Limited Partner has the right upon reasonable request to inspect and copy (at the requesting Limited Partner's expense except as provided in paragraph 7.3(a) hereof) the records of the Partnership during normal business hours at the Partnership office. (c) The General Partner, at the Partnership's expense, shall promptly furnish to a Limited Partner a copy of any amendment to this Agreement executed by the General Partner pursuant to a power of attorney from the Limited Partner. (d) The General Partner, at the Partnership's expense, shall send to each Partner within ninety (90) days after the end of each taxable year the information necessary for the Partner to complete that Partner's federal and state income tax or information returns and there shall be included with such information a copy of the Partnership's federal, state and local income tax or information returns for the year. (e) If the Partnership has more than thirty-five (35) Limited Partners: (1) the General Partner shall cause an annual report to be sent to each of the Partners not later than one hundred twenty (120) days after the close of the fiscal year; that report shall contain a balance sheet as of the end of the fiscal year and an income statement and statement of changes in financial position for the fiscal year; and (2) upon the written request of Limited Partners representing at least five percent (5%) of the Units, the General Partner shall send to each Partner within thirty (30) days, an income statement of the Limited Partnership for the initial three month, six-month, or 22 nine-month period of the current fiscal year ended more than thirty (30) days prior to the date of the request and a balance sheet of the Partnership as of the end of that period; and (f) The financial statements referred to in paragraph 7.3(e) shall be accompanied by the report thereon, if any, of the independent accountants engaged by the Partnership or, if there is no such report, the certificate of the General Partner of the Partnership that such financial statements were prepared without audit from the books and records of the Partnership. 7.4 Books of Account. The Partnership shall keep at all times during its existence proper and complete books of account in accordance with generally accepted accounting principles, and such books shall be open for inspection and copying by any Partner at any time during reasonable business hours at that Partner's expense except as provided in paragraph 7.3 hereof. Such books initially shall be kept on an accrual basis, provided, however, that the General Partner may from time to time change the accounting basis on which such books are kept as may be required or permitted by law. 7.5 Fiscal Year. The fiscal year of the Partnership shall end on the 31st day of December in each year during the term of the Partnership. 7.6 Federal Income Tax Elections. All elections required or permitted to be made by the Partnership under the Internal Revenue Code shall be made by the General Partner in such manner as will, in its opinion, be most advantageous to Partners holding at least a majority of the Units. 7.7 Election to Adjust Basis. In the event of a distribution of property to a Partner or the transfer of an interest in the Partnership by sale, exchange or upon the death of an individual, a Partner or cessation to exist of a corporate Partner, the General Partner may, in its discretion, cause the Partnership to file an election under Section 754 of the Internal Revenue Code in accordance with the regulations issued thereunder to adjust the basis of 23 Partnership property in the manner provided in Section 734 and 743 of the Internal Revenue Code. 8. TERM. 8.1 Basic Term. The Partnership shall commence on the date the Certificate of Limited Partnership is filed with the Indiana Secretary of State and shall continue for ten (10) years after such filing date, unless sooner terminated or dissolved as provided in this Agreement, or unless extended by the General Partner and all of the Limited Partners. 8.2 Dissolution. The Partnership shall be dissolved and its affairs shall be wound up, and its assets liquidated, upon the happening of any of the following: (a) The affirmative vote or written consent of the General Partner and Limited Partners holding at least a majority of the Units outstanding; (b) The sale of all or substantially all of the-assets of the Partnership; (c) The expiration of the term of the Partnership as provided for in paragraph 8.1 above; (d) The entry of a decree of judicial dissolution of the Partnership under the Act; (e) Ninety-one (91) days after the withdrawal of the General Partner, unless the Limited Partners, before that date, elect to continue the business of the Partnership, and elect a replacement General Partner who consents to and accepts the designation as General Partner as of the date of withdrawal; (f) The General Partner fails or refuses to acquire the interest of the Limited Partner(s) as required under Article 11 hereof by paying the price therefor within the time therein specified; but such termination shall not reduce or diminish any damage claims the Limited Partners may have against the General Partner for breach of contract or otherwise. 8.3 Liquidation. Upon termination of the Partnership, the General Partner or, if there is no General Partner, such other party as shall be designated by the Limited Partners, 24 shall immediately proceed to file the Certificate of Cancellation as provided in this Agreement, wind up the Partnership's affairs and liquidate the Partnership. A reasonable time shall be allowed for the orderly liquidation of the Partnership and the discharge of liabilities to its creditors so as to enable the Partnership to minimize any losses attendant upon liquidation. Any gain or loss on disposition of Partnership property in liquidation shall be credited or charged to the Partners in accordance with the provisions of Article 4. 9. TRANSFERS OF LIMITED PARTNERS' PARTNERSHIP INTERESTS. 9.1 Lifetime Transfers of Limited Partners' Partnership Interests. A Limited Partner during his or its lifetime may not transfer, sell, assign, encumber of otherwise dispose ("Transfer") all or any part of his or its Units or other economic interest as a Limited Partner in and to the Partnership, its capital, profits and losses, except to individuals or entities (an "Eligible Limited Partner") meeting the requirements set forth in paragraphs 2.1(l)-(4) herein, contingent upon the following: (a) the General Partner is satisfied that the assignment will not impair the ability of the Partnership to be taxed as a partnership and that the transfer does not violate applicable federal and state securities laws; (b) if requested, such Limited Partner furnishes an opinion of counsel, satisfactory in form and substance to the General Partner and to the Partnership's counsel, to the effect that such assignment will not violate federal or any state securities laws; (c) the transferee represents that he is acquiring the interest for his own account for investment and not with a view to the distribution thereof; (d) the transferee agrees to comply with the terms of this Agreement and to execute any and all documents that the General Partner may deem necessary in connection with the assignment and substitution; (e) such assignment, taken together with other prior transfers, shall not result in a termination of the Partnership for Federal income tax purposes; and 25 (f) the General Partner consents thereto, which consent may be withheld in its sole discretion. 9.2 General Partner's Right of First Refusal. A Limited Partner may not Transfer all or any part of his or its Units or other economic interest as a Limited Partner in and to the Partnership, its capital, profits and losses unless and until the Limited Partner has first offered to sell all of his or its Units to the General Partner at a price equal to the Adjusted Book Value thereof, as determined under Article 12 of this Agreement, or the price offered in a bona fide offer of a third party, whichever is less. The Limited Partner shall notify the General Partner in writing of its or his intention to Transfer his or its Units within ten (10) days of receiving a bona fide offer from a third party for such Units or deciding to Transfer such Units. Such notice shall set forth the terms and conditions of any bona fide offer from a third party. The General Partner shall notify in writing the Limited Partner as to whether it will exercise its right under this paragraph 9.2 to purchase the Limited Partner's Units within thirty (30) days of receiving such notice. Any purchase of Units by the General Partner under this paragraph 9.2 shall be completed within ninety (90) days of the General Partner's receipt of the Limited Partner's notice provided under this paragraph 9.2. 9.3 Death, Bankruptcy or Incompetency of a Limited Partner. Upon the death, Bankruptcy or adjudication of incompetency, termination or dissolution of a Limited Partner, the Partnership shall not be dissolved and the personal representative, guardian or other successor-in-interest of such Limited Partner shall have all of the rights of such Limited Partner for the sole purpose of settling the estate or business of such Limited Partner and shall be liable for all his or its liabilities and obligations to the Partnership. In addition, such personal representative, guardian or other successor-in-interest of such Limited Partner shall have the obligation to transfer the Limited Partner's interest in the Partnership in accordance with the terms and provisions of Article 9. 26 9.4 Substitute Limited Partner. No assignee or transferee of a Unit, or part thereof, or any other person interested in the Partnership as a prospective Limited Partner succeeding to the interest of a Limited Partner, shall become a substitute Limited Partner with full rights as a Limited Partner unless all of the following conditions are satisfied: (a) the assigning or transferring Limited Partner so provides in the instrument of assignment; (b) the assignee or transferee executes such documents as the General Partner may reasonably require so that he will be bound by all the provisions of this Agreement, AS it may then be amended, any Certificate of Limited Partnership, as it may then be amended, and any other agreement by which the General Partner may reasonably require the substitute Limited Partner to be bound; (c) the assignee or transferee agrees to bear all costs and expenses, including legal fees of the Partnership, incurred in effecting such substitution; (d) the assignee or transferee is an Eligible Limited Partner; (e) the legal opinions required in paragraph 9.1 take into account that the person will be a substitute Limited Partner; and (f) the General Partner shall have consented thereto, which consent may be withheld in its sole discretion. 9.5 Amendment for Transfer. Each Partner hereby consents to the execution and recordation on his or its behalf by the General Partner of any amendment hereto any Certificate of Limited Partnership required for the purpose of admitting as a Limited Partner the transferee of any Unit or interest in the Partnership as provided above in this Article 9, and the execution and recordation on his or its behalf of any other instruments required in connection therewith, and the General Partner is hereby granted the right to admit such transferee upon all of the terms set forth above. Each Partner agrees to execute, at the request of the General Partner, 27 all documents necessary or desirable to effect the transfer of any Unit in the Partnership pursuant to this Article 9. 10. OPTION TO PURCHASE UNITS AT DESIGNATED INTERVALS. 10.1 Grant of Options. (a) Each Limited Partner (other than the General Partner with respect to Limited Partnership Units owned by it) hereby grants an option to the General Partner to purchase upon the terms and conditions set forth in this Article 10 all or any number of the Units of such Limited Partner as described herein. (b) During each year the Partnership exists, from January 1 to January 31 inclusive (the "Designated Interval"), that occurs subsequent to December 31, 1992, the General Partner shall have the option, exercisable for any reason at the sole determination of the General Partner by notice to each Limited Partner, to purchase pro rata from the Limited Partners (other than the General Partner) and, upon exercise of such options, each such Limited Partner shall sell all or such portion of such Limited Partner's Units in the Partnership as the Article 10 Notice of Purchase (as defined below) specifies. (c) The Article 10 Notice of Purchase shall be in writing and shall state the number of Units to be acquired pursuant to the exercise of this option. Except as limited under paragraph 10.1(a) above, each exercise of this option shall extend to each Limited Partner pro rata in the ratio that each Limited Partner's Units bears to the total number of Limited Partnership Units held by all Limited Partners to whom the option extends. As a result of the exercise of this option, fractional Units may be acquired by the General Partner resulting in fractional Units being retained by the Limited Partners. Through one or more exercises of this option, the entire interest of each Limited Partner in this Partnership, may be acquired by the General Partner. The purchase price to be paid by the General Partner, determined pursuant to paragraph 10.3 hereof, shall be prorated and paid to each Limited Partner in the same manner as above specified. 28 (d) The payment to be made to such Limited Partners pursuant to this Article is, and shall be conclusively deemed to be, in complete payment and satisfaction of the Units or fractional Units of such Limited Partner (and of any and all parties claiming by, through, or under such Limited Partner) with respect to the Units or fractions of Units so purchased including, without limitation, any rights against the Partnership and (insofar as the affairs of the Partnership are concerned) against the Partners with respect to Units or fractions of Units so purchased. 10.2 Exercise of Option. Exercise of the option granted in paragraph 10.1 hereof shall be accomplished by written notice (the "Article 10 Notice of Purchase') delivered pursuant to paragraph 15.1 hereof to the Limited Partners, or the authorized representatives or successors thereof. The General Partner, if it decides to exercise such option, must exercise such option by giving the Article 10 Notice to Purchase within the Designated Interval. 10.3 Option Price. The option price for each Limited Partnership Unit, or fraction thereof, for purposes of this Article 10 shall be an amount (the "Option Amount") equal to the "Adjusted Book Value" thereof, as determined under Article 12 of this Agreement. 10.4 Closing. Within thirty (30) days after the Option Amount is determined in accordance with Article 12 of this Agreement, or such later date as determined by the General Partner with the agreement of the Limited Partners or the Limited Partners' representatives or successors, as the case may be, the General Partner shall pay to the Limited Partners (or the representative or successor of either) the Option Amount for each of the Limited Partnership Units (or fractional Units) as to which the option is then being exercised. The closing shall take place at the office of the Partnership, and in exchange for the Option Amount for each Unit purchased, each of the Limited Partners shall execute and deliver to the General Partner an assignment of his or its interest, free of liens and encumbrances, stating in such assignment that as to those Units the General Partner may become a substituted Limited Partner. 29 11. MANDATORY BUY BACK OF LIMITED PARTNER'S INTEREST IN PARTNERSHIP (a) If under applicable federal or state law, or rules or regulations promulgated thereunder, it becomes unlawful for physicians or other health care providers who are Partners to refer patients to the MRI Department or Partnership or should reimbursement by Medicare or Medicaid in connection with such referrals becomes unlawful, the General Partner shall acquire, and the Limited Partners shall sell, all of the Units at a price per Unit which is the greater of $l,000 or the Adjusted Book Value of the Unit. (1) The purchase and sale shall be effective as of the date of such law, rule of regulation. From and after that date the Limited Partners shall have no interest in the Partnership except as a creditor for the payments for Units. (2) If the General Partner defaults in its obligation to purchase Units (and such defaults shall mean the Units are not purchased within 30 days after the price is determined under Article 8) then the Partnership shall terminate in accordance with Article 8; however, termination shall not release the General Partner from any claim by Limited Partners for damages or sums due. (b) Anything, contained in paragraph 11(a)(2) above to the contrary notwithstanding if the law as adopted defers effectiveness to allow for "ease-by-ease" approval by the applicable governing agency of an arrangement or interest, the General Partner, upon notice to the Unit holders and upon advice of counsel, may, in its discretion, apply for a ruling provided that from and after the effective date of the law until a favorable ruling is obtained: (1) Limited Partners shall have no right to vote Units; (2) Limited Partners shall neither earn profits and losses nor receive distributions; and (3) Distributable cash flow shall be deposited in escrow. If a favorable ruling is not obtained, the Units shall he purchased as of the date the law is effective in accordance with paragraph (a) above. If a favorable ruling is obtained, 30 the escrow will terminate and rights and interests of Limited Partners shall be retroactively reinstated. 12. ADJUSTED BOOK VALUE OF A PARTNERSHIP INTEREST. 12.1 Adjusted Book Value is Agreed Fair Market Value. When the interest of a Partner is to be acquired under this Agreement at a price which is equal to the "Adjusted Book Value" thereof, the provisions of this Article shall apply. The Partners agree, that as the interest in the Partnership lack marketability, the "Adjusted Book Value" of interests reflect the fair market value thereof. 12.2 Adjusted Book Value of the Partnership. First, the "Adjusted Book Value" of the Partnership's assets and liabilities shall be determined as of the effective date of withdrawal of the Partner, or exercise of the option, or determination of the obligation to purchase and sell Partnership Units whichever is applicable, by the then regularly employed independent accountant of the Partnership, and such determination shall, if made in good faith, and if not patently erroneous, be binding and conclusive upon the parties. The "Adjusted Book Value" shall be equal to the Partnership book value after that book value has been computed observing the adjustments hereinafter described. Such computation shall be made by the independent accountant of the Partnership, without audit, in accordance with the accrual method of accounting regardless of the method of accounting actually employed by the Partnership; however, the following shall be observed. (a) No allowance of any kind shall be made for goodwill or any similar intangible asset of the Partnership unless such goodwill or other intangible asset shall have been acquired by purchase by the Partnership and shall appear as an asset on the Partnership's books and records at the date of termination. (b) All accounts payable shall be valued at face amount, less discounts allowable thereon. 31 (c) All other liabilities shall be valued at face amount, unless a contractual right to a discount has been obtained. No discount, or valuation adjustment shall be made for favorable or unfavorable financing terms or interest rates. (d) All amounts receivable not theretofore written off shall be valued at face amount less a reasonable reserve for non-collection, as determined by the accountant. (e) All furniture, fixtures, leasehold interests, and equipment shall be valued at the greater of book value or fair market value. (f) Inventory of supplies shall be computed at cost or market value, whichever is lower. (g) All unpaid and accrued federal, state, city, and municipal taxes including, but not limited to, sales, payroll, unemployment taxes, excise, franchise and income (but only to the extent such tax or taxes are then applicable to Partnerships), shall be considered AS liabilities. No special accrual of income taxes or capital gains taxes shall be made because of any appraisal or fair market value adjustment to assets, nor for any recapture of tax credits, nor for any potential savings to the Partnership or the continuing Partner because of a Internal Revenue Code Section 754 basis adjustment made as a result of the buy-out of the Partner. (h) Real estate (for this purpose, a leasehold interest is not real estate) shall be valued at fair market value. (i) Contributions to any qualified pension profit sharing or other qualified retirement plan for the benefit of Partnership employees (not for employees of a Partner) for the fiscal year of the Partnership in which the date of determination falls shall be accrued as a liability and shall be prorated for such fiscal year in accordance with the prior accounting procedures of the Partnership. (j) Marketable securities shall be valued at fair market value. (k) In the event of any pending or known claims for professional or other liability which are not fully covered by insurance, the accountant shall accrue any estimated 32 loss therefrom as a liability of the Partnership to the extent such accrual shall be required under the Statement of Financial Accounting Standards applicable to Accounting For Contingencies, as the same shall be amended and restated on the determination date. Each Partner and the Partnership agrees, upon request of said accountants, to submit in connection with such determination a certificate as to their knowledge of any pendency or probable pendency or possible pendency of such claims. Said accountants shall be authorized to take such action or actions as shall be required under said Financial Accounting Standards for said accountants to make such determination hereunder. The accountant shall consider, in making its estimate, the provisions of this Agreement dealing with responsibility for professional claims which are uninsured in whole or in part. 12.3 Value of Partnership Interest. The value of the Units (or fraction thereof, as the case may be) or interest of the Partner whose interest is being acquired shall be the value of his or its capital account after the adjustments described above have been made as of the valuation date to the assets and liabilities (and the net result reflected in the income and capital accounts of the Partners), and after the income accounts have been merged into the capital accounts. 12.4 Fair Market Value Determination. When values are to be determined at fair market value, and a regular trading market for the asset does not exist, the value of the asset shall be determined in accordance with this paragraph. The fair market value of the asset shall be determined by mutual agreement of the purchaser and the Partner(s) selling the Units or interest being valued hereunder. The value so determined shall be submitted in writing, signed by the selling Partner(s) and purchaser, to said accountants within ten (10) days after said accountants shall make a written request for such determination. (a) If the selling Partner(s) and purchaser shall not agree on the value within said ten (10) day period, they shall each promptly and within five (5) days designate a qualified appraiser to value the property and, if the appraisers cannot reach mutual agreement on such 33 value within fifteen (15) days, the appraisers shall within five (5) days designate a third such qualified appraiser and a majority decision of such appraisers shall be binding. (b) In the event the appraisers cannot agree on the choice of the third appraiser or, if the three appraisers cannot agree on the valuation within fifteen (15) days after the date the third appraiser is designated, either the purchaser or the selling Partner(s) shall refer the matter to arbitration before three arbitrators in accordance with the Rules of Conciliation and Arbitration of the American Arbitration Association, and the decision of arbitration shall be final and binding on the parties. (c) Notwithstanding any other provision contained in this paragraph to the contrary, if such valuation shall be submitted for appraisal or arbitration, the date of any closing of the purchase specified herein shall take place within thirty (30) days after the determination of such value by appraisal or arbitration if such determination by appraisal or arbitration shall not be made before the closing date otherwise provided for herein. 12.5 Costs of Determination of Adjusted Book Value. (a) All costs of determining the Adjusted Book Value and the purchase price of a selling Partner's interest hereunder including, but not limited to, accounting fees, appraisal fees, and other costs but excluding the expenses of arbitration and excluding legal fees, shall be paid for by the purchaser. Such costs, if paid for by the Partnership, shall not be taken into account in determining the liabilities of the Partnership as of the valuation date. (b) Each party shall pay its legal expenses, provided, however, in the event of arbitration, expenses shall be paid as determined under those provisions of this Agreement dealing with arbitration. 12.6 Miscellaneous. (a) No selling Partner shall have interest in the Partnership after its withdrawal, or other event providing for the purchase of Units hereunder, except as a creditor for the payment for his or its Units. 34 (b) The purchaser shall, upon purchase of the selling Partner's Units, indemnify and save the withdrawing Partner harmless from any Partnership liabilities appearing on the books of the Partnership as to which the selling Partner was liable, and shall cause the same to be paid in accordance with their terms. 13. INDEMNIFICATION. 13.1 Indemnification of the General Partner. (a) The Partnership shall indemnify, defend and hold harmless the General Partner and its agents and employees, if any, from and against any loss, liability, damage, cost or expense (including legal fees and expenses incurred in defense of any demands, claims or lawsuits) arising from acts or omissions concerning the business or activities undertaken by or on behalf of the Partnership from any source including, without limitation, any demands, claims or lawsuits initiated by a Limited Partner (or assignee), so long as such acts or omissions were taken in good faith and in a manner reasonably believed by the General Partner to be in, or not opposed to, the best interests of the Partnership; provided that no indemnity shall be made with regard to an action or suit by or in the name of the Partnership or a Limited Partner if the conduct which was the basis for such liability was found by a court of competent jurisdiction, upon entry of a final judgment, to be the result of gross negligence or reckless or intentional misconduct or breach of fiduciary duty, unless and only to the extent that the court in which such action or suit was brought shall determine upon application that despite the adjudication of liability but in view of all circumstances of the case, the defendant or respondent is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper; and provided further that nothing contained herein shall increase the liability of any Limited Partner to the Partnership beyond the amount of the capital contributed by him or it, plus his or its share of undistributed profits, if any, in the Partnership. 35 (b) The Partnership shall advance to any person entitled to indemnification pursuant to this Article such funds as shall be required to pay legal fees and expenses incurred in defense of any demands, claims or lawsuits. 13.2 Indemnification of the Partnership. In the event the Partnership is made a party to any claim, dispute or litigation or otherwise incurs any loss or expense as a result of or in connection with any Partner's (or assignee's) obligations or liabilities unrelated to the Partnership business, such Partners or assignees cumulatively, jointly and severally, shall indemnify and reimburse the Partnership for all loss and expense incurred, including reasonable attorneys' fees. In no event shall this obligation be deemed to constitute a limited partnership, a general partnership, or enlarge the liability of any Limited Partner as a Limited Partner. 13.3 Indemnification for Claims Regarding Medical Activities. The Partnership will not provide professional medical services and No Limited Partner will provide medical services on behalf of the Partnership either in his or its capacity as physician or as Limited Partner. However, if the Partnership, the General Partner or any Limited Partner is sued as a result of the medical activities of any other Limited Partner(s), then the Limited Partner(s) whose activity resulted in a claim being made shall (jointly and severally) indemnify, defend and hold harmless the Partnership, the General Partner, the other Limited Partners and all of their officers, directors, agents and employees, if any, from and against any loss, liability, damage, cost or expense (including without limitation legal fees and expenses incurred in defense of any demands, claims or lawsuits) arising from or related to that claim of medical malpractice. 14. POWER OF ATTORNEY. 14.1 Appointment of Attorney-in-Fact. Each Limited Partner hereby grants to the General Partner a special power of attorney, constituting and appointing the General Partner as the Limited Partner's attorney-in-fact, with power and authority to act in his or its name and on his or its behalf to execute, acknowledge and swear to in the execution, acknowledgment, filing and delivering of the following documents: 36 (a) The Certificate of Limited Partnership, and any amendment to the Certificate of Limited Partnership or this Agreement which, under the laws of the State of Indiana or the laws of any other state are required to be executed or filed or which the General Partner deems advisable to execute, file or deliver; (b) Any other instrument or document which may be required to be filed or delivered under the laws of any state or by any governmental agency, or which either General Partner deems advisable to file or deliver; and (c) Any instrument or document which may be required to effect the continuation of the Partnership, the admission of additional or substituted Limited Partners or general partners, or the dissolution and termination of the Partnership (provided the continuation, admission or dissolution and termination are in accordance with the terms of this Agreement), or to reflect any deduction in the amount of capital contributions of Partners. The General Partner shall promptly furnish to each Limited Partner a copy of any amendment to this Agreement executed by it pursuant to a power of attorney from the Limited Partners. 14.2 Nature of Power. The power of attorney granted by each Limited Partner under this Article as limited by paragraph 14.1: (a) Is a special power of attorney coupled with an interest, is irrevocable, shall survive the death or incapacity of the granting Limited Partner; (b) May be exercised by the General Partner acting for each Limited Partner by listing all of the Limited Partners executing any instrument with a signature of the General Partner or one of the officers of the General Partner acting as an attorney-in-fact for all of the Limited Partners; and (c) Shall survive an assignment by a Limited Partner of all or any portion of his or its limited partnership interests in the Partnership but only until the assignee of such limited partnership interests shall (1) be admitted as a substitute Limited Partner and, (2) 37 execute and acknowledge a power of attorney similar to the one granted by each limited partner pursuant to this Article. 15. MISCELLANEOUS. 15.1 Notices. All notices or other communications required or permitted hereunder shall be in writing, signed by or on behalf of the person giving the notice, and shall be personally delivered or sent by first class mail, postage prepaid, to the person or persons to whom such notice is to be given, addressed, in the case of THE Partnership or the General Partner, to the principal place of business of the Partnership and, if to a Limited Partner, to the business or residence address set forth in the current list maintained by the Partnership; provided, however, that each Limited Partner may from time to time, by notice to the General Partner in accordance with this Agreement, specify a different address to which notice to such Limited Partner shall be delivered. All notices shall be deemed to have been sufficiently given or served for all purposes when delivered personally or, if mailed, on the third (3rd) day after deposit in the United States mail, postage and charges prepaid for first-class mail, not including the day of deposit. 15.2 Successors and Assigns. This Agreement shall be binding upon the parties hereto and their respective executors, administrators, successors and assigns. 15.3 Governing Law. This Agreement and all amendments hereto shall be governed by the laws of the State of Indiana. 15.4 Amendment. Except as otherwise herein limited or provided, this Agreement may be amended at any time or from time to time only by the vote or written consent of the General Partner and those Limited Partners holding at least a majority of the Units then outstanding; provided, however, that in no event shall any provision of this Agreement be amended to change, without full and adequate consideration therefor, the participation in profits, losses or distributions of any Partner. 38 15.5 Entire Agreement. This Agreement contains the entire understanding among the parties with respect to the subject matter hereof and supersedes any prior understandings and agreements between them with respect thereto. 15.6 Titles and Captions. Paragraph titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference purposes and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provisions thereof. 15.7 Counterparts. This Agreement may be executed in several counterparts and all so executed counterparts shall constitute one Agreement, binding on all the parties hereto, notwithstanding that all the parties are not signatories to the original or the same counterpart. 15.8 Waiver. No breach of any provision hereof shall be waived unless in a writing signed by all the non-breaching Partners. Waiver of any one breach shall not be deemed to constitute a waiver of any other breach of the same or any other of the provisions hereof. 15.9 Severability. In the event that any provision of this Agreement, in whole or in part (or the application of any provision to a specific situation), is held to be invalid or unenforceable by the final judgment of a court of competent jurisdiction after appeal or the time for appeal has expired, such unenforceability shall be limited to such specific provision or portion thereof (or to such situation), and this Agreement shall be construed and applied in such manner as to minimize such unenforceability. This Agreement shall otherwise remain in full force and effect. 15.10 Creditors None of the provisions of this Agreement shall be for the benefit of or enforceable by any of the creditors of the Partnership or the Partners. 15.11 Remedies The rights and remedies of the Partners hereunder shall not be mutually exclusive, and the exercise by any Partner of any right to which he or it is entitled shall not preclude the exercise of any other right he or it may have. 39 15.12 Authority. Each individual executing this Agreement on behalf of a partnership, corporation, pension plan or other entity warrants that he is authorized to do so and that this Agreement will constitute the legally binding obligation of the entity which he represents. 15.13 Attorneys' Fees. In the event of any litigation between the parties to enforce any provision of this Agreement or otherwise with respect to the subject matter hereof, the party who does not prevail shall pay to the prevailing party all costs and expenses, including reasonable attorneys* fees, incurred by the prevailing party. 15.14 Pronouns. All pronouns and any variations thereof shall be deemed to refer to masculine, feminine, neuter, singular or plural, except where the context of the Agreement clearly indicates otherwise. 40 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. GENERAL PARTNER: INITIAL LIMITED PARTNER: AMERICAN HEALTH SERVICES CORP., a Delaware corporation /s/ Marilyn U. MacNiven-Young ------------------------------- Marilyn U. MacNiven-Young By: /s/ Thomas V. Croal --------------------------- Thomas V. Croal Vice President and Chief Financial Officer [APPROVED AND FILED SEAL] AMENDMENT TO THE CERTIFICATE OF LIMITED PARTNERSHIP OF MRI ASSOCIATES. L.P. THE UNDERSIGNED, American Health Services Corp., a Delaware corporation qualified to do business in the state of Indiana ("General Partner"), in accordance with the provisions of Section 22-16-3-3 of the Indiana statutes, hereby adopts the following amendment to the certificate of Limited Partnership of MRI Associates, L.P., as filed with and approved by the office of the Secretary of State on February 4, 1992. 1. The name of the Limited Partnership is MRI Associates, L.P. 2. Pursuant to paragraph 3.8 Of the Agreement of Limited Partnership attached and incorporated by reference to the Certificate of Limited Partnership, the Initial Limited Partner, Marilyn U. MacNiven-Young, withdraws from the Partnership as a result of certain Limited Partners being admitted to the Partnership pursuant to the closing of the Offering on April 24, 1992. IN WITNESS WHEREOF, the undersigned General Partner has executed the foregoing amendment to the Certificate of Limited Partnership as of this 25th day of May, 1993. GENERAL PARTNER: AMERICAN HEALTH SERVICES CORP., a Delaware corporation By: /s/ THOMAS V. CROAL --------------------------- Thomas V. Croal, Vice President and Chief Financial Officer EX-3.19 23 y55701ex3-19.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.19 ARTICLES OF INCORPORATION OF MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. I, the undersigned natural person of the age of eighteen (18) years or more, acting as incorporator under the Texas Business Corporation Act, do hereby adopt the following Articles of Incorporation for such corporation. ARTICLE I The name of the corporation is MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. ARTICLE II The period of duration of the corporation is perpetual. ARTICLE III The corporation is organized for the purpose of transacting any and all lawful business for which corporations may be organized under the Texas Business Corporation Act. ARTICLE IV The aggregate number of shares which the corporation shall have authority to issue is 1,000 shares of common stock of the par value of $.0l each. ARTICLE V No shareholder of the corporation shall have the right of cumulative voting at any election of directors or upon any other matter. ARTICLE VI Shareholders of the corporation shall have no preemptive right to acquire additional, unissued, or treasury shares of the corporation. ARTICLE VII The following provisions are inserted herein for the purpose of defining, limiting, and regulating the powers of the corporation and of the directors and of the shareholders, provided, however, that said provisions shall not be deemed exclusive of any rights or liabilities otherwise granted or imposed by the laws of the State of Texas: 1. The liability of the directors of the corporation is eliminated to fullest extent permitted by the provisions of the Texas Business Corporation Act and by the provisions of the Texas Miscellaneous Corporation Laws Act, as the same may be amended and supplemented. 2. The corporation shall, to the fullest extent permitted by the provisions of the Texas Business Corporation Act, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said Article from and against any and all of the expenses, liabilities, or other matters referred to or covered by said Article. 3. With respect to any matter for which the affirmative vote of the holders of at least a two-thirds portion of the shares entitled to vote is otherwise required by the Texas Business Corporation Act, the act of the shareholders on that matter shall be the affirmative vote of the holders of at least a majority of the shares entitled to vote on that matter, rather than the affirmative vote otherwise required by the Texas Business Corporation Act. With respect to any matter for which the affirmative vote of the holders of at least two-thirds portion of the shares of any class is otherwise required by the Texas Business Corporation Act, the act of the holders of shares of that class on that matter shall be the affirmative vote of the holders of at least a majority of the shares of that class, rather than the affirmative vote of the holders of shares of that class otherwise required by the Texas Business Corporation Act. 4. Any action required by the Texas Business Corporation Act to be taken at an annual or special meeting of shareholders, or any action which may be taken at an annual or special meeting of shareholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holder or holders of shares having not less than the minimum number of votes that would be necessary to take such action at a meeting at which the holders of all shares entitled to vote on the action were present and voted. ARTICLE VIII The corporation will not commence business until it has received from the issuance of its shares consideration of the value of One Thousand Dollars ($1,000), consisting of money, labor done, or property actually received. ARTICLE IX The address of the registered office of the corporation is 807 Brazos, Austin, Texas 78701, and the name of its initial registered agent at such address is The Prentice-Hall Corporation System, Inc. Page - 2 ARTICLE X The business and affairs of the corporation shall be managed by a board of directors (the "board of directors") composed of such number of persons as may be filed by the bylaws of the corporation. Until changed by the bylaws, the number of directors constituting the board of directors shall be three (3). The name and address of each person who shall serve as initial directors of the corporation as follows: William L. MacKnight 14850 Quorum Drive, Suite 400 Dallas, Texas 75240 Mark A. Solls 14850 Quorum Drive, Suite 400 Dallas, Texas 75240 Glenn. P. Cato 14850 Quorum Drive, Suite 400 Dallas, Texas 75240 ARTICLE XI The initial bylaws of the corporation shall be adopted by the board of directors and the power to alter, amend or repeal the bylaws or adopt new bylaws, subject to repeal or change by action of the shareholders, shall be vested in the board of directors. ARTICLE XII The name and address of the incorporator is Mark A. Solls, 14850 Quorum Drive, Suite 400, Dallas, Texas 75240. ARTICLE XIII From time to time any of the provisions of these Articles of Incorporation may be amended, altered, or repealed, and other provisions authorized by the laws of the State of Texas at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all contracts and rights at any time conferred upon the shareholders of the corporation by these Articles of Incorporation are granted subject to the provisions of this Article. Page - 3 IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of June, 1992. /s/ MARK A. SOLLS ---------------------------------- Mark A. Solls, Incorporator THE STATE OF TEXAS )( )( COUNTY OF DALLAS )( I, the undersigned, a Notary Public, do hereby certify that on this 22nd the of June, 1992, personally appeared before me Mark A. Solls, who, being by me first duly sworn, declared that he is the person who signed the foregoing document as incorporator, and that the statements contained therein are true. JANET L. IOTT /s/ JANET L. IOTT Notary Public, State of Texas ---------------------------- My Commission Expires 8-21 93 Janet L. Iott, Notary Public Page-4 EX-3.20 24 y55701ex3-20.txt BYLAWS EXHIBIT 3.20 BY-LAWS OF MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. ARTICLE I OFFICES Section 1. Registered Office. The registered office of the corporation in the State of Texas shall be located at 807 Brazos, Austin, Texas 78701. The name of the corporation's registered agent at such address shall be The Prentice-Hall Corporation System, Inc.. The registered office and/or registered agent of the corporation may be changed from time to time by action of the board of directors. Section 2. Other Offices. The corporation may also have offices at such other places, both within and without the State of Texas, as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. Place and Time of Meetings. An annual meeting of the shareholders shall be held each calendar year on such date and at such time and place as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice of such meeting. The purpose of the meeting shall be to elect Directors and to conduct such other proper business as may come before the meeting. Section 2. Special Meetings. Special meetings of shareholders may be called for any purpose and may be held at such time and place, within or without the State of Texas, as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. Such meetings may be called at any time by the board of directors or the president. Section 3. Place of Meetings. The board of directors may designate any place, either within or without the State of Texas, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal executive office of the corporation. Section 4. Notice. Whenever shareholders are required or permitted to take action at a Page 1 of 15 meeting, written or printed notice stating the place, date, time, and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each shareholder entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. All such notices shall be delivered, either personally or by mail, by or at the direction of the board of directors, the president or the secretary, and if mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the shareholder at his, her or its address as the same appears on the records of the corporation. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Section 5. Shareholders List. The officer having charge of the stock ledger of the corporation shall make, at least 10 days before every meeting of the shareholders, a complete list of the shareholders entitled to vote at such meeting arranged in alphabetical order, showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting; during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder who is present. Section 6. Quorum. The holders of a majority of the outstanding shares of capital stock, present in person or represented by proxy, shall constitute a quorum at all meetings of the shareholders, except as otherwise provided by statute or by the certificate of incorporation. If a quorum is not present, the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time and/or place. Section 7. Adjourned Meetings. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. Section 8. Vote Required. When a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation or of these by-laws a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 9. Voting Rights. Except as otherwise provided by the General Corporation Law Page 2 of 15 of the State of Texas or by the certificate of incorporation of the corporation or any amendments thereto and subject to Section 3 of Article VI hereof, every shareholder shall at every meeting of the shareholders be entitled to one vote in person or by proxy for each share of common stock held by such shareholder. Section 10. Proxies. Each shareholder entitled to vote at a meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Section 11. Action by Written Consent. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of shareholders of the corporation, or any action which may be taken at any annual or special meeting of such shareholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken and bearing the dates of signature of the shareholders who signed the consent or consents, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the state of Texas, or the corporation's principal place of business, or an officer or agent of the corporation having custody of the book or books in which proceedings of meetings of the shareholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. All consents properly delivered in accordance with this section shall be deemed to be recorded when so delivered. No written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered to the corporation as required by this section, written consents signed by the holders of a sufficient number of shares to take such corporate action are so recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those shareholders who have not consented in writing. Any action taken pursuant to such written consent or consents Of the shareholders shall have the same force and effect as if taken by the shareholders at a meeting thereof. Page 3 of 15 ARTICLE III DIRECTORS Section 1. General Powers. The business and affairs of the corporation shall be managed by or under the direction of the board of directors. Section 2. Number, Election and Term of Office. The number of directors shall be not less than two (2) nor more than seven (7). The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors and at least one director from each class of directors. The directors shall be divided into three classes as nearly equal in number as possible, with the term of office of the first class to expire at the first Annual Meeting of Shareholders held after the initial election of the directors in such class, the term of office of the second class to expire at the second Annual Meeting of Shareholders held after the initial election of the directors in such class and the term of office of the third class to expire at the third Annual Meeting of Shareholders after the initial election of the directors in such class. At each Annual Meeting of Shareholders after such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding Annual Meeting of Shareholders after their election. A nominee to be a director of the Corporation may be elected only by the affirmative vote of more than fifty percent (50%) of the Corporation's outstanding shares entitled to vote for the election of directors. Section 3. Removal and Resignation. Any director or the entire Board of Directors may be removed only for cause. Any director may resign at any time upon written notice to the Corporation. Section 4. Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding pursuant to the Corporation's Certificate of Incorporation, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the directors then in office, although less than a quorum, or by a sole remaining director. Directors chosen pursuant to any of the foregoing provisions shall hold office for a term expiring at the Annual Meeting of Shareholders at which the term of the class to which they have been elected expires and until their successors are duly elected and have qualified or until their earlier resignation or removal. Additional directorships resulting from an increase in the number of directors pursuant to Section 2 of this Article III shall be apportioned among the three terms of directors as equally as possible. No decrease in the number of directors constituting the board shall shorten the term of any incumbent director. Page 4 of l5 Section 5. Annual Meetings. An annual meeting of the Board of Directors shall be the first scheduled meeting of the Board of Directors following the annual meeting of the shareholders. The meeting shall be on such date and at such time and place as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice of such meeting. The purpose of the meeting shall be to conduct such proper business as may come before the meeting. Section 6. Other Meetings and Notice. Regular meetings, other than the annual meeting, of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the board. Special meetings of the board of directors may be called by or at the request of the president on at least 24 hours notice to each director, either personally, by telephone, by mail, or by telegraph;, in like manner and on like notice the president must call a special meeting on the written request of at least a majority of the directors. Section 7. Quorum, Required Vote and Adjournment. A majority of the total number of directors then in office shall constitute a quorum for the transaction of business, provided, that in no event shall a quorum consist of less than one third of the total number of directors established by the shareholders pursuant to Section 2 of this Article III. The vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation or these by-laws a different vote is required, in which case such express provision shall govern and control the decision of such question. Any director may authorize another person or persons to act for him or her by proxy and such proxy shall count for purposes of determining a quorum and for voting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 8. Committees. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation, which to the extent provided in such resolution or these by-laws shall have and may exercise the powers of the board of directors in the management and affairs of the corporation except as otherwise limited by law. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. Page 5 of 15 Section 9. Committee Rules. Each committee of the board of directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the board of directors designating such committee. In the event that a member and that member's alternate, if alternates are designated by the board of directors as provided in Section 8 of this Article III, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member. Section 10. Communications Equipment. Members of the board of directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting. Section 11. Waiver of Notice and Presumption of Assent. Any member of the board of directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. Section 12. Action by Written Consent. Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. ARTICLE IV OFFICERS Section 1. Number. The officers of the corporation shall be elected by the board of directors and may consist of a chairman of the board, a president, one or more vice-presidents, a secretary, a treasurer, and such other officers and assistant officers as may be deemed necessary or desirable by the board of directors. Any number of offices may be held by the same person. In its discretion, the board of directors may choose not to fill any office for any period as it may deem advisable. Page 6 of 15 Section 2. Election and Term of Office. The officers of the corporation shall be elected annually by the board of directors at its first meeting held after each annual meeting of shareholders or as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. Section 3. Removal. Any officer or agent elected by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Section 4. Vacancies. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term by the board of directors then in office. Section 5. Compensation. Compensation of all officers shall be fixed by the board of directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the corporation. Section 6. Chairman of the Board and Chief Executive Officer. The chairman of the board shall be the chief executive officer of the corporation, and shall have the powers and perform the duties incident to that position. Subject to the powers of the board of directors, he or she shall be in the general and active charge of the entire business and affairs of the corporation, and shall be its chief policy making officer. He or she shall preside at all meetings of the board of directors and shareholders and shall have such other powers and perform such other duties as may be prescribed by the board of directors or provided in these by-laws. Whenever the president is unable to serve, by reason of sickness, absence or otherwise, the chairman of the board shall perform all the duties and responsibilities and exercise all the powers of the president. Section 7. The President. The president shall, subject to the powers of the board of directors and the chairman of the board, have general charge of the business, affairs and property of the corporation, and control over its officers, agents and employees; and shall see that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. The president shall have such other powers and perform such other duties as may be prescribed by the chairman of the board or the board of directors or as may be provided in these by-laws. Page 7 of 15 Section 8. Chief Operating Officer. The chief operating officer of the corporation, subject to the powers of the board of directors, shall have general and active management of the business of the corporation; and shall see that all orders and resolutions of the board of directors are carried into effect. The chief operating officer shall have such other powers and perform such other duties as may be prescribed by the chairman of the board., the chief executive officer or the board of directors or as may be provided in these by-laws. Section 9. Vice-presidents. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the board of directors, shall, in the absence or disability of the president, act with all of the powers and be subject to all the restrictions of the president. The vice-presidents shall also perform such other duties and have such other powers as the board of directors, the chairman of the board, the president or these by-laws may, from time to time, prescribe. Section 10. The Secretary and Assistant Secretaries. The secretary shall attend all meetings of the board of directors, all meetings of the committees thereof and all meetings of the shareholders and record all the proceedings of the meetings in a book or books to be kept for that purpose. Under the president's supervision, the secretary shall give, or cause to be given, all notices required to be given by these by-laws or by law; shall have such powers and perform such duties as the board of directors, the chairman of the board, the president or these by-laws may, from time to time, prescribe; and shall have custody of the corporate seal of the corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors, the chairman of the board, the president, or secretary may, from time to time, prescribe. Section 11. The Treasurer and Assistant Treasurer. The treasurer shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation; shall deposit all monies and other valuable effects in the name and to the credit of the corporation as may be ordered by the board of directors; shall cause the funds of the corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the president and the board of directors, at its regular meeting or when the board of directors so requires, an account of the corporation; shall have such powers and perform such duties as the board of directors, the chairman of the board, the president or these by-laws may, from time to time, prescribe. If required by the board of directors, the treasurer shall give the corporation a bond (which shall be rendered every six years) in such sums and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the office of treasurer and for the restoration to the corporation, in case of death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property Page 8 of 15 of whatever kind in the possession or under the control of the treasurer belonging to the corporation. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. The assistant treasurers shall perform such other duties and have such other powers as the board of directors, the chairman of the board, the president or treasurer may, from time to time, prescribe. Section 12. Other Officers. Assistant Officers and Agents. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these by-laws, shall have such authority and perform such duties as may from time to time be prescribed by resolution of the board of directors. Section 13. Absence or Disability of Officers. In the case of the absence or disability of any officer of the corporation and of any person hereby authorized to act in such officer's place during such officer's absence or disability, the board of directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select. ARTICLE V INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS Section 1. Nature of Indemnity. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the corporation to the fullest extent which it is empowered to do so by the General Corporation Law of the State of Texas, as the same exists or may hereafter be amended against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such proceeding) and such indemnification shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 2 hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the corporation. The corporation may, by action of its board of directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers. Page 9 of 15 Section 2. Procedure for Indemnification of Directors and Officers. Any indemnification of a director or officer of the corporation under Section 1 of this Article V or advance of expenses under Section 5 of this Article V shall be made promptly, and in any event within 30 days, upon the written request of the director or officer. If a determination by the corporation that the director or officer is entitled to indemnification pursuant to this Article V is required, and the corporation fails to respond within sixty days to a written request for indemnity, the corporation shall be deemed to have approved the request. if the corporation denies a written request for indemnification or advancing of expenses, in whole or in part, or if payment in full pursuant to such request is not made within 30 days, the right to indemnification or advances as granted by this Article V shall be enforceable by the director or officer in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Texas for the corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Texas, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 3. Article Not Exclusive. The rights to indemnification and-the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article V shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation, by-law, agreement, vote of shareholders or disinterested directors or otherwise. Section 4. Insurance. The corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the corporation or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, whether or not the corporation would have the power to indemnify such person against such liability under this Article V. Page 10 of 15 Section 5. Expenses. Expenses incurred by any person described in Section 1 of this Article V in defending a proceeding shall be paid by the corporation in advance of such proceeding's final disposition upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. Section 6. Employees and Agents. Persons who are not covered by the foregoing provisions of this Article V and who are or were employees or agents of the corporation, or who are or were serving at the request of the corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the board of directors. Section 7. Contract Rights. The provisions of this Article V shall be deemed to be a contract right between the corporation and each director or officer who serves in any such capacity at any time while this Article V and the relevant provisions of the General Corporation Law of the State of Texas or other applicable law are in effect, and any repeal or modification of this Article V or any such law shall not affect any rights or obligations then existing with respect to any state of facts or proceeding then existing. Section 8. Merger or Consolidation. For purposes of this Article V, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article V with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. ARTICLE VI CERTIFICATES OF STOCK Section 1. Form. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by the chairman of the board, president or a vice-president and the secretary or an assistant secretary of the corporation, certifying the number of shares owned by such holder in the corporation. If such a certificate is countersigned (1) by a transfer agent or an assistant transfer agent other than the corporation or its employee or (2) by a registrar, other than the corporation or its employee, the signature of any such chairman of the board, president, vice-president, secretary, or assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation whether because of death, resignation or otherwise before such certificate or certificates have been Page 11 of 15 delivered by the corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation. Shares of stock of the corporation shall only be transferred on the books of the corporation by the holder of record thereof or by such holder's attorney duly authorized in writing, upon surrender to the corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization, and other matters as the corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates, and record the transaction on its books. The board of directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the corporation. Section 2. Lost Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his or her legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against the corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 3. Fixing a Record Date for Shareholder Meetings. In order that the corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the board of directors, the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be the close of business on the next day preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting provided, however, that the board of directors may fix a new record date for the adjourned meeting. Page 12 of 15 Section 4. Fixing a Record Date for Action by Written Consent. in order that the corporation may determine the shareholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors, the record date for determining shareholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by statute, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Texas, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of shareholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by statute, the record date for determining shareholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. Section 5. Fixing a Record Date for Other Purposes. In order that the corporation may determine the shareholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the shareholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such -action. If no record date is fixed, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. Section 6. Registered Shareholders. Prior to the surrender to the corporation of the certificate or certificates for a share or shares of stock with a request to record the transfer of such share or shares, the corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. Section 7. Subscriptions for Stock. Unless otherwise provided for in the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors. Any call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation. Page 13 of 15 ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created. Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders for the payment of money by or to the corporation and all notes and other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner, as shall be determined by resolution of the board of directors or a duly authorized committee thereof. Section 3. Contracts. The board of directors may authorize any officer or officers, or any agent or agents, of the corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. Section 4. Loans. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the board of directors. Section 6. Corporate Seal. The board of directors shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Texas". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Page 14 of 15 Section 7. Voting Securities Owned By Corporation. Voting securities in any other corporation held by the corporation shall be voted by the president, unless the board of directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution. Section 8. Inspection of Books and Records. Any shareholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its shareholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a shareholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the shareholder. The demand under oath shall be directed to the corporation at its registered office in the State of Texas or at its principal place of business. Section 9. Section Headings. Section headings in these by-laws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein. Section 10. Inconsistent Provisions. In the event that any provision of these by-laws is or becomes inconsistent with any provision of the certificate of incorporation, the General Corporation Law of the State of Texas or any other applicable law, the provision of these by-laws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect. ARTICLE VIII AMENDMENTS These by-laws may be altered, amended or repealed or new by-laws may be adopted by the shareholders or by the Board of Directors at any regular meeting of the shareholders or of the Board of Directors or at any special meeting of the shareholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such special meeting; provided, however, that such alteration, amendment, repeal or adoption of new by-laws shall not be effected by the shareholders by less than the affirmative vote of the holders of at least eighty percent (80%) of the outstanding shares of the Corporation entitled to vote in the election of directors, voting as one class, and any required vote of Preferred Stock. Page 15 of 15 WRITTEN CONSENT OF THE SOLE STOCKHOLDER OF MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. (a Texas corporation) IN LIEU OF A MEETING October 16, 2001 The undersigned, being the sole stockholder of Maxum Health Services of North Texas. Inc., a Texas corporation (the "Company"), pursuant to the provisions of Article 9.10(A) of the Texas Business Corporation Act, hereby consents to the taking of the following actions by written consent in lieu of a meeting and hereby consents to, adopts and approves the following resolutions and each and every action effected thereby: AMENDMENT TO THE BYLAWS WHEREAS, the sole stockholder of the Company has deemed it advisable, and in the best interests of the Company, to amend (the "Amendment") the By-Laws (the "By-Laws") of the Company to change the number of directors required to be on the board of directors of the Company; NOW, THEREFORE, BE IT RESOLVED, that the By-Laws shall be amended to restate, in its entirety, the first sentence of Article III, Section 2 to state the following: "The number of directors shall be not less than one (1) nor more than seven (7)." RESOLVED FURTHER, that the proper officers of the Company are and each of them hereby is authorized and directed, in the name and on behalf of the Company, to execute and deliver the Amendment, with such nonmaterial changes or amendments thereto as such officer or officers deem necessary or appropriate; and RESOLVED FURTHER, that all acts and things heretofore done by any such officers, or by any other employees or agents of the Company, on or prior to the date hereof, in connection with the transactions contemplated by the foregoing resolutions hereby are, in all aspects, ratified, confirmed, approved and adopted as acts on behalf of the Company. IN WITNESS WHEREOF, the undersigned sole stockholder of the Company has executed this Written Consent as of the date first above written. MAXUM HEALTH SERVICES CORP. By: /s/ MARILYN U. MacNIVEN-YOUNG ------------------------------------ Mariyln U. MacNiven-Young, Executive Vice President MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. CERTIFICATE OF SECRETARY I, Marilyn U. MacNiven-Young, do hereby certify that: (i) I am the duly elected and acting Secretary of Maxum Health Services of North Texas, Inc., a Texas corporation (the "Company"); and (ii) Amendment No. 1 to the Bylaws ("Bylaws") of the Company attached hereto as Exhibit A, constitutes part of the Bylaws of the Company as duly adopted by the Sole Stockholder of the Company on October 16, 2001. WITNESS my hand this 16th day of October, 2001. /s/ MARILYN U. MacNIVEN-YOUNG ------------------------------------------ Marilyn U. MacNiven-Young, Secretary EXHIBIT A AMENDMENT NO. 1 TO THE BY-LAWS OF MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. A TEXAS CORPORATION ADOPTED BY THE SOLE STOCKHOLDER ON OCTOBER 16, 2001 The first sentence of Article III, Section 2 of the By-laws of Maxum Health Services of North Texas, Inc. is amended in its entirety as follows: "The number of directors shall be not less than one (1) nor more than seven (7)" EX-3.21 25 y55701ex3-21.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.21 ARTICLES OF INCORPORATION OF MAXUM HEALTH SERVICES OF DALLAS, INC. Corporations Section
I, the undersigned, a natural person of the age of eighteen years or more acting as the Incorporator under the Texas Business Corporation Act, do hereby adopt the following Article of Incorporation for the Corporation: ARTICLE I The name of the Corporation is MAXUM HEALTH SERVICES OF DALLAS, INC. ARTICLE II The period of duration of the Corporation is perpetual. ARTICLE III The Corporation is organized for the purpose of transacting any and all lawful business for which corporations may be organized under the Texas Business Corporation Act. ARTICLE IV The aggregate number of shares which the Corporation shall have authority to issue is 1,000 shares of Common Stock of the par value of $.01 each. ARTICLE V No shareholder of the Corporation shall have the right of cumulative voting at any election of directors or upon any other matter. ARTICLE VI Shareholders of the Corporation shall have no preemptive right to acquire additional unissued, or treasury shares of the Corporation. ARTICLE VII The following provisions are inserted herein for the purpose of defining, limiting, and regulating the powers of the Corporation and of the directors and of the shareholders, provided, however, that said provisions shall not be deemed exclusive of any rights or liabilities otherwise granted or imposed by the laws of the State of Texas: Page - 1 1. The liability of the directors of the Corporation is eliminated to the fullest extent permitted by the provisions of the Texas Business Corporation Act and by the provisions of the Texas Miscellaneous Corporation Laws Act, as the same may be amended and supplemented. 2. The Corporation shall, to the fullest extent permitted by the provisions of the Texas Business Corporation Act, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said Article from and against any and all of the expenses, liabilities, or other matters referred to or covered by said Article. 3. With respect to any matter for which the affirmative vote of the holders of at least a two-thirds portion of the shares entitled to vote is otherwise required by the Texas Business Corporation Act, the act of the shareholders on that matter shall be the affirmative vote of the holders of at least a majority of the shares entitled to vote on the matter, rather than the affirmative vote otherwise required by the Texas Business Corporation Act. With respect to any matter for which the affirmative vote of the holders of at least two-thirds portion of the shares of any class is otherwise required by the Texas Business Corporation Act, the act of the holders of shares of that class on that matter shall be the affirmative vote of the holders of at least a majority of the shares of that class, rather than the affirmative vote of the holders of shares of that class otherwise required by the Texas Business Corporation Act. 4. Any action required by the Texas Business Corporation Act to be taken at an annual or special meeting of shareholders, or any action which may be taken at an annual or special meeting of shareholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holder or holders of shares having not less than the minimum number of votes that would be necessary to take such action at a meeting at which the holders of all shares entitled to vote on the action were present and voted. ARTICLE VIII The Corporation will not commence business until it has received from the issuance of its shares consideration of the value of One Thousand Dollars ($1,000), consisting of money, labor done, or property actually received. ARTICLE IX The address of the registered office of the Corporation is 400 N. St. Paul, Suite 1025, Dallas, Texas 75201, end the name of its initial registered agent at such address is The Prentice-Hall Corporation System, Inc. Page - 2 ARTICLE X The business and affairs of the Corporation shall be managed by a board of directors (the "board of directors") composed of such number of persons as may be filed by the bylaws of the Corporation. Until changed by the bylaws, the number of directors constituting the board of directors shall be three (3). The name and address of each person who shall serve as initial directors of the Corporation are as follows:
NAME ADDRESS ---- ------- Glenn P. Cato 14850 Quorum Drive, Suite 400 Dallas, Texas 75240 Don O. Hicks 14850 Quorum Drive, Suite 400 Dallas, Texas 75240 Joseph F. Denninger 14850 Quorum Drive, Suite 400 Dallas, Texas 75240
ARTICLE XI The initial bylaws of the Corporation shall be adopted by the board of directors and the power to alter, amend or repeal the bylaws or adopt new bylaws subject to repeal or change by action of the shareholders, shall be vested in the board of directors. ARTICLE XII The name and address of the incorporator is Glenn P. Cato, 14850 Quorum Drive, Suite 400, Dallas, Texas 75240. ARTICLE XIII From time to time any of the provisions of these Articles of Incorporation may be amended, altered, or repealed, and other provisions authorized by the laws of the State of Texas at the time in force may be added or applied in the matter and at the time prescribed by said laws and all contracts and rights at any time conferred upon the shareholders of the Corporation by these Articles of Incorporation are granted subject to the provision of this Article. Page - 3 IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of September, 1993. /s/ GLENN P. CATO ----------------------------- Glenn P. Cato, Incorporator Page - 4 FILED In the Office of the Secretary of State of Texas ASSUMED NAME CERTIFICATE OCT 09 1995 Corporations Section 1. The name of the corporation as stated in its articles of incorporation is Maxum Health Services of Dallas, Inc. 2. The assumed name under which the business or professional service is or is to be conducted or rendered is Maxum Diagnostic Center - Preston Road. 3. The state under the laws of which it was incorporated, organized or associated is Texas, and the address of its registered or similar office in that jurisdiction is 400 North St. Paul, Suite 1025, Dallas, Texas 75201. 4. The period, not to exceed 10 years, during which the assumed name will be used is October 1, 1995 until September 30, 2004. 5. The entity is a business corporation. 6. The entity's registered office in Texas, is 400 North St. Paul, Suite 1025, Dallas, Texas 75201 and the name of its registered agent at such address is CSC/Prentice Hall Corporation System. The address of the principal office is 14850 Quorum Drive, Suite 400, Dallas, Texas 75240. 7. The county where business or professional services are being or are to be conducted or rendered under such assumed name is Dallas County. /s/ DON G. HICKS ------------------------------------------ Don G. Hicks, Chief Accounting Officer Before me on this 5th day of October, 1995, personally appeared Don G. Hicks, an Officer of Maxum Health Services of Dallas, Inc. and acknowledged to me that he he executed the foregoing certificate for the purposes therein expressed. ============================== KIMBERLY BERTRAND [SEAL] MY COMMISSION EXPIRES December 1, 1997 ============================== (Notary Seal) /s/ KIMBERLY BERTRAND ------------------------------- Notary Public, State of Texas 1 FILED In the Office of the Secretary of State of Texas ASSUMED NAME CERTIFICATE OCTOBER 09 1995 Corporations Section 1. The name of the corporation as stated in its articles of incorporation is Maxum Health Services of Dallas, Inc. 2. The assumed name under which the business or professional service is or is to be conducted or rendered is Maxum Diagnostic Center - Hillcrest. 3. The state under the laws of which it was incorporated, organized or associated is Texas, and the address of its registered or similar office in that jurisdiction is 400 North St. Paul, Suite 1025, Dallas, Texas 75201. 4. The period, not to exceed 10 years, during which the assumed name will be used is October 1, 1995 until September 30, 2004. 5. The entity is a business corporation. 6. The entity's registered office in Texas, is 400 North St. Paul, Suite 1025, Dallas, Texas 75201 and the name of its registered agent at such address is CSC/Prentice Hall Corporation System. The address of the principal office is 14850 Quorum Drive, Suite 400, Dallas, Texas 75240. 7. The county where business or professional services are being or are to be conducted or rendered under such assumed name is Dallas County. /s/ DON G. HICKS ------------------------------------------ Don G. Hicks, Chief Accounting Officer Before me on this 5th day of October, 1995, personally appeared Don G. Hicks, an Officer of Maxum Health Services of Dallas, Inc. and acknowledged to me that he he executed the foregoing certificate for the purposes therein expressed. ============================= KIMBERLY BERTRAND [SEAL] MY COMMISSION EXPIRES December 1, 1997 ============================= (Notary Seal) /s/ KIMBERLY BERTRAND ------------------------------- Notary Public, State of Texas 1 EX-3.22 26 y55701ex3-22.txt BYLAWS EXHIBIT 3.22 BYLAWS OF MAXUM HEALTH SERVICES OF DALLAS, INC. September 29, 1995 TABLE OF CONTENTS Page PREAMBLE 1 ARTICLE ONE: OFFICES 1.01 Registered Office and Agent.................................. 1 1.02 Other Offices................................................ 1 ARTICLE TWO: SHAREHOLDERS 2.01 Annual Meetings.............................................. 1 2.02 Special Meetings............................................. 1 2.03 Place of Meetings............................................ 2 2.04 Notice....................................................... 2 2.05 Voting List.................................................. 2 2.06 Voting of Shares............................................. 2 2.07 Quorum; Withdrawal of Quorum................................. 3 2.08 Majority Vote................................................ 3 2.09 Method of Voting; Proxies.................................... 3 2.10 Closing of Transfer Records; Record Date..................... 4 2.11 Officers Duties at Meeting................................... 4 2.12 Action Without Meeting....................................... 5 ARTICLE THREE: DIRECTORS 3.01 Management................................................... 5 3.02 Number; Election; Term; Qualification........................ 5 3.03 Change in Number............................................. 5 3.04 Removal...................................................... 6 3.05 Vacancies.................................................... 6 3.06 Place of Meetings............................................ 6 3.07 First Meeting................................................ 7 3.08 Regular Meetings............................................. 7 3.09 Special Meetings; Notice..................................... 7 3.10 Quorum; Majority Vote........................................ 7 3.11 Procedure; Minutes........................................... 7 3.12 Presumption of Assent........................................ 7 3.13 Compensation................................................. 8 3.14 Action Without Meeting....................................... 8 (i) ARTICLE FOUR: COMMITTEES 4.01 Designation.................................................. 8 4.02 Number; Qualification; Term.................................. 8 4.03 Authority.................................................... 8 4.04 Committee Changes............................................ 10 4.05 Regular Meetings............................................. 10 4.06 Special Meetings............................................. 10 4.07 Quorum; Majority Vote........................................ 10 4.08 Minutes...................................................... 10 4.09 Compensation................................................. 10 4.10 Responsibility............................................... 10 ARTICLE FIVE: GENERAL PROVISIONS RELATING TO MEETINGS 5.01 Notice....................................................... 11 5.02 Waiver of Notice............................................. 11 5.03 Telephone and Similar Meetings............................... 11 ARTICLE SIX: OFFICERS AND OTHER AGENTS 6.01 Number; Titles; Election; Term; Qualification................ 11 6.02 Removal...................................................... 12 6.03 Vacancies.................................................... 12 6.04 Authority.................................................... 12 6.05 Compensation................................................. 12 6.06 Chairman of the Board........................................ 12 6.07 President.................................................... 12 6.08 Vice Presidents.............................................. 13 6.09 Treasurer.................................................... 13 6.10 Assistant Treasurers......................................... 13 6.11 Secretary.................................................... 14 6.12 Assistant Secretaries........................................ 14 ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS 7.01 Certificated and Uncertificated Shares....................... 14 7.02 Certificates for Certificated Shares......................... 14 7.03 Issuance..................................................... 15 7.04 Consideration for Shares..................................... 15 7.05 Lost, Stolen, or Destroyed Certificates...................... 15 7.06 Transfer of Shares........................................... 16 7.07 Registered Shareholders...................................... 17 (ii) 7.08 Legends...................................................... 17 7.09 Regulations.................................................. 17 ARTICLE EIGHT: MISCELLANEOUS PROVISIONS 8.01 Dividends.................................................... 17 8.02 Books and Records............................................ 17 8.03 Fiscal Year.................................................. 17 8.04 Seal......................................................... 18 8.05 Attestation by the Secretary................................. 18 8.06 Resignation.................................................. 18 8.07 Securities of Other Corporations............................. 18 8.08 Amendment of Bylaws.......................................... 18 8.09 Invalid Provisions........................................... 18 8.10 Headings; Table of Contents.................................. 18 (iii) BYLAWS OF MAXUM HEALTH SERVICES OF DALLAS, INC. A Texas Corporation PREAMBLE These bylaws are subject to, and governed by, the Texas Business Corporation Act and the articles of incorporation of Maxum Health Services of Dallas, Inc. (the "Corporation"). In the event of a direct conflict between the provisions of these bylaws and the mandatory provisions of the Texas Business Corporation Act or the provisions of the articles of incorporation of the Corporation, such provisions of the Texas Business Corporation Act or the articles of incorporation of the Corporation, as the case may be, will be controlling. ARTICLE ONE: OFFICES 1.01 Registered Office and Agent. The registered office and registered agent of the Corporation shall be as designated from time to time by the appropriate filing by the Corporation in the office of the Secretary of State of Texas. 1.02 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Texas, as the board of directors may from time to time determine or the business of the Corporation may require. ARTICLE TWO: SHAREHOLDERS 2.01 Annual Meetings. An annual meeting of shareholders of the Corporation shall be held during each calendar year on such date and at such time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, if not a legal holiday in the place where the meeting is to be held, and, if a legal holiday in such place, then on the next business day following, at the time specified in the notice of the meeting. At such meeting, the shareholders shall elect directors and transact such other business as may properly be brought before the meeting. 2.02 Special Meetings. A special meeting of the shareholders may be called at any time by the president, the board of directors, or the holders of not less than ten percent of all shares entitled to vote at such meeting. Only business within the purpose or purposes described in the notice of special meeting may be conducted at such special meeting. 2.03 Place of Meetings. The annual meeting of shareholders may be held at any place within or without the State of Texas designated by the board of directors. Special meetings of shareholders may be held at any place within or without the State of Texas designated by the person or persons calling such special meeting as provided in Section 2.02 above. Meetings of shareholders shall be held at the principal office of the Corporation unless another place is designated for meetings in the manner provided herein. 2.04 Notice. Except as otherwise provided by law, written or printed notice stating the place, day, and hour of each meeting of the shareholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date of the meeting by or at the direction of the president, the secretary, or the person calling the meeting, to each shareholder of record entitled to vote at such meeting. 2.05 Voting List. At least ten days before each meeting of shareholders, the secretary shall prepare a complete list of shareholders entitled to vote at such meeting, arranged in alphabetical order, including the address of each shareholder and the number of voting shares held by each shareholder. For a period of ten days prior to such meeting, such list shall be kept on file at the registered office or principal place of business of the Corporation and shall be subject to inspection by any shareholder during usual business hours. Such list shall be produced at such meeting, and at all times during such meeting shall be subject to inspection by any shareholder. The original share transfer records shall be prima facie evidence as to who are the shareholders entitled to examine such list. 2.06 Voting of Shares. Treasury shares, shares of the Corporation's own stock owned by another corporation the majority of the voting stock of which is owned or controlled by the Corporation, and shares of the Corporation's own stock held by the Corporation in a fiduciary capacity shall not be shares entitled to vote or to be counted in determining the total number of outstanding shares. Shares standing in the name of another domestic or foreign corporation of any type or kind may be voted by such officer, agent, or proxy as the bylaws of such corporation may authorize or, in the absence of such authorization, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian, or conservator may be voted by him, either in person or by proxy, without transfer of such shares into his name so long as such shares form a part of the estate served by him and are in the possession of such estate. Shares held by a trustee may be voted by him, either in person or by proxy, only after the shares have been transferred into his name as trustee. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without transfer of such shares into his name if authority to do so is contained in the court order by which such receiver was appointed. A shareholder 2 whose shares are pledged shall be entitled to vote such shares until they have been transferred into the name of the pledgee, and thereafter, the pledgee shall be entitled to vote such shares. 2.07 Quorum; Withdrawal of Quorum. A quorum shall be present at a meeting of shareholders if the holders of a majority of the shares entitled to vote are represented at the meeting in person or by proxy, except as otherwise provided by law or the articles of incorporation. If a quorum shall not be present at any meeting of shareholders, the shareholders represented in person or by proxy at such meeting may adjourn the meeting until such time and to such place as may be determined by a vote of the holders of a majority of the shares represented in person or by proxy at that meeting. Once a quorum is present at a meeting of shareholders, the shareholders represented in person or by proxy at the meeting may conduct such business as may be properly brought before the meeting until it is adjourned, and the subsequent withdrawal from the meeting of any shareholder or the refusal of any shareholder represented in person or by proxy to vote shall not affect the presence of a quorum at the meeting. 2.08 Majority Vote. Directors of the Corporation shall be elected by a majority of the votes cast by the holders of shares entitled to vote in the election of directors of the Corporation, represented in person or by proxy at a meeting of shareholders at which a quorum is present. Except as otherwise provided by law, the articles of incorporation, or these bylaws, with respect to any matter, the affirmative vote of the holders of a majority of the Corporation's shares entitled to vote on that matter and represented in person or by proxy at a meeting at which a quorum is present shall be the act of the shareholders. 2.09 Method of Voting; Proxies. Every shareholder of record shall be entitled at every meeting of shareholders to one vote on each matter submitted to a vote, for every share standing in his name on the original share transfer records of the Corporation except to the extent that the voting rights of the shares of any class or classes are increased, limited, or denied by the articles of incorporation. Such share transfer records shall be prima facie evidence as to the identity of shareholders entitled to vote. At any meeting of shareholders, every shareholder having the right to vote may vote either in person or by a proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Each such proxy shall be filed with the secretary of the Corporation before, or at the time of, the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. If no date is stated on a proxy, such proxy shall be presumed to have been executed on the date of the meeting at which it is to be voted. Each proxy shall be revocable unless the proxy form conspicuously states that the proxy is irrevocable and the proxy is coupled with an interest. 2.10 Closing of Transfer Records; Record Date. For the purpose of determining shareholders entitled to notice of, or to vote at, any meeting of shareholders or any 3 adjournment thereof, or entitled to receive a distribution (other than a distribution involving a purchase or redemption by the Corporation of any of its own shares) or a share dividend, or in order to make a determination of shareholders for any other proper purpose (other than determining shareholders entitled to consent to action by shareholders proposed to be taken without a meeting of shareholders), the board of directors may provide that the share transfer records of the Corporation shall be closed for a stated period but not to exceed in any event sixty days. If the share transfer records are closed for the purpose of determining shareholders entitled to notice of, or to vote at, a meeting of shareholders, such records shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the share transfer records, the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than sixty days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the share transfer records are not closed and if no record date is fixed for the determination of shareholders entitled to notice of, or to vote at, a meeting of shareholders or entitled to receive a distribution (other than a distribution involving a purchase or redemption by the Corporation of any of its own shares) or a share dividend, the date on which the notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such distribution or share dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section 2.10, such determination shall apply to any adjournment thereof except where the determination has been made through the closing of the share transfer records and the stated period of closing has expired. 2.11 Officers Duties at Meetings. The president shall preside at, and the secretary shall prepare minutes of, each meeting of shareholders, and in the absence of either such officer, his duties shall be performed by some person or persons elected by the vote of the holders of a majority of the outstanding shares entitled to vote, present in person or represented by proxy. 2.12 Action Without Meeting. Any action which may be taken, or which is required by law or the articles of incorporation or bylaws of the Corporation to be taken, at any annual or special meeting of shareholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall have been signed by the holder or holders of shares having not less than the minimum number of votes that would be necessary to take such action at a meeting at which the holders of all shares entitled to vote on the action were present and voted. The signed consent or consents of shareholders shall be placed in the minute books of the Corporation. The record date for the purpose of determining shareholders entitled to consent to any action pursuant to this Section 2.12 shall be determined in accordance with Article 2.26.C of the Texas Business Corporation Act. 4 ARTICLE THREE: DIRECTORS 3.01 Management. The powers of the Corporation shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the board of directors. 3.02 Number; Election; Term; Qualification. The number of directors which shall constitute the board of directors shall be not less than one. The first board of directors shall consist of the number of directors named in the articles of incorporation. Thereafter, the number of directors which shall constitute the entire board of directors shall be determined by resolution of the board of directors at any meeting thereof or by the shareholders at any meeting thereof, but shall never be less than one. At each annual meeting of shareholders, directors shall be elected to hold office until the next annual meeting of shareholders and until their successors are elected and qualified. No director need be a shareholder, a resident of the State of Texas, or a citizen of the United States. 3.03 Changes in Number. No decrease in the number of directors constituting the entire board of directors shall have the effect of shortening the term of any incumbent director. Any directorship to be filled by reason of an increase in the number of directors may be filled by (i) the shareholders at any annual or special meeting of shareholders called for that purpose or (ii) the board of directors for a term of office continuing only until the next election of one or more directors by the shareholders; provided that the board of directors may not fill more than two such directorships during the period between any two successive annual meetings of shareholders. Notwithstanding the foregoing, whenever the holders of any class or series of shares are entitled to elect one or more directors by the provisions of the articles of incorporation, any newly created directorship(s) of such class or series to be filled by reason of an increase in the number of such directors may be filled by the affirmative vote of a majority of the directors elected by such class or series then in office or by a sole remaining director so elected or by the vote of the holders of the outstanding shares of such class or series, and such directorship(s) shall not in any case be filled by the vote of the remaining directors or by the holders of the outstanding shares of the Corporation as a whole unless otherwise provided in the articles of incorporation. 3.04 Removal. At any meeting of shareholders called expressly for that purpose, any director or the entire board of directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote on the election of directors. Notwithstanding the foregoing, whenever the holders of any class or series of shares are entitled to elect one or more directors by the provisions of the articles of incorporation, only the holders of shares of that class or series shall be entitled to vote 5 for or against the removal of any director elected by the holders of shares of that class or series. 3.05 Vacancies. Any vacancy occurring in the board of directors may be filled by (i) the shareholders at any annual or special meeting of shareholders called for that purpose or (ii) the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors. A director elected to fill a vacancy shall be elected to serve for the unexpired term of his predecessor in office. Notwithstanding the foregoing, whenever the holders of any class or series of shares are entitled to elect one or more directors by the provisions of the articles of incorporation, any vacancies in such directorship(s) may be filled by the affirmative vote of a majority of the directors elected by such class or series then in office or by a sole remaining director so elected or by the vote of the holders of the outstanding shares of such class or series, and such directorship(s) shall not in any case be filled by the vote of the remaining directors or the holders of the outstanding shares of the Corporation as a whole unless otherwise provided in the articles of incorporation. 3.06 Place of Meetings. The board of directors may hold its meetings in such place or places within or without the State of Texas as the board of directors may from time to time determine. 3.07 First Meeting. Each newly elected board of directors may hold its first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after and at the same place as the annual meeting of shareholders, and notice of such meeting shall not be necessary. 3.08 Regular Meetings. Regular meetings of the board of directors may be held without notice at such times and places as may be designated from time to time by resolution of the board of directors and communicated to all directors. 3.09 Special Meetings; Notice. Special meetings of the board of directors shall be held whenever called by the president or by any director. The person calling any special meeting shall cause notice of such special meeting, including therein the time and place of such special meeting, to be given to each director at least two days before such special meeting. Neither the business to be transacted at, nor the purpose of, any special meeting of the board of directors need be specified in the notice or waiver of notice of any special meeting. 3.10 Quorum; Majority Vote. At all meetings of the board of directors, a majority of the number of directors fixed in the manner provided in these bylaws shall constitute a quorum for the transaction of business. If a quorum is not present at a meeting, a majority of the directors present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. The 6 act of a majority of the directors present at a meeting at which a quorum is in attendance shall be the act of the board of directors, unless the act of a greater number is required by law, the articles of incorporation, or these bylaws. 3.11 Procedure; Minutes. At meetings of the board of directors, business shall be transacted in such order as the board of directors may determine from time to time. The board of directors shall appoint at each meeting a person to preside at the meeting and a person to act as secretary of the meeting. The secretary of the meeting shall prepare minutes of the meeting which shall be delivered to the secretary of the Corporation for placement in the minute books of the Corporation. 3.12 Presumption of Assent. A director of the Corporation who is present at any meeting of the board of directors at which action on any matter is taken shall be presumed to have assented to the action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward any dissent by certified or registered mail to the secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. 3.13 Compensation. Directors, in their capacity as directors, may receive, by resolution of the board of directors, a fixed sum and expenses of attendance, if any, for attending meetings of the board of directors or a stated salary. No director shall be precluded from serving the Corporation in any other capacity or receiving compensation therefor. 3.14 Action Without Meeting. Any action which may be taken, or which is required by law, the articles of incorporation, or these bylaws to be taken, at a meeting of the board of directors or any committee may be taken without a meeting if a consent in writing, setting forth the action so taken, shall have been signed by all of the members of the board of directors or committee, as the case may be, and such consent shall have the same force and effect, as of the date stated therein, as a unanimous vote of such members of the board of directors or committee, as the case may be, and may be stated as such in any document or instrument filed with the Secretary of State of Texas or in any certificate or other document delivered to any person. The consent may be in one or more counterparts so long as each director or committee member signs one of the counterparts. The signed consent shall be placed in the minute books of the Corporation. ARTICLE FOUR: COMMITTEES 7 4.01 Designation. The board of directors may, by resolution adopted by a majority of the entire board of directors, designate one or more committees. 4.02 Number; qualification; Term. The board of directors, by resolution adopted by a majority of the entire board of directors, shall designate one or more of its members as members of any committee and may designate one or more of its members as alternate members of any committee, who may, subject to any limitations imposed by the board of directors, replace absent or disqualified members at any meeting of that committee. The number of committee members may be increased or decreased from time to time by resolution adopted by a majority of the entire board of directors. Each committee member shall serve as such until the earliest of (i) the expiration of his term as director, (ii) his resignation as a committee member or as a director, or (iii) his removal, as a committee member or as a director. 4.03 Authority. Each committee, to the extent expressly provided in the resolution establishing such committee, shall have and may exercise all of the authority of the board of directors, including, without limitation, the authority to authorize a distribution and to authorize the issuance of shares of the Corporation. Notwithstanding the foregoing, however, no committee shall have the authority of the board of directors in reference to: (a) amending the articles of incorporation, except that a committee may, to the extent provided in the resolution designating that committee, exercise the authority of the board of directors vested in it in accordance with Article 2.13 of the Texas Business Corporation Act; (b) proposing a reduction of the stated capital of the Corporation in the manner permitted by Article 4.12 of the Texas Business Corporation Act; (c) approving a plan of merger or share exchange of the Corporation; (d) recommending to the shareholders the sale, lease, or exchange of all or substantially all of the property and assets of the Corporation otherwise than in the usual and regular course of its business; (e) recommending to the shareholders a voluntary dissolution of the Corporation or a revocation thereof; (f) amending, altering, or repealing these bylaws or adopting new bylaws of the Corporation; (g) filling vacancies in the board of directors; 8 (h) filling vacancies in, or designating alternate members of, any committee; (i) filling any directorship to be filled by reason of an increase in the number of directors; (j) electing or removing officers of the Corporation or members or alternate members of any committee; (k) fixing the compensation of any member or alternate member of any committee; or (l) altering or repealing any resolution of the board of directors that by its terms provides that it shall not be amendable or repealable. 4.04 Committee Changes. The board of directors shall have the power at any time to fill vacancies in, to change the membership of, and to discharge any committee. 4.05 Regular Meetings. Regular meetings of any committee may be held without notice at such time and place as may be designated from time to time by the committee and communicated to all members thereof. 4.06 Special Meetings. Special meetings of any committee may be held whenever called by any committee member. The committee member calling any special meeting shall cause notice of such special meeting, including therein the time and place of such special meeting, to be given to each committee member at least two days before such special meeting. Neither the business to be transacted at, nor the purpose of, any special meeting of any committee need be specified in the notice or waiver of notice of any special meeting. 4.07 Quorum; Majority Vote. At meetings of any committee, a majority of the number of members designated by the board of directors shall constitute a quorum for the transaction of business. If a quorum is not present at a meeting of any committee, a majority of the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. The act of a majority of the members present at any meeting at which a quorum is in attendance shall be the act of a committee, unless the act of a greater number is required by law, the articles of incorporation, or these bylaws. 4.08 Minutes. Each committee shall cause minutes of its proceedings to be prepared and shall report the same to the board of directors upon the request of the board 9 of directors. The minutes of the proceedings of each committee shall be delivered to the secretary of the Corporation for placement in the minute books of the Corporation. 4.09 Compensation. Committee members may, by resolution of the board of directors, be allowed a fixed sum and expenses of attendance, if any, for attending any committee meetings or a stated salary. 4.10 Responsibility. The designation of any committee and the delegation of authority to it shall not operate to relieve the board of directors or any director of any responsibility imposed upon it or such director by law. ARTICLE FIVE: GENERAL PROVISIONS RELATING TO MEETINGS 5.01 Notice. Whenever by law, the articles of incorporation, or these bylaws, notice is required to be given to any committee member, director, or shareholder and no provision is made as to how such notice shall be given, it shall be construed to mean that any such notice may be given (a) in person, (b) in writing, by mail, postage prepaid, addressed to such committee member, director, or shareholder at his address as it appears on the books of the Corporation or, in the case of a shareholder, the share transfer records of the Corporation, or (c) by any other method permitted by law. Any notice required or permitted to be given by mail shall be deemed to be delivered and given at the time when the same is deposited in the United States mail, postage prepaid, and addressed as aforesaid. 5.02 Waiver of Notice. Whenever by law, the articles of incorporation, or these bylaws, any notice is required to be given to any committee member, shareholder, or director of the Corporation, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time notice should have been given, shall be equivalent to the giving of such notice. Attendance of a committee member, shareholder, or director at a meeting shall constitute a waiver of notice of such meeting, except where such person attends for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. 5.03 Telephone and Similar Meetings. Shareholders, directors, or committee members may participate in and hold a meeting by means of a conference telephone or similar communications equipment by means of which persons participating in the meeting can hear each other. Participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. 10 11 ARTICLE SIX: OFFICERS AND OTHER AGENTS 6.01 Number; Titles; Election; Term; Qualification. The officers of the Corporation shall be a president, one or more vice presidents (and, in the case of each vice president, with such descriptive title, if any, as the board of directors shall determine), a secretary, and a treasurer. The Corporation may also have a chairman of the board, one or more assistant treasurers, one or more assistant secretaries, and such other officers and such agents as the board of directors may from time to time elect or appoint. The board of directors shall elect a president, vice president, treasurer, and secretary at its first meeting at which a quorum shall be present after the annual meeting of shareholders or whenever a vacancy exists. The board of directors then, or from time to time, may also elect or appoint one or more other officers or agents as it shall deem advisable. Each officer and agent shall hold office for the term for which he is elected or appointed and until his successor has been elected or appointed and qualified. Any person may hold any number of offices. No officer or agent need be a shareholder, a director, a resident of the State of Texas, or a citizen of the United States. 6.02 Removal. Any officer or agent elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the best interest of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. 6.03 Vacancies. Any vacancy occurring in any office of the Corporation may be filled by the board of directors. 6.04 Authority. Officers shall have such authority and perform such duties in the management of the Corporation as are provided in these bylaws or as may be determined by resolution of the board of directors not inconsistent with these bylaws. 6.05 Compensation. The compensation, if any, of officers and agents shall be fixed from time to time by the board of directors; provided, that the board of directors may by resolution delegate to any one or more officers of the Corporation the authority to fix such compensation. 6.06 Chairman of the Board. The chairman of the board shall have such powers and duties as may be prescribed by the board of directors. 6.07 President. Unless and to the extent that such powers and duties are expressly delegated to a chairman of the board by the board of directors, the president shall be the chief executive officer of the Corporation and, subject to the supervision of the board of directors, shall have general management and control of the business and 12 property of the Corporation in the ordinary course of its business with all such powers with respect to such general management and control as may be reasonably incident to such responsibilities, including, but not limited to, the power to employ, discharge, or suspend employees and agents of the Corporation, to fix the compensation of employees and agents, and to suspend, with or without cause, any officer of the Corporation pending final action by the board of directors with respect to continued suspension, removal, or reinstatement of such officer. The president may, without limitation, agree upon and execute all division and transfer orders, bonds, contracts, and other obligations in the name of the Corporation. 6.08 Vice Presidents. Each vice president shall have such powers and duties as may be prescribed by the board of directors or as may be delegated from time to time by the president and (in the order as designated by the board of directors, or in the absence of such designation, as determined by the length of time each has held the office of vice president continuously) shall exercise the powers of the president during that officer's absence or inability to act. As between the Corporation and third parties, any action taken by a vice president in the performance of the duties of the president shall be conclusive evidence of the absence or inability to act of the president at the time such action was taken. 6.09 Treasurer. The treasurer shall have custody of the Corporation's funds and securities, shall keep full and accurate accounts of receipts and disbursements, and shall deposit all moneys and valuable effects in the name and to the credit of the Corporation in such depository or depositories as may be designated by the board of directors. The treasurer shall audit all payrolls and vouchers of the Corporation, receive, audit, and consolidate all operating and financial statements of the Corporation and its various departments, shall supervise the accounting and auditing practices of the Corporation, and shall have charge of matters relating to taxation. Additionally, the treasurer shall have the power to endorse for deposit, collection, or otherwise all checks, drafts, notes, bills of exchange, and other commercial paper payable to the Corporation and to give proper receipts and discharges for all payments to the Corporation. The treasurer shall perform such other duties as may be prescribed by the board of directors or as may be delegated from time to time by the president. 6.10 Assistant Treasurers. Each assistant treasurer shall have such powers and duties as may be prescribed by the board of directors or as may be delegated from time to time by the president. The assistant treasurers (in the order as designated by the board of directors or, in the absence of such designation, as determined by the length of time each has held the office of assistant treasurer continuously) shall exercise the powers of the treasurer during that officer's absence or inability to act. As between the Corporation and third parties, any action taken by an assistant treasurer in the performance of the duties of the treasurer shall be conclusive evidence of the absence or inability to act of the treasurer at the time such action was taken. 13 6.11 Secretary. The secretary shall maintain minutes of all meetings of the board of directors, of any committee, and of the shareholders or consents in lieu of such minutes in the Corporation's minute books, and shall cause notice of such meetings to be given when requested by any person authorized to call such meetings. The secretary may sign with the president, in the name of the Corporation, all contracts of the Corporation and affix the seal of the Corporation thereto. The secretary shall have charge of the certificate books, share transfer records, stock ledgers, and such other stock books and papers as the board of directors may direct, all of which shall at all reasonable times be open to inspection by any director at the office of the Corporation during business hours. The secretary shall perform such other duties as may be prescribed by the board of directors or as may be delegated from time to time by the president. 6.12 Assistant Secretaries. Each assistant secretary shall have such powers and duties as may be prescribed by the board of directors or as may be delegated from time to time by the president. The assistant secretaries (in the order designated by the board of directors or, in the absence of such designation, as determined by the length of time each has held the office of assistant secretary continuously) shall exercise the powers of the secretary during that officer's absence or inability to act. As between the Corporation and third parties, any action taken by an assistant secretary in the performance of the duties of the secretary shall be conclusive evidence of the absence or inability to act of the secretary at the time such action was taken. ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS 7.01 Certificated and Uncertificated Shares. The shares of the Corporation may be either certificated shares or uncertificated shares. As used herein, the term "certificated shares" means shares represented by instruments in bearer or registered form, and the term "uncertificated shares" means shares not represented by instruments and the transfers of which are registered upon books maintained for that purpose by or on behalf of the Corporation. 7.02 Certificates for Certificated Shares. The certificates representing certificated shares of stock of the Corporation shall be in such form as shall be approved by the board of directors in conformity with law. The certificates shall be consecutively numbered, shall be entered as they are issued in the books of the Corporation or in the records of the Corporation's designated transfer agent, if any, and shall state upon the face thereof: (a) that the Corporation is organized under the laws of the State of Texas; (b) the name of the person to whom issued; (c) the number and class of shares and the designation of the series, if any, which such certificate represents; (d) the par value of each share represented by such certificate, or a statement that the shares are without par 14 value; and (e) such other matters as may be required by law. The certificates shall be signed by the president or any vice president and also by the secretary, an assistant secretary, or any other officer; however, the signatures of any of such officers may be facsimiles. The certificates may be sealed with the seal of the Corporation or a facsimile thereof. 7.03 Issuance. Shares with or without par value may be issued for such consideration and to such persons as the board of directors may from time to time determine, except in the case of shares with par value the consideration must be at least equal to the par value of such shares. Shares may not be issued until the full amount of the consideration has been paid. After the issuance of uncertificated shares, the Corporation or the transfer agent of the Corporation shall send to the registered owner of such uncertificated shares a written notice containing the information required to be stated on certificates representing shares of stock as set forth in Section 7.02 above and such additional information as may be required by Section 8.408 of the Texas Uniform Commercial Code as currently in effect and as the same may be amended from time to time hereafter. 7.04 Consideration for Shares. The consideration for the issuance of shares shall consist of money paid, labor done (including services actually performed for the Corporation), or property (tangible or intangible) actually received. Neither promissory notes nor the promise of future services shall constitute payment or part payment for the issuance of shares. In the absence of fraud in the transaction, the judgment of the board of directors as to the value of consideration received shall be conclusive. When consideration, fixed as provided by law, has been paid, the shares shall be deemed to have been issued and shall be considered fully paid and nonassessable. The consideration received for shares shall be allocated by the board of directors, in accordance with law, between stated capital and surplus accounts. 7.05 Lost, Stolen, or Destroyed Certificates. The Corporation shall issue a new certificate or certificates in place of any certificate representing shares previously issued if the registered owner of the certificate: (a) Claim. Makes proof by affidavit, in form and substance satisfactory to the board of directors or any proper officer, that a previously issued certificate representing shares has been lost, destroyed, or stolen; (b) Timely Request. Requests the issuance of a new certificate before the Corporation has notice that the certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim; 15 (c) Bond. If required by the board of directors or any proper officer, in its or such officer's discretion, delivers to the Corporation a bond or indemnity agreement in such form, with such surety or sureties, and with such fixed or open penalty, as the board of directors or such officer may direct, in its or such officer's discretion, to indemnify the Corporation (and its transfer agent and registrar, if any) against any claim that may be made on account of the alleged loss, destruction, or theft of the certificate; and (d) Other Requirements. Satisfies any other reasonable requirements imposed by the board of directors. 7.06 Transfer of Shares. Shares of stock of the Corporation shall be transferable only on the books of the Corporation by the shareholders thereof in person or by their duly authorized attorneys or legal representatives. With respect to certificated shares, upon surrender to the Corporation or the transfer agent of the Corporation for transfer of a certificate representing shares duly endorsed and accompanied by any reasonable assurances that such endorsements are genuine and effective as the Corporation may require and after compliance with any applicable law relating to the collection of taxes, the Corporation or its transfer agent shall, if it has no notice of an adverse claim or if it has discharged any duty with respect to any adverse claim, issue one or more new certificates to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. With respect to uncertificated shares, upon delivery to the Corporation or the transfer agent of the Corporation of an instruction originated by an appropriate person (as prescribed by Section 8.308 of the Texas Uniform Commercial Code as currently in effect and as the same may be amended from time to time hereafter) and accompanied by any reasonable assurances that such instruction is genuine and effective as the Corporation may require and after compliance with any applicable law relating to the collection of taxes, the Corporation or its transfer agent shall, if it has no notice of an adverse claim or has discharged any duty with respect to any adverse claim, record the transaction upon its books, and shall send to the new registered owner of such uncertificated shares, and, if the shares have been transferred subject to a registered pledge, to the registered pledge, a written notice containing the information required to be stated on certificates representing shares of stock set forth in Section 7.02 above and such additional information as may be required by Section 8.408 of the Texas Uniform Commercial Code as currently in effect and as the same may be amended from time to time hereafter. 7.07 Registered Shareholders. The Corporation shall be entitled to treat the shareholder of record as the shareholder in fact of any shares and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have actual or other notice thereof, except as otherwise provided by law. 16 7.08 Legends. The board of directors shall cause an appropriate legend to be placed on certificates representing shares of stock as may be deemed necessary or desirable by the board of directors in order for the Corporation to comply with applicable federal or state securities or other laws. 7.09 Regulations. The board of directors shall have the power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer, registration, or replacement of certificates representing shares of stock of the Corporation. ARTICLE EIGHT: MISCELLANEOUS PROVISIONS 8.01 Dividends. Subject to provisions of applicable statutes and the articles of incorporation, dividends may be declared by and at the discretion of the board of directors at any meeting and may be paid in cash, in property, or in shares of stock of the Corporation. 8.02 Books and Records. The Corporation shall keep books and records of account and shall keep minutes of the proceedings of its shareholders, the board of directors, and each committee of the board of directors. The Corporation shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of the original issuance of shares issued by the Corporation and a record of each transfer of those shares that have been presented to the Corporation for registration of transfer, giving the names and addresses of all past and current shareholders and the number and class of the shares held by each of such shareholders. 8.03 Fiscal Year. The fiscal year of the Corporation shall be fixed by the board of directors; provided, that if such fiscal year is not fixed by the board of directors and the board of directors does not defer its determination of the fiscal year, the fiscal year shall be the calendar year. 8.04 Seal. The seal, if any, of the Corporation shall be in such form as may be approved from time to time by the board of directors. If the board of directors approves a seal, the affixation of such seal shall not be required to create a valid and binding obligation against the Corporation. 8.05 Attestation by the Secretary. With respect to any deed, deed of trust, mortgage, or other instrument executed by the Corporation through its duly authorized officer or officers, the attestation to such execution by the secretary of the Corporation shall not be necessary to constitute such deed, deed of trust, mortgage, or other 17 instrument a valid and binding obligation against the Corporation unless the resolutions, if any, of the board of directors authorizing such execution expressly state that such attestation is necessary. 8.06 Resignation. Any director, committee member, officer, or agent may resign by so stating at any meeting of the board of directors or by giving written notice to the board of directors, the president, or the secretary. Such resignation shall take effect at the time specified in the statement made at the board of directors' meeting or in the written notice, but in no event may the effective time of such resignation be prior to the time such statement is made or such notice is given. If no effective time is specified in the resignation, the resignation shall be effective immediately. Unless a resignation specifies otherwise, it shall be effective without being accepted. 8.07 Securities of Other Corporations. The president or any vice president of the Corporation shall have the power and authority to transfer, endorse for transfer, vote, consent, or take any other action with respect to any securities of another issuer which may be held or owned by the Corporation and to make, execute, and deliver any waiver, proxy, or consent with respect to any such securities. 8.08 Amendment of Bylaws. The power to amend or repeal these bylaws or to adopt new bylaws is vested in the board of directors, but is subject to the right of the shareholders to amend or repeal these bylaws or to adopt new bylaws. 8.09 Invalid Provisions. If any part of these bylaws is held invalid or inoperative for any reason, the remaining parts, so far as is possible and reasonable, shall remain valid and operative. 8.10 Headings; Table of Contents. The headings and table of contents used in these bylaws are for convenience only and do not constitute matter to be construed in the interpretation of these bylaws. The undersigned, the secretary of the Corporation, hereby certifies that the foregoing bylaws were adopted by the board of directors of the Corporation as of September 29, 1995. /s/ Don G. Hicks ---------------------------- Don G. Hicks, Secretary 18 EX-3.23 27 y55701ex3-23.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.23 ARTICLES OF INCORPORATION OF NDDC, INC. I, the undersigned natural person of the age of eighteen (18) years or more, acting as incorporator under the Texas Business Corporation Act, do hereby adopt the following Articles of Incorporation for such corporation. ARTICLE I The name of the corporation is NDDC, Inc. ARTICLE II The period of duration of the corporation is perpetual. ARTICLE III The corporation is organized for the purpose of transacting any and all lawful business for which corporations may be organized under the Texas Business Corporation Act. ARTICLE IV The aggregate number of shares which the corporation shall have authority to issue is 1,000 shares of common stock of the par value of $.01 each. ARTICLE V No shareholder of the corporation shall have the right of cumulative voting at any election of directors or upon any other matter. ARTICLE VI Shareholders of the corporation shall have no preemptive right to acquire additional, unissued, or treasury shares of the corporation. ARTICLE VII The following provisions are inserted herein for the purpose of defining, limiting, and regulating the powers of the corporation and of the directors and of the shareholders, provided, however, that said provisions shall not be deemed exclusive of any rights or liabilities otherwise granted or imposed by the laws of the State of Texas: 1. The liability of the directors of the corporation is eliminated to the fullest extent permitted by the provisions of the Texas Business Corporation Act and by the provisions of the Texas Miscellaneous Corporation Laws Act, as the same may be amended and supplemented. 2. The corporation shall, to the fullest extent permitted by the provisions of the Texas Business Corporation Act, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said Article from and against any and all of the expenses, liabilities, or other matters referred to or covered by said Article. 3. With respect to any matter for which the affirmative vote of the holders of at least a two-thirds portion of the shares entitled to vote is otherwise required by the Texas Business Corporation Act, the act of the shareholders on that matter shall be the affirmative vote of the holders of at least a majority of the shares entitled to vote on that matter, rather than the affirmative vote otherwise required by the Texas Business Corporation Act. With respect to any matter for which the affirmative vote of the holders of at least two-thirds portion of the shares of any class is otherwise required by the Texas Business Corporation Act, the act of the holders of shares of that class on that matter shall be the affirmative vote of the holders of at least a majority of the shares of that class, rather than the affirmative vote of the holders of shares of that class otherwise required by the Texas Business Corporation Act. 4. Any action required by the Texas Business Corporation Act to be taken at an annual or special meeting of shareholders, or any action which may be taken at an annual or special meeting of shareholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holder or holders of shares having not less than the minimum number of votes that would be necessary to take such action at a meeting at which the holders of all shares entitled to vote on the action were present and voted. ARTICLE VIII The corporation will not commence business until it has received from the issuance of its shares consideration of the value of One Thousand Dollars ($1,000), consisting of money, labor done, or property actually received. ARTICLE IX The address of the registered office of the corporation is 807 Brazos, Austin, Texas 78701, and the name of its initial registered agent at such address is The Prentice-Hall Corporation System, Inc. Page - 2 ARTICLE X The business and affairs of the corporation shall be managed by a board of directors (the "board of directors") composed of such number of persons as may be filed by the bylaws of the corporation. Until changed by the bylaws, the number of directors constituting the board of directors shall be three (3). The name and address of each person who shall serve as initial directors of the corporation as follows: William L. MacKnight 14850 Quorum Drive, Suite 400 Dallas, Texas 75240 Mark A. Solls 14850 Quorum Drive, Suite 400 Dallas, Texas 75240 Glenn P. Cato 14850 Quorum Drive, Suite 400 Dallas, Texas 75240 ARTICLE XI The initial bylaws of the corporation shall be adopted by the board of directors and the power to alter, amend or repeal the bylaws or adopt new bylaws, subject to repeal or change by action of the shareholders, shall be vested in the board of directors. ARTICLE XII The name and address of the incorporator is Mark A. Solls, 14850 Quorum Drive, Suite 400, Dallas, Texas 75240. ARTICLE XIII From time to time any of the provisions of these Articles of Incorporation may be amended, altered, or repealed, and other provisions authorized by the laws of the State of Texas at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all contracts and rights at any time conferred upon the shareholders of the corporation by these Articles of Incorporation are granted subject to the provisions of this Article. Page - 3 IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of December, 1991. /s/ MARK A. SOLLS ----------------------------------- Mark A. Solls, Incorporator THE STATE OF TEXAS )( )( COUNTY OF DALLAS )( I, the undersigned, a Notary Public, do hereby certify that on this 16th day of December, 1991, personally appeared before me Mark A. Solls, who, being by me first duly sworn, declared that he is the person who signed the foregoing document as incorporator, and that the statements contained therein are true. /s/ JANET L. IOTT ----------------------------------- Janet L. Iott, Notary Public ooooooooooooooooooooooooooooooooooooooooooooooooooo o NOTARY PUBLIC JANET L. IOTT o o [STAR] Notary Public, State of Texas o o STATE OF TEXAS My Commission Expires 8-21-93 o ooooooooooooooooooooooooooooooooooooooooooooooooooo Page - 4 FILED In the Office of the Secretary of State of Texas JAN 13 1992 Corporations Section ASSUMED NAME CERTIFICATE FOR NDDC, INC. 1. The name of the incorporated business as stated in its Articles of Incorporation or comparable document is NDDC, Inc. 2. The assumed name under which the business or professional service is to be conducted or rendered is North Dallas Diagnostic Center. 3. The state under the laws of which it was incorporated is Texas and the address of its registered or similar office in that jurisdiction is c/o The Prentice-Hall Corporation System, Inc., 807 Brazos, Austin, Texas 78701. 4. The period, not to exceed ten years, during which the assumed name will be used is ten years. 5. The corporation is a business corporation. 6. The address of the registered office of the Corporation is 807 Brazos, Austin, Texas 78701 and the name of its registered agent at such address is The Prentice-Hall Corporation System, Inc. 7. The county where the business or professional service is being or is to be conducted or rendered under such assumed name is all counties. NDDC, INC. By: /s/ MARK A. SOLLS ------------------------------------ Name: MARK A. SOLLS ---------------------------------- Title: SENIOR VICE PRESIDENT --------------------------------- STATE OF TEXAS SS. SS. COUNTY OF DALLAS SS. Before me on this 31st day of December, 1991, personally appeared Mark A. Solls and acknowledged to me that he executed the foregoing certificate for the purposes therein expressed. [SEAL] /s/ VICKI BATES --------------------------------- Notary Public in and for the State of Texas My Commission Expires: 4/24/93 - ---------------------------- FILED In the Office of the Secretary of State of Texas SEP 16 1992 Corporations Section ASSUMED NAME CERTIFICATE FOR AN INCORPORATED BUSINESS OR PROFESSION 1. The name of the incorporated business or profession as stated in its Articles of Incorporation or comparable document is NDDC, Inc. . ------------------- 2. The assumed name under which the business or professional service is to be conducted or rendered is Maxum Diagnostic Center . ------------------------------------------- 3 The state, country, or other jurisdiction under the laws of which it was incorporated or associated is Texas , and the address of --------------------- its registered or similar office in that jurisdiction is 807 Brazos, Austin, Texas 78701 . ----------------------------------------------------------------------- 4. The period, not to exceed 10 years, during which the assumed name will be used is 10 years -------------------- 5. The corporation is a (circle one) business corporation, non-profit corporation, professional corporation, professional association or some other type of incorporated business, professional or other association (specify) ----------------------------------------------------------------------- ----------------------------------------------------------------------- 6 If the corporation is required to maintain a registered office in Texas, the address of the registered office is 807 Brazos, Austin, Texas 78701 ------------------------------- and the name of its registered agent at such address is The Prentice-Hall Corporation System, Inc. ----------------------------------------------------------------------- 7 If the corporation is not required to or does not maintain a registered office in Texas, the office address in Texas is N/A ----------------------- and its office address elsewhere is ------------------------------------ ----------------------------------------------------------------------- 8 The county or counties where business or professional services are being or are to be conducted or rendered under such assumed name are [if applicable, use the designation "ALL"]: Dallas ----------------------------------------------------------------------- ----------------------------------------------------------------------- NDDC, INC. By: /s/ MARK A. SOLLS -------------------------------------------- Signature of officer, representative or attorney-in-fact of the corporation Mark A. Solls, Senior Vice President Before me on this 11th day of September , 19 92 , personally appeared Mark A. ------- ----------- ---- --------- Solls and acknowledged to me that he executed the foregoing certificate - ---------- ---- for the purposes therein expressed. - --------------------------------------- JANET L IOTT [SEAL] Notary Public State of Texas My Commission Expires 8 21 93 /s/ JANET L IOTT - --------------------------------------- ------------------------------------ (Notary seal) Notary Public Dallas County --------------- NOTE: A certificate executed and acknowledged by an attorney-in-fact shall include a statement that the attorney-in-fact has been duly authorized in writing by his or her principal to execute and acknowledge the same. FILED In the Office of the Secretary of State of Texas OCT 19 1992 Corporations Section STATEMENT OF CHANGE OF REGISTERED OFFICE BY REGISTERED AGENT To Secretary of State State of Texas: Pursuant to the provisions of Article 2.10-1 of the Texas Business Corporation Act, the undersigned registered agent, for the domestic and foreign corporations named on the attached list submits the following statement for the purpose of changing the registered office for such corporations in the State of Texas: 1. The names of the corporations, (hereinafter called the "corporations") to be represented by the said registered agent are See attached list ----------------- 2. The post office address at which the said registered agent has maintained the registered office for the corporations is c/o The Prentice-Hall Corporation System, Inc. 807 Brazos, Austin, Texas 78701. 3. The new post office address at which the said registered agent will hereafter maintain the registered office for the corporations is c/o The Prentice-Hall Corporation System, Inc. 400 N. St. Paul, Dallas, Texas 75201. 4. Notice of this change of address has been given in writing to each corporation named on the attached list at least 10 days prior to the date of filing of this Statement. Dated: October 19, 1992 THE PRENTICE-HALL CORPORATION SYSTEM, INC. /s/ RICHARD L. KUSHAY ---------------------------------------------- Richard L. Kushay, Assistant Vice President FILED In the Office of the Secretary of State of Texas OCT 09 1995 Corporations Section ASSUMED NAME CERTIFICATE 1. The name of the corporation as stated in its articles of incorporation is NDDC, Inc. 2. The assumed name under which the business or professional service is or is to be conducted or rendered is Maxum Diagnostic Center - Forest Lane. 3. The state under the laws of which it was incorporated is Texas, and the address of its registered or similar office in that jurisdiction is 807 Brazos, Austin, Texas 78701. 4. The period, not to exceed 10 years, during which the assumed name will be used is October 1, 1995 until September 30, 2004. 5. The entity is a business corporation. 6. The entity's registered office in Texas is 807 Brazos, Austin, Texas 78701 and the name of its registered agent at such address is CSC/Prentice Hall Corporation System, Inc. The address of the principal office is 14850 Quorum Drive, Suite 400, Dallas, Texas 75240. 7. The county where business or professional services are being or are to be conducted or rendered under such assumed name is Dallas. /s/ DON G. HICKS --------------------------------------- Don G. Hicks, Chief Accounting Officer Before me on this 5th day of October, 1995, personally appeared Don G. --- Hicks, an Officer of NDDC, Inc., and acknowledged to me that he executed the foregoing certificate for the purposes therein expressed. - --------------------------------- KIMBERLY BERTRAND [SEAL] MY COMMISSION EXPIRES DECEMBER 1, 1997 - --------------------------------- (Notary Seal) /s/ KIMBERLY BERTRAND -------------------------------- Notary Public, State of Texas 1 STATEMENT OF CHANGE OF REGISTERED OFFICE BY --------------------------- REGISTERED AGENT FILED In the Office of the Secretary of State of Texas To the Secretary of State JUL 14 1997 State of Texas Corporations Section --------------------------- Pursuant to the provisions of Article 2.10.1 of the Texas Business Corporation Act, the undersigned registered agent, for the corporation named below submits the following statement for the purpose of changing the registered office address for such corporation in the State of Texas: Charter No. See attached list 1. The name of the corporation (hereinafter called the "Corporation") represented by the said registered agent is: See attached list 2. The address at which the said registered agent has maintained the registered office for the corporation is 400 N. St. Paul Dallas, Texas 75201 3. The new address at which the said registered agent will hereafter maintain the registered office for the corporation is 800 Brazos Austin, Texas 78701 4. Notice of this change of address has been given in writing to the above corporation at least 10 days prior to the date of filing of this Statement. Dated: July 11, 1997 THE PRENTICE-HALL CORPORATION SYSTEM, INC. /s/ JOHN H. PELLETIER ------------------------------------------------- John H. Pelletier, Assistant Vice President OFFICE OF THE Corporations Section SECRETARY OF STATE [THE STATE OF TEXAS SEAL] P.O. Box 13697 Austin, Texas 78711-3697 STATEMENT OF CHANGE OF REGISTERED OFFICE OR REGISTERED AGENT OR BOTH BY A CORPORATION, LIMITED LIABILITY COMPANY OR LIMITED PARTNERSHIP FILED In the Office of the Secretary of State of Texas APR 15 1998 Corporations Section 1. The name of the entity is NDDC, INC. ---------------------------------------------------------------- The entity's charter/certificate of authority/file number is 1215244 . ----------------------------- 2. The registered office address as PRESENTLY shown in the records of the Texas secretary of state is: 800 Brazos Street, Austin, TX 78701 . -------------------------------------------------------------- 3. A.__ The address of the NEW registered office is: (Please provide street address, city, state and zip code. THE ADDRESS MUST BE IN TEXAS.) c/o C T CORPORATION SYSTEM, 350 N. St. Paul Street, Dallas, TX 75201 . ------------------------------------------------------------------------------------------ OR B.__ The registered office address will not change. 4. The name of the registered agent as PRESENTLY shown in the records of the Texas secretary of state is The Prentice-Hall Corporation System, Inc. . --------------------------------------------------------- 5. A.__ The name of the NEW registered agent is C T CORPORATION SYSTEM . -------------------------------------------- OR B.__ The registered agent will not change. 6. Following the changes shown above, the address of the registered office and the address of the office of the registered agent will continue to be identical, as required by law. 7. The changes shown above were authorized by Business Corporations may select A or B Limited Liability Companies may select D or E Non-Profit Corporations may select A, B, or C Limited Partnerships select F A X The board of directors; OR ------ B. An officer of the corporation so authorized by the board of directors, OR ------ C. The members of the corporation in whom management of the corporation is vested ------ pursuant to article 2.14C of the Texas Non-Profit Corporation Act D. Its members ------ E. Its managers ------ F. The limited partnership ------
/s/ BGD 4/2/98 ------------------------------------------ (Authorized Officer of Corporation) (Authorized Member of Manager of LLC) (General Partner of Limited Partnership) BRIAN G. DRAZBA S.V.P. OF FINANCE & CONTROLLER (TEXAS -- 2231 -- 12/28/95) EX-3.24 28 y55701ex3-24.txt BYLAWS EXHIBIT 3.24 BY-LAWS OF NDDC, INC. ARTICLE I OFFICES Section 1. Registered Office. The registered office of the corporation in the State of Texas shall be located at 807 Brazos, Austin, Texas 78701. The name of the corporation's registered agent at such address shall be The Prentice-Hall Corporation System, Inc.. The registered office and/or registered agent of the corporation may be changed from time to time by action of the board of directors. Section 2. Other Offices. The corporation may also have offices at such other places, both within and without the State of Texas, as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. Place and Time of Meetings. An annual meeting of the shareholders shall be held each calendar year on such date and at such time and place as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice of such meeting. The purpose of the meeting shall be to elect Directors and to conduct such other proper business as may come before the meeting. Section 2. Special Meetings. Special meetings of shareholders may be called for any purpose and may be held at such time and place, within or without the State of Texas, as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. Such meetings may be called at any time by the board of directors or the president. Section 3. Place of Meetings. The board of directors may designate any place, either within or without the State of Texas, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal executive office of the corporation. Section 4. Notice. Whenever shareholders are required or permitted to take action at a Page 1 of 15 meeting, written or printed notice stating the place, date, time, and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each shareholder entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. All such notices shall be delivered, either personally or by mail, by or at the direction of the board of directors, the president or the secretary, and if mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the shareholder at his, her or its address as the same appears on the records of the corporation. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Section 5. Shareholders List. The officer having charge of the stock ledger of the corporation shall make, at least 10 days before every meeting of the shareholders, a complete list of the shareholders entitled to vote at such meeting arranged in alphabetical order, showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting; during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder who is present. Section 6. Quorum. The holders of a majority of the outstanding shares of capital stock, present in person or represented by proxy, shall constitute a quorum at all meetings of the shareholders, except as otherwise provided by statute or by the certificate of incorporation. If a quorum is not present, the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time and/or place. Section 7. Adjourned Meetings. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. Section 8. Vote Required. When a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the question is one Page 2 of 15 upon which by express provisions of an applicable law or of the certificate of incorporation or of these by-laws a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 9. Voting Rights. Except as otherwise provided by the General Corporation Law of the State of Texas or by the certificate of incorporation of the corporation or any amendments thereto and subject to Section 3 of Article VI hereof, every shareholder shall at every meeting of the shareholders be entitled to one vote in person or by proxy for each share of common stock held by such shareholder. Section 10. Proxies. Each shareholder entitled to vote at a meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Section 11. Action by Written Consent. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of shareholders of the corporation, or any action which may be taken at any annual or special meeting of such shareholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken and bearing the dates of signature of the shareholders who signed the consent or consents, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the state of Texas, or the corporation's principal place of business, or an officer or agent of the corporation having custody of the book or books in which proceedings of meetings of the shareholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. All consents properly delivered in accordance with this section shall be deemed to be recorded when so delivered. No written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered to the corporation as required by this section, written consents signed by the holders of a sufficient number of shares to take such corporate action are so recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those shareholders who have not consented in writing. Any action taken pursuant to such written consent or consents Of the shareholders shall have the same force and effect as if taken by the shareholders at a meeting thereof. Page 3 of 15 ARTICLE III DIRECTORS Section 1. General Powers. The business and affairs of the corporation shall be managed by or under the direction of the board of directors. Section 2. Number, Election and Term of Office. The number of directors shall be not less than two (2) nor more than seven (7). The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors and at least one director from each class of directors. The directors shall be divided into three classes as nearly equal in number as possible, with the term of office of the first class to expire at the first Annual Meeting of Shareholders held after the initial election of the directors in such class, the term of office of the second class to expire at the second Annual Meeting of Shareholders held after the initial election of the directors in such class and the term of office of the third class to expire at the third Annual Meeting of Shareholders after the initial election of the directors in such class. At each Annual Meeting of Shareholders after such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding Annual Meeting of Shareholders after their election. A nominee to be a director of the Corporation may be elected only by the affirmative vote of more than fifty percent (50%) of the Corporation's outstanding shares entitled to vote for the election of directors. Section 3. Removal and Resignation. Any director or the entire Board of Directors may be removed only for cause. Any director may resign at any time upon written notice to the Corporation. Section 4. Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding pursuant to the Corporation's Certificate of Incorporation, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the directors then in office, although less than a quorum, or by a sole remaining director. Directors chosen pursuant to any of the foregoing provisions shall hold office for a term expiring at the Annual Meeting of Shareholders at which the term of the class to which they have been elected expires and until their successors are duly elected and have qualified or until their earlier resignation or removal. Additional directorships resulting from an increase in the number of directors pursuant to Section 2 of this Article III shall be apportioned among the three terms of directors as equally as possible. No decrease in the number of directors constituting the board shall shorten the term of any incumbent director. Section 5. Annual Meetings. An annual meeting of the Board of Directors shall be the first Page 4 of 15 scheduled meeting of the Board of Directors following the annual meeting of the shareholders. The meeting shall be on such date and at such time and place as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice of such meeting. The purpose of the meeting shall be to conduct such proper business as may come before the meeting. Section 6. Other Meetings and Notice. Regular meetings, other than the annual meeting, of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the board. Special meetings of the board of directors may be called by or at the request of the president on at least 24 hours notice to each director, either personally, by telephone, by mail, or by telegraph;, in like manner and on like notice the president must call a special meeting on the written request of at least a majority of the directors. Section 7. Quorum. Required Vote and Adjournment. A majority of the total number of directors then in office shall constitute a quorum for the transaction of business, provided, that in no event shall a quorum consist of less than one third of the total number of directors established by the shareholders pursuant to Section 2 of this Article III. The vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation or these by-laws a different vote is required, in which case such express provision shall govern and control the decision of such question. Any director may authorize another person or persons to act for him or her by proxy and such proxy shall count for purposes of determining a quorum and for voting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 8. Committees. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation, which to the extent provided in such resolution or these by-laws shall have and may exercise the powers of the board of directors in the management and affairs of the corporation except as otherwise limited by law. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. Section 9. Committee Rules. Each committee of the board of directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the board of directors designating such committee. In the event Page 5 of 15 that a member and that member's alternate, if alternates are designated by the board of directors as provided in Section 8 of this Article III, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member. Section 10. Communications Equipment. Members of the board of directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting. Section 11. Waiver of Notice and Presumption of Assent. Any member of the board of directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. Section 12. Action by Written Consent. Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. ARTICLE IV OFFICERS Section 1. Number. The officers of the corporation shall be elected by the board of directors and may consist of a chairman of the board, a president, one or more vice-presidents, a secretary, a treasurer, and such other officers and assistant officers as may be deemed necessary or desirable by the board of directors. Any number of offices may be held by the same person. In its discretion, the board of directors may choose not to fill any office for any period as it may deem advisable. Section 2. Election and Term of Office. The officers of the corporation shall be elected annually by the board of directors at its first meeting held after each annual meeting of shareholders or as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or Page 6 of 15 removal as hereinafter provided. Section 3. Removal. Any officer or agent elected by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Section 4. Vacancies. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term by the board of directors then in office. Section 5. Compensation. Compensation of all officers shall be fixed by the board of directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the corporation. Section 6. Chairman of the Board and Chief Executive Officer. The chairman of the board shall be the chief executive officer of the corporation, and shall have the powers and perform the duties incident to that position. Subject to the powers of the board of directors, he or she shall be in the general and active charge of the entire business and affairs of the corporation, and shall be its chief policy making officer. He or she shall preside at all meetings of the board of directors and shareholders and shall have such other powers and perform such other duties as may be prescribed by the board of directors or provided in these by-laws. Whenever the president is unable to serve, by reason of sickness, absence or otherwise, the chairman of the board shall perform all the duties and responsibilities and exercise all the powers of the president. Section 7. The President. The president shall, subject to the powers of the board of directors and the chairman of the board, have general charge of the business, affairs and property of the corporation, and control over its officers, agents and employees; and shall see that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. The president shall have such other powers and perform such other duties as may be prescribed by the chairman of the board or the board of directors or as may be provided in these by-laws. Section 8. Chief Operating Officer. The chief operating officer of the corporation, subject to the powers of the board of directors, shall have general and active management of the business of the corporation; and shall see that all orders and resolutions of the board of directors are carried into effect. The chief operating officer shall have such other powers and perform such other duties as may be prescribed by the chairman of the board., the chief executive officer or the board of directors or as may be provided in these by-laws. Page 7 of 15 WRITTEN CONSENT OF THE SOLE STOCKHOLDER OF NDDC, INC. (a Texas corporation) IN LIEU OF A MEETING October 16, 2001 The undersigned, being the sole stockholder of NDDC, INC., a Texas corporation (the "Company"), pursuant to the provisions of Article 9.10(A) of the Texas Business Corporation Act, hereby consents to the taking of the following actions by written consent in lieu of a meeting and hereby consents to, adopts and approves the following resolutions and each and every action effected thereby: AMENDMENT TO THE BYLAWS WHEREAS, the sole stockholder of the Company has deemed it advisable, and in the best interests of the Company, to amend (the "Amendment") the By-Laws (the "By-Laws") of the Company to change the number of directors required to be on the board of directors of the Company; NOW, THEREFORE, BE IT RESOLVED, that the By-Laws shall be amended to restate, in its entirety, the first sentence of Article III, Section 2 to state the following: "The number of directors shall be not less than one (1) nor more than seven (7)." RESOLVED FURTHER, that the proper officers of the Company are and each of them hereby is authorized and directed, in the name and on behalf of the Company, to execute and deliver the Amendment, with such nonmaterial changes or amendments thereto as such officer or officers deem necessary or appropriate; and RESOLVED FURTHER, that all acts and things heretofore done by any such officers, or by any other employees or agents of the Company, on or prior to the date hereof, in connection with the transactions contemplated by the foregoing resolutions hereby are, in all aspects, ratified, confirmed, approved and adopted as acts on behalf of the Company. IN WITNESS WHEREOF, the undersigned sole stockholder of the Company has executed this Written Consent as of the date first above written. MAXUM HEALTH SERVICES CORP. By: /s/ MARILYN U. MacNIVEN-YOUNG ---------------------------------- Marilyn U. MacNiven-Young, Executive Vice President NDDC, INC. CERTIFICATE OF SECRETARY I, Marilyn U. MacNiven-Young, do hereby certify that: (i) I am the duly elected and acting Secretary of NDDC, Inc., a Texas corporation (the "Company"); and (ii) Amendment No. 1 to the Bylaws ("Bylaws") of the Company attached hereto as Exhibit A, constitutes part of the Bylaws of the Company as duly adopted by the Sole Stockholder of the Company on October 16, 2001. WITNESS my hand this 16th day of October, 2001. /s/ MARILYN U. MacNIVEN-YOUNG --------------------------------------- Marilyn U. MacNiven-Young, Secretary EXHIBIT A AMENDMENT NO. 1 TO THE BY-LAWS OF NDDC, INC. A TEXAS CORPORATION ADOPTED BY THE SOLE STOCKHOLDER ON OCTOBER 16, 2001 The first sentence of Article III, Section 2 of the By-laws of NDDC, Inc. is amended in its entirety as follows: "The number of directors shall be not less than one (1) nor more than seven (7)" EX-3.25 29 y55701ex3-25.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.25 CERTIFICATE OF INCORPORATION OF MAXUM HEALTH MANAGEMENT CORP. ----------------------- The undersigned, a natural person, for the purpose of organizing a corporation for conducting the business and promoting the purposes hereinafter stated, under the provisions and subject to the requirement of the laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and known, identified, and referred to as the "General Corporation Law of the State of Delaware"), hereby certifies that: FIRST: The name of the corporation (hereinafter called the "Corporation") is: MAXUM HEALTH MANAGEMENT CORP. SECOND: The address, including street, number, city, and county, of the registered office of the corporation in the state of Delaware is 32 Loockerman Square, Suite L-100, City of Dover 19901, County of Kent; and the name of the registered agent of the Corporation in the State of Delaware at such address is The Prentice-Hall Corporation System, Inc. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is one thousand (1,000). The par value of each such shares is $.01. All such shares are of one class and are shares of Common Stock. FIFTH: The name and the mailing address of the incorporator are as follows: Mark A. Solls 14850 Quorum Drive, Suite 400 Dallas, Texas 75240 SIXTH: The Corporation is to have perpetual existence. I, the undersigned, for the purpose of forming a corporation under the laws of the State of Delaware, do make and file and record this Certificate, and do certify that the facts herein stated are true, and I have accordingly hereunto set my hand this 24th day of February, 1993. INCORPORATOR: /s/ MARK A. SOLLS ----------------- Mark A. Solls STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 06/21/1996 960182441 - 2327544 CERTIFICATE OF RESTORATION AND REVIVAL OF CERTIFICATE OF INCORPORATION OF MAXUM HEALTH MANAGEMENT CORP. It is hereby certified that: 1. The name of the corporation (hereinafter called the "corporation") is Maxum Health Management Corp. 2. The corporation was organized under the provisions of the General Corporation Law of the State of Delaware. The date of filling of its original certificate of incorporation with the Secretary of State of the State of Delaware is March 1, 1993. 3. The address, including the street, city, and county, of the registered office of the corporation in the State of Delaware and the name of the registered agent at such address are as follows: Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805, County of New Castle. 4. The corporation hereby procures a restoration and revival of its certificate of incorporation, which became inoperative by law on March 1, 1995 for failure to file annual reports and non-payment of taxes payable to the State of Delaware. 5. The certificate of incorporation of the corporation, which provides for and will continue to provide for, perpetual duration, shall, upon the filing of this Certificate of Restoration and Revival of the Certificate of Incorporation in the Department of State of the State of Delaware, be restored and revived and shall become fully operative on February 28, 1995. Signed on the 21st day of June, 1996. MAXUM HEALTH MANAGEMENT CORP. By: /s/ DON G. HICKS --------------------------- Don G. Hicks Assistant Secretary and Chief Accounting Officer STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 03:00 PM 10/18/1996 960303535 - 2327544 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF MAXUM HEALTH MANAGEMENT CORP. MAXUM HEALTH MANAGEMENT CORP., a corporation organized and existing under and by virtue of the General Corporation Law of the state of Delaware, does hereby certify: FIRST: The amendment to the Certificate of Incorporation of Maxum Health Management Corp. set forth in the following resolution was duly approved and adopted by the written consent of the sole director of Maxum Health Management Corp. in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware; and SECOND: The amendment to the Certificate of Incorporation of Maxum Health Management Corp. was approved by the written consent of the sole stockholder of Maxum Health Management Corp. in accordance with the provisions of Section 228 of the General Corporation Law of the state of Delaware; FIRST: The name of the corporation (hereinafter called the "Corporation") is DIAGNOSTIC SOLUTIONS CORP." THIRD: The amendment to the Certificate of Incorporation of Maxum Health Management Corp. was duly adopted in accordance with the provisions of Sections 242 and 228 of the General Corporation Law of the state of Delaware. IN WITNESS WHEREOF, Maxum Health Management Corp. has caused this Certificate to be signed by its duly authorized officer on this 17th day of October, 1996. MAXUM HEALTH MANAGEMENT CORP. BY: /s/ E. LARRY ATKINS --------------------------------- E. Larry Atkins, President and Chief Executive Officer CERTIFICATE OF CHANGE OF REGISTERED AGENT AND REGISTERED OFFICE * * * * * DIAGNOSTIC SOLUTIONS CORP., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: The present registered agent of the corporation is Corporation Service Company and the present registered office of the corporation is in the county of New Castle. The Board of Directors of DIAGNOSTIC SOLUTIONS CORP. adopted the following resolution on the January 2, 1998. Resolved, that the registered office of DIAGNOSTIC SOLUTIONS CORP. in the state of Delaware be and it hereby is changed to Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, and the authorization of the present registered agent of this corporation be and the same is hereby withdrawn, and THE CORPORATION TRUST COMPANY, shall be and is hereby constituted and appointed the registered agent of this corporation at the address of its registered office. IN WITNESS WHEREOF, DIAGNOSTIC SOLUTIONS CORP. has caused this statement to be signed by Brian G. Drazba, its S.V.P. of Finance & Controller this 16th day of January, 1998 /s/ B. G. DRAZBA ----------------------- (DEL. - 264 - 6/15/94) STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 01:30 PM 01/21/1998 981024811 - 2327544 EX-3.26 30 y55701ex3-26.txt BYLAWS EXHIBIT 3.26 BY-LAWS OF MAXUM HEALTH MANAGEMENT CORP. A DELAWARE CORPORATION TABLE OF CONTENTS ARTICLE ONE: OFFICES
Page ---- 1.1 Registered Office and Agent ....................................................... 1 1.2 Other Offices ..................................................................... 1 ARTICLE TWO: MEETINGS OF STOCKHOLDERS 2.1 Annual Meeting .................................................................... 1 2.2 Special Meeting ................................................................... 2 2.3 Place of Meetings ................................................................. 2 2.4 Notice ............................................................................ 2 2.5 Voting List ....................................................................... 2 2.6 Quorum ............................................................................ 2 2.7 Required Vote; Withdrawal of Quorum ............................................... 3 2.8 Method of Voting; Proxies ......................................................... 3 2.9 Record Date ....................................................................... 3 2.10 Conduct of Meeting ................................................................ 4 2.11 Inspectors ........................................................................ 5 ARTICLE THREE: DIRECTORS 3.1 Management......................................................................... 5 3.2 Number; Qualification; Election; Term ............................................. 5 3.3 Change in Number .................................................................. 6 3.4 Removal ........................................................................... 6 3.5 Vacancies ......................................................................... 6 3.6 Meetings of Directors ............................................................. 6 3.7 First Meeting ..................................................................... 7 3.8 Election of Officers .............................................................. 7 3.9 Regular Meetings .................................................................. 7 3.10 Special Meetings .................................................................. 7 3.11 Notice ............................................................................ 7 3.12 Quorum; Majority Vote ............................................................. 7 3.13 Procedure ......................................................................... 7 3.14 Presumption of Assent ............................................................. 8 3.15 Compensation ...................................................................... 8
ii ARTICLE FOUR: COMMITTEES 4.1 Designation ....................................................................... 8 4.2 Number; Qualification; Term ....................................................... 8 4.3 Authority ......................................................................... 8 4.4 Committee Changes ................................................................. 8 4.5 Alternate Members of Committees ................................................... 9 4.6 Regular Meetings .................................................................. 9 4.7 Special Meetings................................................................... 9 4.8 Quorum; Majority Vote ............................................................. 9 4.9 Minutes ........................................................................... 9 4.10 Compensation....................................................................... 9 4.11 Responsibility .................................................................... 9 ARTICLE FIVE: NOTICE 5.1 Method ............................................................................ 10 5.2 Waiver ............................................................................ 10 ARTICLE SIX: OFFICERS 6.1 Number; Titles; Term of Office .................................................... 10 6.2 Removal ........................................................................... 10 6.3 Vacancies ......................................................................... 11 6.4 Authority ......................................................................... 11 6.5 Compensation ...................................................................... 11 6.6 Chairman of the Board ............................................................. 11 6.7 President ......................................................................... 11 6.8 Vice Presidents ................................................................... 11 6.9 Treasurer ......................................................................... 12 6.10 Assistant Treasurers .............................................................. 12 6.11 Secretary ......................................................................... 12 6.12 Assistant Secretaries ............................................................. 12 ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS 7.1 Certificates for Shares ........................................................... 12 7.2 Replacement of Lost or Destroyed Certificates ..................................... 13 7.3 Transfer of Shares ................................................................ 13 7.4 Registered Stockholders ........................................................... 13 7.5 Regulations ....................................................................... 13 7.6 Legends ........................................................................... 13
iii ARTICLE EIGHT: MISCELLANEOUS PROVISIONS 8.1 Dividends ......................................................................... 14 8.2 Reserves .......................................................................... 14 8.3 Books and Records ................................................................. 14 8.4 Fiscal Year ....................................................................... 14 8.5 Seal .............................................................................. 14 8.6 Resignations ...................................................................... 14 8.7 Securities of Other Corporations .................................................. 14 8.8 Telephone Meetings ................................................................ 15 8.9 Action Without a Meeting .......................................................... 15 8.10 Invalid Provisions ................................................................ 16 8.11 Mortgages, etc. ................................................................... 16 8.12 Headings .......................................................................... 16 8.13 References ........................................................................ 16 8.14 Amendments ........................................................................ 16
iv BY-LAWS OF MAXUM HEALTH MANAGEMENT CORP. A Delaware Corporation PREAMBLE These by-laws are subject to, and governed by, the General Corporation Law of the State of Delaware (the "Delaware General Corporation Law") and the certificate of incorporation of Maxum Health Management Corp., a Delaware corporation (the "Corporation"). In the event of a direct conflict between the provisions of these by-laws and the mandatory provisions of the Delaware General Corporation Law or the provisions of the certificate of incorporation of the Corporation, such provisions of the Delaware General Corporation Law or the certificate of incorporation of the Corporation, as the case may be, will be controlling. ARTICLE ONE: OFFICES 1.1 Registered Office and Agent. The registered office and registered agent of the Corporation shall be as designated from time to time by the appropriate filing by the Corporation in the office of the Secretary of State of the State of Delaware. 1.2 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the board of directors may from time to time determine or as the business of the Corporation may require. ARTICLE TWO: MEETINGS OF STOCKHOLDERS 2.1 Annual Meeting. An annual meeting of stockholders of the Corporation shall be held each calendar year on such date and at such time as shall be designated from time to time by the board of directors and stated in the notice of the meeting or in a duly executed waiver of notice of such meeting. At such meeting, the stockholders shall elect directors and transact such other business as may properly be brought before the meeting. 2.2 Special Meeting. A special meeting of the stockholders may be called at any time by the Chairman of the Board, the President, the board of directors, and shall be called by the President or the Secretary at the request in writing of the stockholders of record of not less than ten percent of all shares entitled to vote at such meeting or as otherwise provided by the certificate of incorporation of the Corporation. A special meeting shall be held on such date and at such time as shall be designated by the person(s) calling the meeting and stated in the notice of 1 the meeting or in a duly executed waiver of notice of such meeting. Only such business shall be transacted at a special meeting as may be stated or indicated in the notice of such meeting or in a duly executed waiver of notice of such meeting. 2.3 Place of Meetings. An annual meeting of stockholders may be held at any place within or without the State of Delaware designated by the board of directors. A special meeting of stockholders may be held at any place within or without the State of Delaware designated in the notice of the meeting or a duly executed waiver of notice of such meeting. Meetings of stockholders shall be held at the principal office of the Corporation unless another place is designated for meetings in the manner provided herein. 2.4 Notice. Written or printed notice stating the place, day, and time of each meeting of the stockholders and, in case-of a special meeting, the purpose or purposes for which the meeting is called shall be delivered not less than ten nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the officer or person(s) calling the meeting, to each stockholder of record entitled to vote at such meeting. If such notice is to be sent by mail, it shall be directed to such stockholder at his address as it appears on the records of the Corporation, unless he shall have filed with the Secretary of the Corporation a written request that notices to him be mailed to some other address, in which case it shall be directed to him at such other address. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy and shall not, at the beginning of such meeting, object to the transaction of any business because the meeting is not lawfully called or convened, or who shall, either before or after the meeting, submit a signed waiver of notice, in person or by proxy. 2.5 Voting List. At least ten days before each meeting of stockholders, the Secretary or other officer of the Corporation who has charge of the Corporation's stock ledger, either directly or through another officer appointed by him or through a transfer agent appointed by the board of directors, shall prepare a complete list of stockholders entitled to vote thereat, arranged in alphabetical order and showing the address of each stockholder and number of shares registered in the name of each stockholder. For a period of ten days prior to such meeting, such list shall be kept on file at a place within the city where the meeting is to be held, which place shall be specified in the notice of meeting or a duly executed waiver of notice of such meeting or, if not so specified, at the place where the meeting is to be held and shall be open to examination by any stockholder during ordinary business hours. Such list shall be produced at such meeting and kept at the meeting at all times during such meeting and may be inspected by any stockholder who is present. 2.6 Quorum. The holders of a majority of the outstanding shares entitled to vote on a matter, present in person or by proxy, shall constitute a quorum at any meeting of stockholders, except as otherwise provided by law, the certificate of incorporation of the 2 Corporation, or these by-laws. If a quorum shall not be present, in person or by proxy, at any meeting of stockholders, the stockholders entitled to vote thereat who are present, in person or by proxy, or, if no stockholder entitled to vote is present, any officer of the Corporation may adjourn the meeting from time to time, without notice other than announcement at the meeting (unless the board of directors, after such adjournment, fixes a new record date for the adjourned meeting), until a quorum shall be present, in person or by proxy. At any adjourned meeting at which a quorum shall be present, in person or by proxy, any business may be transacted which may have been transacted at the original meeting had a quorum been present; provided that, if the adjournment is for more than 30 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting. 2.7 Required Vote; Withdrawal of Quorum. When a quorum is present at any meeting, the vote of the holders of at least a majority of the outstanding shares entitled to vote who are present, in person or by proxy, shall decide any question brought before such meeting, unless the question is one on which, by express provision of statute, the certificate of incorporation of the Corporation, or these by-laws, a different vote is required, in which case such express provision shall govern and control the decision of such question. The stockholders present at a duly constituted meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. 2.8 Method of Voting: Proxies. Except as otherwise provided in the certificate of incorporation of the Corporation or by law, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Elections of directors need not be by written ballot. At any meeting of stockholders, every stockholder having the right to vote may vote either in person or by a proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. Each such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after three years from the date of its execution, unless otherwise provided in the proxy. If no date is stated in a proxy, such proxy shall be presumed to have been executed on the date of the meeting at which it is to be voted. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power or unless otherwise made irrevocable by law. 2.9 Record Date. (a) For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, for any such determination of 3 stockholders, such date in any case to be not more than 60 days and not less than ten days prior to such meeting nor more than 60 days prior to any other action. If no record date is fixed: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. (iii) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by law or these by-laws, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office in the State of Delaware, principal place of business, or such officer or agent shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by law or these by-laws, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. 2.10 Conduct of Meeting. The Chairman of the Board, if such office has been filled, and, if not or if the Chairman of the Board is absent or otherwise unable to act, the President shall preside at all meetings of stockholders. The Secretary shall keep the records of each meeting of stockholders. In the absence or inability to act of any such officer, such officer's duties shall be performed by the officer given the authority to act 4 for such absent or non-acting officer under these by-laws or by some person appointed by the meeting. 2.11 Inspectors. The board of directors may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If any of the inspectors so appointed shall fail to appear or act, the chairman of the meeting shall, or if inspectors shall not have been appointed, the chairman of the meeting may, appoint one or more inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge, request, or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders. ARTICLE THREE: DIRECTORS 3.1 Management. The business and property of the Corporation shall be managed by the board of directors. Subject to the restrictions imposed by law, the certificate of incorporation of the Corporation, or these by-laws, the board of directors may exercise all the powers of the Corporation. 3.2 Number: Qualification: Election: Term. The number of directors which shall constitute the entire board of directors shall be not less than one. The first board of directors shall consist of the number of directors named in the certificate of incorporation of the Corporation or, if no directors are so named, shall consist of the number of directors elected by the incorporator(s) at an organizational meeting or by unanimous written consent in lieu thereof. Thereafter, within the limits above specified, the number of directors which shall constitute the entire board of directors shall be determined by resolution of the board of directors or by resolution of the stockholders at the annual meeting thereof or at a special meeting thereof called for that purpose. Except as otherwise required by law, the certificate of incorporation of the Corporation, or these by-laws, the directors shall be elected at an annual meeting of stockholders at which a quorum is present. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy and entitled to vote on the election of directors. Each director so chosen shall hold office until the first annual meeting of stockholders held after his election and until his successor is elected and qualified or, if earlier, until 5 his death, resignation, or removal from office. None of the directors need be a stockholder of the Corporation or a resident of the State of Delaware. Each director must have attained the age of majority. 3.3 Change in Number. No decrease in the number of directors constituting the entire board of directors shall have the effect of shortening the term of any incumbent director. 3.4 Removal. Except as otherwise provided in the certificate of incorporation of the Corporation or these by-laws, at any meeting of stockholders called expressly for that purpose, any director or the entire board of directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote on the election of directors; provided, however, that so long as stockholders have the right to cumulate votes in the election of directors pursuant to the certificate of incorporation of the Corporation, if less than the entire board of directors is to be removed, no one of the directors may be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire board of directors. 3.5 Vacancies. Vacancies and newly-created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by the sole remaining director, and each director so chosen shall hold office until the first annual meeting of stockholders held after his election and until his successor is elected and qualified or, if earlier, until his death, resignation, or removal from office. If there are no directors in office, an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly-created directorship, the directors then in office shall constitute less than a majority of the whole board of directors (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships or to replace the directors chosen by the directors then in office. Except as otherwise provided in these by-laws, when one or more directors shall resign from the board of directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in these by-laws with respect to the filling of other vacancies. 3.6 Meetings of Directors. The directors may hold their meetings and may have an office and keep the books of the Corporation, except as otherwise provided by statute, in such place or places within or without the State of Delaware as the board of directors may from time to time determine or as shall be specified in the notice of such meeting or duly executed waiver of notice of such meeting. 6 3.7 First Meeting. Each newly elected board of directors may hold its first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after and at the same place as the annual meeting of stockholders, and no notice of such meeting shall be necessary. 3.8 Election of Officers. At the first meeting of the board of directors after each annual meeting of stockholders at which a quorum shall be present, the board of directors shall elect the officers of the Corporation. 3.9 Regular Meetings. Regular meetings of the board of directors shall be held at such times and places as shall be designated from time to time by resolution of the board of directors. Notice of such regular meetings shall not be required. 3.10 Special Meetings. Special meetings of the board of directors shall be held whenever called by the Chairman of the Board, the President, or any director. 3.11 Notice. The Secretary shall give notice of each special meeting to each director at least 24 hours before the meeting. Notice of any such meeting need not be given to any director who shall, either before or after the meeting, submit a signed waiver of notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice to him. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. 3.12 Quorum; Majority Vote. At all meetings of the board of directors, a majority of the directors fixed in the manner provided in these by-laws shall constitute a quorum for the transaction of business. If at any meeting of the board of directors there be less than a quorum present, a majority of those present or any director solely present may adjourn the meeting from time to time without further notice. Unless the act of a greater number is required by law, the certificate of incorporation of the Corporation, or these by-laws, the act of a majority of the directors present at a meeting at which a quorum is in attendance shall be the act of the board of directors. At any time that the certificate of incorporation of the Corporation provides that directors elected by the holders of a class or series of stock shall have more or less than one vote per director on any matter, every reference in these by-laws to a majority or other proportion of directors shall refer to a majority or other proportion of the votes of such directors. 3.13 Procedure. At meetings of the board of directors, business shall be transacted in such order as from time to time the board of directors may determine. The Chairman of the Board, if such office has been filled, and, if not or if the Chairman of the Board is absent or otherwise unable to act, the President shall preside at all meetings of the board of directors. In the absence or inability to act of either such officer, a chairman shall be chosen by the board of directors from among the directors present. The 7 Secretary of the Corporation shall act as the secretary of each meeting of the board of directors unless the board of directors appoints another person to act as secretary of the meeting. The board of directors shall keep regular minutes of its proceedings which shall be placed in the minute book of the Corporation. 3.14 Presumption of Assent. A director of the Corporation who is present at the meeting of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward any dissent by certified or registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. 3.15 Compensation. The board of directors shall have the authority to fix the compensation, including fees and reimbursement of expenses, paid to directors for attendance at regular or special meetings of the board of directors or any committee thereof; provided, that nothing contained herein shall be construed to preclude any director from serving the Corporation in any other capacity or receiving compensation therefor. ARTICLE FOUR: COMMITTEES 4.1 Designation. The board of directors may, by resolution adopted by a majority of the entire board of directors, designate one or more committees. 4.2 Number: Qualification-Term. Each committee shall consist of one or more directors appointed by resolution adopted by a majority of the entire board of directors. The number of committee members may be increased or decreased from time to time by resolution adopted by a majority of the entire board of directors. Each committee member shall serve as such until the earliest of (i) the expiration of his term as director, (ii) his resignation as a committee member or as a director, or (iii) his removal as a committee member or as a director. 4.3 Authority. Each committee, to the extent expressly provided in the resolution establishing such committee, shall have and may exercise all of the authority of the board of directors in the management of the business and property of the Corporation except to the extent expressly restricted by law, the certificate of incorporation of the Corporation, or these by-laws. 4.4 Committee Changes. The board of directors shall have the power at any time to fill vacancies in, to change the membership of, and to discharge any committee. 8 4.5 Alternate Members of Committees. The board of directors may designate one or more directors as alternate members of any committee. Any such alternate member may replace any absent or disqualified member at any meeting of the committee. If no alternate committee members have been so appointed to a committee or each such alternate committee member is absent or disqualified, the member or members of such committee present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. 4.6 Regular Meetings. Regular meetings of any committee may be held without notice at such time and place as may be designated from time to time by the committee and communicated to all members thereof. 4.7 Special Meetings. Special meetings of any committee may be held whenever called by any committee member. The committee member calling any special meeting shall cause notice of such special meeting, including therein the time and place of such special meeting, to be given to each committee member at least two days before such special meeting. Neither the business to be transacted at, nor the purpose of, any special meeting of any committee need be specified in the notice or waiver of notice of any special meeting. 4.8 Quorum: Majority Vote. At meetings of any committee, a majority of the number of members designated by the board of directors shall constitute a quorum for the transaction of business. If a quorum is not present at a meeting of any committee, a majority of the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. The act of a majority of the members present at any meeting at which a quorum is in attendance shall be the act of a committee, unless the act of a greater number is required by law, the certificate of incorporation of the Corporation, or these by-laws. 4.9 Minutes. Each committee shall cause minutes of its proceedings to be prepared and shall report the same to the board of directors upon the request of the board of directors. The minutes of the proceedings of each committee shall be delivered to the Secretary of the Corporation for placement in the minute books of the Corporation. 4.10 Compensation. Committee members may, by resolution of the board of directors, be allowed a fixed sum and expenses of attendance, if any, for attending any committee meetings or a stated salary. 4.11 Responsibility. The designation of any committee and the delegation of authority to it shall not operate to relieve the board of directors or any director of any responsibility imposed upon it or such director by law. 9 ARTICLE FIVE: NOTICE 5.1 Method. Whenever by statute, the certificate of incorporation of the Corporation, or these by-laws, notice is required to be given to any committee member, director, or stockholder and no provision is made as to how such notice shall be given, personal notice shall not be required and any such notice may be given (a) in writing, by mail, postage prepaid, addressed to such committee member, director, or stockholder at his address as it appears on the books or (in the case of a stockholder) the stock transfer records of the Corporation, or (b) by any other method permitted by law (including but not limited to overnight courier service, telegram, telex, or telefax). Any notice required or permitted to be given by mail shall be deemed to be delivered and given at the time when the same is deposited in the United States mail as aforesaid. Any notice required or permitted to be given by overnight courier service shall be deemed to be delivered and given at the time delivered to such service with all charges prepaid and addressed as aforesaid. Any notice required or permitted to be given by telegram, telex, or telefax shall be deemed to be delivered and given at the time transmitted with all charges prepaid and addressed as aforesaid. 5.2 Waiver. Whenever any notice is required to be given to any stockholder, director, or committee member of the Corporation by statute, the certificate of incorporation of the Corporation, or these by-laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Attendance of a stockholder, director, or committee member at a meeting shall constitute a waiver of notice of such meeting, except where such person attends for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE SIX: OFFICERS 6.1 Number: Titles: Term of Office. The officers of the Corporation shall be a President, a Secretary, and such other officers as the board of directors may from time to time elect or appoint, including a Chairman of the Board, one or more Vice Presidents (with each Vice President to have such descriptive title, if any, as the board of directors shall determine), and a Treasurer. Each officer shall hold office until his successor shall have been duly elected and shall have qualified, until his death, or until he shall resign or shall have been removed in the manner hereinafter provided. Any two or more offices may be held by the same person. None of the officers need be a stockholder or a director of the Corporation or a resident of the State of Delaware. 6.2 Removal. Any officer or agent elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the best interest of the Corporation will be served thereby, but such removal shall be without 10 prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. 6.3 Vacancies. Any vacancy occurring in any office of the Corporation (by death, resignation, removal, or otherwise) may be filled by the board of directors. 6.4 Authority. Officers shall have such authority and perform such duties in the management of the Corporation as are provided in these by-laws or as may be determined by resolution of the board of directors not inconsistent with these by-laws. 6.5 Compensation. The compensation, if any, of officers and agents shall be fixed from time to time by the board of directors; provided, however, that the board of directors may delegate the power to determine the compensation of any officer and agent (other than the officer to whom such power is delegated) to the Chairman of the Board or the President. 6.6 Chairman of the Board. The Chairman of the Board, if elected by the board of directors, shall have such powers and duties as may be prescribed by the board of directors. Such officer shall preside at all meetings of the stockholders and of the board of directors. Such officer may sign all certificates for shares of stock of the Corporation. 6.7 President. The President shall be the chief executive officer of the Corporation and, subject to the board of directors, he shall have general executive charge, management, and control of the properties and operations of the Corporation in the ordinary course of its business, with all such powers with respect to such properties and operations as may be reasonably incident to such responsibilities. If the board of directors has not elected a Chairman of the Board or in the absence or inability to act of the Chairman of the Board, the President shall exercise all of the powers and discharge all of the duties of the Chairman of the Board. As between the Corporation and third parties, any action taken by the President in the performance of the duties of the Chairman of the Board shall be conclusive evidence that there is no Chairman of the Board or that the Chairman of the Board is absent or unable to act. 6.8 Vice Presidents. Each Vice President shall have such powers and duties as may be assigned to him by the board of directors, the Chairman of the Board, or the President, and (in order of their seniority as determined by the board of directors or, in the absence of such determination, as determined by the length of time they have held the office of Vice President) shall exercise the powers of the President during that officer's absence or inability to act. As between the Corporation and third parties, any action taken by a Vice President in the performance of the duties of the President shall be conclusive evidence of the absence or inability to act of the President at the time such action was taken. 11 6.9 Treasurer. The Treasurer shall have custody of the Corporation's funds and securities, shall keep full and accurate account of receipts and disbursements, shall deposit all monies and valuable effects in the name and to the credit of the Corporation in such depository or depositories as may be designated by the board of directors, and shall perform such other duties as may be prescribed by the board of directors, the Chairman of the Board, or the President. 6.10 Assistant Treasurers. Each Assistant Treasurer shall have such powers and duties as may be assigned to him by the board of directors, the Chairman of the Board, or the President. The Assistant Treasurers (in the order of their seniority as determined by the board of directors or, in the absence of such a determination, as determined by the length of time they have held the office of Assistant Treasurer) shall exercise the powers of the Treasurer during that officer's absence or inability to act. 6.11 Secretary. Except as otherwise provided in these bylaws, the Secretary shall keep the minutes of all meetings of the board of directors and of the stockholders in books provided for that purpose, and he shall attend to the giving and service of all notices. He may sign with the Chairman of the Board or the President, in the name of the Corporation, all contracts of the Corporation and affix the seal of the Corporation thereto. He may sign with the Chairman of the Board or the President all certificates for shares of stock of the Corporation, and he shall have charge of the certificate books, transfer books, and stock papers as the board of directors may direct, all of which shall at all reasonable times be open to inspection by any director upon application at the office of the Corporation during business hours. He shall in general perform all duties incident to the office of the Secretary, subject to the control of the board of directors, the Chairman of the Board, and the President. 6.12 Assistant Secretaries. Each Assistant Secretary shall have such powers and duties as may be assigned to him by the board of directors, the Chairman of the Board, or the President. The Assistant Secretaries (in the order of their seniority as determined by the board of directors or, in the absence of such a determination, as determined by the length of time they have held the office of Assistant Secretary) shall exercise the powers of the Secretary during that officer's absence or inability to act. ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS 7.1 Certificates for Shares. Certificates for shares of stock of the Corporation shall be in such form as shall he approved by the board of directors. The certificates shall be signed by the Chairman of the Board or the President or a Vice President and also by the Secretary or an Assistant Secretary or by the Treasurer or an Assistant Treasurer. Any and all signatures on the certificate may be a facsimile and may be sealed with the seal of the Corporation or a facsimile thereof. If any officer, transfer agent, or registrar who has signed, or whose facsimile signature has been placed upon, a certificate has ceased to be such officer, transfer agent, or registrar before such certificate is issued, 12 such certificate may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. The certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued and shall exhibit the holder's name and the number of shares. 7.2 Replacement Of Lost or Destroyed Certificates. The board of directors may direct a new certificate or certificates to be issued in place of a certificate or certificates theretofore issued by the Corporation and alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate or certificates representing shares to be lost or destroyed. When authorizing such issue of a new certificate or certificates the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond with a surety or sureties satisfactory to the Corporation in such sum as It may direct as indemnity against any claim, or expense resulting from a claim, that may be made against the Corporation with respect to the certificate or certificates alleged to have been lost or destroyed. 7.3 Transfer of Shares. Shares of stock of the Corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, the Corporation or its transfer agent shall issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. 7.4 Registered Stockholders. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. 7.5 Regulations. The board of directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer, and registration or the replacement of certificates for shares of stock of the Corporation. 7.6 Legends. The board of directors shall have the power and authority to provide that certificates representing shares of stock bear such legends as the board of directors deems appropriate to assure that the Corporation does not become liable for violations of federal or state securities laws or other applicable law. 13 ARTICLE EIGHT: MISCELLANEOUS PROVISIONS 8.1 Dividends. Subject to provisions of law and the certificate of incorporation of the Corporation, dividends may be declared by the board of directors at any regular or special meeting and may be paid in cash, in property, or in shares of stock of the Corporation. Such declaration and payment shall be at the discretion of the board of directors. 8.2 Reserves. There may be created by the board of directors out of funds of the Corporation legally available therefor such reserve or reserves as the directors from time to time, in their discretion, consider proper to provide for contingencies, to equalize dividends, or to repair or maintain any property of the Corporation, or for such other purpose as the board of directors shall consider beneficial to the Corporation, and the board of directors may modify or abolish any such reserve in the manner in which it was created. 8.3 Books and Records. The Corporation shall keep correct and complete books and records of account, shall keep minutes of the proceedings of its stockholders and board of directors and shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of the shares held by each. 8.4 Fiscal Year. The fiscal year of the Corporation shall he fixed by the board of directors; provided, that if such fiscal year is not fixed by the board of directors and the selection of the fiscal year is not expressly deferred by the board of directors, the fiscal year shall be the calendar year. 8.5 Seal. The seal of the Corporation shall be such as from time to time may be approved by the board of directors. 8.6 Resignations. Any director, committee member, or officer may resign by so stating at any meeting of the board of directors or by giving written notice to the board of directors, the Chairman of the Board, the President, or the Secretary. Such resignation shall take effect at the time specified therein or, if no time is specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 8.7 Securities of Other Corporations. The Chairman of the Board, the President, or any Vice President of the Corporation shall have the power and authority to transfer, endorse for transfer, vote, consent, or take any other action with respect to any securities of another issuer which may be held or owned by the Corporation and to make, execute, and deliver any waiver, proxy, or consent with respect to any such securities. 14 8.8 Telephone Meetings. Stockholders (acting for themselves or through a proxy), members of the board of directors, and members of a committee of the board of directors may participate in and hold a meeting of such stockholders, board of directors, or committee by means of a conference telephone or similar communications equipment by means of which persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. 8.9 Action Without a Meeting. (a) Unless otherwise provided in the certificate of incorporation of the Corporation, any action required by the Delaware General Corporation Law to be taken at an annual or special meeting of the stockholders, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders (acting for themselves or through a proxy) of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which the holders of all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Every written consent of stockholders shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered in the manner required by this Section 8.9(a) to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office, principal place of business, or such officer or agent shall be by hand or by certified or registered mail, return receipt requested. (b) Unless otherwise restricted by the certificate of incorporation of the Corporation or by these by-laws, any action required or permitted to be taken at a meeting of the board of directors, or of any committee of the board of directors, may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be signed by all the directors or all the committee members, as the case may be, entitled to vote with respect to the subject matter thereof, and such consent shall have the same force and effect as a vote of such directors or committee members, as the case may be, and may be stated as such in any certificate or document filed with the Secretary of State of the State of Delaware or in any certificate delivered to any person. Such consent or consents shall be filed with the minutes of proceedings of the board or committee, as the case may be. 15 8.10 Invalid Provisions. If any part of these by-laws shall be held invalid or inoperative for any reason, the remaining parts, so far as it is possible and reasonable, shall remain valid and operative. 8.11 Mortgages. etc.. With respect to any deed, deed of trust, mortgage, or other instrument executed by the Corporation through its duly authorized officer or officers, the attestation to such execution by the Secretary of the Corporation shall not be necessary to constitute such deed, deed of trust, mortgage, or other instrument a valid and binding obligation against the Corporation unless the resolutions, if any, of the board of directors authorizing such execution expressly state that such attestation is necessary. 8.12 Headings. The headings used in these by-laws have been inserted for administrative convenience only and do not constitute matter to be construed in interpretation. 8.13 References. Whenever herein the singular number is used, the same shall include the plural where appropriate, and words of any gender should include each other gender where appropriate. 8.14 Amendments. These by-laws may be altered, amended, or repealed or new by-laws may be adopted by the stockholders or by the board of directors at any regular meeting of the stockholders or the board of directors or at any special meeting of the stockholders or the board of directors if notice of such alteration, amendment, repeal, or adoption of new by-laws be contained in the notice of such special meeting. The undersigned, the Assistant Secretary of the Corporation, hereby certifies that the foregoing by-laws were adopted by unanimous consent by the directors of the Corporation on June 20, 1996, effective as of March 1, 1993. /s/ DON G. HICKS ---------------------------------------- Don G. Hicks, Assistant Secretary 16 EX-4.1 31 y55701ex4-1.txt INDENTURE Exhibit 4.1 INSIGHT HEALTH SERVICES CORP. 9-7/8% SENIOR SUBORDINATED NOTES DUE 2011 INDENTURE Dated as of October 30, 2001 STATE STREET BANK AND TRUST COMPANY, N.A. TRUSTEE CROSS-REFERENCE TABLE*
TRUST INDENTURE ACT SECTION INDENTURE SECTION 310(a)(1).........................................................7.10 (a)(2).........................................................7.10 (a)(3).........................................................N.A. (a)(4).........................................................N.A. (a)(5).........................................................7.10 (b)............................................................7.10 (c)............................................................N.A. 311(a)............................................................7.11 (b)............................................................7.11 (c)............................................................N.A. 312(a)............................................................2.06 (b)............................................................13.03 (c)............................................................13.03 313(a)............................................................7.06, 13.03 (b)(1).........................................................N.A. (b)(2).........................................................7.06, 7.07 (c)............................................................7.06, 13.02 (d)............................................................7.06 314(a)............................................................7.06, 13.05 (b)............................................................N.A. (c)(1).........................................................N.A. (c)(2).........................................................N.A. (c)(3).........................................................N.A. (d)............................................................N.A. (e)............................................................13.05 (f)............................................................N.A. 315(a)............................................................N.A. (b)............................................................N.A. (c)............................................................N.A. (d)............................................................N.A. (e)............................................................N.A. 316(a)(last sentence).............................................N.A. (a)(1)(A)......................................................N.A. (a)(1)(B)......................................................N.A. (a)(2).........................................................N.A. (b)............................................................N.A. (c)............................................................13.13
N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. 317(a)(1).........................................................N.A. (a)(2).........................................................N.A. (b)............................................................N.A. 318(a)............................................................N.A. (b)............................................................N.A. (c)............................................................13.01
TABLE OF CONTENTS
Page CROSS-REFERENCE TABLE.......................................................i ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions..................................................1 Section 1.02 Other Definitions...........................................20 Section 1.03 Incorporation by Reference of Trust Indenture Act...........21 Section 1.04 Rules of Construction.......................................22 ARTICLE TWO THE NOTES Section 2.01 Form and Dating.............................................22 Section 2.02 Execution and Authentication................................24 Section 2.03 Methods of Receiving Payments on the Notes..................24 Section 2.04 Registrar and Paying Agent..................................25 Section 2.05 Paying Agent to Hold Money in Trust.........................25 Section 2.06 Holder Lists................................................25 Section 2.07 Transfer and Exchange.......................................26 Section 2.08 Replacement Notes...........................................39 Section 2.09 Outstanding Notes...........................................39 Section 2.10 Treasury Notes..............................................40 Section 2.11 Temporary Notes.............................................40 Section 2.12 Cancellation................................................40 Section 2.13 Defaulted Interest..........................................40 Section 2.14 CUSIP Numbers...............................................41 ARTICLE THREE REDEMPTION AND PREPAYMENT; SATISFACTION AND DISCHARGE Section 3.01 Notices to Trustee..........................................41 Section 3.02 Selection of Notes to Be Redeemed...........................41 Section 3.03 Notice of Redemption........................................42 Section 3.04 Effect of Notice of Redemption..............................43 Section 3.05 Deposit of Redemption Price.................................43 Section 3.06 Notes Redeemed in Part......................................43 Section 3.07 Optional Redemption.........................................44 Section 3.08 Mandatory Redemption........................................44 Section 3.09 Repurchase Offers...........................................44 Section 3.10 Application of Trust Money..................................46
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ARTICLE FOUR COVENANTS Section 4.01 Payment of Notes............................................47 Section 4.02 Maintenance of Office or Agency.............................47 Section 4.03 Reports.....................................................48 Section 4.04 Compliance Certificate......................................48 Section 4.05 Taxes.......................................................49 Section 4.06 Stay, Extension and Usury Laws..............................49 Section 4.07 Restricted Payments.........................................49 Section 4.08 Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.............................................54 Section 4.09 Incurrence of Indebtedness and Issuance of Disqualified Stock....................................................55 Section 4.10 Asset Sales.................................................58 Section 4.11 Transactions with Affiliates................................59 Section 4.12 Liens.......................................................60 Section 4.13 Corporate Existence.........................................61 Section 4.14 Limitation on Layering Debt.................................61 Section 4.15 Offer to Repurchase upon a Change of Control................61 Section 4.16 Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries..................................63 Section 4.17 Designation of Restricted and Unrestricted Subsidiaries.....63 Section 4.18 Payments for Consent........................................64 Section 4.19 Limitations on Issuances of Guarantees of Indebtedness......64 Section 4.20 Additional Guarantees.......................................65 ARTICLE FIVE SUCCESSORS Section 5.01 Merger, Consolidation or Sale of Assets.....................65 ARTICLE SIX DEFAULTS AND REMEDIES Section 6.01 Events of Default...........................................67 Section 6.02 Acceleration................................................68 Section 6.03 Other Remedies..............................................69 Section 6.04 Waiver of Past Defaults.....................................69 Section 6.05 Control by Majority.........................................70 Section 6.06 Limitation on Suits.........................................70 Section 6.07 Rights of Holders of Notes to Receive Payment...............71 Section 6.08 Collection Suit by Trustee..................................71 Section 6.09 Trustee May File Proofs of Claim............................71 Section 6.10 Priorities..................................................72 Section 6.11 Undertaking for Costs.......................................72
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ARTICLE SEVEN TRUSTEE Section 7.01 Duties of Trustee...........................................72 Section 7.02 Certain Rights of Trustee...................................74 Section 7.03 Individual Rights of Trustee................................74 Section 7.04 Trustee's Disclaimer........................................75 Section 7.05 Notice of Defaults..........................................75 Section 7.06 Reports by Trustee to Holders of the Notes..................75 Section 7.07 Compensation and Indemnity..................................75 Section 7.08 Replacement of Trustee......................................76 Section 7.09 Successor Trustee by Merger, Etc............................77 Section 7.10 Eligibility; Disqualification...............................77 Section 7.11 Preferential Collection of Claims Against Company...........78 ARTICLE EIGHT DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance....78 Section 8.02 Legal Defeasance and Discharge..............................78 Section 8.03 Covenant Defeasance.........................................79 Section 8.04 Conditions to Legal or Covenant Defeasance..................79 Section 8.05 Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions....................80 Section 8.06 Repayment to the Company....................................81 Section 8.07 Reinstatement...............................................81 ARTICLE NINE AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes.........................82 Section 9.02 With Consent of Holders of Notes............................83 Section 9.03 Compliance with Trust Indenture Act.........................85 Section 9.04 Revocation and Effect of Consents...........................85 Section 9.05 Notation on or Exchange of Notes............................85 Section 9.06 Trustee to Sign Amendments, Etc.............................85 ARTICLE TEN SUBORDINATION Section 10.01 Agreement to Subordinate....................................86 Section 10.02 Liquidation; Dissolution; Bankruptcy........................86 Section 10.03 Default on Designated Senior Indebtedness...................86 Section 10.04 Acceleration of Securities..................................87 Section 10.05 When Distribution Must Be Paid Over.........................87 Section 10.06 Notice by the Company.......................................88 Section 10.07 Subrogation.................................................88
ii Section 10.08 Relative Rights.............................................88 Section 10.09 Subordination May Not Be Impaired by the Company............89 Section 10.10 Distribution or Notice to Representative....................89 Section 10.11 Rights of Trustee and Paying Agent..........................89 Section 10.12 Authorization to Effect Subordination.......................89 ARTICLE ELEVEN GUARANTEES Section 11.01 Guarantee...................................................90 Section 11.02 Subordination of Guarantee..................................91 Section 11.03 Limitation on Guarantor Liability...........................91 Section 11.04 Execution and Delivery of Guarantee.........................92 Section 11.05 Releases of Guarantors......................................92 ARTICLE TWELVE SATISFACTION AND DISCHARGE Section 12.01 Satisfaction and Discharge..................................93 Section 12.02 Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions.................94 Section 12.03 Repayment to the Company....................................94 ARTICLE THIRTEEN MISCELLANEOUS Section 13.01 Trust Indenture Act Controls................................95 Section 13.02 Notices.....................................................95 Section 13.03 Communication by Holders of Notes with Other Holders of Notes....................................................96 Section 13.04 Certificate and Opinion as to Conditions Precedent..........96 Section 13.05 Statements Required in Certificate or Opinion...............97 Section 13.06 Rules by Trustee and Agents.................................97 Section 13.07 No Personal Liability of Directors, Officers, Employees and Stockholders.............................................97 Section 13.08 Governing Law...............................................98 Section 13.09 Consent to Jurisdiction.....................................98 Section 13.10 No Adverse Interpretation of Other Agreements...............98 Section 13.11 Successors..................................................98 Section 13.12 Severability................................................99 Section 13.13 Counterpart Originals.......................................99 Section 13.14 Acts of Holders.............................................99 Section 13.15 Benefit of Indenture.......................................100 Section 13.16 Table of Contents, Headings, Etc...........................101 Section 13.17 Trustee Not Fiduciary for Holders of Senior Indebtedness...101
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EXHIBITS Exhibit A1 FORM OF NOTE Exhibit A2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF NOTATION OF GUARANTEE Exhibit F FORM OF SUPPLEMENTAL INDENTURE SCHEDULE I EXISTING INDEBTEDNESS SCHEDULE II AGREEMENTS EXCLUDED FROM TRANSACTIONS WITH AFFILIATES COVENANT
v INDENTURE dated as of October 30, 2001 among InSight Health Services Corp., a Delaware corporation (the "COMPANY"), InSight Health Services Holdings Corp., a Delaware Corporation, (the "PARENT"), the Subsidiary Guarantors (as defined below) and State Street Bank and Trust Company, N.A., a national banking association, as trustee. The Company, the Parent the Subsidiary Guarantors and the Trustee (as defined below) agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined below) of the 9-7/8% Senior Subordinated Notes due 2011: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions. "144A GLOBAL NOTE" means a global note substantially in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that shall be issued in a denomination equal to the outstanding principal amount at maturity of the Notes sold in reliance on Rule 144A. "ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (a) existing at the time such Person is merged with or into the Company or a Subsidiary or becomes a Subsidiary or (b) assumed in connection with the acquisition of assets from such Person. "ADDITIONAL NOTES" means up to $100 million aggregate principal amount of Notes (other than the Notes issued on the date hereof) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof. "AFFILIATE" means, with respect to any specified person, (a) any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person or (b) any other person that owns, directly or indirectly, 10% or more of such specified person's Capital Stock or any executive officer or director of any such specified person or other person. For the purposes of this definition, "control," when used with respect to any specified person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "AGENT" means any Registrar, Paying Agent or co-registrar. "AGENT BANK" means Bank of America, N.A. and its successors under the Credit Agreement, in its capacity as administrative agent. "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "ASSET SALE" means (i) the sale, lease, conveyance or other disposition of any assets (including, without limitation, by way of merger, consolidation or similar arrangement) (collectively, a "transfer") by the Company or any Restricted Subsidiary other than in the ordinary course of business and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Shares of Capital Stock of any of the Company's Restricted Subsidiaries (which will be deemed to include the sale, grant or conveyance of any interest in the income, profits or proceeds therefrom), in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (x) that have a fair market value in excess of $2 million or (y) for Net Cash Proceeds in excess of $2 million. For the purposes of this definition, the term "Asset Sale" does not include (a) any transfer of properties or assets (i) that is governed by Sections 4.07, 4.16 (to the extent of paragraph (a) thereof) or 5.01 hereof, (ii) between or among the Company and its Restricted Subsidiaries pursuant to transactions that do not violate any other provision of this Indenture or (iii) representing obsolete or permanently retired equipment and facilities or (b) the sale or exchange of equipment in connection with the purchase or other acquisition of other equipment, in each case used in the business of the Company or its Restricted Subsidiaries as it was in existence on the Reference Date or any business determined by the Board of the Company in its good faith judgment to be reasonably related thereto. Notwithstanding anything to the contrary set forth above, a disposition of Receivables and Related Assets other than pursuant to a Receivables Program contemplated under the provisions described in Section 4.09(c)(xiii) shall be deemed to be an Asset Sale. "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "BANKS" means the banks and other financial institutions that from time to time are lenders under the Credit Agreement. "BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "BENEFICIALLY OWNS" and "BENEFICIALLY OWNED" shall have a corresponding meaning. "BOARD" means the Company's Board of Directors or the Parent's Board of Directors, as applicable. "BOARD RESOLUTION" means, with respect to a Board, a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company or the Parent, as the case may be, to have been duly adopted by such Board and to be in full force and effect on the date of such certification, and delivered to the Trustee. "BROKER-DEALER" has the meaning set forth in the Registration Rights Agreement. "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are authorized or obligated by law 2 or executive order to close. If a payment date is not a Business Day, payment may be made on the next succeeding day that is a Business Day, and no interest shall accrue on such payment for the intervening period. "CAPITALIZED LEASE OBLIGATION" means, with respect to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee which, in accordance with GAAP, is required to be accounted for as a capital lease on the balance sheet of that Person. "CAPITAL STOCK" of any Person means any and all shares, interests, partnership interests, participations, rights in or other equivalents (however designated) of such Person's equity interest (however designated), whether now outstanding or issued after the Closing Date. "CASH EQUIVALENTS" means, at any date, (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (b) U.S. dollar denominated time deposits and certificates of deposit of (i) any lender under the Credit Agreement, (ii) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (iii) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank being an "Approved Lender"), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody's and maturing within twelve months of the date of acquisition, (d) repurchase agreements entered into by any Person with a bank or trust company (including any of the lenders under the Credit Agreement) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations and (e) Investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by reputable financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing subdivisions (a) through (d). "CHANGE OF CONTROL means the occurrence of any of the following: (a) the consummation of any transaction (including, without limitation, any merger or consolidation) (i) prior to a Public Equity Offering by the Company or the Parent, the result of which is that the Principals and their Related Parties become the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) of less than 50% of the Voting Stock of the Company or the Parent, as the case may be (measured by voting power rather than the number of shares), or (ii) after a Public Equity Offering of the Company or the Parent, any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act), other than the Principals 3 and their Related Parties, become the beneficial owner (as defined above), directly or indirectly, of 35% or more of the Voting Stock of the Company or the Parent, as the case may be, and such person is or becomes, directly or indirectly, the beneficial owner of a greater percentage of the voting power of the Voting Stock of the Company or the Parent, as the case may be, calculated on a fully diluted basis, than the percentage beneficially owned by the Principals and their Related Parties; (b) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Subsidiaries or the Parent and its Subsidiaries, in each case, taken as a whole, to any "person" (as the term is defined in Section 13(d)(3) of the Exchange Act) other than the Principals or Related Parties of the Principals; (c) the first day on which a majority of the members of the Board of the Company or the Parent are not Continuing Directors; or (d) the Company or the Parent is liquidated or dissolved or adopts a plan of liquidation or dissolution, other than in a transaction that complies with the provisions described under Section 5.01 hereof. "CLEARSTREAM" means Clearstream Banking, societe anonyme, Luxembourg. "CLOSING DATE" means the date on which the $225 million in aggregate principal amount of the Notes were originally issued under this Indenture. "COMMON STOCK" means, with respect to any Person, any and all shares, interests, participations and other equivalents (however designated, whether voting or non-voting) of such Person's Common Stock, whether now outstanding or issued after the date of this Indenture, and includes, without limitation, all series and classes of such Common Stock. "COMPANY" means InSight Health Services Corp., a Delaware corporation. "COMPANY REQUEST" or "COMPANY ORDER" means a written request or order signed in the name of the Company by its Chairman, its President, any Vice President, its Treasurer or an Assistant Treasurer, and delivered to the Trustee. "CONSOLIDATED EBITDA" means, for any period, the sum of, without duplication, Consolidated Net Income for such period, plus (or, in the case of clause (d) below, plus or minus) the following items to the extent included in computing Consolidated Net Income for such period: (a) Fixed Charges for such period, plus (b) the provision for federal, state, local and foreign income taxes of the Company and its Restricted Subsidiaries for such period, plus (c) the aggregate depreciation and amortization expense of the Company and its Restricted Subsidiaries for such period, plus (d) any other non-cash charges for such period, and minus non-cash items increasing Consolidated Net Income for such period, other than non-cash charges or items increasing Consolidated Net Income resulting from changes in prepaid assets or accrued liabilities in the ordinary course of business, plus (e) Minority Interest; provided that fixed charges, income tax expense, depreciation and amortization expense and non-cash charges of a 4 Restricted Subsidiary will be included in Consolidated EBITDA only to the extent (and in the same proportion) that the net income of such Subsidiary was included in calculating Consolidated Net Income for such period. "CONSOLIDATED NET INCOME" means, for any period, the net income (or net loss) of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, adjusted to the extent included in calculating such net income or loss by excluding (a) any net after-tax extraordinary or nonrecurring gains or losses (less all fees and expenses relating thereto), (b) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to Asset Sales or discontinued operations, (c) the portion of net income (or loss) of any Person (other than the Company or a Restricted Subsidiary), including Unrestricted Subsidiaries, in which the Company or any Restricted Subsidiary has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any Restricted Subsidiary in cash during such period, (d) the net income (or loss) of any Person combined with the Company or any Restricted Subsidiary on a "pooling of interests" basis attributable to any period prior to the date of combination, (e) the net income (but not the net loss) of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is at the date of determination restricted, directly or indirectly, except to the extent that such net income is actually paid to the Company or a Restricted Subsidiary thereof by loans, advances, intercompany transfers, principal repayments or otherwise and (f) the cumulative effect of a change in accounting principles. "CONSOLIDATED TANGIBLE ASSETS" means, as of the date of determination, the total assets, less goodwill and other intangibles, shown on the balance sheet of the Company and its Restricted Subsidiaries as of the most recent date for which such a balance sheet is available, determined on a consolidated basis in accordance with GAAP. "CONTINUING DIRECTORS" means, as of the date of determination, any member of the Board of the Company or the Parent, as the case may be, who: (a) was a member of such Board on the Reference Date; (b) was nominated for election or elected to such Board with the approval of the majority of the Continuing Directors who were members of such Board at the time of such nomination or election; or (c) was nominated by one or more of the Principals and the Related Parties. "CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the Trustee specified in Section 13.02 hereof or such other address as to which the Trustee may give notice to the Company. "CREDIT AGREEMENT" means the credit agreement, dated as of the Reference Date, among the Company, the Parent, the Subsidiary Guarantors, the lenders named therein, Bank of America, N.A., as administrative agent, First Union National Bank, as syndication agent, and The CIT Group/Business Credit, Inc., as documentation agent, providing for up to $225 million in term loan borrowings and $50 million of revolving credit borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection 5 therewith, as such credit agreement (and related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith) may be amended, restated, supplemented, refinanced, extended or otherwise modified from time to time. "CUSTODIAN" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "DEFAULT" means any event that is, or after notice or the passage of time or both, would be, an Event of Default. "DEFINITIVE NOTE" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.07 hereof, substantially in the form of Exhibit A1 hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "DEPOSITARY" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.04 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "DESIGNATED NONCASH CONSIDERATION" means the fair market value of noncash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as Designated Noncash Consideration pursuant to an officer's certificate, setting forth the basis of such valuation, executed by the principal executive officer and the principal financial officer of the Company, less the amount of cash or Cash Equivalents received in connection with a sale of such Designated Noncash Consideration. "DESIGNATED SENIOR INDEBTEDNESS" means (i) so long as the Senior Bank Debt is outstanding, the Senior Bank Debt and (ii) thereafter, any other Senior Indebtedness permitted under this Indenture the principal amount of which is $25 million or more and that has been specifically designated by the Company, in the instrument creating or evidencing such Senior Indebtedness or in an officers' certificate delivered to the Trustee, as "Designated Senior Indebtedness." "DISINTERESTED DIRECTOR" means, with respect to any transaction or series of transactions in respect of which the Board is required to deliver a resolution of the Board, to make a finding or otherwise take action under this Indenture, a member of the Board who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "DISQUALIFIED STOCK" means any class or series of Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or by contract or otherwise (i) is or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the Notes, (ii) is redeemable at the option of the holder thereof, at any time prior to such final Stated Maturity or (iii) at the option of the holder thereof is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity; provided that any Capital Stock that would constitute Disqualified Stock solely as a result of the provisions therein giving holders thereof the right to cause the issuer thereof to 6 repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Notes will not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Sections 4.10 and 4.15 hereof, and such Capital Stock specifically provides that the issuer will not repurchase or redeem any such stock pursuant to such provisions prior to the Company's repurchase of such Notes as are required to be repurchased pursuant to the provisions contained in Sections 4.10 and 4.15 hereof. "EQUITY INTERESTS" means Capital Stock and all warrants, options and other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EQUITY OFFERING" means a public or private offering of Capital Stock (other than Disqualified Stock) of the Parent or the Company. "EQUITY SPONSORS" means J.W. Childs Associates, L.P., J.W. Childs Equity Partners II, L.P., The Halifax Group, L.L.C. and Halifax Capital Partners, L.P. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, including the rules and regulations of the SEC promulgated thereunder. "EXCHANGE NOTES" means the Notes issued in the Exchange Offer in accordance with Section 2.07(f) hereof. "EXCHANGE OFFER" has the meaning set forth in the Registration Rights Agreement. "EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the Registration Rights Agreement. "EXISTING INDEBTEDNESS" means the Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreement) that was outstanding on the Reference Date and listed on Schedule I to this Indenture, until such amounts are repaid. "EXISTING NOTES" means the 9-5/8% Senior Subordinated Notes Due 2008 of the Company. "FACILITY" means any premises, together with the diagnostic imaging and treatment equipment installed therein, used by the Company in the conduct of the business of providing diagnostic imaging and information, treatment and related management services. "FIXED CHARGE COVERAGE RATIO" means, for any period, the ratio of Consolidated EBITDA for such period to Fixed Charges for such period. "FIXED CHARGES" means, for any period, without duplication, the sum of (a) the amount that, in conformity with GAAP, would be set forth opposite the caption "interest 7 expense" (or any like caption) on a consolidated statement of operations of the Company and its Restricted Subsidiaries for such period, including, without limitation, (i) amortization of original issue discount, (ii) the net cost of interest rate contracts (including, amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) amortization of debt issuance costs, and (v) the interest component of Capitalized Lease Obligations, plus (b) all dividends and distributions paid (whether or not in cash) on Preferred Stock and Disqualified Stock by the Company or any Restricted Subsidiary (to any Person other than the Company or any of its Restricted Subsidiaries), other than dividends on Equity Interests payable solely in Qualified Equity Interests of the Company, computed on a tax effected basis, plus (c) all interest on any Indebtedness of any Person guaranteed by the Company or any of its Restricted Subsidiaries or secured by a lien on the assets of the Company or any of its Restricted Subsidiaries; provided that Fixed Charges will not include (i) any gain or loss from extinguishment of debt, including the write-off of debt issuance costs, and (ii) the fixed charges of a Restricted Subsidiary to the extent (and in the same proportion) that the net income of such Subsidiary was excluded in calculating Consolidated Net Income pursuant to clause (e) of the definition thereof for such period. "FOREIGN SUBSIDIARY" means a Restricted Subsidiary that is incorporated in a jurisdiction other than the United States or a state thereof or the District of Columbia and that has no material operations or assets in the United States. "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect on the Closing Date. "GLOBAL NOTE LEGEND" means the legend set forth in Section 2.07(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. "GLOBAL NOTES" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A1 or A2 hereto, as appropriate, issued in accordance with Section 2.01, 2.07(b)(iv), 2.07(d)(ii) or 2.07(f) of this Indenture. "GUARANTEE" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "GUARANTEE" means a Guarantee of the Notes pursuant to the Indenture. "GUARANTORS" means: (1) the Parent; (2) the Subsidiary Guarantors; and (3) any other Subsidiary that executes a Guarantee in accordance with the provisions hereof; and their respective successors and assigns. "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person entered into in the ordinary course of business under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and other similar financial agreements or arrangements designed to protect such Person against, or manage the 8 exposure of such Person to, fluctuations in interest rates, and (ii) forward exchange agreements, currency swap, currency option and other similar financial agreements or arrangements designed to protect such Person against, or manage the exposure of such Person to, fluctuations in foreign currency exchange rates. "HOLDER" means a Person in whose name a Note is registered. "IAI GLOBAL NOTE" means the global Note substantially in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors. "INDEBTEDNESS" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (a) every obligation of such Person for money borrowed, (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services, (e) the attributable value of every Capitalized Lease Obligation of such Person, (f) all Disqualified Stock of such Person valued at its maximum fixed repurchase price, plus accrued and unpaid dividends thereon, (g) all obligations of such Person under or in respect of Hedging Obligations, and (h) every obligation of the type referred to in clauses (a) through (g) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed. For purposes of this definition, the "maximum fixed repurchase price" of any Disqualified Stock that does not have a fixed repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which Indebtedness is required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value will be determined in good faith by the board of directors of the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade accounts payable and accrued liabilities arising in the ordinary course of business and any liability for federal, state or local taxes or other taxes owed by such Person will not be considered Indebtedness for purposes of this definition. "INDENTURE" means this Indenture, as amended or supplemented from time to time. "INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a Global Note through a Participant. "INITIAL PURCHASERS" means each of Banc of America Securities LLC and First Union Securities, Inc. as initial purchasers under the Purchase Agreement dated October 25, 2001, among the Company, the Guarantors, Banc of America Securities LLC and First Union Securities, Inc. 9 "INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "INVESTMENT" in any Person means, (i) directly or indirectly, any advance, loan or other extension of credit (including, without limitation, by way of guarantee or similar arrangement) or capital contribution to such Person, the purchase or other acquisition of any stock, bonds, notes, debentures or other securities issued by such Person, the acquisition (by purchase or otherwise) of all or substantially all of the business or assets of such Person, or the making of any investment in such Person, (ii) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary and (iii) the fair market value of the Capital Stock (or any other Investment), held by the Company or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to be a Restricted Subsidiary. Investments exclude endorsements for deposit or collection in the ordinary course of business and extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. "LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "LIEN" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon, or with respect to, any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. A Person will be deemed to own subject to a Lien any property that such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "LIQUIDATED DAMAGES" means all liquidated damages then owing pursuant to Section 5 of the Registration Rights Agreement. "MINORITY INTEREST" means, with respect to any Person, interests in income of such Person's Subsidiaries held by Persons other than such Person or another Subsidiary of such Person, as reflected on such Person's consolidated financial statements. "MOODY'S" means Moody's Investors Service and any successor thereof. "NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents, including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary), net of (a) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (b) provisions for all taxes payable as a result of such Asset Sale, (c) payments made to retire Indebtedness where such Indebtedness is secured by the assets that are the subject of such Asset Sale, (d) amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in the assets that are subject to the Asset Sale 10 and (e) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the seller after such Asset Sale, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "NON-PAYMENT EVENT OF DEFAULT" means any event (other than a Payment Event of Default) the occurrence of which entitles one or more Persons to accelerate the maturity of any Designated Senior Indebtedness. "NON-RECOURSE INDEBTEDNESS" means Indebtedness of a Person (i) as to which neither the Company nor any of its Restricted Subsidiaries (other than such Person), (a) provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, agreement or instrument that would constitute Indebtedness) or (b) is directly or indirectly liable (as a guarantor or otherwise), and (ii) the obligees of which will have recourse for repayment of the principal of and interest on such Indebtedness and any fees, indemnities, expense reimbursements or other amount of whatsoever nature accrued or payable in connection with such Indebtedness solely against the assets of such Person and not against any of the assets of the Company or its Restricted Subsidiaries (other than such Person). "NON-U.S. PERSON" means a Person who is not a U.S. Person. "NOTES" means the 9-7/8% Senior Subordinated Notes due 2011 of the Company issued on the date hereof and the Exchange Notes. The Notes and the Additional Notes, if any, shall be treated as a single class for all purposes under this Indenture. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "OFFERING" means the offering of the Notes by the Company. "OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company by at least two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 13.05 hereof. "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 13.05 hereof. "PARENT" means InSight Health Services Holdings Corp., a Delaware corporation and its successors. 11 "PARI PASSU INDEBTEDNESS" means (a) with respect to the Notes, Indebtedness that ranks pari passu in right of payment to the Notes and (b) with respect to any Guarantee, Indebtedness that ranks pari passu in right of payment to such Guarantee. "PARTICIPANT" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and with respect to DTC, shall include Euroclear and Clearstream). "PERMITTED BUSINESS" means the business conducted by the Company, its Restricted Subsidiaries and Permitted Joint Ventures as of the Reference Date and any and all diagnostic imaging and information businesses that in the good faith judgment of the Board of the Company are reasonably related thereto. "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 4.09(c) hereof. "PERMITTED INVESTMENTS" means any of the following: (a) Investments in (i) United States dollars (including such dollars as are held as overnight bank deposits and demand deposits with banks), (ii) securities with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof); (iii) certificates of deposit, Euro-dollar time deposits or acceptances with a maturity of one year or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus of not less than $500,000,000; (iv) any shares of money market mutual or similar funds having assets in excess of $500,000,000; (v) repurchase obligations with a term not exceeding seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above; and (vi) commercial paper with a maturity of one year or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and having a rating (A) from Moody's of at least P-1 or (B) from S&P of at least A-1; (b) Investments by the Company or any Restricted Subsidiary in another Person, if as a result of such Investment (i) such other Person becomes a Restricted Subsidiary or (ii) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a Restricted Subsidiary; (c) Investments by the Company or a Restricted Subsidiary in the Company or a Restricted Subsidiary; (d) Investments that were in existence on the Reference Date; (e) promissory notes or other evidence of Indebtedness received as a result of Asset Sales permitted under Section 4.10 hereof; (f) loans or advances to officers, directors and employees of the Company or any of its Restricted Subsidiaries made (i) in the ordinary course of business in an amount not to exceed $5 million in the aggregate at any one time outstanding or (ii) in connection with the 12 purchase by such Persons of Equity Interests of the Parent so long as the cash proceeds of such purchase received by the Parent are contemporaneously remitted by the Parent to the Company as a capital contribution; (g) any Investment by the Company or any Restricted Subsidiary of the Company in Permitted Joint Ventures made after the Reference Date, having an aggregate fair market value, when taken together with all other Investments made pursuant to this clause (g) that are at the time outstanding, not exceeding the greater of (i) $30 million and (ii) 10% of the Consolidated Tangible Assets of the Company as of the last day of the most recent full fiscal quarter ending immediately prior to the date of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (h) any Investment by the Company or any Restricted Subsidiary in a trust, limited liability company, special purpose entity or other similar entity in connection with a Receivables Program; provided that (A) such Investment is made by a Receivables Subsidiary and (B) the only assets transferred to such trust, limited liability company, special purpose entity or other similar entity consist of Receivables and Related Assets of such Receivables Subsidiary; and (i) other Investments that do not exceed $20 million in the aggregate at any one time outstanding. "PERMITTED JOINT VENTURE" means any joint venture, partnership or other Person designated by the Board of the Company, (i) at least 20% of whose Capital Stock with voting power under ordinary circumstances to elect directors (or Persons having similar or corresponding powers and responsibilities) is at the time owned (beneficially or directly) by the Company and/or by one or more Restricted Subsidiaries of the Company and if the Company owns more than 50% of the Capital Stock of the Permitted Joint Venture, such Permitted Joint Venture is either a Restricted Subsidiary of the Company or has been designated as an Unrestricted Subsidiary of the Company in accordance with the provisions of Section 4.17 hereof, (ii) (x) if it is an Unrestricted Subsidiary, all Indebtedness of such Person is Non-Recourse Indebtedness or (y) if it is a Person other than an Unrestricted Subsidiary, either all Indebtedness of such Person is Non-Recourse Indebtedness or the only Indebtedness of such Person that is not Non-Recourse Indebtedness is Indebtedness as to which any guarantee provided by the Company or a Restricted Subsidiary complies with the provisions of Sections 4.07 and 4.09 hereof, and (iii) which is engaged in a Permitted Business; provided, that each of Berwyn Magnetic Resonance Center, LLC, Garfield Imaging Center, Ltd., Tom's River Imaging Associates, L.P., St. John's Regional Imaging Center, LLC, Dublin Diagnostic Imaging, LLC, Connecticut Lithotripsy, LLC, Northern Indiana Oncology Center of Porter Memorial Hospital, LLC, Lockport MRI, LLC, Wilkes-Barre Imaging, LLC, Sun Coast Imaging Center, LLC, Granada Hills Open MRI, LLC, Daniel Freeman MRI, LLC, InSight-Premier Health, LLC, Southern Connecticut Imaging Centers, LLC, Parkway Imaging Center, LLC, Metabolic Imaging of Kentucky, LLC, Maine Molecular Imaging, LLC, Greater Waterbury Imaging Center, L.P. and Central Maine Magnetic Imaging Associates shall be deemed to be a Permitted Joint Venture. Any such designation (other than with respect to the Persons identified in the preceding sentence) shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the 13 resolution giving effect to such designation and an officer's certificate certifying that such designation complied with the foregoing provisions. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries; provided that: (i) the principal amount of such Permitted Refinancing Indebtedness does not exceed the principal amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded plus accrued interest plus the lesser of the amount of any premium required to be paid in connection with such refinancings pursuant to the terms of such indebtedness or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing (in each case plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date not earlier than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Permitted Refinancing Indebtedness shall not include Indebtedness of a Restricted Subsidiary that refinances Indebtedness of the Company or Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor that refinances Indebtedness of a Subsidiary Guarantor. "PERSON" means any individual, corporation, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or any agency or political subdivision thereof. "PREFERRED STOCK" means, with respect to any Person, any and all shares, interests, partnership interests, participation, rights in or other equivalents (however designated) of such Person's preferred or preference stock, whether now outstanding or issued after the Closing Date, and including, without limitation, all classes and series of preferred or preference stock of such Person. "PRINCIPALS" means the Equity Sponsors and their respective Affiliates. "PRIVATE PLACEMENT LEGEND" means the legend set forth in Section 2.07(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "PUBLIC EQUITY OFFERING" means an offer and sale of Capital Stock (other than Disqualified Stock) of the Company or the Parent pursuant to a registration statement that has been declared effective by the SEC pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company). 14 "PURCHASE MONEY OBLIGATIONS" of any Person means any obligations of such Person to any seller or any other Person incurred or assumed to finance the construction and/or acquisition of real or personal property to be used in the business of such Person or any of its Subsidiaries in an amount that is not more than 100% of the cost of such property, and incurred within 90 days after the date of such construction or acquisition (excluding accounts payable to trade creditors incurred in the ordinary course of business); provided that any Lien on such Indebtedness shall not extend to any property other than the property so acquired or constructed. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "QUALIFIED EQUITY INTEREST" means any Qualified Stock and all warrants, options or other rights to acquire Qualified Stock (but excluding any debt security that is convertible into or exchangeable for Capital Stock). "QUALIFIED STOCK" of any Person means any and all Capital Stock of such Person, other than Disqualified Stock. "RECEIVABLES AND RELATED ASSETS" means accounts receivable, instruments, chattel paper, health care insurance receivables, obligations, general intangibles and other similar assets, including interest in merchandise or goods, the sale or lease of which give rise to the foregoing, related contractual rights, guarantees, insurance proceeds, collections, other related assets and proceeds of all the foregoing. "RECEIVABLES PROGRAM" means, with respect to any Person, any securitization program pursuant to which such Person pledges, sells or otherwise transfers or encumbers its Receivables and Related Assets, including a trust, limited liability company, special purpose entity or other similar entity. "RECEIVABLES SUBSIDIARY" means a Wholly Owned Subsidiary (i) created for the purpose of financing Receivables and Related Assets created in the ordinary course of business of the Company and its Subsidiaries and (ii) the sole assets of which consist of Receivables and Related Assets of the Company and its Subsidiaries and Permitted Investments. "REFERENCE DATE" means October 17, 2001. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of the Closing Date, by and among the Company, the Guarantors and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time. "REGULATION S" means Regulation S promulgated under the Securities Act. "REGULATION S GLOBAL NOTE" means a Regulation S Temporary Global Note or a Regulation S Permanent Global Note, as appropriate. "REGULATION S PERMANENT GLOBAL NOTE" means a permanent global Note in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, 15 issued in a denomination equal to the outstanding principal amount at maturity of the Regulation S Temporary Global Note upon expiration of the Restricted Period. "REGULATION S TEMPORARY GLOBAL NOTE" means a temporary global Note in the form of Exhibit A2 hereto bearing the Global Note Legend, the Private Placement Legend and the Temporary Regulation S Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount at maturity of the Notes initially sold in reliance on Rule 903 of Regulation S. "RELATED PARTY" means: (a) any controlling stockholder, partner, member, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Principal; or (b) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Principals and/or such other Persons referred to in the immediately preceding clause. "REPRESENTATIVE" means the trustee, agent or representative for any Senior Indebtedness. "RESPONSIBLE OFFICER," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. "RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the Private Placement Legend. "RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private Placement Legend. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED PERIOD" means the 40-day restricted period as defined in Regulation S. "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary other than an Unrestricted Subsidiary. Notwithstanding anything to the contrary herein or in the Notes, Toms River Imaging Associates, L.P. shall be deemed to be a Restricted Subsidiary of the Company for purposes of this Indenture and the Notes so long as the Company and the Guarantors, directly or indirectly, own at least 50% of the Voting Stock thereof. "RULE 144" means Rule 144 promulgated under the Securities Act. 16 "RULE 144A" means Rule 144A promulgated under the Securities Act. "RULE 903" means Rule 903 promulgated under the Securities Act. "RULE 904" means Rule 904 promulgated the Securities Act. "SALE AND LEASEBACK TRANSACTION" means any transaction or series of related transactions pursuant to which the Company or a Restricted Subsidiary sells or transfers any property or asset in connection with the leasing, or the resale against installment payments, of such property or asset to the seller or transferor. "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and the rules and regulations thereunder. "SENIOR BANK DEBT" means the Obligations outstanding under the Credit Agreement. "SENIOR INDEBTEDNESS" " means (i) the Senior Bank Debt and any Hedging Obligations owing by the Company or any Guarantor to any lender which is a party to the Credit Agreement (or to any Affiliate of any such lender), (ii) any other Indebtedness permitted to be incurred by the Company or any Restricted Subsidiary under the terms of this Indenture and (iii) any Indebtedness of the Parent, unless, in the case of clauses (ii) and (iii), the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to any Indebtedness for money borrowed. Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness will not include (i) Indebtedness evidenced by the Notes or the Guarantees, (ii) Indebtedness of the Company or any Guarantor that is expressly subordinated in right of payment to any Senior Indebtedness of the Company or such Guarantor or the Notes or such Guarantor's Guarantee, (iii) Indebtedness of the Company that by operation of law is subordinate to any general unsecured obligations of the Company, (iv) Indebtedness of the Company or any Guarantor to the extent incurred in violation of this Indenture, (v) any liability for federal, state or local taxes or other taxes, owed or owing by the Company or the Parent, (vi) trade account payables owed or owing by the Company or any Guarantor, (vii) amounts owed by the Company or any Guarantor for compensation to employees or for services rendered to the Company or such Guarantor, (viii) Indebtedness of the Company to any Restricted Subsidiary or any other Affiliate of the Company, (ix) Disqualified Stock of the Company or any Guarantor and (x) Indebtedness which when incurred and without respect to any election under Section 1111(b) of Title 11 of the United States Code is without recourse to the Company or any Restricted Subsidiary. "SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary of the Company that, together with its Subsidiaries, (a) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated net revenues of the Company and its Subsidiaries, (b) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the 17 Company and its Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the most recently available consolidated financial statements of the Company for such fiscal year or (c) was organized or acquired after the beginning of such fiscal year and would have been a Significant Subsidiary if it had been owned during such entire fiscal year. "S&P" means Standard & Poor's Ratings Group and any successor thereof. "STATED MATURITY" means, when used with respect to any Note or any installment of interest thereon, the date specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable and, when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness or any installment of interest thereon is due and payable. "SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or a Guarantor that is subordinated in right of payment to the Notes or the Guarantee issued by such Guarantor, as the case may be. "SUBSIDIARY" means any Person a majority of the equity ownership or Voting Stock of which is at the time owned, directly or indirectly, by the Company and/or one or more other Subsidiaries of the Company. Notwithstanding anything to the contrary herein or in the Notes, Toms River Imaging Associates, L.P. shall be deemed to be a Subsidiary of the Company for purposes of this Indenture and the Notes so long as the Company and the Guarantors, directly or indirectly, own at least 50% of the Voting Stock thereof. "SUBSIDIARY GUARANTORS" means, collectively, all Wholly Owned Restricted Subsidiaries that are incorporated in the United States or a State thereof or the District of Columbia. "TEMPORARY REGULATION S LEGEND" means the legend set forth in Section 2.07(h) hereof, which is required to be placed on the Regulation S Temporary Global Note. "TRANSACTIONS" means, collectively, (i) the merger of InSight Health Services Acquisition Corp. ("ACQUISITION CORP.") with and into the Company pursuant to an Agreement and Plan of Merger, dated as of June 29, 2001, among Acquisition Corp., the Parent and the Company, as amended, and the payment of the purchase price thereunder, (ii) the initial funding under the Credit Agreement, (iii) the equity contribution by the Equity Sponsors or their Affiliates of $98,125,216 to the Parent, (iv) the rollover of options having a net value of $1,874,784 by certain members of the Company's senior management into options of the Parent, (v) the repurchase by Acquisition Corp. of all of the Existing Notes and payment of accrued interest and tender premium thereon and (vi) the repayment of then outstanding senior debt of the Company, in each case as such transactions occurred on the Reference Date. "TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C. Sections 77aaa - 77bbbb), as in effect on the date on which this Indenture is qualified under the TIA. 18 "TRUSTEE" means State Street Bank and Trust Company, N.A., until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "UNRESTRICTED GLOBAL NOTE" means a permanent Global Note substantially in the form of Exhibit A1 attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary that is designated by the Board of the Company as an Unrestricted Subsidiary in accordance with Section 4.17 hereof and (b) any Subsidiary of an Unrestricted Subsidiary. "U.S. GOVERNMENT OBLIGATIONS" means (i) securities that are (a) direct obligations of the United States of America for the payment of which the full faith and credit of the United States of America is pledged or (b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof; and (ii) depositary receipts issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any U.S. Government Obligation which is specified in clause (i) above and held by such bank for the account of the holder of such depositary receipt, or with respect to any specific payment of principal or interest on any U.S. Government Obligation which is so specified and held, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal or interest of the U.S. Government Obligation evidenced by such depositary receipt. "U.S. PERSON" means a U.S. person as defined in Rule 902(o) under the Securities Act. "VOTING STOCK" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency). "WEIGHTED AVERAGE LIFE TO MATURITY" means, as of the date of determination with respect to any Indebtedness or Disqualified Stock, the quotient obtained by dividing (a) the sum of the products of (i) the number of years from the date of determination to the date or dates of each successive scheduled principal or liquidation value payment of such Indebtedness or 19 Disqualified Stock, respectively, multiplied by (ii) the amount of each such principal or liquidation value payment by (b) the sum of all such principal or liquidation value payments. "WHOLLY OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary, all of the outstanding Voting Stock (other than directors' qualifying shares or shares of foreign Restricted Subsidiaries required to be owned by foreign nationals pursuant to applicable law) of which is owned, directly or indirectly, by the Company. "WHOLLY OWNED SUBSIDIARY" means any Subsidiary, all of the outstanding Voting Stock (other than directors' qualifying shares or shares of foreign Subsidiaries required to be owned by foreign nationals pursuant to applicable law) of which is owned, directly or indirectly, by the Company. Section 1.02 Other Definitions.
DEFINED IN TERM SECTION "AUTHENTICATION ORDER" ................................................ 2.02 "CHANGE OF CONTROL OFFER" ............................................. 4.15 "CHANGE OF CONTROL PAYMENT" ........................................... 4.15 "CHANGE OF CONTROL PAYMENT DATE" ...................................... 4.15 "COVENANT DEFEASANCE" ................................................. 8.03 "DTC" ................................................................. 2.01 "EVENT OF DEFAULT" .................................................... 6.01 "EXCESS PROCEEDS" ..................................................... 4.10 "EXCESS PROCEEDS OFFER" ............................................... 4.10 "INCUR" ............................................................... 4.09 "LEGAL DEFEASANCE" .................................................... 8.02 "OFFER AMOUNT" ........................................................ 3.09 "OFFER PERIOD" ........................................................ 3.09 "PAYING AGENT" ........................................................ 2.04 "PAYMENT DEFAULT" ..................................................... 6.01 "PURCHASE DATE" ....................................................... 3.09 "REGISTRAR" ........................................................... 2.04 "RELATED JUDGMENT" .................................................... 13.09 "RELATED PROCEEDINGS" ................................................. 13.09 "REPURCHASE OFFER" .................................................... 3.09 "RESALE RESTRICTION TERMINATION DATE" ................................. 2.07 "RESTRICTED PAYMENTS" ................................................. 4.07 "SPECIFIED COURTS" .................................................... 13.09
20 Section 1.03 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Notes; "INDENTURE SECURITY HOLDER" means a Holder of a Note; "INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and "OBLIGOR" on the Notes means the Company and any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04 Rules of Construction. (a) Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (iii) "or" is not exclusive; (iv) words in the singular include the plural, and in the plural include the singular; (v) provisions apply to successive events and transactions; and (vi) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. 21 ARTICLE TWO THE NOTES Section 2.01 Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A1 or A2 hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be issued in registered, global form without interest coupons and only shall be in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A1 or A2 attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A1 attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.07 hereof. (c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, as custodian for The Depository Trust Company ("DTC") in New York, New York, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from Euroclear and Clearstream certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount at maturity of the Regulation S Temporary Global Note (except to the extent of any Beneficial Owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who shall take delivery of a beneficial ownership interest in a 144A Global Note bearing a Private Placement Legend, all as contemplated by Section 2.07(a)(ii) hereof), and (ii) an Officers' Certificate from the Company. Following the termination of the Restricted 22 Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. (d) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by Participants through Euroclear or Clearstream. Section 2.02 Execution and Authentication. Two Officers of the Company shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. Such signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is unlimited. The Trustee shall, upon a written order of the Company signed by two Officers of the Company (an "AUTHENTICATION ORDER") delivered to the Trustee from time to time, authenticate Notes for original issue up to the aggregate principal amount of $325 million, of which $225 million will be issued on the date of this Indenture. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.08 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.03 Methods of Receiving Payments on the Notes. If a Holder of Notes has given wire transfer instructions to the Company at least 10 Business Days before payment is due, the Company shall pay all principal, interest and 23 premium and Liquidated Damages, if any, on that Holder's Notes in accordance with those instructions. All other payments on Notes shall be made at the office or agency of the Paying Agent and Registrar within the City and State of New York unless the Company elects to make interest payments by check mailed to the Holders at their addresses set forth in the register of Holders. Payments of interest to the Trustee as Paying Agent, if the Trustee then acts as Paying Agent, with respect to any Interest Payment Date (as defined in the Notes) shall be made by the Company in immediately available funds for receipt by the Trustee one Business Day prior to the such Interest Payment Date (or in no event later than 12:30 p.m. Eastern Time on such Interest Payment Date). Section 2.04 Registrar and Paying Agent. (a) The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("REGISTRAR") and an office or agency where Notes may be presented for payment ("PAYING AGENT"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without prior notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. (b) The Company initially appoints DTC to act as Depositary with respect to the Global Notes. (c) The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. Section 2.05 Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and shall notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or one of its Subsidiaries) shall have no further liability for the money. If the Company or any of its Subsidiaries acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. 24 Section 2.06 Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). Section 2.07 Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes shall be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 90 days after the date of such notice from the Depositary; (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act; or (iii) there shall have occurred and be continuing a Default or Event of Default with respect to the Notes. Upon the occurrence of any of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.08 and 2.11 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.07 or Section 2.08 or 2.11 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.07(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.07(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery 25 thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Temporary Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.07(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.07(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.07(f) hereof, the requirements of this Section 2.07(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount at maturity of the relevant Global Notes pursuant to Section 2.07(i) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.07(b)(ii) above and the Registrar receives the following: (A) if the transferee shall take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and 26 (B) if the transferee shall take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or Regulation S Permanent Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any Holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.07(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. 27 If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any Holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or 28 (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.07(i) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.07(c) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.07(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Beneficial Interests in Regulation S Temporary Global Note to Definitive Notes. Notwithstanding Sections 2.07(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (iii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A Holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or 29 (D) the Registrar receives the following: (1) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any Holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.07(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.07(i) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.07(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.07(c)(iv) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: 30 (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, and in the case of clause (C) above, the Regulation S Global Note and in all other cases the IAI Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: 31 (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.07(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an 32 Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.07(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.07(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer shall be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer shall be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer shall be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; 33 (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not Broker-Dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. Any Notes that remain outstanding after the consummation of the Exchange Offer, and Exchange Notes issued in connection with the Exchange Offer, shall be treated as a single class of securities under this Indenture. 34 (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. Except as permitted below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: THIS NOTE AND THE GUARANTEES ENDORSED HEREON HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR THE GUARANTEES ENDORSED HEREON NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL CLOSING DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON (OR ANY PREDECESSOR OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, THE PARENT OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE (E) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, 35 CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraph (b)(iv), (c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of this Section 2.07 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.07(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. (h) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note shall bear a legend in substantially the following form: THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON. (i) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.12 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who shall take delivery thereof in the 36 form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (j) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a Holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.11, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid and legally binding obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. 37 (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.07 to effect a registration of transfer or exchange may be submitted by facsimile with the original to follow by first class mail. Section 2.08 Replacement Notes. (a) If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. (b) Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.09 Outstanding Notes. (a) The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.10 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof. (b) If a Note is replaced pursuant to Section 2.08 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser. (c) If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. (d) If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any of the foregoing) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. Section 2.10 Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the 38 purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. Section 2.11 Temporary Notes. (a) Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of Definitive Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Notes in exchange for temporary Notes. (b) Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. Section 2.12 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of canceled Notes in accordance with its procedures for the disposition of canceled securities in effect as of the date of such disposition (subject to the record retention requirement of the Exchange Act). Certification of the disposition of all canceled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.13 Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. Section 2.14 CUSIP Numbers. The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice 39 of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the "CUSIP" numbers. ARTICLE THREE REDEMPTION AND PREPAYMENT; SATISFACTION AND DISCHARGE Section 3.01 Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. Section 3.02 Selection of Notes to Be Redeemed. (a) If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. (b) The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount at maturity thereof to be redeemed. No Notes in amounts of $1,000 or less shall be redeemed in part. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.03 Notice of Redemption. (a) Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (i) the redemption date; 40 (ii) the redemption price; (iii) if any Note is being redeemed in part, the portion of the principal amount at maturity of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion of the original Note shall be issued in the name of the Holder thereof upon cancellation of the original Note; (iv) the name and address of the Paying Agent; (v) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price and become due on the date fixed for redemption; (vi) that, unless the Company defaults in making such redemption payment, interest, if any, on Notes called for redemption ceases to accrue on and after the redemption date; (vii) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (viii) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. (b) At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. The notice, if mailed in the manner provided herein shall be presumed to have been given, whether or not the Holder receives such notice. Section 3.04 Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05 Deposit of Redemption Price. (a) One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest and Liquidated Damages, if any, on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. (b) If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or 41 prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Holder in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06 Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. No Notes in denominations of $1,000 or less shall be redeemed in part. Section 3.07 Optional Redemption. (a) Except as set forth in clause (b) and (c) of this Section 3.07, the Company shall not have the option to redeem the Notes pursuant to this Section 3.07 prior to November 1, 2006. Thereafter, the Company may redeem all or a part of the Notes from time to time, upon not less than 30 days' (or, if all of the Notes are then held by an Initial Purchaser and/or any of its affiliates, 15 days) nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on November 1 of the years indicated below (subject to the right of Holders on the relevant record date to receive interest due on the related interest payment date):
YEAR PERCENTAGE ---- ---------- 2006 104.938% 2007 103.292% 2008 101.646% 2009 and thereafter 100.000%
(b) At any time prior to November 1, 2004, the Company may redeem up to 35% of the aggregate principal amount of Notes originally issued hereunder at a redemption price of 109.875% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of the initial Public Offerings; provided that (A) at least 65% of the aggregate principal amount of the Notes originally issued under this Indenture remains outstanding immediately after the occurrence of such redemption, excluding Notes held by the Parent, the Company and its Subsidiaries; and (B) the redemption must occur within 60 days of the date of the closing of such initial Public Equity Offering. 42 (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. Section 3.08 Mandatory Redemption. Except as set forth in Section 4.10 and 4.15 hereof, the Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. Section 3.09 Repurchase Offers. In the event that, pursuant to Sections 4.10 and 4.15 hereof, the Company shall be required to commence an offer to all Holders to purchase their respective Notes (a "REPURCHASE OFFER"), it shall follow the procedures specified below. The Repurchase Offer shall remain open for a period of not less than 30 and not more than 60 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than five Business Days after the termination of the Offer Period (the "PURCHASE DATE"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Sections 4.10 and 4.15 hereof (the "OFFER AMOUNT") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Repurchase Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Repurchase Offer. Upon the commencement of a Repurchase Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Repurchase Offer. The Repurchase Offer shall be made to all Holders. The notice, which shall govern the terms of the Repurchase Offer, shall state: (i) that the Repurchase Offer is being made pursuant to Section 4.10 or Section 4.15 hereof, and the length of time the Repurchase Offer shall remain open; (ii) the Offer Amount, the purchase price and the Purchase Date; (iii) that any Note not tendered or accepted for payment shall continue to accrete or accrue interest and Liquidated Damages, if any; (iv) that, unless the Company defaults in making such payment, any Note (or portion thereof) accepted for payment pursuant to the Repurchase Offer shall cease to accrete or accrue interest and Liquidated Damages, if any, after the Purchase Date; (v) that Holders electing to have a Note purchased pursuant to a Repurchase Offer may elect to have Notes purchased in integral multiples of $1,000 only; 43 (vi) that Holders electing to have a Note purchased pursuant to any Repurchase Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (vii) that Holders shall be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing its election to have such Note purchased; (viii) that, if the aggregate amount of Notes surrendered by Holders exceeds the Offer Amount, the Trustee shall select the Notes to be purchased pursuant to the terms of Section 3.02 hereof (with such adjustments as may be deemed appropriate by the Trustee so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (ix) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On the Purchase Date, the Company shall, to the extent lawful, accept for payment on a pro rata basis to the extent necessary, the Offer Amount of Notes (or portions thereof) tendered pursuant to the Repurchase Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes (or portions thereof) were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of Notes tendered by such Holder, as the case may be, and accepted by the Company for purchase, and the Company shall promptly issue a new Note. The Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount at maturity equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the respective Holder thereof. The Company shall publicly announce the results of the Repurchase Offer on the Purchase Date. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Excess Proceeds Offer. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. 44 Section 3.10 Application of Trust Money. All money deposited with the Trustee pursuant to Section 12.02 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. ARTICLE FOUR COVENANTS Section 4.01 Payment of Notes. (a) The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or one of its Subsidiaries, holds as of 1:00 p.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. (b) The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest, and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02 Maintenance of Office or Agency. (a) The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee or an agent of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. (b) The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain 45 an office or agency in the Borough of Manhattan, The City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. (c) The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.04 of this Indenture. Section 4.03 Reports. (a) Whether or not the Company is required to file reports with the SEC, so long as any Notes are outstanding, the Company will file with the SEC, within the time periods specified in the SEC's rules and regulations, all such annual reports, quarterly reports and other documents that the Company would be required to file if it were subject to Section 13(a) or 15(d) under the Exchange Act. The Company will also be required (i) to supply to the Trustee and each Holder, or supply to the Trustee for forwarding to each such Holder, without cost to such Holder, copies of such reports and other documents within 15 days after the date on which the Company files such reports and documents with the SEC or the date on which the Company would be required to file such reports and documents if the Company were so required and (ii) if filing such reports and documents with the SEC is not accepted by the SEC or is prohibited under the Exchange Act, to supply at the Company's cost copies of such reports and documents to any prospective Holder promptly upon written request. In addition, the Company has agreed that, for so long as any Notes remain outstanding, it will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information specified in Rule 144A(d)(4) under the Securities Act. (b) Notwithstanding subsection (a) above, so long as the Parent guarantees the Notes, the reports, information and other documents required to be filed and provided as described above may be those of the Parent, rather than the Company, so long as such filings (i) would satisfy the requirements of the Exchange Act and the regulations promulgated thereunder and (ii) disclose the Company's results of operations and financial condition in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in at least such detail as would be required if the Company were filing such report. Section 4.04 Compliance Certificate. (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge, the Company has kept, observed, performed and fulfilled its obligations under this Indenture and is not in default in the performance or observance of any of the material terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred and be continuing, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her 46 knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) If required under Section 314(a) of the Trust Indenture Act, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (which shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article Four or Article Five hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05 Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, any material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. Section 4.06 Stay, Extension and Usury Laws. The Company and each of the Guarantors covenant (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant that they shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. Section 4.07 Restricted Payments. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, take any of the following actions: (i) declare or pay any dividend on, or make any distribution to holders of, any shares of the Capital Stock of the Company or any Restricted Subsidiary, other than (i) dividends or distributions payable solely in Qualified Equity Interests or (ii) dividends or distributions by a Restricted Subsidiary payable to the Company or a Wholly Owned 47 Restricted Subsidiary or to all holders of Capital Stock of such Restricted Subsidiary on a pro rata basis; (ii) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any shares of Capital Stock, or any options, warrants or other rights to acquire such shares of Capital Stock, of the Company, any direct or indirect parent of the Company or any Subsidiary of the Company (other than a Wholly Owned Restricted Subsidiary); (iii) make any principal payment on, or repurchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, sinking fund payment or maturity, any Subordinated Indebtedness; and (iv) make any Investment (other than a Permitted Investment) in any Person (such payments or other actions described in (but not excluded from) clauses (a) through (d) being referred to as "RESTRICTED PAYMENTS"), unless at the time of, and immediately after giving effect to, the proposed Restricted Payment: (i) no Default or Event of Default has occurred and is continuing; (ii) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a); and (iii) the aggregate amount of all Restricted Payments made after the Reference Date does not exceed the sum of: (A) 50% of the aggregate Consolidated Net Income of the Company during the period (taken as one accounting period) from the first day of the Company's first fiscal quarter commencing after the Closing Date to the last day of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Net Income is a loss, minus 100% of such amount); plus (B) 100% of the aggregate net cash proceeds received by the Company after the Reference Date as a capital contribution or from the issuance or sale (other than to a Subsidiary) of either (1) Qualified Equity Interests of the Company or (2) debt securities or Disqualified Stock that have been converted into or exchanged for Qualified Stock of the Company, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange. (b) Notwithstanding the foregoing, the Company and its Restricted Subsidiaries may take the following actions, so long as no Default or Event of Default has occurred and is continuing or would occur: 48 (i) the payment of any dividend within 60 days after the date of declaration thereof, if at the declaration date such payment would not have been prohibited by the foregoing provisions; (ii) the repurchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company, in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, Qualified Equity Interests of the Company or of the Parent, the proceeds of which are contributed to the Company as a capital contribution on a substantially concurrent basis; (iii) the purchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, shares of Qualified Equity Interests of the Company or of the Parent, the proceeds of which are contributed to the Company as a capital contribution on a substantially concurrent basis; (iv) the purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Indebtedness in exchange for, or out of the net cash proceeds of a substantially concurrent issuance or sale (other than to a Subsidiary) of, Subordinated Indebtedness, so long as the Company or a Restricted Subsidiary would be permitted to refinance such original Subordinated Indebtedness with such new Subordinated Indebtedness pursuant to clause (iv) of the definition of Permitted Indebtedness; (v) the repurchase of any Subordinated Indebtedness at a purchase price not greater than 101% of the principal amount of such Subordinated Indebtedness in the event of a Change of Control in accordance with provisions similar to Section 4.15 hereof; provided that prior to or simultaneously with such repurchase, the Company has made the Change of Control Offer as provided in Section 4.15 hereof with respect to the Notes and has repurchased all Notes validly tendered for payment in connection with such Change of Control Offer; (vi) the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Company, options on any such shares or related stock appreciation rights or similar securities, or any dividend, distribution or advance to the Parent for the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Parent, options on any such shares or related stock appreciation rights or similar securities, in each case held by officers, directors or employees or former officers, directors or employees (or their estates or beneficiaries under their estates) of the Company, the Parent or any Subsidiary of the Company, as applicable, or by any employee benefit plan of the Company, the Parent or any Subsidiary of the Company, as applicable, upon death, disability, retirement or termination of employment or pursuant to the terms of any employee benefit plan or any other agreement under which such shares of stock or related rights were issued; provided that the aggregate amount of cash applied by the Company for such purchase, redemption, acquisition, cancellation or other retirement of such shares of Capital Stock of the Company or the Parent after the Reference Date does not exceed $7.5 million in the aggregate (excluding for purposes of calculating such amount the aggregate amount 49 received by any Person in connection with such purchase, redemption, acquisition, cancellation or other retirement of such shares that is concurrently used to repay loans made to such Person by the Company pursuant to clause (f) of the definition of "Permitted Investment"); (vii) the payment of dividends or other distributions or the making of loans or advances to the Parent in amounts required for the Parent to pay franchise taxes and other fees required to maintain its existence and provide for all other customary operating costs of the Parent to the extent attributable to the ownership and operation of the Company and its Restricted Subsidiaries, including, without limitation, in respect of director fees and expenses, administrative, legal and accounting services provided by third parties and other customary costs and expenses including all costs and expenses with respect to filings with the SEC; (viii) the payment of dividends or other distributions by the Company to the Parent in amounts required to pay the tax obligations of the Parent attributable to the Company and its Subsidiaries, determined as if the Company and its Subsidiaries had filed a separate consolidated, combined or unitary return for the relevant taxing jurisdiction; provided that (x) the amount of dividends paid pursuant to this clause (viii) to enable the Parent to pay Federal and state income taxes (and franchise taxes based on income) at any time shall not exceed the amount of such Federal and state income taxes (and franchise taxes based on income) actually owing by the Parent at such time to the respective tax authorities for the respective period and (y) any refunds received by the Parent attributable to the Company or any of its Restricted Subsidiaries shall promptly be remitted by the Parent to the Company through a contribution or purchase of common stock (other than Disqualified Stock) of the Company; (ix) the payment of dividends or other distributions or the making of loans or advances to the Parent in amounts required for the Parent to pay to the Equity Sponsors an annual amount not to exceed $500,000 for payment of management consulting or financial advisory services provided to the Company or any of the Subsidiaries; and (x) other Restricted Payments not to exceed $10 million at any one time outstanding. (b) The actions described in clauses (v), (vi), (vii), (viii), (ix) and (x) of Section 4.07(b) will be Restricted Payments that will be permitted to be taken in accordance with this Section 4.07 but will reduce the amount that would otherwise be available for Restricted Payments under clause (iv)(iii) of Section 4.07(a) hereof and the actions described in clauses (i), (ii), (iii) and (iv) of Section 4.07(b) will be Restricted Payments that will be permitted to be taken in accordance with this Section 4.07 and will not reduce the amount that would otherwise be available for Restricted Payments under clause (iv)(iii) of Section 4.07(a) hereof. For the purpose of making any calculations under this Indenture (i) if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will be deemed to have made an Investment in an amount equal to the greater of the fair market value or net book value of the net assets of such Restricted Subsidiary at the time of such designation as determined by the 50 Board of the Company, and (ii) any property transferred to or from an Unrestricted Subsidiary will be valued at fair market value at the time of such transfer, as determined by the Board of the Company. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of the Company whose resolution with respect thereto shall be delivered to the Trustee, such determination to be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $10 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required under this Section 4.07 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. If the aggregate amount of all Restricted Payments calculated under the foregoing provision includes an Investment in an Unrestricted Subsidiary or other Person that thereafter becomes a Restricted Subsidiary, the aggregate amount of all Restricted Payments calculated under the foregoing provision will be reduced by the lesser of (x) the net asset value of such Subsidiary at the time it becomes a Restricted Subsidiary and (y) the initial amount of such Investment. If an Investment resulted in the making of a Restricted Payment, the aggregate amount of all Restricted Payments calculated under the foregoing provision will be reduced by the amount of any net reduction in such Investment (resulting from the payment of interest or dividends, loan repayment, transfer of assets or otherwise, other than the redesignation of an Unrestricted Subsidiary or other Person as a Restricted Subsidiary), to the extent such net reduction is not included in the Company's Consolidated Net Income; provided that the total amount by which the aggregate amount of all Restricted Payments may be reduced may not exceed the lesser of (x) the cash proceeds received by the Company and its Restricted Subsidiaries in connection with such net reduction and (y) the initial amount of such Investment. In computing the Consolidated Net Income of the Company for purposes of Section 4.07(a)(iv)(iii)(A) hereof, (i) the Company may use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (ii) the Company will be permitted to rely in good faith on the financial statements and other financial data derived from its books and records that are available on the date of determination. If the Company makes a Restricted Payment that, at the time of the making of such Restricted Payment, would in the good faith determination of the Company be permitted under the requirements of this Indenture, such Restricted Payment will be deemed to have been made in compliance with this Indenture notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Net Income of the Company for any period. 51 Section 4.08 Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to (i) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock, (ii) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (iii) make loans or advances to the Company or any other Restricted Subsidiary or (iv) transfer any of its properties or assets to the Company or any other Restricted Subsidiary. (b) However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (i) any agreement (including the Credit Agreement) in effect on the Reference Date; (ii) customary non-assignment provisions of any lease, license or other contract entered into in the ordinary course of business by the Company or any Restricted Subsidiary; (iii) the refinancing or successive refinancing of Indebtedness incurred under the agreements (including the Credit Agreement) in effect on the Reference Date, so long as such encumbrances or restrictions are no more restrictive, taken as a whole, than those contained in such original agreement; (iv) any agreement or other instrument of a Person acquired by the Company or any Restricted Subsidiary in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; (v) purchase money obligations for acquired property permitted under Section 4.09 hereof that impose restrictions of the nature described in clause (iv) of Section 4.08(a) hereof on the property so acquired; (vi) any agreement for the sale of a Restricted Subsidiary or an asset that restricts distributions by that Restricted Subsidiary or transfers of such asset pending its sale; (vii) secured Indebtedness otherwise permitted to be incurred pursuant to Section 4.12 hereof that limits the right of the debtor to dispose of the assets securing such Indebtedness; (viii) restrictions on cash or other deposits or net worth imposed by leases entered into in the ordinary course of business; (ix) Non-Recourse Indebtedness of any Permitted Joint Venture permitted to be incurred under this Indenture; 52 (x) applicable law or regulation; (xi) a Receivables Program with respect to a Receivables Subsidiary; and (xii) customary provisions in joint venture, limited liability company operating, partnership, shareholder and other similar agreements entered into in the ordinary course of business reasonably consistent with past practice by the Company or any Restricted Subsidiary. Section 4.09 Incurrence of Indebtedness and Issuance of Disqualified Stock. (a) The Company will not, and will not permit any Restricted Subsidiary to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "INCUR"), any Indebtedness (including Acquired Indebtedness and the issuance of Disqualified Stock), except that the Company and any Subsidiary Guarantors may incur Indebtedness if, at the time of such event, the Fixed Charge Coverage Ratio for the immediately preceding four full fiscal quarters for which internal financial statements are available, taken as one accounting period, would have been equal to at least 2.0 to 1.0. (b) In making the foregoing calculation for any four-quarter period that includes the Reference Date, pro forma effect will be given to the Transactions, as if such transactions had occurred at the beginning of such four-quarter period. In addition (but without duplication), in making the foregoing calculation, pro forma effect will be given to: (i) the incurrence of such Indebtedness and (if applicable) the application of the net proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was incurred and the application of such proceeds occurred at the beginning of such four-quarter period; (ii) the incurrence, repayment or retirement of any other Indebtedness by the Company or its Restricted Subsidiaries since the first day of such four-quarter period as if such Indebtedness was incurred, repaid or retired at the beginning of such four-quarter period; and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred at the beginning of such four-quarter period. In making a computation under the foregoing clause (i) or (ii), (A) the amount of Indebtedness under a revolving credit facility will be computed based on the average daily balance of such Indebtedness during such four-quarter period, (B) if such Indebtedness bears, at the option of the Company, a fixed or floating rate of interest, interest thereon will be computed by applying, at the option of the Company, either the fixed or floating rate, and (C) the amount of any Indebtedness that bears interest at a floating rate will be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any 53 Hedging Obligations applicable to such Indebtedness if such Hedging Obligations have a remaining term at the date of determination in excess of 12 months). (c) Notwithstanding the foregoing, the Company may, and may permit its Restricted Subsidiaries to, incur the following Indebtedness ("PERMITTED INDEBTEDNESS"): (i) Indebtedness of the Company or any Subsidiary Guarantor under the Credit Agreement (and the incurrence by any Guarantor of guarantees thereof) in an aggregate principal amount at any one time outstanding not to exceed $375 million, less any amounts applied to the permanent reduction of such credit facilities pursuant to the provisions of Section 4.10 hereof; (ii) Indebtedness represented by the Notes (other than the Additional Notes) and the Guarantees; (iii) Existing Indebtedness; (iv) the incurrence by the Company of Permitted Refinancing Indebtedness in exchange for, or the net cash proceeds of which are used to refund, refinance or replace, any Indebtedness that is permitted to be incurred under clause (ii) or (iii) above; (v) Indebtedness owed by the Company to any Restricted Subsidiary or owed by any Restricted Subsidiary to the Company or a Restricted Subsidiary (provided that such Indebtedness is held by the Company or such Restricted Subsidiary); provided that: (A) any Indebtedness of the Company or any Subsidiary Guarantor owing to any such Restricted Subsidiary is unsecured and subordinated in right of payment from and after such time as the Notes shall become due and payable (whether at Stated Maturity, acceleration, or otherwise) to the payment and performance of the Company's obligations under the Notes or the Subsidiary Guarantor's obligations under its Guarantee, as the case may be; and (B) (x) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (y) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof, shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (v); (vi) Indebtedness of the Company or any Restricted Subsidiary under Hedging Obligations incurred in the ordinary course of business; (vii) Indebtedness of the Company or any Restricted Subsidiary consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock; 54 (viii) either (A) Capitalized Lease Obligations of the Company or any Restricted Subsidiary or (B) Indebtedness under purchase money mortgages or secured by purchase money security interests so long as (x) such Indebtedness is not secured by any property or assets of the Company or any Restricted Subsidiary other than the property and assets so acquired and (y) such Indebtedness is created within 90 days of the acquisition of the related property; provided that the aggregate amount of Indebtedness under clauses (A) and (B) does not exceed 15% of Consolidated Tangible Assets at any one time outstanding; (ix) Guarantees by any Restricted Subsidiary made in accordance with the provisions of Section 4.19 hereof; (x) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within two business days of incurrence; (xi) Indebtedness of the Company or any of its Restricted Subsidiaries represented by letters of credit for the account of the Company or such Restricted Subsidiary, as the case may be, in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; (xii) the incurrence of Non-Recourse Indebtedness by Permitted Joint Ventures that are Restricted Subsidiaries; (xiii) Indebtedness incurred by a Receivables Subsidiary pursuant to a Receivables Program; provided that, after giving effect to any such incurrence of Indebtedness, the aggregate principal amount of all Indebtedness incurred under this clause (xiii) and then outstanding does not exceed $30 million; and (xiv) Indebtedness of the Company, any Restricted Subsidiary or any Permitted Joint Venture not permitted by any other clause of this definition, in an aggregate principal amount not to exceed $30 million at any one time outstanding. (d) For purposes of determining compliance with this Section 4.09, in the event that any proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (i) through (xiv) above, or is entitled to be incurred pursuant to Section 4.09(a) hereof, the Company will be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this Section 4.09. Indebtedness under the Credit Agreement incurred on the Reference Date shall be deemed to have been incurred on the Reference Date in reliance on the exception provided by clause (i) of the definition of Permitted Indebtedness. 55 Section 4.10 Asset Sales. (a) The Company will not, and will not permit any Restricted Subsidiary to, engage in any Asset Sale unless (i) the consideration received by the Company or such Restricted Subsidiary for such Asset Sale is not less than the fair market value of the assets sold evidenced by a resolution of the board of directors of such entity set forth in an Officers' Certificate delivered to the Trustee and (ii) the consideration received by the Company or the relevant Restricted Subsidiary in respect of such Asset Sale consists of at least 75% cash or Cash Equivalents (for purposes of this clause (ii), cash and Cash Equivalents includes (1) any liabilities (as reflected in the Company's consolidated balance sheet) of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Note Guarantee) that are assumed by any transferee of any such assets or other property in such Asset Sale, and where the Company or the relevant Restricted Subsidiary is released from any further liability in connection therewith with respect to such liabilities, (2) any securities, notes or other similar obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted within 180 days of the consummation of the related Asset Sale by the Company or such Restricted Subsidiary into cash and Cash Equivalents (to the extent of the net cash proceeds or the Cash Equivalents (net of related costs) received upon such conversion) and (3) any Designated Noncash Consideration received by the Company or any such Restricted Subsidiary in the Asset Sale having an aggregate fair market value, as determined by the Board of the Company, taken together with all other Designated Noncash Consideration received pursuant to this clause that is at that time outstanding, not to exceed the greater of: (A) $10 million; and (B) 15% of Consolidated Tangible Assets at the time of the receipt of such Designated Noncash Consideration (with the fair market value of each item of such Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value). (b) If the Company or any Restricted Subsidiary engages in an Asset Sale, the Company may, at its option, within 12 months after such Asset Sale, (i) apply all or a portion of the Net Cash Proceeds to the permanent reduction of amounts outstanding under the Credit Agreement (and to correspondingly reduce the commitments, if any, with respect thereto) or to the permanent repayment of other Senior Indebtedness of the Company or a Restricted Subsidiary, provided that the repayment of any Indebtedness incurred under the Credit Agreement in connection with the acquisition of any Facility with the proceeds of any subsequent Sale and Leaseback Transaction relating to such Facility shall not be required to result in the permanent reduction of the amounts outstanding under the Credit Agreement or correspondingly permanently reduce the commitments thereunder, or (ii) invest (or enter into a legally binding agreement to invest) all or a portion of such Net Cash Proceeds in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in the businesses of the Company or its Restricted Subsidiaries, as the case may be, existing on the Reference Date or in businesses the same, similar or reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, the Company may, within 90 days of such termination or within 12 months of such 56 Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical contained in such clause (ii)) above. Pending the final application of any such Net Cash Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Cash Proceeds in a manner that is not prohibited by this Indenture. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph shall constitute "EXCESS PROCEEDS". (c) When the aggregate amount of Excess Proceeds exceeds $10 million, the Company will, within 30 days thereafter, make an offer to purchase (an "EXCESS PROCEEDS OFFER") from all Holders of Notes on a pro rata basis, in accordance with the procedures set forth in this Indenture, the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased with the Excess Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued interest and Liquidated Damages, if any, to the date such offer to purchase is consummated. To the extent that the aggregate principal amount of Notes tendered pursuant to such offer to purchase is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the Notes to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset to zero. Section 4.11 Transactions with Affiliates. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or suffer to exist any transaction with, or for the benefit of, any Affiliate of the Company ("Interested Persons"), unless (i) such transaction is on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could have been obtained in an arm's-length transaction with third parties who are not Interested Persons and (ii) the Company delivers to the Trustee (x) with respect to any transaction or series of related transactions entered into after the Reference Date involving aggregate payments in excess of $5 million, a resolution of the Company's Board set forth in an officers' certificate certifying that such transaction or transactions complies with clause (i) above and that such transaction or transactions have been approved by the Board (including a majority of the Disinterested Directors) of the Company and (y) with respect to a transaction or series of related transactions involving aggregate payments equal to or greater than $10 million, a written opinion as to the fairness to the Company or such Restricted Subsidiary of such transaction or series of transactions from a financial point of view issued by an accounting, appraisal or investment banking firm, in each case of national standing. (b) The foregoing Section 4.11(a) will not restrict: (i) transactions among the Company and/or its Restricted Subsidiaries; (ii) the Company from paying reasonable and customary regular compensation, indemnification, reimbursement and fees to officers of the Company or any Restricted Subsidiary and to directors of the Company or any Restricted Subsidiary who are not employees of the Company or any Restricted Subsidiary; 57 (iii) transactions permitted by Section 4.07; (iv) advances to employees for moving, entertainment and travel expenses and similar expenditures in the ordinary course of business and consistent with past practice; (v) any Receivables Program of the Company or a Restricted Subsidiary; (vi) the agreements listed on Schedule II to this Indenture, in each case as in effect as of the Reference Date or any amendment thereto (so long as the amended agreement is not more disadvantageous to the Holders of the Notes in any material respect than such agreement immediately prior to such amendment) or any transaction contemplated thereby; and (vii) sales of Equity Interests to Affiliates. Section 4.12 Liens. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Pari Passu Indebtedness or Subordinated Indebtedness of the Company on or with respect to any of its property or assets, including any shares of stock or Indebtedness of any Restricted Subsidiary, whether owned at the Closing Date or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless: (i) in the case of any Lien securing Subordinated Indebtedness, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien; and (ii) in the case of any Lien securing Pari Passu Indebtedness, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to or ranks equally with such Lien. (b) The Company will not permit any Subsidiary Guarantor to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Pari Passu Indebtedness or Subordinated Indebtedness of such Subsidiary Guarantor on or with respect to such Subsidiary Guarantor's properties or assets, including any shares of stock or Indebtedness of any other Restricted Subsidiary, whether owned at the date of this Indenture or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless: (i) in the case of any Lien securing Pari Passu Indebtedness of such Subsidiary Guarantor, each Guarantee of such Subsidiary Guarantor is secured by a Lien on such property, assets or proceeds that is senior in priority to or ranks equally with such Lien; and (ii) in the case of any Lien securing Subordinated Indebtedness of such Subsidiary Guarantor, each Guarantee of such Subsidiary Guarantor is secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien. 58 Section 4.13 Corporate Existence. Subject to Article Five, the Parent and the Company will do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence, rights (charter and statutory) and franchises of the Parent, the Company and each Subsidiary; provided that the Company shall not be required to preserve any such right or franchise if the Board shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries as a whole and that the loss thereof is not disadvantageous in any material respect to the Holders. Section 4.14 Limitation on Layering Debt. Neither the Company nor any Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness or guarantee, as applicable, that is subordinate or junior in right of payment to any Senior Indebtedness and senior in any respect in right of payment to the Notes or such Guarantor's Guarantee, respectively. Section 4.15 Offer to Repurchase upon a Change of Control. (a) Upon the occurrence of a Change of Control, each Holder shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "CHANGE OF CONTROL OFFER") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "CHANGE OF CONTROL PAYMENT"). Within 30 days following any Change of Control, the Company shall notify the Trustee thereof and mail a notice, by first-class mail, postage prepaid, to each Holder, describing the transaction or transactions that constitute the Change of Control and stating (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed or such later date as is necessary to comply with the requirements under the Exchange Act (the "CHANGE OF CONTROL PAYMENT DATE"); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing its election to have the Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company shall comply with the requirements of Rule 14e-1 under 59 the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture relating to such Change of Control Offer, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof. (b) By 2:00 p.m. Eastern Time on the Change of Control Payment Date, the Company shall, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. (c) Notwithstanding anything to the contrary in this Section 4.15, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 and Section 3.09 hereof and all other provisions of this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. Section 4.16 Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries. The Company (a) will not permit any Restricted Subsidiary to issue any Capital Stock unless after giving effect thereto the Company's percentage interest (direct and indirect) in the Capital Stock of such Restricted Subsidiary is at least equal to its percentage interest prior thereto, and (b) will not, and will not permit any Restricted Subsidiary to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Restricted Subsidiary to any Person (other than the Company or a Wholly Owned Restricted Subsidiary); provided that this covenant will not prohibit (i) the sale or other disposition of all, but not less than all, of the issued and outstanding Capital Stock of a Restricted Subsidiary owned by the Company and its Restricted Subsidiaries in compliance with the other provisions of this Indenture, (ii) the sale or other disposition of a portion of the issued and outstanding Capital Stock of a Restricted Subsidiary (other than a Subsidiary Guarantor) whether or not as a result of such sale or disposition such Restricted Subsidiary continues or ceases to be a Restricted Subsidiary if (A) at the time of such sale or disposition, the Company could make an Investment in the remaining Capital Stock held by it or one of its Restricted Subsidiaries in an amount equal to the amount of its remaining Investment in such Person pursuant to Section 4.07 hereof and (B) such sale or disposition is permitted under, and the Company or such Restricted Subsidiary applies the Net Cash Proceeds of any such sale in accordance with, Section 4.10 hereof, or (iii) the ownership by directors of director's qualifying shares or the ownership by foreign nationals of Capital Stock of any Restricted Subsidiary, to the extent mandated by applicable law. The Company will not permit 60 any Restricted Subsidiary to issue any Preferred Stock other than to the Company or any Subsidiary Guarantor. Section 4.17 Designation of Restricted and Unrestricted Subsidiaries. (a) The Board of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as (i) such Subsidiary has no Indebtedness other than Non-Recourse Indebtedness, (ii) no default with respect to any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Indebtedness of the Company or any Restricted Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity, (iii) any Investment in such Subsidiary made as a result of designating such Subsidiary an Unrestricted Subsidiary will not violate the provisions of Section 4.07 hereof, (iv) neither the Company nor any Restricted Subsidiary has a contract, agreement, arrangement, understanding or obligation of any kind, whether written or oral, with such Subsidiary other than those that might be obtained at the time from Persons who are not Affiliates of the Company, (v) neither the Company nor any Restricted Subsidiary has any obligation to subscribe for additional shares of Capital Stock or other equity interests in such Subsidiary, or to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results, and (vi) such Unrestricted Subsidiary has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Notwithstanding the foregoing, the Company may not designate any Subsidiary Guarantor (whether or not existing as of the Closing Date) as an Unrestricted Subsidiary. (b) The Board of the Company may designate any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) no Default or Event of Default has occurred and is continuing following such designation and (ii) the Company could, at the time of making such designation and giving such pro forma effect as if such designation had been made at the beginning of the applicable four quarter period, incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) (treating any Indebtedness of such Unrestricted Subsidiary as the incurrence of Indebtedness by a Restricted Subsidiary). Section 4.18 Payments for Consent. Neither the Company nor any of its Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. 61 Section 4.19 Limitations on Issuances of Guarantees of Indebtedness. (a) The Company will not permit any Restricted Subsidiary that is not a Subsidiary Guarantor, directly or indirectly, to guarantee, assume or in any other manner become liable for the payment of any Indebtedness of the Company or any Indebtedness of any other Restricted Subsidiary, unless (i) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture providing for a guarantee of payment of the Notes by such Restricted Subsidiary on a senior subordinated basis on the same terms as set forth in this Indenture and (ii) with respect to any guarantee of Subordinated Indebtedness by a Restricted Subsidiary, any such guarantee is subordinated to such Restricted Subsidiary's guarantee with respect to the Notes at least to the same extent as such Subordinated Indebtedness is subordinated to the Notes, provided that the foregoing provision will not be applicable to any guarantee by any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary. (b) Any guarantee by a Restricted Subsidiary of the Notes pursuant to the preceding paragraph may provide by its terms that it will be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer to any Person not an Affiliate of the Company of all of the Company's and the Restricted Subsidiaries' Capital Stock in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by this Indenture) or (ii) the release or discharge of the guarantee that resulted in the creation of such guarantee of the Notes, except a discharge or release by or as a result of payment under such guarantee. Section 4.20 Additional Guarantees. The Company shall provide to the Trustee, on the date that any Person (other than a Foreign Subsidiary) becomes a Wholly Owned Restricted Subsidiary, a supplemental indenture to this Indenture, executed by such new Wholly Owned Restricted Subsidiary, providing for a full and unconditional guarantee on a senior subordinated basis by such new Wholly Owned Restricted Subsidiary of the Company's obligations under the Notes and this Indenture to the same extent as that set forth in this Indenture. ARTICLE FIVE SUCCESSORS Section 5.01 Merger, Consolidation or Sale of Assets. (a) Neither the Parent nor the Company will, in a single transaction or series of related transactions, consolidate or merge with or into (whether or not the Parent or the Company, as the case may be, is the surviving corporation), or directly and/or indirectly through its Subsidiaries, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets (determined on a consolidated basis for the Parent or the Company, as the case may be, and its Subsidiaries taken as a whole) in one or more related transactions to, another corporation, Person or entity unless: 62 (i) either (i) the Company or the Parent, as the case may be, is the surviving corporation or (ii) the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (the "SURVIVING ENTITY") is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia and assumes all the obligations of the Company or the Parent, as the case may be, under the Notes and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (ii) immediately after giving effect to such transaction and treating any obligation of the Company in connection with or as a result of such transaction as having been incurred as of the time of such transaction, no Default or Event of Default has occurred and is continuing; (iii) if such transaction involves the Company, the Company (or the Surviving Entity if the Company is not the continuing obligor under this Indenture) could, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant Section 4.09(a); (iv) each Guarantor, unless it is the other party to the transaction described above, has by supplemental indenture confirmed that its Guarantee applies to the Surviving Entity's obligations under this Indenture and the Notes; (v) if any of the property or assets of the Company or any of its Restricted Subsidiaries would thereupon become subject to any Lien, the provisions of Section 4.12 hereof are complied with; and (vi) the Company or the Parent, as the case may be, delivers or causes to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such transaction complies with the requirements of this Indenture. (b) No Subsidiary Guarantor shall consolidate with or merge with or into any other Person or convey, sell, assign, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any other Person (other than the Company or another Subsidiary Guarantor) unless: (i) subject to the provisions of the following paragraph, the Person formed by or surviving such consolidation or merger (if other than such Subsidiary Guarantor) or to which such properties and assets are transferred assumes all of the obligations of such Subsidiary Guarantor under this Indenture and its Guarantee, pursuant to a supplemental indenture in form and substance satisfactory to the Trustee; (ii) immediately after giving effect to such transaction, no Default or Event of Default has occurred and is continuing; and 63 (iii) the Subsidiary Guarantor delivers, or causes to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such transaction complies with the requirements of this Indenture. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. (c) In the event of any transaction described in and complying with the provisions of Section 5.01(a) in which the Company is not the continuing obligor under this Indenture, the Surviving Entity will succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, and thereafter the Company will, except in the case of a lease, be discharged from all of its obligations under this Indenture and the Notes. ARTICLE SIX DEFAULTS AND REMEDIES Section 6.01 Events of Default. "EVENT OF DEFAULT", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes (whether or not prohibited by Article Ten of this Indenture); (ii) default in payment when due of the principal of (or premium, if any, on) the Notes (whether or not prohibited by Article Ten of this Indenture); (iii) failure by the Parent or the Company, as applicable, or any of their Restricted Subsidiaries to comply with the provisions of Sections 4.07, 4.09, 4.10, 4.15 and 5.01; (iv) default in the performance, or breach, of any covenant or agreement of the Company or any Guarantor contained in this Indenture or in any Guarantee (other than a default in the performance, or breach, of a covenant or agreement that is specifically dealt with elsewhere herein), and continuance of such default or breach for a period of 60 days after written notice has been given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; 64 (v) (x) an event of default has occurred under any mortgage, bond, indenture, loan agreement or other document evidencing an issue of Indebtedness of the Company, the Parent or any Restricted Subsidiary, which issue individually or in the aggregate has an aggregate outstanding principal amount of not less than $10 million, and such default has resulted in such Indebtedness becoming, whether by declaration or otherwise, due and payable prior to the date on which it would otherwise become due and payable or (y) a default (a "PAYMENT DEFAULT") in any payment when due at final maturity of any such Indebtedness; (vi) failure by the Company, the Parent or any of its Restricted Subsidiaries to pay one or more final judgments the uninsured portion of which exceeds in the aggregate $10 million, which judgment or judgments are not paid, discharged or stayed for a period of 60 days; (vii) any Guarantee ceases to be in full force and effect or is declared null and void or any such Guarantor denies that it has any further liability under any Guarantee, or gives notice to such effect (other than by reason of the termination of this Indenture or the release of any such Guarantee in accordance with this Indenture); (viii) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Company, the Parent or any Significant Subsidiary a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustments or composition of or in respect of the Company, the Parent or any Significant Subsidiary under any Bankruptcy Law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company, the Parent or any Significant Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or (ix) the institution by the Company, the Parent or any Significant Subsidiary of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any Bankruptcy Law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company, the Parent or any Significant Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due. Section 6.02 Acceleration. (a) If an Event of Default (other than as specified in Section 6.01(viii) or (ix) hereof) occurs and is continuing, the Trustee or the Holders of not less than 25% in aggregate principal amount of then outstanding Notes may, and the Trustee at the request of such Holders will, declare the principal of, and accrued interest on, all of the outstanding Notes immediately due and payable and, upon any such declaration, such principal and such interest will become 65 due and payable immediately. The Trustee shall promptly notify the Company of any such acceleration of the Notes pursuant to this Section 6.02(a). If an Event of Default specified in Section 6.01(viii) or (ix) hereof occurs and is continuing, then the principal of and accrued interest on all of the outstanding Notes will ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. (b) At any time after a declaration of acceleration under this Indenture, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the holders of a majority in aggregate principal amount of the outstanding Notes, by written notice to the Company and the Trustee, may rescind such declaration and its consequences if: (i) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on, and Liquidate Damages with respect to, all Notes, (B) all unpaid principal of (and premium, if any, on) any outstanding Notes that has become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Notes, (C) to the extent that payment of such interest is lawful, interest upon overdue interest and overdue principal at the rate borne by the Notes and (D) all sums paid or advanced by the Trustee under this Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (ii) all Events of Default, other than the non-payment of amounts of principal of (or premium, if any, on), interest on or Liquidated Damages with respect to, the Notes that have become due solely by such declaration of acceleration, have been cured or waived. No such rescission will affect any subsequent default or impair any right consequent thereon. (c) Notwithstanding the preceding paragraph, in the event of a declaration of acceleration in respect of the Notes because an Event of Default specified in Section 6.01(v) shall have occurred and be continuing and provided no judgment or decree for payment of the money due has been obtained by the Trustee, such declaration of acceleration shall be automatically annulled if the Indebtedness that is the subject of such Event of Default has been discharged or the holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness, and written notice of such discharge or rescission, as the case may be, shall have been given to the Trustee by the Company and countersigned by the holders of such Indebtedness or a trustee, fiduciary or agent for such holders, within 30 days after such declaration of acceleration in respect of the Notes, and no other Event of Default has occurred during such 30-day period which has not been cured or waived during such period. Section 6.03 Other Remedies. (a) If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, interest, and Liquidated Damages, if any, with respect to, the Notes or to enforce the performance of any provision of the Notes or this Indenture. (b) The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon and during the continuance of an Event of Default shall not impair the right or remedy or constitute a waiver of 66 or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04 Waiver of Past Defaults. Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee, may on behalf of the Holders of all of the Notes, waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of interest or Liquidated Damages, if any, on, or the principal of, the Notes (including in connection with an offer to purchase) (provided, however, that the Holders of a majority in principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). The Company shall deliver to the Trustee an Officers' Certificate stating that the requisite percentage of Holders have consented to such waiver and attaching copies of such consents. In case of any such waiver, the Company, the Trustee and the Holders shall be restored to their former positions and rights hereunder and under the Notes, respectively. This Section 6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05 Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or Liquidated Damages, if any) if it determines that withholding notice is in their interest. Section 6.06 Limitation on Suits. (a) A Holder may pursue a remedy with respect to this Indenture, or the Notes or the Guarantees only if: (i) the Holder gives to the Trustee written notice of a continuing Event of Default; (ii) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (iii) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee security and indemnity satisfactory to the Trustee against any loss, liability or expense that might be incurred by it in connection with the request or direction; 67 (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (v) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. (b) A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07 Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, interest on, and Liquidated Damages, if any, with respect to, the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08 Collection Suit by Trustee. If an Event of Default specified in Section 6.01(i) or (ii) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium, if any, interest, and Liquidated Damages, if any, remaining unpaid on the Notes and interest on overdue principal and premium, if any, and, to the extent lawful, interest and Liquidated Damages, if any, and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09 Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company or any Guarantor (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other securities or property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other 68 properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10 Priorities. (a) If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, interest and Liquidated Damages, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, interest, and Liquidated Damages, if any, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. (b) The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. Section 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than ten percent in principal amount of the then outstanding Notes. ARTICLE SEVEN TRUSTEE Section 7.01 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, and is actually known to the Trustee, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. 69 (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform on their face to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (f) Money held in trust by the Trustee need not be segregated from other funds and need not be held in an interest-bearing account, in each case except to the extent required by law or by any other provision of this Indenture. Section 7.02 Certain Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. 70 (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of such event is sent to the Trustee in accordance with Section 13.02 hereof, and such notice references the Notes. Section 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may become a creditor of, or otherwise deal with, the Company or any of its Affiliates with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest as described in the Trust Indenture Act, it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04 Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. 71 Section 7.05 Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium and Liquidated Damages, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. Section 7.06 Reports by Trustee to Holders of the Notes. (a) Within 60 days after each May 15 beginning with the May 15 following the date hereof, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event describeD in TIA Section 313(a) has occurred within the twelve months preceding the reportiNG date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as reqUIred by TIA Section 313(c). (b) A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange or any delisting thereof. Section 7.07 Compensation and Indemnity. (a) The Company shall pay to the Trustee (in its capacity as Trustee, and, to the extent it has been appointed as such, as Paying Agent and Registrar) from time to time reasonable compensation for its acceptance of this Indenture and services hereunder in accordance with a written schedule provided by the Trustee to the Company. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable and customary disbursements, advances and reasonable out-of-pocket expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable and customary compensation, disbursements and expenses of the Trustee's agents and counsel. (b) The Company shall indemnify the Trustee against any and all losses, liabilities or reasonable out-of-pocket expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by either of the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable and customary fees and expenses of such counsel. The Company need not 72 pay for any settlement made without its consent, which consent shall not be unreasonably withheld. (c) The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. (d) To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. (e) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(viii) or (ix) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. Section 7.08 Replacement of Trustee. (a) A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. (b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (i) the Trustee fails to comply with Section 7.10 hereof; (ii) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (iii) a custodian or public officer takes charge of the Trustee or its property; or (iv) the Trustee becomes incapable of acting. (c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. (d) If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition at the expense of the Company any court of competent jurisdiction for the appointment of a successor Trustee. 73 (e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (f) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. Section 7.09 Successor Trustee by Merger, Etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another Person, the successor Person without any further act shall be the successor Trustee. Section 7.10 Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has (or its corporate parent shall have) a combined capital and surplus of at least $100.0 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). Section 7.11 Preferential Collection of Claims Against Company. The Trustee is subject to TIA Section 311(a), excluding any creditOR relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. The Trustee hereby waives any right to set-off any claim that it may have against the Company in any capacity (other than as Trustee and Paying Agent) against any of the assets of the Company held by the Trustee; provided, however, that if the Trustee is or becomes a lender of any other Indebtedness permitted hereunder to be pari passu with the Notes, then such waiver shall not apply to the extent of such Indebtedness. 74 ARTICLE EIGHT DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of the Board evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight. Section 8.02 Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.02 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes and all obligations of the Guarantors shall be deemed to have been discharged with respect to their obligations under the Subsidiary Guarantees on the date the conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the Company and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes and Subsidiary Guarantees, respectively, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, interest and Liquidated Damages, if any, on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article Two and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. Section 8.03 Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.19, 4.20 and 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply 75 with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(iii) through (vii) shall not constitute Events of Default. Section 8.04 Conditions to Legal or Covenant Defeasance. (a) The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: (i) the Company must irrevocably deposit or cause to be deposited with the Trustee, as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders, money in an amount, or U.S. Government Obligations that through the scheduled payment of principal and interest thereon will provide money in an amount, or a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge the principal of (and premium, if any, on) and interest and Liquidated Damages, if any, on the outstanding Notes at maturity (or upon redemption, if applicable) of such principal or installment of interest or Liquidated Damages; (ii) no Default or Event of Default has occurred and is continuing on the date of such deposit or, insofar as an event of bankruptcy under Section 6.01(viii) is concerned, at any time during the period ending on the 91st day after the date of such deposit; (iii) such Legal Defeasance or Covenant Defeasance may not result in a breach or violation of, or constitute a default under, this Indenture, the Credit Agreement or any material agreement or instrument to which the Company or any Guarantor is a party or by which it is bound; (iv) in the case of Legal Defeasance, the Company must deliver to the Trustee an Opinion of Counsel stating that the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or, since the Closing Date, there has been a change in applicable federal income tax law, to the effect, and based thereon such opinion must confirm, that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (v) in the case of Covenant Defeasance, the Company must have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such 76 Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; and (vi) the Company must have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with. Section 8.05 Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. (a) Subject to Section 8.06 hereof, all money and non-callable U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "TRUSTEE") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Liquidated Damages, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. (b) The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable U.S. Government Obligations deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. (c) Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable U.S. Government Obligations held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06 Repayment to the Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published 77 once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Company. Section 8.07 Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable U.S. Government Obligations in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes. (a) Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors, and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (i) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company in this Indenture and in the Notes; or (ii) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (iii) to add additional Events of Defaults; or (iv) to provide for uncertificated Notes in addition to or in place of certificated Notes; or (v) to evidence and provide for the acceptance of appointment under this Indenture by a successor Trustee; or (vi) to secure the Notes; or (vii) to cure any ambiguity, to correct or supplement any provision in this Indenture that may be defective or inconsistent with any other provision in this Indenture, 78 or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such actions pursuant to this clause do not adversely affect the interests of the Holders in any material respect; or (viii) to comply with any requirements of the SEC in order to effect and maintain the qualification of this Indenture under the Trust Indenture Act; or (ix) to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture as of its date; or (x) to allow any Guarantor to execute a supplemental Indenture and a Guarantee with respect to the Notes; or (xi) to provide for the issuance of the Exchange Notes pursuant to the terms of this Indenture. Notwithstanding the foregoing, neither the Company nor the Trustee may amend any provisions of the Indenture or the Notes concerning (i) the subordination of the Notes and the Guarantees or (ii) legal defeasance or covenant defeasance without, in either case, the prior written consent of the Agent Bank, acting on behalf of the Banks under the Credit Agreement. (b) Upon the request of the Company accompanied by a resolution of its Board authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02 With Consent of Holders of Notes. (a) Except as provided below in this Section 9.02, the Company the Guarantors and the Trustee may amend or supplement this Indenture or the Notes with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). (b) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto. If a record date is fixed, the Holders on such record date, or its duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental indenture, whether or not such Holders remain Holders after such record date; provided that unless such consent shall have 79 become effective by virtue of the requisite percentage having been obtained prior to the date which is 90 days after such record date, any such consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect. (c) Upon the request of the Company accompanied by a resolution of its Board authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence reasonably satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. (d) It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. (e) After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) may waive compliance in a particular instance by the Company with any provision of this Indenture, or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (i) change the Stated Maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest or Liquidated Damages, if any, thereon or any premium payable upon the redemption thereof, or change the coin or currency in which any Note or any premium or the interest or any Liquidated Damages thereon are payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the redemption date); (ii) amend, change or modify the obligation of the Company to make and consummate an Excess Proceeds Offer with respect to any Asset Sale in accordance with the covenant described under Section 4.10 or the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control in accordance with Section 4.15, including, in each case, amending, changing or modifying any definition relating thereto; (iii) reduce the percentage in principal amount of outstanding Notes, the consent of whose Holders is required for any waiver of compliance with certain 80 provisions of, or certain defaults and their consequences provided for under, this Indenture; (iv) waive a Default or Event of Default in the payment of principal of, or premium, if any, or interest or Liquidated Damages, if any, on the Notes or reduce the percentage or aggregate principal amount of outstanding Notes the consent of whose Holders is necessary for waiver of compliance with certain provisions of this Indenture or for waiver of certain Defaults or Events of Default; (v) modify the ranking or priority of the Notes or the Guarantee of any Guarantor; (vi) release any Guarantor from any of its obligations under its Guarantee or this Indenture other than in accordance with the terms of this Indenture; or (vii) make any change in the preceding amendment and waiver provisions. Section 9.03 Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. Section 9.04 Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. Section 9.05 Notation on or Exchange of Notes. (a) The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. (b) Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06 Trustee to Sign Amendments, Etc. The Trustee shall sign any amended or supplemental indenture or Note authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment 81 or supplemental Indenture or Note until its Board approves it. In executing any amended or supplemental indenture or Note, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE TEN SUBORDINATION Section 10.01 Agreement to Subordinate. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article Ten, to the prior payment in full of all Senior Indebtedness (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Indebtedness. Section 10.02 Liquidation; Dissolution; Bankruptcy. The holders of Senior Indebtedness of the Company will be entitled to receive payment in full of all Obligations due in respect of Senior Indebtedness of the Company (including interest after the commencement of any bankruptcy proceeding at the rate specified in the applicable Senior Indebtedness of the Company) before the Holders will be entitled to receive any payment with respect to the Notes (except that Holders may receive and retain securities that are subordinated at least to the same extent as the Notes to Senior Indebtedness and any securities issued in exchange for Senior Indebtedness ("PERMITTED JUNIOR SECURITIES") and payments made from the trust pursuant to Article Eight hereunder), in the event of any distribution to creditors of the Company: (i) in a liquidation or dissolution of the Company; (ii) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property; (iii) in an assignment for the benefit of creditors; or (iv) in any marshaling of the Company's assets and liabilities. Section 10.03 Default on Designated Senior Indebtedness. (a) The Company may not make any payment in respect of the Notes (except in Permitted Junior Securities or from the trust pursuant to Article Eight hereof): (i) in the event any default in the payment of principal of, interest or premium, if any, on Designated Senior Indebtedness occurs and is continuing beyond any applicable period of grace (a "PAYMENT EVENT OF DEFAULT"), or (ii) any Non-payment Event of Default occurs and is continuing with respect to Designated Senior Indebtedness which permits holders of the Designated Senior Indebtedness as to which such default relates to accelerate its maturity and the Trustee receives a notice of such default (a "PAYMENT BLOCKAGE NOTICE") from (A) with respect to the Designated Senior Indebtedness arising under the Credit Agreement, the Agent 82 Bank, or (B) with respect to any other Designated Senior Indebtedness, the holders or the representative of the holders of any such Designated Senior Indebtedness. (iii) Payments on the Notes may and shall be resumed (x) in the case of a Payment Event of Default, upon the date on which such default is cured or waived and (y) in case of a Non-payment Event of Default, the earlier of the date on which such Non-payment Event of Default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received unless the maturity of any Designated Senior Indebtedness has been accelerated. No new period of payment blockage may be commenced by a Payment Blockage Notice unless and until (i) 360 days have elapsed since the first day of the effectiveness of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal, premium, if any, and interest on the Notes that have come due have been paid in full in cash. No Non-payment Event of Default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice, unless such default has been cured or waived for a period of not less than 90 days. Section 10.04 Acceleration of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of the acceleration. Section 10.05 When Distribution Must Be Paid Over. (a) In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes (except in Permitted Junior Securities or from the trust pursuant to Article Eight hereof) at a time when such payment is prohibited by Article Ten hereof and the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Article Ten hereof, such payment shall be held by the Trustee or such Holder, as applicable, in trust for the benefit of the holders of Senior Indebtedness of the Company. Upon proper written request of the holders of Senior Indebtedness of the Company, the Trustee or such Holder, as the case may be, shall deliver the amounts in trust to the holders of Senior Indebtedness or their proper Representative under the indenture or other agreement (if any) pursuant to which Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Indebtedness remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. (b) With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article Ten, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Indebtedness shall 83 be entitled by virtue of this Article Ten, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. Section 10.06 Notice by the Company. The Company shall promptly notify the Trustee and the Paying Agent in writing of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article Ten, but failure to give such notice shall not affect the subordination of the Notes to the Senior Indebtedness as provided in this Article Ten. Section 10.07 Subrogation. After all Senior Indebtedness is paid in full and until the Notes are paid in full, Holders shall be subrogated (equally and ratably with the holders of all Indebtedness of the Company which by its express terms is subordinated to Senior Indebtedness of the Company to the same extent as the Notes are subordinated and which is entitled to like rights of subrogation) to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Indebtedness. A distribution made under this Article Ten to holders of Senior Indebtedness that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on the Notes. Section 10.08 Relative Rights. (a) This Article Ten defines the relative rights of Holders and holders of Senior Indebtedness. Nothing in this Indenture shall: (i) impair, as between the Company and Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (ii) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Indebtedness; or (iii) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Indebtedness to receive distributions and payments otherwise payable to Holders. (b) If the Company fails because of this Article Ten to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. Section 10.09 Subordination May Not Be Impaired by the Company. No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. 84 Section 10.10 Distribution or Notice to Representative. (a) Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative. (b) Upon any payment or distribution of assets of the Company referred to in this Article Ten, the Trustee and the Holders of Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Ten. Section 10.11 Rights of Trustee and Paying Agent. (a) Notwithstanding the provisions of this Article Ten or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article Ten. Only the Company or a Representative may give the notice. Nothing in this Article Ten shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. (b) The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. Section 10.12 Authorization to Effect Subordination. Each Holder, by the Holder's acceptance thereof, agrees and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article Ten, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the lenders under the Credit Agreement are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. 85 ARTICLE ELEVEN GUARANTEES Section 11.01 Guarantee. (a) Subject to this Article Eleven each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful (subject in all cases to any applicable grace period provided herein), and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. (b) The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Subject to Section 6.06 hereof, each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. (c) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (d) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other 86 prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article Six hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. Section 11.02 Subordination of Guarantee. The Obligations of each Guarantor under its Guarantee pursuant to this Article Eleven shall be junior and subordinated to the prior payment in full of all Senior Indebtedness of such Guarantor (including Senior Indebtedness of the Guarantor incurred after the date hereof) on the same basis as the Notes are junior and subordinated to the prior payment in full all Senior Indebtedness of the Company, as described in Article Ten hereof. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article Ten hereof. Section 11.03 Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article Eleven, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent transfer or conveyance. Section 11.04 Execution and Delivery of Guarantee. (a) To evidence its Guarantee set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Guarantee substantially in the form included in Exhibit E shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by any of its executive officers. (b) Each Guarantor hereby agrees that its Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. (c) If an Officer whose signature is on this Indenture or on the Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Guarantee is endorsed, the Guarantee shall be valid nevertheless. 87 (d) The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantors. (e) In the event that the Company creates or acquires any new Wholly Owned Restricted Subsidiaries subsequent to the date of this Indenture, if required by Section 4.20 hereof, the Company shall cause such Subsidiaries to execute supplemental indentures to this Indenture and Guarantees in accordance with Section 4.20 hereof and this Article Eleven, to the extent applicable. Section 11.05 Releases of Guarantors. (a) A Subsidiary Guarantor will be deemed automatically and unconditionally released and discharged from all of its obligations under its Guarantee without any further action on the part of the Trustee or any Holder of the Notes upon a sale or other disposition to a Person not an Affiliate of the Company of all of the Capital Stock of, or all or substantially all of the assets of, such Subsidiary Guarantor, by way of merger, consolidation or otherwise, which transaction is carried out in accordance with Section 4.10 hereof; provided that any such termination shall occur (x) only to the extent that all obligations of such Subsidiary Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure any Indebtedness of the Company shall also terminate upon such sale, disposition or release and (y) only if the Trustee is furnished with written notice of such release together with an Officers' Certificate from such Subsidiary Guarantor to the effect that all of the conditions to release in this Section 11.05(a) have been satisfied. (b) Any Guarantor not released from its obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article Eleven. ARTICLE TWELVE SATISFACTION AND DISCHARGE Section 12.01 Satisfaction and Discharge. (a) This Indenture shall be discharged and shall cease to be of further effect as to all Notes issued thereunder, when: (i) either: (A) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (B) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and the 88 Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Liquidated Damages, if any, and accrued interest to the date of maturity or redemption; (ii) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound; (iii) the Company or any Guarantor has paid or caused to be paid all sums payable by it hereunder; and (iv) the Company has delivered irrevocable instructions to the Trustee hereunder to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be. (b) In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel (which opinion may be subject to customary assumptions and exclusions) to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. (c) Notwithstanding the above, the Trustee shall pay to the Company from time to time upon its request any cash or U.S. Government Obligations held by it as provided in this section which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect a satisfaction and discharge under this Article Twelve. Section 12.02 Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. Subject to Section 12.03 hereof, all money and non-callable U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 12.02, the "TRUSTEE") pursuant to Section 12.01 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Liquidated Damages, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. 89 Section 12.03 Repayment to the Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium and Liquidated Damages, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times or The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Company. ARTICLE THIRTEEN MISCELLANEOUS Section 13.01 Trust Indenture Act Controls. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), tHe imposed duties shall control. Section 13.02 Notices. (a) Any notice or communication by the Company or any Guarantor, on the one hand, or the Trustee on the other hand, to the other is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), facsimile or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company or any Guarantor: InSight Health Services Corp. 4400 MacArthur Blvd. Suite 800 Newport Beach, CA 92660 Facsimile: 949-476-8006 Attention: Chief Financial Officer, with a copy to General Counsel with copies to: J.W. Childs Associates, L.P. One Federal Street 21st Floor Boston, MA 02110 Facsimile: 617-753-1101 90 Attention: Edward D. Yun and to: Halifax Capital Partners, L.P. 1133 Connecticut Avenue N.W. Suite 700 Washington, D.C. 20036 Facsimile: 202-296-7133 Attention: David W. Dupree and to: Kaye Scholer LLP 245 Park Avenue New York, NY 10022 Facsimile: 212-836-8689 Attention: Stephen C. Koval, Esq. If to the Trustee: State Street Bank and Trust Company, N.A. 61 Broadway, 15th Floor New York, NY 10006 Attention: Corporate Trust Department (b) The Company, the Guarantors or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. (c) All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. (d) Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. (e) If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. 91 (f) If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. Section 13.03 Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to its rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). Section 13.04 Certificate and Opinion as to Conditions Precedent. (a) Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (i) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (ii) to the extent required under Section 314 of the Trust Indenture Act, an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Section 13.05 Statements Required in Certificate or Opinion. (a) Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA SectIon 314(e) and shall include: (i) a statement that the Person making such certificate or opinion has read such covenant or condition; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (iv) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. 92 Section 13.06 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 13.07 No Personal Liability of Directors, Officers, Employees and Stockholders. No director, officer, employee, incorporator or shareholder of the Parent, the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Parent, the Company or the Subsidiary Guarantors under the Notes, this Indenture, the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. Section 13.08 Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Section 13.09 Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Indenture or the transactions contemplated hereby ("RELATED PROCEEDINGS") may be instituted in the federal courts of the United States of America located in the City of New York or the courts of the State of New York in each case located in the City of New York (collectively, the "SPECIFIED COURTS"), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a "RELATED JUDGMENT"), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party's address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that a Related Proceeding has been brought in an inconvenient forum. Section 13.10 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or any of its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. 93 Section 13.11 Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 5.01. Section 13.12 Severability. In case any provision in this Indenture or the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 13.13 Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 13.14 Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by the Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "ACT" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company if made in the manner provided in this Section 13.14. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to such witness, notary or officer the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) Notwithstanding anything to the contrary contained in this Section 13.14, the principal amount and serial numbers of Notes held by any Holder, and the date of holding the same, shall be proved by the register of the Notes maintained by the Registrar as provided in Section 2.04 hereof. 94 (d) If the Company shall solicit from the Holders of the Notes any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a resolution of its Board, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith or the date of the most recent list of Holders forwarded to the Trustee prior to such solicitation pursuant to Section 2.06 hereof and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of the then outstanding Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the then outstanding Notes shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration or transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note. (f) Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Note may do so itself with regard to all or any part of the principal amount of such Note or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. Section 13.15 Benefit of Indenture. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any Registrar and its successors hereunder, and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. 95 Section 13.16 Table of Contents, Headings, Etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. Section 13.17 Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders or the Company or to any other Person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Agreement or otherwise. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 96 SIGNATURES INSIGHT HEALTH SERVICES CORP. By: /s/ Mark J. Tricolli ______________________________ Name: Mark J. Tricolli Title: Authorized Person INSIGHT HEALTH SERVICES HOLDINGS CORP. By: /s/ Mark J. Tricolli ______________________________ Name: Mark J. Tricolli Title: Vice President & Secretary INSIGHT HEALTH CORP. By: /s/ Mark J. Tricolli ______________________________ Name: Mark J. Tricolli Title: Authorized Person SIGNAL MEDICAL SERVICES, INC. By: /s/ Mark J. Tricolli ______________________________ Name: Mark J. Tricolli Title: Authorized Person OPEN MRI, INC. By: /s/ Mark J. Tricolli ______________________________ Name: Mark J. Tricolli Title: Authorized Person MAXUM HEALTH CORP. By: /s/ Mark J. Tricolli ______________________________ Name: Mark J. Tricolli 97 Title: Authorized Person RADIOSURGERY CENTERS, INC. By: /s/ Mark J. Tricolli ______________________________ Name: Mark J. Tricolli Title: Authorized Person MAXUM HEALTH SERVICES CORP. By: /s/ Mark J. Tricolli ______________________________ Name: Mark J. Tricolli Title: Authorized Person MRI ASSOCIATES, L.P. By: InSight Health Corp., its General Partner By: /s/ Mark J. Tricolli ______________________________ Name: Mark J. Tricolli Title: Authorized Person MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. By: /s/ Mark J. Tricolli ______________________________ Name: Mark J. Tricolli Title: Authorized Person MAXUM HEALTH SERVICES OF DALLAS, INC. By: /s/ Mark J. Tricolli ______________________________ Name: Mark J. Tricolli Title: Authorized Person NDDC, INC. By: /s/ Mark J. Tricolli ______________________________ Name: Mark J. Tricolli 98 Title: Authorized Person DIAGNOSTIC SOLUTIONS CORP. By: /s/ Mark J. Tricolli ______________________________ Name: Mark J. Tricolli Title: Authorized Person STATE STREET BANK AND TRUST COMPANY, N.A., as Trustee By: /s/ Angelita L. Pena ______________________________ Name: Angelita L. Pena Title: Assistant Vice President 99 EXHIBIT A1 [Face of Note] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.07(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. THIS NOTE AND THE GUARANTEES ENDORSED HEREON HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR THE GUARANTEES ENDORSED HEREON NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL CLOSING DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON (OR ANY PREDECESSOR OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, THE PARENT OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED A1-1 INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE (E) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. A1-2 CUSIP [ ] No. **$_____** INSIGHT HEALTH SERVICES CORP. 9-7/8% Senior Subordinated Notes due 2011 Closing Date: October 30, 2001 InSight Health Services Corp., a Delaware corporation (the "Company", which term includes any successor under this Indenture hereinafter referred to), for value received, promises to pay to CEDE & CO., or its registered assigns, the principal sum of [Amount of Note] ($[ ]) on November 1, 2011. Interest Payment Dates: May 1 and November 1, commencing May 1, 2002. Record Dates: April 15 and October 15. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. A1-3 IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. INSIGHT HEALTH SERVICES CORP. By: ____________________________ Name: Title: By: ____________________________ Name: Title: This is one of the 9-7/8% Senior Subordinated Notes due 2011 described in the within-mentioned Indenture. Dated: October 30, 2001 STATE STREET BANK AND TRUST COMPANY, N.A., as Trustee By: __________________________________ Authorized Signatory A1-4 [Reverse Side of Note] INSIGHT HEALTH SERVICES CORP. 9-7/8% Senior Subordinated Notes due 2011 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. The Company promises to pay interest on the principal amount of this Note at 9-7/8% per annum from the date hereof until maturity and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages, if any, semi-annually in arrears on May 1 and November 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be May 1, 2002. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the 15th day of the month next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.13 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose in The City of New York, or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest, premium and Liquidated Damages, if any, on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Registrar. Initially, State Street Bank and Trust Company, N.A., the Trustee under the Indenture, shall act as Paying Agent and Registrar. The A1-5 Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated as of October 30, 2001 ("Indenture") among the Company, the Parent, the Subsidiary Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. This Note is an obligation of the Company limited to $225 million in aggregate principal amount. The Indenture pursuant to which this Note is issued provides that up to $100 million aggregate principal amount of Additional Notes may be issued thereunder. 5. Optional Redemption. (a) Except as set forth in paragraphs 5(b) below, the Company shall not have the option to redeem the Notes prior to November 1, 2006. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on November 1 of the years indicated below:
Year Percentage ---- ---------- 2006............................................ 104.938% 2007............................................ 103.292% 2008............................................ 101.646% 2009 and thereafter............................. 100.000%
(b) Notwithstanding the foregoing, at any time prior to November 1, 2004, the Company may redeem up to 35% of the aggregate principal amount of Notes originally issued under the Indenture at a redemption price of 109.875% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of the initial Public Equity Offerings of the Company or the Parent; provided that (A) at least 65% of the aggregate principal amount of the Notes originally issued under the Indenture remains outstanding immediately after the occurrence of such redemption, excluding Notes held by the Parent, the Company and its Subsidiaries; and (B) the redemption must occur within 60 days of the date of the closing of such initial Public Equity Offering. 6. Mandatory Redemption. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. Repurchase at Option of Holder. (a) Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages A1-6 thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. (b) Within 365 days after the receipt of any Net Cash Proceeds from an Asset Sale, the Company may, at its option, within 12 months after such Asset Sale, (i) apply all or a portion of the Net Cash Proceeds to the permanent reduction of amounts outstanding under the Credit Agreement (and to correspondingly reduce the commitments, if any, with respect thereto) or to the permanent repayment of other Senior Indebtedness of the Company or a Restricted Subsidiary, provided that the repayment of any Indebtedness incurred under the Credit Agreement in connection with the acquisition of any Facility with the proceeds of any subsequent Sale and Leaseback Transaction relating to such Facility shall not be required to result in the permanent reduction of the amounts outstanding under the Credit Agreement or correspondingly permanently reduce the commitments thereunder, or (ii) invest (or enter into a legally binding agreement to invest) all or a portion of such Net Cash Proceeds in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in the businesses of the Company or its Restricted Subsidiaries, as the case may be, existing on the Reference Date or in businesses the same, similar or reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical contained in such clause (ii)) above. Pending the final application of any such Net Cash Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Cash Proceeds in a manner that is not prohibited by this Indenture. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph shall constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $10 million, the Company will, within 30 days thereafter, make an offer to purchase (an "Excess Proceeds Offer") from all Holders of Notes on a pro rata basis, in accordance with the procedures set forth in this Indenture, the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased with the Excess Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued interest and Liquidated Damages, if any, to the date such offer to purchase is consummated. If the aggregate principal amount of Notes validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the Notes to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset to zero. 8. Selection and Notice of Redemption If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously A1-7 called for redemption. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion of the original Note will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest and Liquidated Damages, if any, cease to accrue on Notes or portions of them called for redemption. 9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. 10. Persons Deemed Owners. The registered Holder of a Note will be treated as its owner for all purposes. 11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal of the then outstanding Notes and Additional Notes, if any, voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes). Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency; to provide for uncertificated Notes in addition to or in place of certificated Notes; to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company; to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; to add additional Events of Default; to evidence and provide for the acceptance of appointment under the Indenture by a successor Trustee; to secure the Notes; to comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act; to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture as of its date; to allow any Guarantor to execute a supplemental Indenture and a Guarantee with respect to the Notes; or to provide for the issuance of the Exchange Notes pursuant to the terms of the Indenture. 12. Defaults and Remedies. In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Parent, the Company or any Restricted Subsidiary that is a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding A1-8 Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company specifying the respective Event of Default. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or Liquidated Damages, if any) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or Liquidated Damages, if any, on, or the principal of, the Notes. 13. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. No Recourse Against Others. No director, officer, employee, incorporator or stockholder of the Parent, the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Parent, the Company or the Subsidiary Guarantors under the Notes, the Indenture, the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. 15. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes. In addition to the rights provided to Holders under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of October 30, 2001, between the Company, the Parent, the Guarantors and the parties named on the signature pages thereof or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall have the rights set forth in one or more registration rights agreements, if any, between the Company, the Parent, the Guarantors and the other parties thereto, relating to rights given by the Company and the Guarantors to the purchasers of Additional Notes (the "Registration Rights Agreement"). 17. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: A1-9 InSight Health Services Corp. 4400 MacArthur Blvd., Suite 800 Newport Beach, California 92660 Attention: General Counsel Facsimile: (949) 476-0137 A1-10 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: _________________________________ (Insert assignee's legal name) _______________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: _____________ Your Signature:___________________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A1-11 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $ ________________ Date:_____________ Your Signature:__________________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No.:__________________________ Signature Guarantee*:______ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A1-12 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount at Amount of Decrease in Amount of Increase in Maturity Signature of Principal Amount at Principal Amount at of this Global Note Authorized Officer Maturity Maturity Following such of Trustee or Date of Exchange of this Global Note of this Global Note Decrease (or Increase) Note Custodian - ---------------- ------------------- ------------------- ---------------------- --------------
A1-13 EXHIBIT A2 [Face of Note] Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the Registered owner hereof, Cede & Co., has an interest herein. THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.07(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON. THIS NOTE AND THE GUARANTEES ENDORSED HEREON HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR THE GUARANTEES ENDORSED HEREON NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL CLOSING DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE A2-1 AND THE GUARANTEES ENDORSED HEREON (OR ANY PREDECESSOR OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, THE PARENT OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE (E) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. A2-2 CUSIP [ ] No. **$_____** INSIGHT HEALTH SERVICES CORP. 9-7/8% Senior Subordinated Notes due 2011 Closing Date: October 30, 2001 InSight Health Services Corp., a Delaware corporation (the "Company", which term includes any successor under this Indenture hereinafter referred to), for value received, promises to pay to CEDE & CO., or its registered assigns, the principal sum of [Amount of Note] ($[ ]) on November 1, 2011. Interest Payment Dates: May 1 and November 1, commencing May 1, 2002. Record Dates: April 15 and October 15. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. A2-3 IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. INSIGHT HEALTH SERVICES CORP. By: ______________________________ Name: Title: By: ______________________________ Name: Title: This is one of the 9-7/8% Senior Subordinated Notes due 2011 described in the within-mentioned Indenture. Dated: October 30, 2001 STATE STREET BANK AND TRUST COMPANY, N.A., as Trustee By: __________________________________ Authorized Signatory A2-4 [Reverse Side of Note] INSIGHT HEALTH SERVICES CORP. 9-7/8% Senior Subordinated Notes due 2011 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. The Company promises to pay interest on the principal amount of this Note at 9-7/8% per annum from the date hereof until maturity and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages, if any, semi-annually in arrears on May 1 and November 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be May 1, 2002. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the 15th day of the month next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.13 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose in The City of New York, or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest, premium and Liquidated Damages, if any, on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Registrar. Initially, State Street Bank and Trust Company, N.A., the Trustee under the Indenture, shall act as Paying Agent and Registrar. The A2-5 Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated as of October 30, 2001 ("Indenture") among the Company, the Parent, the Subsidiary Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. This Note is an obligation of the Company limited to $225 million in aggregate principal amount. The Indenture pursuant to which this Note is issued provides that up to $100 million aggregate principal amount of Additional Notes may be issued thereunder. 5. Optional Redemption. (a) Except as set forth in paragraphs 5(b) below, the Company shall not have the option to redeem the Notes prior to November 1, 2006. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on November 1 of the years indicated below:
Year Percentage ---- ---------- 2006............................................ 104.938% 2007............................................ 103.292% 2008............................................ 101.646% 2009 and thereafter............................. 100.000%
(b) Notwithstanding the foregoing, at any time prior to November 1, 2004, the Company may redeem up to 35% of the aggregate principal amount of Notes originally issued under the Indenture at a redemption price of 109.875% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of the initial Public Equity Offerings of the Company or the Parent; provided that (A) at least 65% of the aggregate principal amount of the Notes originally issued under the Indenture remains outstanding immediately after the occurrence of such redemption, excluding Notes held by the Parent, the Company and its Subsidiaries; and (B) the redemption must occur within 60 days of the date of the closing of such initial Public Equity Offering. 6. Mandatory Redemption. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. Repurchase at Option of Holder. (a) Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages A2-6 thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. (b) Within 365 days after the receipt of any Net Cash Proceeds from an Asset Sale, the Company may, at its option, within 12 months after such Asset Sale, (i) apply all or a portion of the Net Cash Proceeds to the permanent reduction of amounts outstanding under the Credit Agreement (and to correspondingly reduce the commitments, if any, with respect thereto) or to the permanent repayment of other Senior Indebtedness of the Company or a Restricted Subsidiary, provided that the repayment of any Indebtedness incurred under the Credit Agreement in connection with the acquisition of any Facility with the proceeds of any subsequent Sale and Leaseback Transaction relating to such Facility shall not be required to result in the permanent reduction of the amounts outstanding under the Credit Agreement or correspondingly permanently reduce the commitments thereunder, or (ii) invest (or enter into a legally binding agreement to invest) all or a portion of such Net Cash Proceeds in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in the businesses of the Company or its Restricted Subsidiaries, as the case may be, existing on the Reference Date or in businesses the same, similar or reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical contained in such clause (ii)) above. Pending the final application of any such Net Cash Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Cash Proceeds in a manner that is not prohibited by this Indenture. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph shall constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $10 million, the Company will, within 30 days thereafter, make an offer to purchase (an "Excess Proceeds Offer") from all Holders of Notes on a pro rata basis, in accordance with the procedures set forth in this Indenture, the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased with the Excess Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued interest and Liquidated Damages, if any, to the date such offer to purchase is consummated. If the aggregate principal amount of Notes validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the Notes to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset to zero. 8. Selection and Notice of Redemption If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously A2-7 called for redemption. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion of the original Note will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest and Liquidated Damages, if any, cease to accrue on Notes or portions of them called for redemption. 9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. 10. Persons Deemed Owners. The registered Holder of a Note will be treated as its owner for all purposes. 11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal of the then outstanding Notes and Additional Notes, if any, voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes). Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency; to provide for uncertificated Notes in addition to or in place of certificated Notes; to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company; to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; to add additional Events of Default; to evidence and provide for the acceptance of appointment under the Indenture by a successor Trustee; to secure the Notes; to comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act; to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture as of its date; to allow any Guarantor to execute a supplemental Indenture and a Guarantee with respect to the Notes; or to provide for the issuance of the Exchange Notes pursuant to the terms of the Indenture. 12. Defaults and Remedies. In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Parent, the Company or any Restricted Subsidiary that is a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding A2-8 Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company specifying the respective Event of Default. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or Liquidated Damages, if any) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or Liquidated Damages, if any, on, or the principal of, the Notes. 13. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. No Recourse Against Others. No director, officer, employee, incorporator or stockholder of the Parent, the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Parent, the Company or the Subsidiary Guarantors under the Notes, the Indenture, the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. 15. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes. In addition to the rights provided to Holders under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of October 30, 2001, between the Company, the Parent, the Guarantors and the parties named on the signature pages thereof or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall have the rights set forth in one or more registration rights agreements, if any, between the Company, the Parent, the Guarantors and the other parties thereto, relating to rights given by the Company and the Guarantors to the purchasers of Additional Notes (the "Registration Rights Agreement"). 17. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: A2-9 InSight Health Services Corp. 4400 MacArthur Blvd., Suite 800 Newport Beach, California 92660 Attention: General Counsel Facsimile: (949) 476-0137 A2-10 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: _________________________________ (Insert assignee's legal name) _______________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: _____________ Your Signature:___________________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A2-11 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $ ________________ Date:_____________ Your Signature:__________________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No.:__________________________ Signature Guarantee*:______ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A2-12 SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note or of other Restricted Global Notes for an interest in this Regulation S Temporary Global Note, have been made:
Principal Amount at Amount of Decrease in Amount of Increase in Maturity Signature of Principal Amount at Principal Amount at of this Global Note Authorized Officer Maturity Maturity Following such of Trustee or Date of Exchange of this Global Note of this Global Note Decrease (or Increase) Note Custodian - ---------------- ------------------- ------------------- ---------------------- --------------
A2-13 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER InSight Health Services Corp. 4400 MacArthur Blvd., Suite 800 Newport Beach, California 92660 Attention: General Counsel Facsimile: (949) 476-0137 State Street Bank and Trust Company, N.A. 61 Broadway, 15th Floor New York, NY 10006 Attention: Corporate Trust Department Re: 9-7/8% Senior Subordinated Notes due 2011 Reference is hereby made to the Indenture, dated as of October 30, 2001 (the "Indenture"), among InSight Health Services Corp., a Delaware corporation (the "Company"), InSight Health Services Holdings Corp., a Delaware corporation (the "Parent"), the Subsidiary Guarantors, and State Street Bank and Trust Company, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________ (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount at maturity of $___________ in such Note[s] or interests (the "Transfer"), to ___________________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. B-1 2. Check if Transferee will take delivery of a beneficial interest in the Regulation S Temporary Global Note, the Regulation S Permanent Global Note or a Definitive Note pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Permanent Global Note, the Regulation S Temporary Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. Check and complete if Transferee will take delivery of a beneficial interest in the IAI Global Note or a Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) such Transfer is being effected to the Company or a subsidiary thereof; or (c) such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the B-2 Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act. 4. Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note. (a) Check if Transfer is Pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. B-3 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ________________________________________ [Insert Name of Transferor] By:________________________________________ Name: Title: Dated:______________ B-4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (A) OR (B)] (A) a beneficial interest in the: (i) 144A Global Note (CUSIP __________); or (ii) Regulation S Global Note (CUSIP __________); or (iii) IAI Global Note (CUSIP __________); or (B) a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (A) a beneficial interest in the: (i) 144A Global Note (CUSIP __________); or (ii) Regulation S Global Note (CUSIP __________); or (iii) IAI Global Note (CUSIP________); or (iv) Unrestricted Global Note (CUSIP___________); or (B) a Restricted Definitive Note; or (C) an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-5 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE InSight Health Services Corp. 4400 MacArthur Blvd., Suite 800 Newport Beach, California 92660 Attention: General Counsel Facsimile: (949) 476-0137 State Street Bank and Trust Company, N.A. 61 Broadway, 15th Floor New York, NY 10006 Attention: Corporate Trust Department Re: 9-7/8% Senior Subordinated Notes due 2011 Reference is hereby made to the Indenture, dated as of October 30, 2001 (the "Indenture"), among InSight Health Services Corp., a Delaware corporation (the "Company"), InSight Health Services Holdings Corp., a Delaware corporation (the "Parent"), the Subsidiary Guarantors, and State Street Bank and Trust Company, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. __________________________ (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount at maturity of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note (a) Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount at maturity, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby C-1 certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes (a) Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount at maturity, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] [ ] 144A Global Note, [ ] Regulation S Global Note, [ ] IAI Global Note with an equal principal amount at maturity, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account C-2 without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. __________________________________________ [Insert Name of Transferor] By:_______________________________________ Name: Title: Dated:____________ C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR [ ] Re: 9-7/8% Senior Subordinated Notes due 2011 Reference is hereby made to the Indenture, dated as of October 30, 2001 (the "Indenture"), among InSight Health Services Corp., a Delaware corporation (the "Company") InSight Health Services Holdings Corp., a Delaware corporation (the "Parent"), the Subsidiary Guarantors, and State Street Bank and Trust Company, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount at maturity of: (a) beneficial interest in a Global Note, or (b) a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. D-1 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ___________________________________________ [Insert Name of Accredited Investor] By:________________________________________ Name: Title: Dated:__________________ D-2 EXHIBIT E FORM OF NOTATION OF GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of October 30, 2001 (the "Indenture") among InSight Health Services Corp. (the "Company"), InSight Health Services Holdings Corp., the Subsidiary Guarantors (as defined in the Indenture), and State Street Bank and Trust Company, N.A., as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth in Article Eleven of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided that the Indebtedness evidenced by this Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of the Indenture. [Name of Guarantor] By: ________________________________ Name: Title: E-1 EXHIBIT F FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS Supplemental Indenture (this "Supplemental Indenture"), dated as of _____________, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of InSight Health Services Corp. (or its permitted successor), a Delaware corporation (the "Company"), InSight Health Services Holdings Corp., the Subsidiary Guarantors (as defined in the Indenture referred to herein) and State Street Bank and Trust Company, N.A., as trustee under the Indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of October 30, 2001 providing for the issuance of an aggregate principal amount of $225 million of 9-7/8% Senior Subordinated Notes due 2011 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all other Guarantors, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance that might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following are hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article Six of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. (h) Pursuant to Section 10.02 of the Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article Ten of the Indenture shall result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent transfer or conveyance. 3. Subordination. The Obligations of the Guaranteeing Subsidiary under its Guarantee pursuant to this Supplemental Indenture shall be junior and subordinated to the Senior Indebtedness of the Guaranteeing Subsidiary on the same basis as the Notes are junior and subordinated to the Senior Indebtedness of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by the Guaranteeing Subsidiary only at such time as they may receive and/or retain payments in respect of the Notes pursuant to the Indenture, including Article Ten thereof. 4. Execution and Delivery. Each Guaranteeing Subsidiary agrees that the Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. 5. Guaranteeing Subsidiary May Consolidate, Etc., on Certain Terms. Except as otherwise provided in Section 11.05 of the Indenture, a Subsidiary Guarantor may not consolidate with or merge with or into any other Person or convey, sell, assign, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any other Person (other than the Company or another Subsidiary Guarantor) unless: (i) subject to the provisions of the following paragraph, the Person formed by or surviving such consolidation or merger (if other than such Subsidiary Guarantor) or to which such properties and assets are transferred assumes all of the obligations of such Subsidiary Guarantor under this Indenture and its Guarantee, pursuant to a supplemental indenture in form and substance satisfactory to the Trustee; (ii) immediately after giving effect to such transaction, no Default or Event of Default has occurred and is continuing; and (iii) the Subsidiary Guarantor delivers, or causes to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such transaction complies with the requirements of this Indenture. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and reasonably satisfactory in form to the Trustee, of the Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by a Guarantor, such successor Person shall succeed to and be substituted for a Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Guarantees had been issued at the date of the execution hereof. 6. Releases. (a) A Subsidiary Guarantor will be deemed automatically and unconditionally released and discharged from all of its obligations under its Guarantee without any further action on the part of the Trustee or any Holder of the Notes upon a sale or other disposition to a Person not an Affiliate of the Company of all of the Capital Stock of, or all or substantially all of the assets of, such Subsidiary Guarantor, by way of merger, consolidation or otherwise, which transaction is carried out in accordance with Section 4.10 hereof; provided that any such termination shall occur (x) only to the extent that all obligations of such Subsidiary Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure any Indebtedness of the Company shall also terminate upon such sale, disposition or release and (y) only if the Trustee is furnished with written notice of such release together with an Officers' Certificate from such Subsidiary Guarantor to the effect that all of the conditions to release in this Section 6 have been satisfied. (b) Any Guarantor not released from its obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article Eleven of the Indenture. 7. No Recourse Against Others. No director, officer, employee, incorporator or stockholder of the Parent, the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Parent, the Company or the Subsidiary Guarantors under the Notes, this Indenture, the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. 8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 9. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 10. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. 11. Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: _______________, ____ [Guaranteeing Subsidiary] By: __________________________ Name: Title: INSIGHT HEALTH SERVICES CORP. By: __________________________ Name: Title: INSIGHT HEALTH SERVICES HOLDINGS CORP. By: ______________________________ Name: Title: [Subsidiary Guarantors] By: ______________________________ Name: Title: STATE STREET BANK AND TRUST COMPANY, N.A., AS TRUSTEE By: ______________________________ Name: Title: EX-4.2 32 y55701ex4-2.txt PURCHASE AGREEMENT EXHIBIT 4.2 INSIGHT HEALTH SERVICES HOLDINGS CORP., INSIGHT HEALTH SERVICES CORP. - AND - THE SUBSIDIARY GUARANTORS LISTED ON SCHEDULE A HERETO $225,000,000 9-7/8% SENIOR SUBORDINATED NOTES DUE 2011 PURCHASE AGREEMENT DATED OCTOBER 25, 2001 BANC OF AMERICA SECURITIES LLC FIRST UNION SECURITIES, INC. Table of Contents
Page Section 1. Representations and Warranties.................................. 3 (a) No Registration Required........................................ 3 (b) No Integration of Offerings or General Solicitation............. 3 (c) Eligibility for Resale Under Rule 144A.......................... 4 (d) The Offering Memorandum......................................... 4 (e) Incorporated Documents.......................................... 4 (f) The Remarketing Agreement....................................... 4 (g) The Registration Rights Agreement............................... 4 (h) The DTC Letter of Representations............................... 5 (i) Authorization of the Securities and the Exchange Securities..... 5 (j) Authorization of the Indenture.................................. 6 (k) Descriptions in the Offering Memorandum......................... 6 (l) No Material Adverse Change...................................... 6 (m) Independent Accountants......................................... 7 (n) Preparation of the Financial Statements......................... 7 (o) Incorporation and Good Standing of Company and its Subsidiaries.................................................... 7 (p) Capitalization and Other Capital Stock Matters.................. 8 (q) Non-Contravention of Instruments; No Further Authorizations or Approvals Required........................................... 9 (r) No Material Actions or Proceedings.............................. 10 (s) Intellectual Property Rights.................................... 10 (t) All Necessary Permits, Etc...................................... 10 (u) Regulatory Matters.............................................. 10 (v) Medicare/Medicaid Participation................................. 12 (w) Title to Properties............................................. 13 (x) Material Agreements............................................. 13 (y) Tax Law Compliance.............................................. 13 (z) Company Not an "Investment Company"............................. 13 (aa) Insurance....................................................... 13 (bb) No Price Stabilization or Manipulation.......................... 14 (cc) Solvency........................................................ 14 (dd) No Unlawful Contributions or Other Payments..................... 14 (ee) Company's Accounting System..................................... 14 (ff) Compliance with Environmental Laws.............................. 15 (gg) ERISA Compliance................................................ 15 (hh) Regulation S Compliance......................................... 16 (ii) Taxes; Fees..................................................... 16 (jj) No Labor Disputes............................................... 16 Section 2. Issuance and Delivery of the Securities......................... 17 (a) The Securities.................................................. 17 (b) The Closing Date................................................ 17 (c) Delivery of the Notes........................................... 17
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(d) Delivery of Offering Memorandum to the Initial Purchaser........ 17 (e) Initial Purchaser as Qualified Institutional Buyer.............. 17 Section 3. Covenants....................................................... 18 (a) The Initial Purchaser's Review of Proposed Amendments and Supplements..................................................... 18 (b) Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters.................................... 18 (c) Copies of the Offering Memorandum............................... 18 (d) Blue Sky Compliance............................................. 18 (e) Depositary...................................................... 19 (f) Additional Issuer Information................................... 19 (g) Future Agreement Not to Offer or Sell Additional Securities..... 20 (h) Future Reports to the Initial Purchaser......................... 20 (i) No Integration.................................................. 20 (j) Legended Securities............................................. 20 (k) PORTAL.......................................................... 20 (l) Rating of Securities............................................ 21 Section 4. Payment of Expenses............................................. 21 Section 5. Additional Covenants............................................ 21 (a) Accountants' Comfort Letter..................................... 21 (b) Opinion of Counsel for the Company.............................. 22 (c) Opinion of General Counsel for the Company...................... 22 (d) Opinion of Regulatory Counsel for the Company................... 22 (e) Officers' Certificate........................................... 22 (f) Bring-down Comfort Letters...................................... 22 (g) Registration Rights Agreement................................... 23 (h) Additional Documents............................................ 23 Section 6. Reimbursement of Initial Purchaser's Expenses................... 23 Section 7. Offer, Sale and Resale Procedures............................... 23 (a) Offers and Sales Only to Qualified Institutional Buyers and Non-U.S. Persons................................................ 23 (b) No General Solicitation......................................... 23 (c) Restrictions on Transfer........................................ 23 Section 8. Indemnification................................................. 24 (a) Indemnification of the Initial Purchaser........................ 24 (b) Indemnification of the Company and the Guarantors and their Directors and Officers.......................................... 25 (c) Notifications and Other Indemnification Procedures.............. 25 (d) Settlements..................................................... 26
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Section 9. Contribution.................................................... 27 Section 10. [Intentionally Omitted]......................................... 28 Section 11. Representations and Indemnities to Survive Delivery............. 28 Section 12. Notices......................................................... 28 Section 13. Successors...................................................... 30 Section 14. Partial Unenforceability........................................ 30 Section 15. Governing Law; Consent to Jurisdiction.......................... 30 (a) Governing Law Provisions........................................ 30 (b) Consent to Jurisdiction......................................... 30 Section 16. General Provisions.............................................. 30
SCHEDULE A - Guarantors SCHEDULE B - Material Agreements SCHEDULE C - Subsidiaries of InSight Health Services Corp. SCHEDULE D - Initial Purchasers EXHIBIT A-1 - Form of Opinion of Kaye Scholer LLP EXHIBIT A-2 - Form of Opinion of Hunton & Williams EXHIBIT B - Form of Opinion of General Counsel for the Company EXHIBIT C - Form of Opinion of Regulatory Counsel for the Company ANNEX 1 - Terms and Conditions of Offers and Sales iii Purchase Agreement October 25, 2001 BANC OF AMERICA SECURITIES LLC FIRST UNION SECURITIES, INC. c/o Banc of America Securities LLC 9 West 57th Street, 47th Floor New York, NY 10019 Ladies and Gentlemen: Introductory. Pursuant to the terms of a Note Purchase Agreement, dated October 17, 2001, among InSight Health Services Acquisition Corp., a Delaware corporation, InSight Health Services Corp., a Delaware corporation (the "Company"), InSight Health Services Holdings Corp., a Delaware corporation ("Holdings"), the Subsidiary Guarantors (as defined herein), Banc of America Bridge LLC and Banc of America Securities LLC, (the "Note Purchase Agreement"), the Company is (i) issuing to Banc of America Securities LLC and First Union Securities, Inc. (collectively, the "Initial Purchasers"), acting severally and not jointly, the respective amounts set forth in Schedule D of $200,000,000 aggregate principal amount of the Company's 9-7/8% Senior Subordinated Notes Due 2011 (the "Initial Notes") in exchange for $200,000,000 principal amount of the Company's 12-1/8% Senior Subordinated Notes due 2011 (the "Existing Notes") and (ii) issuing and selling to the Initial Purchasers, acting severally and not jointly, the respective amounts set forth in Schedule D of an additional $25,000,000 aggregate principal amount of the Company's 9-7/8% Senior Subordinated Notes due 2011 (the "Additional Notes" and, together with the Initial Notes, the "Notes). Terms used herein and not otherwise defined herein shall have the respective meanings assigned to them in the Note Purchase Agreement. The Notes will be issued pursuant to an indenture, dated as of October 30, 2001 (the "Indenture"), among the Company, the Guarantors (as defined below) and State Street Bank and Trust Company N.A., as trustee (the "Trustee"). Notes issued in book-entry form will be issued in the name of Cede & Co., as nominee of The Depository Trust Company (the "Depositary") pursuant to a letter of representations, to be dated as of the Closing Date (as defined in Section 2), to be entered into in connection with the issuance of the Securities (the "DTC Letter of Representations") among the Company, the Trustee and the Depositary. The payment of principal of, premium and Liquidated Damages (as defined in the Indenture), if any, and interest on the Notes and the Exchange Notes (as defined below) will, upon issuance of the Notes, become fully and unconditionally guaranteed on a senior subordinated and unsecured basis, jointly and severally by (i) Holdings, (ii) each of the Company's directly and indirectly wholly-owned subsidiaries listed in Schedule A attached hereto, and (iii) any wholly-owned or other subsidiary of the Company formed or acquired after the Closing Date that executes an additional guarantee in accordance with the terms of the Indenture, and respective successors and assigns of Holdings and the subsidiaries of the Company referred to in (ii) and (iii) above (collectively, the "Guarantors," and the subsidiaries referred to in (ii) and (iii) above, the "Subsidiary Guarantors"), pursuant to their guarantees (the "Guarantees"). The Notes and the Guarantees attached thereto are herein collectively referred to as the "Securities," and the Exchange Notes and the Guarantees attached thereto are herein collectively referred to as the "Exchange Securities." The holders of the Notes will be entitled to the benefits of a remarketed notes registration rights agreement, to be dated as of the Closing Date (the "Registration Rights Agreement"), among the Company, the Guarantors and the Initial Purchasers, substantially in the form of Exhibit E attached to the Note Purchase Agreement, pursuant to which the Company and the Guarantors agree to file, within 120 days of the Closing Date, a registration statement with the Securities and Exchange Commission (the "Commission") registering the Exchange Securities under the Securities Act of 1933, as amended (the "Securities Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder). The Company understands that the Initial Purchasers propose to make an offering of the Securities on the terms and in the manner set forth herein and in the Offering Memorandum (as defined below) and agrees that the Initial Purchasers may sell, subject to the conditions set forth herein, all or a portion of the Securities to purchasers (the "Subsequent Purchasers") at any time after the date of this Agreement. The Securities are to be offered and sold to or through the Initial Purchasers without being registered with the Commission under the Securities Act, in reliance upon exemptions therefrom. The terms of the Securities and the Indenture will require that investors that acquire Securities expressly agree that Securities may only be resold or otherwise transferred, after the date hereof, if such Securities are registered for sale under the Securities Act or if an exemption from the registration requirements of the Securities Act is available (including the exemptions afforded by Rule 144A under the Securities Act ("Rule 144A") or Regulation S under the Securities Act ("Regulation S")). The Company has prepared and delivered to the Initial Purchasers copies of a preliminary offering memorandum, dated October 19, 2001 (the "Preliminary Offering Memorandum"), and has prepared and will deliver to the Initial Purchasers, copies of the Offering Memorandum (defined below), describing the terms of the Securities, each for use by the Initial Purchasers in connection with their solicitation of offers to purchase the Securities. As used herein, the "Offering Memorandum" shall mean, with respect to any date or time referred to in this Agreement, the offering memorandum, dated October 25, 2001, including amendments or supplements thereto, any exhibits thereto and the Incorporated Documents (as defined in Section 1 below), in the most recent form that has been prepared and delivered by the Company to the Initial Purchasers in connection with their solicitation of offers to purchase Securities. Further, any reference to the Preliminary Offering Memorandum or the Offering Memorandum shall be deemed to refer to and include any Additional Issuer Information (as defined in Section 3) furnished by the Company prior to the completion of the distribution of the Securities. 2 All references in this Agreement to financial statements and other information which is "contained," "included" or "stated" in the Offering Memorandum (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which are incorporated by reference in the Offering Memorandum; all references in this Agreement to amendments or supplements to the Offering Memorandum shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934 (as amended, the "Exchange Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder) which is incorporated or deemed to be incorporated by reference in the Offering Memorandum; and all references in this Agreement to the Transaction Documents shall be deemed to mean and include this Purchase Agreement, the Registration Rights Agreement, the Indenture, the Securities and the DTC Letter of Representations. References herein to "Subsidiaries" shall mean each corporation, partnership, joint venture or other entity in which (i) the Company owns, directly or indirectly, 50% or more of the outstanding voting securities or equity interests or (ii) the Company or any Subsidiary is the sole general partner or the sole managing member. Each of the Company and the Guarantors hereby confirms its respective agreement with the Initial Purchasers as follows: Section 1. Representations and Warranties. The Company and each of the Guarantors hereby jointly and severally represent, warrant and covenant to each Initial Purchaser as follows: (a) No Registration Required. Subject to compliance by the Initial Purchasers with the representations and warranties set forth in Section 2(e) hereof and with the procedures set forth in Section 7 hereof, it is not necessary in connection with the issuance and sale of the Securities to the Initial Purchasers and the offer, sale and delivery of the Securities to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the Securities under the Securities Act or, until such time as the Exchange Securities are issued pursuant to an effective registration statement, to qualify the Indenture under the Trust Indenture Act of 1939 (the "Trust Indenture Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder). (b) No Integration of Offerings or General Solicitation. None of the Company or any Guarantor has, directly or indirectly, solicited any offer to buy or offered to sell, and none of them will, directly or indirectly, solicit any offer to buy or offer to sell, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Securities in a manner that would require the Securities to be registered under the Securities Act. None of the Company, the Guarantors, their respective affiliates (as such term is defined in Rule 501(b) under the Securities Act (each, an "Affiliate")) or any person acting on their behalf (other than the Initial Purchasers, as to whom none of the Company or any Guarantor makes any representation or warranty) has engaged or will engage, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. With respect to those Securities sold in reliance upon Regulation S, (i) none of the Company, the Guarantors, their Affiliates or 3 any person acting on their behalf (other than the Initial Purchasers, as to whom none of the Company or any Guarantor makes any representation or warranty) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (ii) each of the Company, the Guarantors and their Affiliates and any person acting on their behalf (other than the Initial Purchasers, as to whom none of the Company or any Guarantor makes any representation or warranty) has complied and will comply with the offering restrictions set forth in Regulation S. (c) Eligibility for Resale Under Rule 144A. The Securities are eligible for resale pursuant to Rule 144A and will not be, at the Closing Date, of the same class as securities listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder) or quoted in a U.S. automated interdealer quotation system. (d) The Offering Memorandum. The Offering Memorandum does not, and at the Closing Date will not, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation, warranty and agreement shall not apply to statements in or omissions from the Offering Memorandum made in reliance upon and in conformity with information furnished to the Company in writing by the Initial Purchasers expressly for use in the Offering Memorandum. Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, contains all the information specified in, and meeting the requirements of Rule 144A(d)(4). None of the Company or any Guarantor has distributed and none of them will distribute, prior to the later of the Closing Date and the completion of the Initial Purchasers' distribution of the Securities, any offering material in connection with the offering and sale of the Securities other than the Preliminary Offering Memorandum, the Offering Memorandum or as agreed upon by the Initial Purchasers. (e) Incorporated Documents. The Offering Memorandum as delivered from time to time shall incorporate by reference the Annual Report of the Company on Form 10-K for the fiscal year ended June 30, 2001 filed with the Commission on September 14, 2001 (the "Annual Report"), each Quarterly Report of the Company on Form 10-Q and each Current Report of the Company on Form 8-K (and any amendment(s) thereto) filed with the Commission between the date hereof and the Closing Date. The documents incorporated or deemed to be incorporated by reference in the Offering Memorandum, at the time they were, or hereafter are, filed with the Commission (collectively, the "Incorporated Documents") complied and will comply in all material respects with the requirements of the Exchange Act. (f) The Purchase Agreement. This Agreement has been duly authorized, executed and delivered by each of the Company and the Guarantors. (g) The Registration Rights Agreement. At the Closing Date, the Registration Rights Agreement will have been duly authorized, executed and delivered by, and 4 (assuming the due authorization, execution and delivery thereof by the other parties thereto) will be a valid and binding agreement of, the Company and each Guarantor, enforceable in accordance with its terms, except as rights to indemnification and contribution thereunder may be limited by applicable law and except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity). Pursuant to the Registration Rights Agreement, the Company and each Guarantor will agree to file with the Commission, under the circumstances set forth therein, (i) a registration statement under the Securities Act relating to another series of debt securities of the Company with terms substantially identical to the Notes (the "Exchange Notes") to be offered in exchange for the Notes (the "Exchange Offer") and (ii) to the extent required by the Registration Rights Agreement, a shelf registration statement pursuant to Rule 415 of the Securities Act relating to the resale by certain holders of the Notes, and in each case, to use its best efforts to cause such registration statements to be declared effective. (h) The DTC Letter of Representations. At the Closing Date, the DTC Letter of Representations will have been duly authorized, executed and delivered by, and (assuming the due authorization, execution and delivery thereof by the other parties thereto) will be a valid and binding agreement of, the Company, enforceable in accordance with its terms except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity). (i) Authorization of the Securities and the Exchange Securities. (i) The Notes to be issued to the Initial Purchasers are in the form contemplated by Section 10(a) of the Note Purchase Agreement and by the Indenture, have been duly authorized for issuance and sale pursuant to this Agreement and the Indenture and, at the Closing Date, will have been duly executed by the Company and, when authenticated in the manner provided for in the Indenture and delivered in exchange for the Existing Notes (and against payment of the purchase price for the Additional Notes), will constitute valid and binding agreements of the Company, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity) and will be entitled to the benefits of the Indenture; (ii) prior to their issuance, the Exchange Notes will have been duly and validly authorized for issuance by the Company, and when issued and authenticated in accordance with the terms of the Indenture, the Registration Rights Agreement and the Exchange Offer, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or similar laws relating to or affecting enforcement of the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity) and will be entitled to the benefits of the Indenture; (iii) the Guarantees of the 5 Notes will be in the form contemplated by the Indenture, will have been, prior to their issuance, duly authorized for issuance and sale pursuant to this Agreement and the Indenture and will have been duly executed by each of the Guarantors and, when the Guarantees have been authenticated in the manner provided for in the Indenture and delivered, will constitute valid and binding agreements of the Guarantors, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity) and will be entitled to the benefits of the Indenture; and (iv) prior to their issuance, the Guarantees of the Exchange Notes will be in the form contemplated by the Indenture and will have been duly and validly authorized for issuance and sale pursuant to the Indenture and when issued and authenticated in accordance with the terms of the Indenture, will constitute valid and binding agreements of the Guarantors, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity) and will be entitled to the benefits of the Indenture. (j) Authorization of the Indenture. The Indenture has been duly authorized by the Company and the Guarantors and, at the Closing Date, will have been duly executed and delivered by the Company and the Guarantors and (assuming due authorization, execution and delivery by other parties thereto) will constitute a valid and binding agreement of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity). (k) Descriptions in the Offering Memorandum. The Notes, the Guarantees of the Notes and the Indenture conform, or will conform, in all material respects to the respective statements relating thereto contained in the Offering Memorandum. The Exchange Notes and the Guarantees of the Exchange Notes will conform in all material respects to the respective statements relating thereto contained in the Offering Memorandum and the Registration Statement at the time such Registration Statement becomes effective. (l) No Material Adverse Change. Except as otherwise disclosed in the Offering Memorandum, subsequent to the respective dates as of which information is given in the Offering Memorandum, (i) there has been no material adverse change or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the business, assets, properties, liabilities (contingent or otherwise) or operations, of Holdings or the Company and its Subsidiaries considered as one entity (any such change or development is called a "Material Adverse Change"); (ii) Holdings, and the Company and its Subsidiaries considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, not in 6 the ordinary course of business nor entered into any material transaction or agreement not in the ordinary course of business; and (iii) there has been no dividend or distribution of any kind declared, paid or made by Holdings, the Company or any of its Subsidiaries on any class of capital stock (except for dividends paid by a Subsidiary of the Company to the Company or to another Subsidiary of the Company) or repurchase or redemption by Holdings, the Company or any of its Subsidiaries of any class of capital stock. (m) Independent Accountants. Arthur Andersen LLP (the "Independent Accountants"), who have expressed their opinion with respect to the financial statements (which term as used in this Agreement includes the related notes thereto) included in the Offering Memorandum are independent public or certified public accountants with respect to the Company within the meaning of Regulation S-X under the Exchange Act. (n) Preparation of the Financial Statements. The consolidated financial statements of the Company, together with the related notes, included in the Offering Memorandum present fairly, in all material respects, the consolidated financial position of the Company and its Subsidiaries as of and at the dates indicated and the results of their operations and cash flows for the periods specified. The financial statements included in the Offering Memorandum comply as to form with the applicable requirements of the Securities Act. Such financial statements have been prepared in conformity with generally accepted accounting principles as applied in the United States of America applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. The financial data with respect to the Company and its Subsidiaries set forth in the Offering Memorandum under the captions "Offering Memorandum Summary -- Summary Consolidated Historical and Pro Forma Financial and Operating Data," "Unaudited Pro Forma Condensed Consolidated Financial Statements" and "Selected Historical Financial and Operating Data" present fairly, in all material respects, the historical financial information set forth therein on a basis consistent with that of the audited and unaudited financial statements contained in the Offering Memorandum. The unaudited pro forma financial data of the Company and its Subsidiaries, and the related notes thereto included in the Offering Memorandum present fairly, in all material respects, the information contained therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and have been properly presented on the bases described therein, and the assumptions used in the preparation thereof are believed to be reasonable in light of then existing conditions and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (o) Incorporation and Good Standing of Company and its Subsidiaries. Each of Holdings, the Company and the Subsidiaries of the Company has been duly organized and is validly existing as a corporation, limited partnership or limited liability company, as the case may be, in good standing under the laws of the jurisdiction of its organization; each of Holdings, the Company and the Subsidiaries of the Company has the power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum; and each of Holdings, the Company and the Subsidiary Guarantors has the power and authority to enter into and/or perform its obligations, as the case may be, under each of this Agreement, the Indenture, the Registration Rights 7 Agreement, the DTC Letter of Representations, the Securities and the Exchange Securities to which it is a party. Each of Holdings, the Company and each of its Subsidiaries is duly qualified as a foreign corporation, limited liability company or limited partnership, as the case may be, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. (p) Capitalization and Other Capital Stock Matters. At the date specified in such table, the Company had the authorized, issued and outstanding capitalization as set forth in the Offering Memorandum under the caption "Capitalization" under the heading "Actual." At the date specified in such table, on a consolidated basis, after giving pro forma effect to (i) the issuance and sale of the Securities pursuant hereto, (ii) the consummation of the Merger, (iii) the funding of the Credit Facilities, (iv) the Equity Contribution, (v) the Option Rollover, each as described in the Offering Memorandum, and (vi) the application of the proceeds from the issuance and sale of the Securities, the funding of the Credit Facilities, the Equity Contribution and the Option Rollover to the refinancing transactions described under the caption "Use of Proceeds" in the Offering Memorandum, the Company would have an authorized and outstanding capitalization as set forth in the Offering Memorandum under the caption "Capitalization" under the heading "Pro Forma." All of the outstanding shares of capital stock of Holdings and the Company have been duly authorized and validly issued, are fully paid and nonassessable. None of the outstanding shares of capital stock of Holdings or the Company were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of Holdings or the Company, as the case may be. Except for rights of first refusal or "tag-along" or "drag along" rights customarily contained in stockholders' agreements, partnership agreements or joint venture operating agreements, there are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of Holdings or the Company or any of the Subsidiaries, other than those described in the Offering Memorandum. The description of Holdings' stock option, stock bonus, stock purchase and other stock plans or arrangements and the options or other rights granted thereunder, set forth in the Offering Memorandum accurately and fairly describes, in all material respects, such plans, arrangements, options and rights. As of the date hereof, all of the issued and outstanding capital stock of the Company has been duly authorized and validly issued, is fully paid and nonassessable and is owned directly by Holdings, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim except as described in the Offering Memorandum. In addition, all of the issued and outstanding capital stock of each Subsidiary, except as described in the Offering Memorandum, has been duly authorized and validly issued, is fully paid and nonassessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim, except for any security interests, mortgages, pledges, liens, encumbrances or claims of the lenders existing under the Credit Agreement, dated as of October 17, 2001, among the Company, the Guarantors, Bank of America, N.A., as administrative agent, First Union National Bank, as 8 syndication agent, The CIT Group/Business, Inc., as documentation agent, and the other lenders party thereto (such agreement, as amended from time to time, the "Existing Credit Agreement"). The only Subsidiaries of the Company are those Subsidiaries listed in Schedule C hereto. (q) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required. None of Holdings, the Company or any of its Subsidiaries is in violation of its charter or by-laws or is in default or has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time, or both, would reasonably be expected to constitute a default ("Default") under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease, license or other instrument to which Holdings, the Company or any of its Subsidiaries is a party or by which it or any of them may be bound or to which any of the property or assets of Holdings, the Company or any of its Subsidiaries is subject (each, an "Instrument"), except for such Defaults as would not, individually or in the aggregate, result in a Material Adverse Change or except for such defaults that have been waived in writing. The Company's and each Guarantor's execution, delivery and performance of this Agreement, the Company's and each Guarantor's execution and delivery of, and the performance by the Company and the Guarantors of, the Registration Rights Agreement and the Indenture, the Company's execution and delivery of, and the performance by the Company of, the DTC Letter of Representations, and the issuance and delivery of the Securities or the Exchange Securities, and consummation of the transactions contemplated hereby and thereby and by the Offering Memorandum (i) will not result in any violation of the provisions of the partnership agreement, operating agreement, charter or by-laws, as applicable, of Holdings, the Company or any of its Subsidiaries, (ii) will not conflict with or constitute a breach of, or Default or a Debt Repayment Triggering Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of Holdings, the Company or any of its Subsidiaries pursuant to, or require the consent of any other party to, any Instrument, except for such conflicts, breaches, Defaults, Debt Repayment Triggering Events, liens, charges or encumbrances as would not, individually or in the aggregate, result in a Material Adverse Change and (iii) will not result in any violation of any law, administrative regulation or administrative or court decree applicable to Holdings or the Company or any of its Subsidiaries except for such violations that would not, individually or in the aggregate, result in a Material Adverse Change. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency, is required for the Company's or each Guarantor's execution, delivery and performance of this Agreement, the Registration Rights Agreement, the DTC Letter of Representations or the Indenture, to which it is a party, or the issuance and delivery of the Securities or the Exchange Securities, or consummation of the transactions contemplated hereby and thereby and by the Offering Memorandum, except such as will be obtained by the Company or the Guarantors and are in full force and effect under the Securities Act, the Trust Indenture Act and such as may be required under state securities laws or the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Initial Purchasers in the manner contemplated herein and in the Offering Memorandum and in connection with Holdings', the Company's and the Subsidiary Guarantors' obligations under the 9 Registration Rights Agreement. As used herein, a "Debt Repayment Triggering Event" means any event or condition which gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture or other evidence of material indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by Holdings or the Company or any of its Subsidiaries. (r) No Material Actions or Proceedings. Except as otherwise disclosed in the Offering Memorandum, there are no legal or governmental actions, suits or proceedings pending or, to the best of the knowledge of Holdings and the Company, threatened (i) against or affecting Holdings or the Company or any of the Subsidiaries, (ii) which has as the subject thereof any property owned or leased by, Holdings, the Company or any of its Subsidiaries, where in any such case (A) there is a reasonable possibility that such action, suit or proceeding might be determined adversely to Holdings or the Company or such Subsidiary and (B) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to result in a Material Adverse Change or materially and adversely affect the transactions contemplated by this Agreement. (s) Intellectual Property Rights. The Company and its Subsidiaries own, possess or license sufficient trademarks, trade names, patent rights, copyrights, licenses, approvals, trade secrets and other similar rights (collectively, "Intellectual Property Rights") reasonably necessary to conduct their businesses as now conducted; and the expected expiration of any of such Intellectual Property Rights would not result in a Material Adverse Change. Neither the Company nor any of its Subsidiaries has received any notice of infringement or conflict with asserted Intellectual Property Rights of others, which infringement or conflict, if the subject of an unfavorable decision, ruling or filing would reasonably be expected to result in a Material Adverse Change and, except as otherwise disclosed in the Offering Memorandum, neither the Company nor any of its Subsidiaries is in default under the terms of any license or similar agreement related to any Intellectual Property Rights necessary to conduct their business as now conducted or contemplated except as would not reasonably be expected to result in a Material Adverse Change. (t) All Necessary Permits, Etc. The Company and each of its Subsidiaries possess such valid and current certificates, authorizations or permits issued by the appropriate municipal, state, federal or foreign regulatory agencies or bodies necessary to conduct their respective businesses as now conducted except as would not reasonably be expected to result in a Material Adverse Change, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such license, certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, could reasonably be expected to result in a Material Adverse Change. (u) Regulatory Matters. To the knowledge of Holdings, the Company and each Subsidiary Guarantor, none of (i) the Company, any of its Subsidiaries, or the officers, directors, employees, or agents (as defined in 42 C.F.R. Part 420 Subpart C and 42 C.F.R. Section 1001.1001(a)(2)) of the Company or any of its Subsidiaries, or (ii) any 10 entity which the Company or any of its Subsidiaries manages or for which the Company or any of its Subsidiaries provides billing services ("Managed Entity") or the employees of any Managed Entity who are leased from the Company or any of its Subsidiaries, has been charged with, or has been or is being investigated with respect to, any activity (and with respect to the officers, directors, agents and employees of the Company or any of its Subsidiaries or any employee of any Managed Entity as described above, only as to any activity during their employment or association with the Company, any Subsidiary of the Company or any Managed Entity) that materially contravenes or could materially contravene or constitutes or could constitute a material violation of any Healthcare Law. To the knowledge of Holdings, the Company and each Subsidiary Guarantor, no person who has a direct or indirect ownership interest of 5% or more (as those terms are defined in 42 C.F.R. Part 420 Subpart C and 42 C.F.R. Section 1001.1001(a)(2)) in the Company or any Subsidiary, has been charged with, or has been or is being investigated with respect to, any activity involving the Company or any Subsidiary that materially contravenes or could materially contravene or constitutes or could constitute a material violation of any Healthcare Law. To the actual knowledge of the officers of the Company, none of the officers, directors and agents of any Managed Entity has been charged with, or has been or is being investigated with respect to, any activity during their employment or association with any Managed Entity that materially contravenes or could materially contravene or constitutes or could constitute a material violation of any Healthcare Law. To the actual knowledge of the officers of the Company, no person who has a direct or indirect ownership interest of 5% or more (as those terms are defined in 42 C.F.R. Part 420 Subpart C and 42 C.F.R. Section 1001.1001(a)(2)) in a Managed Entity has been charged with, or has been or is being investigated with respect to, any activity in connection with the Managed Entity that materially contravenes or could materially contravene or constitutes or could constitute a material violation of any Healthcare Law. To the knowledge of Holdings, the Company and each Subsidiary Guarantor, none of the Company, any of its Subsidiaries, any Managed Entity or any of the officers, directors, employees or agents (as described above) of the Company or any Subsidiary or any employee of any Managed Entity who is leased from the Company or any Subsidiary, has engaged in any activity (and with respect to the officers, directors, agents and employees of the Company or any Subsidiary or any employee of any Managed Entity as described above, only as to any activity during their employment or association with the Company, any Subsidiary or any Managed Entity) that materially contravenes or constitutes a material violation of any Healthcare Law during their employment or association with the Company, any Subsidiary, or any Managed Entity. To the actual knowledge of the officers of the Company, none of the officers, directors or agents of any Managed Entity has engaged in any activity during their employment or association with the Company, any Subsidiary or any Managed Entity that materially contravenes or constitutes a material violation of any Healthcare Law. "Healthcare Law" means the following laws or regulations relating to the regulation of the health care industry or to payment for services rendered by healthcare providers: (i) Sections 1877, 1128, 1128A or 1128B of the Social Security Act ("SSA"); (ii) any prohibition on the making of any false statement or misrepresentation of material facts to any governmental agency that administers a federal or state health care program (including, but not limited to, Medicare, Medicaid, and the federal Civilian Health and Medical Plan of the Uniformed Services); (iii) the 11 licensure, certification or registration requirements of health care facilities, services or equipment, including, but not limited to, the Mammography Quality Standards Act; (iv) any state certificate of need or similar law governing the establishment of health care facilities or services or the making of health care capital expenditures; (v) any state law relating to fee-splitting or the corporate practice of medicine; (vi) any state physician self-referral prohibition or state anti-kickback law; (vii) any criminal offense relating to the delivery of, or claim for payment for, a healthcare item or service under any federal or state health care program; (viii) any federal or state law relating to the interference with or obstruction of any investigation into any criminal offense; and (ix) any criminal offense under federal or state law relating to the unlawful manufacture, distribution, prescription or dispensing of a controlled substance. (v) Medicare/Medicaid Participation. To the knowledge of Holdings, the Company and each Subsidiary, none of the Company, any of its Subsidiaries, or any existing officers or directors of the Company or the respective Subsidiary who is expected to be an officer, director, agent (as defined in 42 C.F.R. Section 1001.1001(a)(2)), or managing employee (as defined in SSA Section 1126(b) or any regulations promulgated thereunder) of the Company or the respective Subsidiary: (1) has had a material civil monetary penalty assessed against it under Section 1128A of the SSA or any regulations promulgated thereunder; (2) has been excluded from participation under the Medicare program or a federal or state health care program; or (3) has been convicted (as that term in defined in 42 C.F.R. Section 1001.2) of any of the following categories of offenses as described in SSA Section 1128(a) and (b)(1), (2), (3) or any regulations promulgated thereunder: (i) criminal offenses relating to the delivery of an item or service under Medicare or any federal or state health care program; (ii) criminal offenses under federal or state law relating to patient neglect or abuse in connection with the delivery of a healthcare item or service; criminal offenses under federal or state law relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a healthcare item or service or with respect to any act or omission in a program operated by or financed in whole or in part by any federal, state or local governmental agency; (iii) federal or state laws relating to the interference with or obstruction of any investigation into any criminal offense described above in this paragraph; or (iv) criminal offenses under federal or state law relating to the unlawful manufacture, distribution, prescription or dispensing of a controlled substance. The Company, a Subsidiary, or an entity owned in whole or in part by the Company or a Subsidiary has a Medicare provider number, and a participating provider agreement in force with a Medicare Part B carrier, and materially meets all applicable Medicare conditions of coverage, in each locale, as applicable, in which the Company, such Subsidiary or such entity bills directly to Medicare for services furnished by the Company, such Subsidiary or such entity. The Company, a Subsidiary, or an entity owned in whole or in part by the Company or a Subsidiary has a Medicare provider number, and a participating provider agreement, and materially satisfies all applicable Medicaid conditions of coverage, in each state, as applicable, in which the Company, such Subsidiary, or such other entity bills directly to such state's Medicaid agency for services provided by the Company, such Subsidiary, or such other entity for Medicaid patients. 12 (w) Title to Properties. Except as otherwise disclosed in the Offering Memorandum, the Company and each of its Subsidiaries has good and marketable title to all their properties and assets reflected as owned in the financial statements referred to in Section 1(n) above (or elsewhere in the Offering Memorandum), in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects, except as would not reasonably be expected to result in a Material Adverse Change. Any real property, improvements, equipment and personal property held under lease by the Company or any of its Subsidiaries are held under valid and enforceable leases, except for such invalidations and unenforceabilities as would not reasonably be expected to result in a Material Adverse Change. (x) Material Agreements. The agreements, contracts or instruments listed as exhibits to the Annual Report and those listed in Schedule B attached hereto are the only material agreements, contracts or instruments binding upon Holdings and/or the Company and its Subsidiaries, or agreements, contracts or instruments that provide for the payments by Holdings, the Company or any of its Subsidiaries after the date hereof of $2 million or more. (y) Tax Law Compliance. The Company and its Subsidiaries have filed all material federal, state and foreign income and franchise tax returns required to be filed and have paid all taxes shown on such returns required to be paid by any of them which are due and payable and, if due and payable, any related or similar assessment, fine or penalty levied against any of them. The Company and each Subsidiary Guarantor has made adequate charges, accruals and reserves in the applicable financial statements referred to in Section 1(n) above in respect of all federal, state and foreign income and franchise taxes for all periods as to which the tax liability of the Company or any of its Subsidiaries has not been finally determined, except where such failure would not reasonably be expected to result in a Material Adverse Change. (z) Company Not an "Investment Company". Holdings and the Company have been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the "Investment Company Act"). None of Holdings or the Company is an "investment company" within the meaning of Investment Company Act and each of Holdings and the Company will conduct its business in a manner so that it will not become subject to the Investment Company Act. (aa) Insurance. Each of the Company and its Subsidiaries are insured by recognized, financially sound institutions with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate and customary for their businesses including, but not limited to, policies covering real and personal property owned or leased by the Company and its Subsidiaries against theft, damage, destruction, acts of vandalism and earthquakes. The Company has no reason to believe that it or any Subsidiary will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change. To the best of the Company's knowledge, after due inquiry, neither the Company nor any Subsidiary has been denied 13 any insurance coverage which it has sought or for which it has applied and there are no claims by the Company or any of its Subsidiaries under any current insurance policy as to which any insurance company or institution is denying, or will deny, liability or coverage or defending under a reservation of rights clause. (bb) No Price Stabilization or Manipulation. None of the Company, the Guarantors or any of their respective Affiliates has taken or will take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. (cc) Solvency. Holdings, the Company and each of the Company's Subsidiaries, taken as a whole, is Solvent. As used herein, the term "Solvent" means, with respect to Holdings, the Company and its Subsidiaries, taken as a whole, on a particular date, that on such date (i) such entity is able to pay its debts and other liabilities, contingent obligations and other commitments as they mature in the ordinary course of business, (ii) such entity does not intend to, and does not believe that it will, incur debts or liabilities beyond such entity's ability to pay as such debts and liabilities mature in their ordinary course, (iii) such entity is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such entity's assets would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such entity is engaged or is to engage, (iv) the fair value of the assets of such entity is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such entity and (v) the present fair salable value of the assets of such entity is not less than the amount that will be required to pay the probable liability of such entity on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. (dd) No Unlawful Contributions or Other Payments. Neither the Company nor any of its Subsidiaries nor, to the best of the Company's or any Guarantor's knowledge, any employee or agent of the Company or any Subsidiary, has made any contribution or other payment to any official of, or candidate for, any federal, state or foreign office in violation of any law or of the character necessary to be disclosed in the Offering Memorandum in order to make the statements therein not misleading. (ee) Company's Accounting System. The Company and each of its Subsidiaries maintains a system of accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles as applied in the United States of America and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with 14 existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (ff) Compliance with Environmental Laws. Except as otherwise disclosed in the Offering Memorandum or as would not, individually or in the aggregate, result in a Material Adverse Change (i) the Company and each of its Subsidiaries have all permits, authorizations and approvals required under any Environmental Laws and are in compliance with their requirements, (ii) neither the Company nor any of its Subsidiaries, to the knowledge of the Company, after due inquiry, is in violation of any federal, state, local or foreign law or regulation relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products (collectively, "Materials of Environmental Concern"), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (collectively, "Environmental Laws"), which violation includes, but is not limited to, noncompliance with any permits or other governmental authorizations required for the operation of the business of the Company or its Subsidiaries under applicable Environmental Laws, or noncompliance with the terms and conditions thereof, nor has the Company or any of its Subsidiaries received any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company or any of its Subsidiaries is in violation of any Environmental Law; (iii) there is, to the knowledge of the Company, after due inquiry, no claim, action or cause of action filed with a court or governmental authority, no investigation with respect to which the Company or any Subsidiary has received written notice, and no written notice by any person or entity alleging potential liability for investigatory costs, cleanup costs, governmental responses costs, natural resources damages, property damages, personal injuries, attorneys' fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by the Company or any of its Subsidiaries, now or in the past (collectively, "Environmental Claims"), pending or, to the best of the Company's or any Guarantor's knowledge, threatened against the Company or any of its Subsidiaries or any person or entity whose liability for any Environmental Claim the Company or any of its Subsidiaries has retained or assumed either contractually or by operation of law; and (iv) to the knowledge of the Company, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that reasonably could result in a violation of any Environmental Law or form the basis of a potential Environmental Claim against the Company or any of its Subsidiaries or against any person or entity whose liability for any Environmental Claim the Company or any of its Subsidiaries has retained or assumed either contractually or by operation of law. (gg) ERISA Compliance. The Company and its Subsidiaries and any "employee benefit plan" (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder 15 (collectively, "ERISA")) established or maintained by the Company, its Subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in all respects with ERISA or, if not in compliance, would not reasonably be expected to result in a Material Adverse Change. "ERISA Affiliate" means, with respect to the Company or a Subsidiary, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the "Code") of which the Company or such Subsidiary is a member. No "reportable event" (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any "employee benefit plan" established or maintained by the Company, its Subsidiaries or any of their ERISA Affiliates. No "employee benefit plan" established or maintained by the Company, its Subsidiaries or any of their ERISA Affiliates, if such "employee benefit plan" were terminated, would have any "amount of unfunded benefit liabilities" (as defined under ERISA). Neither the Company, its Subsidiaries nor any of their ERISA Affiliates has incurred or reasonably expects to incur any liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan" established or maintained by the Company, its Subsidiaries or any of their ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification. (hh) Regulation S Compliance. The Company, the Guarantors and their respective Affiliates and all authorized persons acting on their behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation) have complied with and will comply with the offering restrictions requirements of Regulation S in connection with the offering of the Securities outside the United States and, in connection therewith, the Offering Memorandum will contain the disclosure required by Rule 902(h). (ii) Taxes; Fees. There are no stamp or other issuance or transfer taxes or duties or other similar fees or charges required to be paid in connection with the execution and delivery of this Agreement or the issuance or sale by the Company of the Securities. (jj) No Labor Disputes. As of the date hereof, (i) there is no unfair labor practice complaint pending against the Company or any of its Subsidiaries or, to the best knowledge of the Company, threatened against any of them, before the National Labor Relations Board or any state or local labor relations board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Company or any of its Subsidiaries or, to the best knowledge of the Company, threatened against any of them, (ii) there is no material strike, labor dispute, slowdown or stoppage pending against the Company or any of its Subsidiaries or, to the knowledge of the Company, threatened against the Company and (iii) the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its principal customers, suppliers, manufacturers or contractors, in each case which is likely to result in a Material Adverse Change. 16 Any certificate signed by an officer of the Company or any Guarantor and delivered to the Initial Purchasers pursuant to this Agreement or to counsel for the Initial Purchasers shall be deemed to be a representation and warranty by the Company or such Guarantor to the Initial Purchasers as to the matters set forth therein. Section 2. Purchase, Sale and Delivery of the Securities. (a) The Securities. The Company agrees to (x) issue to the Initial Purchasers, in exchange for all of the Existing Notes held by the Initial Purchasers, the aggregate principal amount of Notes set forth on Schedule D hereto and (y) issue and sell to the Initial Purchasers, acting severally and not jointly, the aggregate principal amount of Additional Notes set forth on Schedule D hereto at a purchase price equal to 97% of the principal amount thereof, payable on the Closing Date (it being acknowledged that the discount of 3% shall be in satisfaction of the fees payable with respect to the Additional Notes by the Company pursuant to the second sentence of Section 2 of the Fee Letter). The Notes shall be resold by the Initial Purchasers at par; provided that, with the consent of J.W. Childs Associates, L.P. and The Halifax Group, L.L.C., the Initial Purchasers may resell the Notes at a price below par. (b) The Closing Date. Delivery of certificates for the Securities in definitive form to be issued and sold to the Initial Purchasers (and payment of the purchase price for the Additional Notes) shall be made at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022-6069 (or such other place as may be agreed to by the Company and Banc of America Securities LLC) at 9:00 a.m. New York City time, on the Exchange Date (as defined in the Note Purchase Agreement), or such other time and date as Banc of America Securities LLC shall designate by notice to the Company (the time and date of such closing are called the "Closing Date"). The Company hereby acknowledges that circumstances under which the Initial Purchasers may provide notice to postpone the Closing Date as originally scheduled include, but are in no way limited to, any determination by the Company or the Initial Purchasers to recirculate to investors copies of an amended or supplemented Offering Memorandum. (c) Delivery of the Notes. The Notes shall be delivered as provided in Section 10(a) of the Note Purchase Agreement. The certificates for the Notes shall be in such denominations and registered in the name of the Depositary or its nominee, pursuant to the DTC Letter of Representations, and shall be made available for inspection on the business day preceding the Closing Date at a location in New York City, as the Initial Purchasers may designate. Time shall be of the essence. (d) Delivery of Offering Memorandum to the Initial Purchasers. Not later than 12:00 p.m. on the second business day following the date of this Agreement, the Company shall deliver or cause to be delivered copies of the Offering Memorandum in such quantities and at such places as the Initial Purchasers shall reasonably request. (e) Initial Purchasers as Qualified Institutional Buyers. Each Initial Purchaser represents and warrants to, and agrees with, the Company that (i) it is a "qualified institutional buyer" within the meaning of Rule 144A (a "Qualified 17 Institutional Buyer"), and (ii) with respect to those Securities sold in reliance on Regulation S, (A) has not engaged and will not engage in any direct selling efforts within the meaning of Regulation S and (B) has complied and will comply with the offering restrictions requirements of Regulations S. Section 3. Covenants. The Company and each Guarantor further jointly and severally covenant and agree with each Initial Purchaser as follows: (a) The Initial Purchasers' Review of Proposed Amendments and Supplements. Prior to amending or supplementing the Offering Memorandum (including any amendment or supplement through incorporation by reference of any report filed under the Exchange Act), the Company shall furnish to the Initial Purchasers for review a copy of each such proposed amendment or supplement, and the Company shall not use any such proposed amendment or supplement to which any Initial Purchaser reasonably objects in writing within 3 business days (with advice from its independent counsel). (b) Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters. If, prior to the completion of the placement of the Securities by the Initial Purchasers with the Subsequent Purchasers, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Offering Memorandum in order to make the statements therein, in the light of the circumstances when the Offering Memorandum is delivered to a Subsequent Purchaser, not misleading, or if in the opinion of the Initial Purchasers or counsel for the Initial Purchasers it is otherwise necessary to amend or supplement the Offering Memorandum to comply with law, the Company agrees to promptly prepare (subject to Section 3(a) hereof), and furnish at its own expense to the Initial Purchasers, amendments or supplements to the Offering Memorandum so that the statements in the Offering Memorandum as so amended or supplemented will not, in the light of the circumstances when the Offering Memorandum is delivered to a Subsequent Purchaser, be misleading or so that the Offering Memorandum, as amended or supplemented, will comply with law. The Company and the Guarantors hereby expressly acknowledge that the indemnification and contribution provisions of Sections 8 and 9 hereof are specifically applicable and relate to each offering memorandum, registration statement, prospectus, amendment or supplement referred to in this Section 3(b). (c) Copies of the Offering Memorandum. The Company agrees to furnish the Initial Purchasers, without charge, as many copies of the Offering Memorandum and any amendments and supplements thereto as they shall have reasonably requested prior to or at the time of the original printing of the Offering Memorandum or any amendment or supplement thereto. (d) Blue Sky Compliance. Holdings, the Company and the Subsidiary Guarantors shall cooperate with the Initial Purchasers and counsel for the Initial Purchasers to qualify or register the Securities for sale under (or obtain exemptions from the application of) the Blue Sky or state securities laws of those jurisdictions designated by the Initial Purchasers, shall comply with such laws and shall continue such 18 qualifications, registrations and exemptions in effect so long as required for the distribution of the Securities. Holdings, the Company and the Subsidiary Guarantors shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or where it would be subject to taxation as a foreign corporation. Holdings and the Company will advise the Initial Purchasers promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Securities for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, Holdings, the Company and the Subsidiary Guarantors shall use their reasonable best efforts to obtain the withdrawal thereof at the earliest possible moment. (e) Depositary. The Company will cooperate with the Initial Purchasers and use its reasonable best efforts to permit the Securities to be eligible for clearance and settlement through the facilities of the Depositary. (f) Additional Issuer Information. Prior to the completion of the placement of the Securities by the Initial Purchasers with the Subsequent Purchasers, the Company, or, if permitted by the Exchange Act, Holdings, shall file, on a timely basis, with the Commission all reports and documents required to be filed under Section 13 or 15 of the Exchange Act; provided that if such filings are being made by Holdings, rather than by the Company, such filings shall adequately disclose the Company's results of operations and financial condition in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in at least such detail as would be required if the Company were filing such report. In addition, at any time Holdings or the Company is not subject to Section 13 or 15 of the Exchange Act, Holdings and the Company covenant that they will furnish, at their expense, upon request, to registered holders of Securities within the time periods specified in the Exchange Act (i) all quarterly and annual reports that would be required to be filed with the Commission on Forms 10-Q and 10-K if Holdings or the Company were required to file such Forms, (including, in each case, financial information and a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by Holdings' and the Company's certified independent accountants); and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if Holdings or the Company were required to file such reports. In addition, following the date the Company is required to consummate the exchange offer contemplated by the Registration Rights Agreement, whether or not required by the Commission, Holdings and the Company will file a copy of all of the information and reports referred to in clauses (i) and (ii) above with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective purchasers of Securities upon request. In addition, the Company and the Guarantors agree that, for so long as Securities (but not the Exchange Securities) remain outstanding, they will furnish to holders and beneficial owners of Securities and to securities analysts and prospective purchasers of Securities, upon their request, the information (together with the documents 19 referred to in the second sentence of this paragraph, the "Additional Issuer Information") required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. (g) Future Agreement Not to Offer or Sell Additional Securities. Holdings and the Company, during the period of 180 days following the date of the Offering Memorandum, will not, without the prior written consent of Banc of America Securities LLC (which consent may be withheld at the sole discretion of such Initial Purchaser), directly or indirectly, sell, offer, contract or grant any option to sell, pledge, transfer or establish an open "put equivalent position" within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or transfer, or announce the offering of, or file any registration statement under the Securities Act in respect of, any debt securities of the Company or securities exchangeable for or convertible into debt securities of the Company (other than to register the Exchange Securities). (h) Future Reports to the Initial Purchasers. For so long as any Securities or Exchange Securities remain outstanding, Holdings and the Company will furnish to the Initial Purchasers (i) as soon as reasonably practicable after the end of each fiscal year, copies of the Annual Report of Holdings and the Company containing the balance sheet of Holdings and the Company as of the close of such fiscal year and statements of income, stockholders' equity and cash flows for the year then ended and the opinion thereon of Holdings' and the Company's independent public or certified public accountants; (ii) as soon as reasonably practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by Holdings and the Company with the Commission; and (iii) as soon as available, copies of any report or communication of Holdings and the Company mailed generally to holders of its capital stock or debt securities (including the holders of the Securities). (i) No Integration. Each of Holdings and the Company agrees that it will not and will cause its affiliates not to, make any offer or sale of securities of any class if, as a result of the doctrine of "integration" referred to in Rule 502 under the Securities Act, such offer or sale would render invalid (for the purpose of (i) the issuance and sale of the Securities by the Company to the Initial Purchaser, (ii) the resale of the Securities by the Initial Purchasers to Subsequent Purchasers or (iii) the resale of the Securities by such Subsequent Purchasers to others) the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof or by Rule 144A or by Regulation S thereunder or otherwise. (j) Legended Securities. Each certificate for a Note will bear the legend substantially in the form set forth in Section 10(d) of the Note Purchase Agreement for the time period and upon the other terms stated in the Offering Memorandum. (k) PORTAL. The Company will use its reasonable best efforts to cause such Notes when issued to be eligible for the National Association of Securities Dealers, Inc. PORTAL market (the "PORTAL market"). 20 (l) Rating of Securities. The Company shall take all reasonable action necessary to enable Standard & Poor's Ratings Services, a division of McGraw Hill, Inc. ("S&P"), and Moody's Investor Services, Inc. ("Moody's") to provide their respective credit ratings to the Securities. Banc of America Securities LLC, on behalf of the Initial Purchasers, may, in its sole discretion, waive in writing the performance by Holdings or the Company of any one or more of the foregoing covenants or extend the time for their performance. Section 4. Payment of Expenses. The Company agrees, and Holdings shall cause the Company, to pay all costs, fees and expenses incurred in connection with the performance of its obligations hereunder and in connection with the transactions contemplated hereby, including without limitation (i) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Securities to the Initial Purchasers, (ii) all fees and expenses of the Company's and the Guarantors' counsel, independent public or certified public accountants and other advisors, (iii) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of each Preliminary Offering Memorandum and the Offering Memorandum (including financial statements), and all amendments and supplements thereto, (iv) all filing fees, reasonable attorneys' fees and expenses incurred by the Company, the Guarantors or the Initial Purchasers in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Securities for offer and sale under the Blue Sky laws and, if requested by an Initial Purchaser, preparing and printing a "Blue Sky Survey" or memorandum, and any supplements thereto, advising such Initial Purchaser of such qualifications, registrations and exemptions, such fees and expenses under this clause (iv) not to exceed $20,000 in the aggregate, (v) the fees and expenses of the Trustee, including the fees and disbursements of counsel for the Trustee in connection with the Indenture, the Securities and the Exchange Securities, (vi) all fees and expenses (including reasonable fees and expenses of counsel) of the Company in connection with approval of the Securities by the Depositary for "book-entry" transfer, and (vii) the performance by Company of its other obligations under this Agreement. Except as provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the Initial Purchasers shall pay their own expenses, including the fees and disbursements of its counsel, and shall be responsible for all roadshow related costs. Section 5. Additional Covenants. The Company and each Guarantor further jointly and severally covenant and agree with each Initial Purchaser as follows: (a) Accountants' Comfort Letter. The Company shall use its best efforts to cause the Independent Accountants to deliver to the Initial Purchasers, on the Closing Date, a letter dated the date hereof addressed to the Initial Purchasers, in form and substance satisfactory to the Initial Purchasers, containing statements and information of the type ordinarily included in accountant's "comfort letters" to the Initial Purchasers, delivered according to Statement of Auditing Standards Nos. 71, 72 and 76 (or any successor bulletins), with respect to the audited and unaudited financial statements, pro forma, and other financial information contained in the Offering Memorandum. 21 (b) Opinion of Counsel for the Company. The Company shall use its best efforts to cause Kaye Scholer LLP and Hunton & Williams, counsel for the Company, to deliver to the Initial Purchasers, on the Closing Date, opinions of such counsels, dated as of such Closing Date, the forms of which are attached as Exhibit A-1 and Exhibit A-2, respectively. (c) Opinion of General Counsel for the Company. The Company shall use its best efforts to cause Marilyn U. MacNiven-Young, its General Counsel to deliver to the Initial Purchasers, on the Closing Date, an opinion of such counsel, dated as of such Closing Date, the form of which is attached as Exhibit B. (d) Opinion of Regulatory Counsel for the Company. The Company shall use its best efforts to cause Davis Wright Tremaine LLP, regulatory counsel for the Company, to deliver to the Initial Purchasers, on the Closing Date, an opinion of such counsel, dated as of such Closing Date, the form of which is attached as Exhibit C. (e) Officers' Certificate. On the Closing Date, each of Holdings and the Company shall deliver to the Initial Purchasers written certificates, executed by the Chief Executive Officer, President, Executive Vice President or Senior Vice President of each of Holdings and the Company, as the case may be, and the Chief Financial Officer or Chief Accounting Officer of each of Holdings and the Company, as the case may be, dated as of the Closing Date, to the effect that: (i) for the period from and after the date of this Agreement and prior to the Closing Date, to their knowledge, after due inquiry, there has not occurred any Material Adverse Change; (ii) for the period from the date of this Agreement and prior to the Closing Date, there has not occurred any downgrading, nor has any notice been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any securities of the Company or any of its Subsidiaries by any "nationally recognized statistical rating organization", as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; (iii) the representations, warranties and covenants of the Company and each Guarantor, as the case may be, and set forth in Section 1 of this Agreement are true and correct in all material respects (without giving effect to any limitation as to "materiality" or "Material Adverse Change" set forth therein) with the same force and effect as though expressly made on and as of the Closing Date; and (iv) the Company and the Guarantors have complied in all material respects with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date. (f) Bring-down Comfort Letters. The Company shall use its best efforts to cause the Independent Accountants to deliver to the Initial Purchasers, 22 on the Closing Date, a letter dated such date, in form and substance satisfactory to the Initial Purchasers, to the effect that such Independent Accountants reaffirm the statements made in the letter furnished by them pursuant to subsection (a) of this Section 5, except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the Closing Date. (g) Registration Rights Agreement. The Company and the Guarantors shall enter into the Registration Rights Agreement and deliver to the Initial Purchasers executed counterparts thereof. (h) Additional Documents. On or before the Closing Date, the Company shall deliver to the Initial Purchasers and counsel for the Initial Purchasers such information and documents as the Initial Purchasers and such counsel may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Securities as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained. Section 6. Reimbursement of Initial Purchasers' Expenses. If the issuance and sale to the Initial Purchasers of the Securities on the Closing Date is not consummated because of any refusal, inability or failure on the part of the Company to perform any agreement herein or to comply with any provision hereof, the Company agrees to, and Holdings agrees to cause the Company to, reimburse the Initial Purchasers upon demand for all reasonable out-of-pocket expenses that shall have been incurred by the Initial Purchasers in connection with the proposed offering and sale of the Securities. Section 7. Offer, Sale and Resale Procedures. The Initial Purchasers, on the one hand, and Holdings and the Company, on the other hand, hereby establish and agree to observe the following procedures in connection with the offer and sale of the Securities: (a) Offers and Sales Only to Qualified Institutional Buyers and Non-U.S. Persons. Offers and sales of the Securities will be made only by the Initial Purchasers or Affiliates thereof qualified to do so in the jurisdictions in which such offers or sales are made. Each such offer or sale shall only be made (A) to persons whom the offeror or seller reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the Securities Act) or (B) non-U.S. persons outside the United States to whom the offeror or seller reasonably believes offers and sales of the Securities may be made in reliance upon Regulation S under the Securities Act, upon the terms and conditions set forth in Annex I hereto, which Annex I is hereby expressly made a part hereof. (b) No General Solicitation. The Securities will be offered by approaching prospective Subsequent Purchasers on an individual basis. No general solicitation or general advertising (within the meaning of Rule 502(c) under the Securities Act) will be used in the United States in connection with the offering of the Securities. (c) Restrictions on Transfer. Upon original issuance by the Company, and until such time as the same is no longer required under the applicable requirements of the Securities Act, the Notes (and all securities issued in exchange therefor or in substitution 23 thereof, other than the Exchange Securities) shall bear a legend substantially in the form set forth in Section 10(d) of the Note Purchase Agreement. Following the sale of the Securities by the Initial Purchasers to Subsequent Purchasers pursuant to the terms hereof, the Initial Purchasers shall not be liable or responsible to the Company for any losses, damages or liabilities suffered or incurred by the Company, including any losses, damages or liabilities under the Securities Act, arising from or relating to any resale or transfer of any Security. Section 8. Indemnification. (a) Indemnification of the Initial Purchasers. Each of Holdings, the Company and each of the Subsidiary Guarantors jointly and severally agrees to indemnify and hold harmless each Initial Purchaser, its directors, officers and employees, and each person, if any, who controls any Initial Purchaser within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Initial Purchaser or such controlling person may become subject, under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of Holdings and the Company), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based (i) upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (ii) in whole or in part upon any inaccuracy in the representations and warranties of the Company or any Guarantor contained herein; or (iii) in whole or in part upon any failure of the Company or any Guarantor to perform its obligations hereunder or under law; or (iv) any act or failure to act or any alleged act or failure to act by any Initial Purchaser in connection with, or relating in any manner to, the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon any matter covered by clause (i) above to the extent such loss, claim, damage, liability or expense is not covered in items (i) through (iii) (subject to the limitations set forth below), provided that none of the Company or any Guarantor shall be liable under this clause (iv) to the extent that a court of competent jurisdiction shall have determined by a final judgment that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Initial Purchaser through its gross negligence or willful misconduct; and to reimburse such Initial Purchaser and each such controlling person for any and all expenses (including the fees and disbursements of counsel chosen by Banc of America Securities LLC) as such expenses are reasonably incurred by such Initial Purchaser or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged 24 omission made in reliance upon and in conformity with written information furnished to the Company by the Initial Purchasers expressly for use in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto). The indemnity agreement set forth in this Section 8(a) shall be in addition to any liabilities that Holdings or the Company and the Subsidiary Guarantors may otherwise have. (b) Indemnification of the Company and the Guarantors and their Directors and Officers. Each Initial Purchaser agrees to indemnify and hold harmless Holdings and the Company and each of their respective directors and each person, if any, who controls the Company or Holdings within the meaning of the Securities Act or the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which Holdings or the Company or any such director, or controlling person may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Initial Purchasers), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), or arises out of or is based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein in the light of the circumstances under which they were made not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), in reliance upon and in conformity with written information furnished to the Company by the Initial Purchasers expressly for use therein; and to reimburse Holdings and the Company or any such director or controlling person for any legal and other expenses reasonably incurred by Holdings or the Company or any such director or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. Holdings and the Company hereby acknowledge that the only information that the Initial Purchasers have furnished to the Company expressly for use in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto) are the statements set forth in (A) the seventh full paragraph on introductory page ii of the Offering Memorandum, (B) the second sentence under the caption "Risk Factors -- You cannot be sure that an active trading market will develop for these notes," and (C) the first sentence of the third paragraph, the first three sentences of the fourth paragraph, the third sentence of the sixth paragraph and the eighth paragraph under the caption "Plan of Distribution" in the Offering Memorandum; and the Initial Purchasers confirm that such statements are correct. The indemnity agreement set forth in this Section 8(b) shall be in addition to any liabilities that each Initial Purchaser may otherwise have. (c) Notifications and Other Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 8, notify the indemnifying party in writing of 25 the commencement thereof, but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise than under the indemnity agreement contained in this Section 8 or to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party's election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (together with local counsel), approved by the indemnifying party (Banc of America Securities LLC in the case of Section 8 and Section 9), representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party. (d) Settlements. The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final non-appealable judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8(c) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the final terms of such proposed settlement as soon as practicable prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No 26 indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. Section 9. Contribution. If the indemnification provided for in Section 8 is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by Holdings, the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchasers, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of Holdings and the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchasers, on the other hand, in connection with the statements or omissions or inaccuracies in the representations and warranties herein which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by Holdings and the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchasers, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds, if any, from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company and the total discount, if any, received by the Initial Purchasers bear to the aggregate initial offering price of the Securities. The relative fault of Holdings, the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchasers, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact or any such inaccurate or alleged inaccurate representation or warranty relates to information supplied by Holdings, the Company or the Subsidiary Guarantors, on the one hand, or the Initial Purchasers, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 8(c) with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 9; provided that no additional notice shall be required with respect to any action for which notice has been given under Section 8(c) for purposes of indemnification. 27 The Company, the Guarantors and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 9. Notwithstanding the provisions of this Section 9, the Initial Purchasers shall not be required to contribute any amount in excess of the discount received by the Initial Purchasers in connection with the Securities distributed by them. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 9, each director, officer and employee of any Initial Purchaser and each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Initial Purchasers, and each director of Holdings and the Company and each person, if any, who controls Holdings and the Company within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as Holdings and the Company. Section 10. [Intentionally Omitted.] Section 11. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of Holdings and the Company of their officers and of the Initial Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Initial Purchasers, Holdings or the Company or any of its or their partners, officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Securities sold hereunder and any termination of this Agreement. Section 12. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered or by facsimile and confirmed to the parties hereto as follows: If to the Initial Purchasers: Banc of America Securities LLC 9 West 57th Street New York, NY 10019 Facsimile: 212-847-8324 Attention: Raymond A. Cubero, Managing Director with a copy to: Shearman & Sterling 599 Lexington Avenue New York, NY 10022 Facsimile: 212-848-7179 Attention: Christopher C. Paci, Esq. 28 If to the Company or Holdings: InSight Health Services Corp. 4400 MacArthur Blvd. Suite 800 Newport Beach, CA 92660 Facsimile: 949-476-8006 Attention: Chief Financial Officer with copies to: J.W. Childs Associates, L.P. One Federal Street 21st Floor Boston, MA 02110 Facsimile: 617-753-1101 Attention: Edward D. Yun and to: The Halifax Group, L.L.C. 1133 Connecticut Avenue N.W. Suite 700 Washington, D.C. 20036 Facsimile: 202-296-7133 Attention: David W. Dupree and to: Kaye Scholer LLP 245 Park Avenue New York, NY 10022 Facsimile: 212-836-8689 Attention: Stephen C. Koval, Esq. and to: InSight Health Services Corp. 4400 MacArthur Blvd. Suite 800 Newport Beach, CA 92660 Facsimile: 949-476-0137 Attention: General Counsel Any party hereto may change the address for receipt of communications by giving written notice to the others. 29 Section 13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and to the benefit of the employees, officers and directors and controlling persons referred to in Section 8 and Section 9, and in each case their respective successors, and no other person will have any right or obligation hereunder. The term "successors" shall not include any purchaser of the Securities as such from the Initial Purchasers by reason of such purchase. Section 14. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. Section 15. Governing Law; Consent to Jurisdiction. (a) Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE. (b) Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby ("Related Proceedings") may be instituted in the federal courts of the United States of America located in the City and County of New York or the courts of the State of New York in each case located in the City and County of New York (collectively, the "Specified Courts"), and each party hereto irrevocably submits to the non-exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a "Related Judgment"), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party's address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum. Section 16. General Provisions. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof except, as to the Initial Purchasers, the Note Purchase Agreement. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit. The Table of Contents and the section headings herein 30 are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement. 31 Kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms. Very truly yours, INSIGHT HEALTH SERVICES HOLDINGS CORP. By: /s/ Mark J. Tricolli ------------------------------- Name: Mark J. Tricolli Title: Vice President & Secretary INSIGHT HEALTH SERVICES CORP. By: /s/ Mark J. Tricolli ------------------------------- Name: Mark J. Tricolli Title: INSIGHT HEALTH CORP. By: ------------------------------- Name: Mark J. Tricolli Title: SIGNAL MEDICAL SERVICES, INC. By: /s/ Mark J. Tricolli ------------------------------- Name: Mark J. Tricolli Title: OPEN MRI, INC. By: /s/ Mark J. Tricolli ------------------------------- Name: Mark J. Tricolli Title: Authorized Person MAXUM HEALTH CORP. By: /s/ Mark J. Tricolli ------------------------------- Name: Mark J. Tricolli Title: Authorized Person RADIOSURGERY CENTERS, INC. By: /s/ Mark J. Tricolli ------------------------------- Name: Mark J. Tricolli Title: Authorized Person MAXUM HEALTH SERVICES CORP. By: /s/ Mark J. Tricolli ------------------------------- Name: Mark J. Tricolli Title: Authorized Person MRI ASSOCIATES, L.P. By: InSight Health Corp., its General Partner By: /s/ Mark J. Tricolli ------------------------------- Name: Mark J. Tricolli Title: Authorized Person MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. By: /s/ Mark J. Tricolli ------------------------------- Name: Mark J. Tricolli Title: Authorized Person MAXUM HEALTH SERVICES OF DALLAS, INC. By: /s/ Mark J. Tricolli ------------------------------- Name: Mark J. Tricolli Title: Authorized Person NDDC, INC. By: /s/ Mark J. Tricolli ------------------------------- Name: Mark J. Tricolli Title: Authorized Person DIAGNOSTIC SOLUTIONS CORP. By: /s/ Mark J. Tricolli ------------------------------- Name: Mark J. Tricolli Title: Authorized Person The foregoing Purchase Agreement is hereby confirmed and accepted by the Initial Purchasers as of the date first above written. BANC OF AMERICA SECURITIES LLC By: /s/ Raymond Cubero --------------------------- Name: Raymond Cubero Title: Managing Director FIRST UNION SECURITIES, INC. By: /s/ Jeff Gore --------------------------- Name: Jeff Gore Title: Vice President SCHEDULE A GUARANTORS ---------- Guarantor Jurisdiction of Organization - --------- ---------------------------- InSight Health Corp. Delaware Signal Medical Services, Inc. Delaware Open MRI, Inc. Delaware Maxum Health Corp. Delaware Radiosurgery Centers, Inc. Delaware Maxum Health Services Corp. Delaware MRI Associates, L.P. Indiana Maxum Health Services of North Texas, Inc. Texas Maxum Health Services of Dallas, Inc. Texas NDDC, Inc. Texas Diagnostic Solutions Corp. Delaware SCHEDULE B MATERIAL AGREEMENTS ------------------- 1. Credit Agreement, dated as of October 17, 2001, among InSight Health Services Acquisition Corp., InSight Health Services Holdings Corp., InSight Health Services Corp. , the Guarantors, as defined therein, the lenders from time to time party thereto, First Union National Bank, as syndication agent, The CIT Group/Business Credit, Inc., as documentation agent, and Bank of America, N.A., as administrative agent. 2. Note Purchase Agreement, dated as of October 17, 2001, among InSight Health Services Acquisition Corp., InSight Health Services Holdings Corp., InSight Health Services Corp., the Subsidiary Guarantors, as defined therein, Banc of America Bridge LLC and Banc of America Securities LLC. 3. Management Agreement, dated as of October 17, 2001, among J.W. Childs Advisors II., L.P, Halifax Genpar, L.P., InSight Health Services Holdings Corp. and InSight Health Services Corp. 4. Amended and Restated Stockholders Agreement by and among InSight Health Services Holdings Corp., J.W. Childs Equity Partners II, L.P., JWC InSight Co-invest LLC, Halifax Capital Partners, L.P., David W. Dupree and the other parties named therein. 5. Swap Master Agreement, dated as of December 24, 1997, between NationsBank, N.A. and InSight Health Services Corp., including exercise of Swap Option dated as of March 29, 2001. 6. Borrower Assignment, Assumption and Release dated as of October 17, 2001 by and between Acquisition Corp. and InSight. 7. InSight Health Services Parent Corp. 2001 Stock Option Plan Stock Option Agreement between InSight Health Services Holdings Corp. and each of Steven T. Plochocki, Michael A. Boylan, Thomas V. Croal and Michael S. Madler. 8. Executive Employment Agreement dated as of June 29, 2001, between InSight Health Services Corp., InSight Health Services Holdings Corp. and each of Robert J. Armstrong, Susan E. Arnheiter, Patricia R. Blank, Michael A. Boylan, Michael W. Brown, Thomas V. Croal, Joseph F. Denninger, Brian G. Drazba, Cecilia A. Guastaferro, Michael S. Madler, Tammy M. Morita, Steven T. Plochocki and Brian W. Woodbury. 9. Security Agreement dated as of October 17, 2001 by and among InSight Health Services Holdings Corp., InSight Health Services Corp. and the Subsidiary Guarantors (as defined therein). 10. Pledge Agreement dated as of October 17, 2001 by and between InSight Health Services Holdings Corp., InSight Health Services Corp. and the Subsidiary Guarantors (as defined therein). 11. Paying Agent Agreement dated as of October 17, 2001 between InSight Health Services Holdings Corp. and American Stock and Transfer & Trust Company. 12. Subscription and Contribution Agreement dated as of October 17, 2001 by and among InSight Health Services Holdings Corp., J.W. Childs Equity Partners II, L.P., JWC InSight Co-invest LLC, Halifax Capital Partners, L.P. and David W. Dupree. 13. Real Estate Lease for 11617 North Central Expressway, Suite 132, Dallas, Texas between Century Properties Fund XIII and NDDC, Inc. 14. Real Estate Lease for 4225 Rosewood Drive, Suites 4, 5 and 6, Pleasanton, California between New Plan Excel Realty Trust, Inc. and InSight Health Corp. 15. Real Estate Lease for 1001 and 1005 North Highland Avenue, Murfreesboro, Tennessee between Marlin Properties, LLC and InSight Health Corp. 16. Real Estate Lease for 800 Shadow Lane, Las Vegas, Nevada between Borstein Partners Ltd. and InSight Health Corp. 17. Real Estate Lease for 12455 East Washington Boulevard, Whittier, California between Washington Magnetic Resonance Center and InSight Health Corp. 18. Real Estate Lease for 21 Stockton Drive, Toms River, New Jersey between Center State Health Group, Inc. and Toms River Imaging Associates, LP. 19. Real Estate Lease for 1700 North Rose, Suite 110, Oxnard, California between CHW Central Coast and St. John's Regional Imaging Center, LLC. 20. Real Estate Lease for 17950 Preston Road, Suite 120, Dallas, Texas between 17950 Partners, Ltd. and InSight Health Corp. 21. Purchase Agreement between IHC and Berlex Laboratories dated 5/1/00. 22. Master Service Agreement between IHC and General Electric dated 1/1/97. 23. Agreement between the Company and Lafayette Pharmaceuticals, Inc. dated 2/14/00. 24. Distribution and Service Agreement between IHC and NHD, Inc. dated 2/14/00. 25. Operating Lease with General Electric for 1.5T Signa dated 10/00 (G1238A). 26. Operating Lease with General Electric for 1.5T Signa dated 03/01 (G1242A). 27. Operating Lease with General Electric for 1.5T Signa dated 03/01 (G1243A). 28. Operating Lease with General Electric for 1.5T Signa dated 03/01 (G1244A). 29. Operating Lease with General Electric for 1.5T Signa dated 03/01 (G1245A). SCHEDULE C SUBSIDIARIES OF INSIGHT HEALTH SERVICES CORP. Subsidiary Jurisdiction of Organization - ---------- ---------------------------- InSight Health Corp. Delaware Diagnostic Solutions Corp. Delaware Maxum Health Corp. Delaware Maxum Health Services Corp. Delaware Maxum Health Services of Dallas, Inc. Texas Maxum Health Services of North Texas, Inc. Texas NDDC, Inc. Texas Open MRI, Inc. Delaware Radiosurgery Centers, Inc. Delaware Signal Medical Services, Inc. Delaware Toms River Imaging Associates, L.P. New Jersey Berwyn Magnetic Resonance Center, LLC Illinois Connecticut Lithotripsy, LLC Connecticut Daniel Freeman MRI, LLC California Dublin Diagnostic Imaging, LLC Ohio Garfield Imaging Center, Ltd. California Granada Hills Open MRI, LLC California InSight-Premier Health, LLC Maine Lockport MRI, LLC New York MRI Associates, L.P. Indiana St. John's Regional Imaging Center, LLC California Sun Coast Imaging Center, LLC Florida Wilkes-Barre Imaging, LLC Pennsylvania SCHEDULE D ---------- INITIAL PURCHASERS ------------------
Aggregate Principal Amount of Initial Notes to be issued in exchange for Existing Initial Purchasers Notes ------------------ ------------------------ Banc of America Securities LLC ...................... $ 170,000,000 First Union Securities, Inc.......................... $ 30,000,000 ------------------------ Total $ 200,000,000
Aggregate Principal Amount of Additional Initial Purchasers Notes ------------------ ------------------------ Banc of America Securities LLC ...................... $ 21,250,000 First Union Securities, Inc.......................... $ 3,750,000 ------------------------ Total $ 25,000,000
EXHIBIT A-1 FORM OF OPINION OF KAYE SCHOLER LLP (i) Each of Holdings and the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware. (ii) Each of Holdings and the Company has the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under the Purchase Agreement and the other Transaction Documents to which it is a party. (iii) All of the issued and outstanding capital stock of each of Holdings and the Company has been duly authorized and, to our knowledge, has been validly issued, is fully paid and non-assessable. Except as described in the Offering Memorandum, all the outstanding shares of capital stock of the Company are owned of record by Holdings, free and clear of any security interest, mortgage, pledge, lien, encumbrance or any pending or threatened claim. (iv) The description of Holdings' stock option, stock bonus and other stock plans or arrangements and the options or other rights granted thereunder set forth in the Offering Memorandum fairly summarizes, in all material respects, such plans, arrangements, options and rights. (v) The issuance and sale of the Notes by the Company will not be subject to any preemptive right arising by operation of the charter or by-laws of the Company or the General Corporation Law of the State of Delaware or under any agreement listed on Schedule 1 hereto. (vi) The Purchase Agreement has been duly authorized, executed and delivered by Holdings and the Company. (vii) Each of the Registration Rights Agreement and the DTC Letter of Representations has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company, enforceable in accordance with its terms, except with respect to any indemnification or contribution provision thereof and subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights and remedies and general principles of equity (regardless of whether considered in a proceeding at law or in equity), and the Registration Rights Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, Holdings, enforceable in accordance with its terms, except with respect to any indemnification or contribution provision thereof and subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights and remedies and general principles of equity (regardless of whether considered in a proceeding at law or in equity). (viii) The Indenture has been duly authorized, executed and delivered by the Company and Holdings and (assuming the due authorization, execution and delivery thereof by the Trustee) constitutes a valid and binding agreement of the Company and Holdings, enforceable against the Company and Holdings in accordance with its terms, except with respect A-1 to any indemnification or contribution provision thereof and subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights and remedies and general principles of equity (regardless of whether considered in a proceeding at law or in equity). (ix) The Notes are in the form contemplated by the Indenture, have been duly authorized by the Company for issuance and sale pursuant to the Purchase Agreement and the Indenture and, when executed by the Company and authenticated by the Trustee in the manner provided in the Indenture (assuming the due authorization, execution and delivery of the Indenture by the Trustee) and delivered against surrender of the Existing Notes in exchange therefor (and, in the case of the Additional Notes, payment of the purchase price therefor), will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except with respect to any indemnification or contribution provision thereof and subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights and remedies and general principles of equity (regardless of whether considered in a proceeding at law or in equity). (x) The Board of Directors of the Company has duly adopted by requisite vote the resolutions necessary to authorize the execution, delivery and performance of the Exchange Notes. No approval by Holdings, as sole stockholder of the Company, is required therefor. (xi) The Guarantee by Holdings of the Notes is in the form contemplated by the Indenture, has been duly authorized for issuance and sale pursuant to the Purchase Agreement and the Indenture and, at the Closing Date, will have been duly executed by Holdings and, when the Notes have been authenticated in the manner provided for in the Indenture and delivered against surrender of the Existing Notes in exchange therefor (and, in the case of the Additional Notes, payment of the purchase price therefor), will constitute the valid and binding agreement of Holdings, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights and remedies and general principles of equity (regardless of whether considered in a proceeding at law or in equity), and will be entitled to the benefits of the Indenture. (xii) The Securities, the Indenture and the Registration Rights Agreement conform in all material respects to the descriptions thereof contained in the Offering Memorandum. (xiii) The statements in the Offering Memorandum under the captions "Offering Memorandum Summary -- The Acquisition and Related Financing Transactions," "Risk Factors -- Risks Relating to the Notes -- Your right to receive payments on these notes is junior to the issuer's existing senior indebtedness and possibly all of its future borrowings. Further, the guarantees of these notes are junior to all of the guarantors' existing senior indebtedness and possibly to all their future borrowings," "Risk Factors -- Risks Relating to the Notes -- Since the notes are unsecured, your right to enforce remedies is limited by the rights of holders of secured debt," "Risk Factors -- Risks Relating to the Notes -- You should not rely on our parent company's guarantee in evaluating an investment in the notes," "Risk Factors -- Risks Relating to the Notes -- Not all of our subsidiaries guarantee our obligations under the notes, and the assets A-2 of the non-guarantor subsidiaries may not be available to make payments on the notes," "Risk Factors -- Risks Relating to the Notes -- The indenture related to the notes and the new senior credit facilities will contain various covenants which limit our management's discretion in the operations of our business," "Risk Factors -- Risks Relating to the Notes -- The issuer may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture," "Risk Factors -- Risks Relating to the Notes -- Federal and state statutes allow courts, under specific circumstances, to avoid guarantees and require noteholders to return payments received from guarantors," "Risk Factors -- Risks Relating to Our Company and Our Industry -- The interests of our controlling stockholders could conflict with those of the holders of the notes offered hereby," "The Acquisition and Related Financing Transactions," "Management -- Employment Agreements," "Management -- 2001 Stock Option Plan," "Management -- Stock Option Agreements," "Certain Relationships and Related Transactions," "Description of New Senior Credit Facilities," "Description of the Notes," "Certain Federal Income Tax Considerations" and "Notice to Investors," insofar as such statements constitute matters of law, summaries of legal matters, documents or legal conclusions, have been reviewed by such counsel, fairly summarize, in all material respects, the matters referred to therein and do not omit a material fact necessary to make the statements contained therein not misleading. (xiv) No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency of the federal government of the United States or the State of New York, is required for the execution, delivery and performance by the Company or any Guarantor of the Purchase Agreement, the Registration Rights Agreement, the Indenture or the Securities, as applicable, the execution, delivery and performance by the Company of the DTC Letter of Representations or the issuance and delivery by the Company or any Guarantor of the Securities, or consummation of the transactions contemplated hereby and thereby, except as may be required under the Securities Act, the Exchange Act, the Trust Indenture Act and applicable state securities or blue sky laws. (xv) The execution and delivery of the Purchase Agreement, the Registration Rights Agreement, the DTC Letter of Representations, the Securities and the Indenture by the Company and Holdings, to the extent it is a party thereto, the performance by the Company and Holdings of their respective obligations thereunder (i) will not result in any violation of the provisions of the charter or by-laws of the Company or Holdings, as applicable, (ii) will not constitute a breach of, or Default, or result in the imposition of any lien, charge or encumbrance upon any property or assets of the Company or Holdings, as applicable, pursuant to, with respect to the Company, any of the Agreements listed on Schedule 1 hereto, and with respect to Holdings, any of the Agreements listed on Schedule 2 hereto which Holdings has identified to us as its only material agreements; or (iii) to the best knowledge of such counsel, will not result in any violation of any law or administrative regulation, which a lawyer exercising customary professional diligence would reasonably recognize as being applicable to Holdings or the Company with respect to the transactions contemplated by the Purchase Agreement, the Registration Rights Agreement, the Indenture and the Securities. Such counsel need express no opinion herein as to the applicability or effect of Healthcare Laws. (xvi) Neither the Company nor Holding is, nor after surrender of the Existing Notes in exchange for the Notes (and receipt of payment for the Additional Notes) will it be, an "investment company" requiring it to register under the Investment Company Act. A-3 (xvii) Assuming the accuracy of the representations, warranties and covenants of the Company, the Guarantors and the Initial Purchasers contained in the Purchase Agreement, no registration of the Notes or the Guarantees under the Securities Act, and no qualification of an indenture under the Trust Indenture Act with respect thereto, is required in connection with the exchange of the Existing Notes for the Securities (or, with respect to the Additional Notes, the purchase thereof) by the Initial Purchasers or the initial resale of the Securities by the Initial Purchasers to Qualified Institutional Buyers or non-U.S. persons in the manner contemplated by the Purchase Agreement and the Offering Memorandum other than any registration or qualification that may be required in connection with the Exchange Offer contemplated by the Offering Memorandum or in connection with the Registration Rights Agreement. Such counsel need express no opinion, however, as to (x) the effect of state securities or "blue sky" laws, foreign securities laws or the Exchange Act or (y) when or under what circumstances any Notes initially sold by the Initial Purchasers may be reoffered or resold. (xviii) To such counsel's knowledge, other than as described in the Offering Memorandum, there are no pending or threatened legal or governmental proceedings to which Holdings is a party that would be required to be described by Item 103 of Regulation S-K under the Securities Act if the issuance of the Notes were being registered under the Securities Act but is not so described in the Offering Memorandum. (xix) None of the sale, issuance, execution or delivery of the Notes will contravene Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve System. A-4 EXHIBIT A-2 FORM OF OPINION OF HUNTON & WILLIAMS (i) Based solely on certificates of public officials and officers of the Company, including the organizational documents attached thereto, the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. (ii) Based solely on certificates of public officials and officers of the Company (which certificates shall be attached as exhibits to such opinion), and the documents attached to such certificates (including the organizational documents of the Subsidiary Guarantors), each Subsidiary Guarantor is in valid existence and in good standing under the laws of its respective jurisdiction of incorporation or formation as set forth on Schedule I hereto. Based solely on certificates of public officials and officers of the Company (which certificates shall be attached as exhibits to such opinion), and the documents attached to such certificates (including the organizational documents of the Subsidiary Guarantors), each Subsidiary Guarantor (a) has corporate or entity power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and to enter into the Purchase Agreement and the other Transaction Documents to which it is a party and (b) to the best of our knowledge, is duly qualified as a foreign corporation or limited partnership, as the case may be, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. (iii) All of the issued and outstanding capital stock of each Subsidiary Guarantor, if a corporation, has been duly authorized and, to our knowledge, has been validly issued, is fully paid and non-assessable and is owned by Holdings, directly or through Subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or any pending or threatened claim, except as disclosed in the Offering Memorandum. (iv) The Purchase Agreement has been duly authorized, executed and delivered by each Subsidiary Guarantor. (v) The Registration Rights Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, each Subsidiary Guarantor, enforceable in accordance with its terms. (vi) The Indenture has been duly authorized, executed and delivered by the each Subsidiary Guarantor and (assuming the due authorization, execution and delivery thereof by the Trustee) constitutes a valid and binding agreement of each Subsidiary Guarantor, enforceable against each Subsidiary Guarantor in accordance with its terms. (vii) The Guarantees by the Subsidiary Guarantors of the Notes are in the respective forms contemplated by the Indenture, have been duly authorized for issuance and sale pursuant A-5 to the Purchase Agreement and the Indenture and have been duly executed by each of the Subsidiary Guarantors and, assuming the Notes have been authenticated in the manner provided for in Section 2.02 of the Indenture and delivered against surrender of the Existing Notes in exchange therefor (and, in the case of the Additional Notes, assuming the payment of the purchase price therefor), will constitute the valid and binding agreement of each Subsidiary Guarantor, enforceable in accordance with its terms and will be entitled to the benefits of the Indenture. (viii) The documents incorporated by reference in the Offering Memorandum (other than the financial statements and related notes thereto and other financial, statistical and accounting data and supporting schedules therein, as to which no opinion need be rendered), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act. (ix) To such counsel's knowledge, there are no pending or threatened legal or governmental proceedings to which the Company or any of its subsidiaries is a party that would be required to be described by Item 103 of Regulation S-K under the Securities Act if the issuance of the Notes were being registered under the Securities Act but is not so described in the Offering Memorandum. The enforceability of the Registration Rights Agreement, the Indenture and the Guarantees of the Notes by the Subsidiary Guarantors is subject to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws affecting the rights of creditors generally, and (ii) general principles of equity, whether considered at law or in equity. We express no opinion with respect to the indemnification and contribution provisions contained in the Registration Rights Agreement and the Indenture. We have participated in various conferences with the officers and other representatives of the Company and its independent certified public accountants. In some conferences you and your counsel also participated. At those conferences, the contents of the Offering Memorandum and Prospectus were discussed and revised. Since the dates of those conferences, we have inquired of certain officers whether there has been any material change in the affairs of the Company. Because of the inherent limitations in the independent verification of factual matters, and the character of determinations involved in the preparation of offering memoranda under the Securities Act, we are not passing upon, and do not assume any responsibility for, and make no representation that we have independently verified, the accuracy, completeness or fairness of the statements contained in the Offering Memorandum. Also, we do not express any opinion or belief as to the financial statements or other financial and statistical information contained in the Offering Memorandum, or derived therefrom, or incorporated therein by reference. However, subject to the foregoing, on the basis of our participation in the conferences referred to above and our examination of the documents referred to herein, we advise you that nothing has come to the attention of the attorneys of this firm who have been engaged in the representation of the Company in connection with the Company's issuance and sale of the Notes that leads us to believe that the Offering Memorandum, as of its date or at the Closing Date, contained or contains an untrue statement of material fact or omitted or omits to state a material fact necessary A-6 in order to make the statements therein, in light of the circumstances under which they were made, not misleading. A-7 EXHIBIT B FORM OF OPINION OF GENERAL COUNSEL FOR THE COMPANY (i) The statements in the Offering Memorandum under the captions "Risk Factors -- Risks Relating to Our Company and Our Industry -- Changes in the rates or methods of third-party reimbursements for diagnostic imaging and therapeutic services could result in reduced demand for our services or create downward pricing pressure, which would result in a decline in our revenues and harm our financial position," "Risk Factors -- Risks Relating to Our Company and Our Industry -- We may be unable to renew or maintain our customer contracts which would harm our business and financial results," "Risk Factors -- Risks Relating to Government Regulation of Our Business," "Business -- Diagnostic Imaging and Other Equipment," "Business -- Properties," "Business -- Reimbursement of HealthCare Costs," "Business -- Government Regulation," "Business -- Compliance Program," "Business -- Legal Proceedings" and "Business - -- Company History," insofar as such statements constitute matters of law, summaries of legal matters, proceedings, documents or legal conclusions, have been reviewed by such counsel and fairly present and summarize, in all material respects, the matters referred to therein. The statements under the captions "Business -- Proposed Acquisition and Related Financing Transactions," "Business - -- Diagnostic Imaging and Other Equipment," "Business -- Government Regulation," " -- Reimbursement of HealthCare Costs," "Business -- Compliance Program," "Business -- Company History," "Business -- Properties," "Business -- Legal Proceedings," "Directors and Executive Officers of the Registrant -- Board of Directors," "Directors and Executive Officers of the Registrant -- Section 16(a) Beneficial Ownership Reporting Compliance," "Executive Compensation -- Compensation of Directors," "Executive Compensation -- Indemnification Agreements," "Executive Compensation -- Employment Agreements and Severance Arrangements" and "Certain Relationships and Related Transactions" in the Annual Report of the Company on Form 10-K incorporated by reference in the Offering Memorandum, insofar as such statements constitute matters of law, summaries of legal matters, proceedings, documents or legal conclusions, have been reviewed by such counsel and fairly present and summarize, in all material respects, the matters referred to therein. (ii) To such counsel's knowledge, the Company and each Subsidiary Guarantor has such permits, licenses, franchises, certifications, accreditations and authorizations (collectively, "Authorizations") from all regulatory or governmental officials, bodies or tribunals as are necessary to own, lease and operate its respective properties and to conduct its business in the manner described in the Offering Memorandum and is eligible to participate in the Medicare and Medicaid programs as and to the extent described in the Offering Memorandum and, to such counsel's knowledge, the Company and each Subsidiary Guarantor has fulfilled and performed all of its material obligations with respect to such Authorizations or eligibility and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof except where such revocation or termination would not result in a Material Adverse Change. (iii) The execution and delivery of the Purchase Agreement, the DTC Letter of Representations, the Registration Rights Agreement, the Indenture and the Securities by the Company and the Subsidiary Guarantors and the performance by the Company and the Subsidiary Guarantors of their respective obligations thereunder (i) will not result in any B-1 violation of the provisions of the limited partnership agreement, charter or by-laws of the Company or any Subsidiary Guarantor, as applicable, or (ii) will not constitute a breach of, or Default under or result in the imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Subsidiary Guarantor pursuant to (x) any contract, loan agreement, note indenture, mortgage, deed of trust, lease or other agreement or instrument filed by the Company with the Commission (other than the agreements listed on Schedule 1 hereto, as to which such counsel need not express an opinion, or (y) to such counsel's knowledge, any statute, rule or regulation or any judgment, order or decree of any governmental authority or court or arbitrator applicable to the Company or any Subsidiary Guarantor. (iv) The issuance and sale of the Notes by the Company will not be subject to any preemptive rights arising under any agreement known to us to which the Company is a party, other than the agreements listed on Schedule A hereto, as to which such counsel need not express an opinion. (v) To the best knowledge of such counsel, neither the Company nor any of the Subsidiary Guarantors is in violation of its charter or by-laws or equivalent constitutive document or any law, administrative regulation or administrative or court decree applicable to it or is in Default in the performance or observance of any obligation, agreement, covenant or condition contained in any agreement listed as an Exhibit to the Annual Report or in Schedule B to the Purchase Agreement to which the Company or any Subsidiary Guarantor is a party. In addition, such counsel shall state that such counsel has participated in conferences with officers and other representatives of Acquisition and the Company, representatives of the independent public or certified public accountants for the Company and with representatives of the Initial Purchaser at which the contents of the Offering Memorandum, and any supplements or amendments thereto, and related matters were discussed and revised and, although such counsel is not passing upon and does not assume any responsibility for, and makes no representation that such counsel has independently verified, the accuracy, completeness or fairness of the statements contained in the Offering Memorandum (other than as specified above), and any supplements or amendments thereto, subject to the foregoing, no facts have come to such counsel's attention which would lead such counsel to believe that either the Offering Memorandum, as of its date or at the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no belief as to the financial statements or other financial or statistical data derived therefrom, included or incorporated by reference in the Offering Memorandum or any amendments or supplements thereto). B-2 EXHIBIT C FORM OF OPINION OF REGULATORY COUNSEL FOR THE COMPANY The statements in the Offering Memorandum under the captions "Risk Factors - -- Risks Relating to Our Company and Our Industry -- Changes in the rates or methods of third-party reimbursements for diagnostic imaging and therapeutic services could result in reduced demand for our services or create downward pricing pressure, which would result in a decline in our revenues and harm our financial position," "Risk Factors -- Risks Relating to Government Regulation of Our Business," "Business -- Reimbursement of HealthCare Costs" and "Business -- Government Regulation," insofar as such statements constitute a summary of the legal or regulatory matters or legal or regulatory proceedings referred to therein, have been reviewed by such counsel, are correct in all material respects and do not omit a material fact necessary to make the statements contained therein not misleading. The statements under the captions "Business -- Government Regulation" and " -- Reimbursement of HealthCare Costs" in the Annual Report of the Company on Form 10-K for the year ended June 30, 2001 incorporated by reference in the Offering Memorandum, insofar as such statements constitute a summary of the legal or regulatory matters or legal or regulatory proceedings referred to therein, have been reviewed by such counsel, are correct in all material respects and do not omit a material fact necessary to make the statements contained therein not misleading. Such counsel need not express any opinion on any representation by the Company or any omission by the Company to make any disclosure in the Offering Memorandum or the Annual Report concerning its compliance with any legal or regulatory matter or the effect upon it of any legal or regulatory matter. Such counsel's opinion is confined to the summaries of legal and regulatory matters appearing in the Offering Memorandum and the Annual Report, and such counsel is not expressing any opinion on whether those summaries include summaries of all the legal and regulatory matters affecting the Company. ANNEX I TERMS AND CONDITIONS OF OFFERS AND SALES Resale Pursuant to Regulation S or Rule 144A. Each Initial Purchaser understands that: (a) Each Initial Purchaser agrees that it has not offered or sold and will not offer or sell the Securities in the United States or to, or for the benefit or account of, a U.S. Person (other than a distributor), in each case, as defined in Rule 902 under the Securities Act (i) as part of its distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering of the Securities pursuant hereto and the Closing Date, other than in accordance with Regulation S of the Securities Act or another exemption from the registration requirements of the Securities Act. Such Initial Purchaser agrees that, during such 40-day restricted period, it will not cause any advertisement with respect to the Securities (including any "tombstone" advertisement) to be published in any newspaper or periodical or posted in any public place and will not issue any circular relating to the Securities, except such advertisements as permitted by and include the statements required by Regulation S. (b) Each Initial Purchaser agrees that, at or prior to confirmation of a sale of Securities by it to any distributor, dealer or person receiving a selling concession, fee or other remuneration during the 40-day restricted period referred to in Rule 903(c)(3) under the Securities Act, it will send to such distributor, dealer or person receiving a selling concession, fee or other remuneration a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of your distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the Offering and the Closing Date, except in either case in accordance with Regulation S under the Securities Act (or Rule 144A in transactions that are exempt from the registration requirements of the Securities Act), and in connection with any subsequent sale by you of the Notes covered hereby in reliance on Regulation S during the period referred to above to any distributor, dealer or person receiving a selling concession, fee or other remuneration, you must deliver a notice to substantially the foregoing effect. Terms used above have the meanings assigned to them in Regulation S." EX-4.3 33 y55701ex4-3.txt REGISTRATION RIGHTS AGREEMENT Exhibit 4.3 $225,000,000 9-7/8% SENIOR SUBORDINATED NOTES DUE 2011 REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER 30, 2001 BY AND AMONG INSIGHT HEALTH SERVICES CORP., INSIGHT HEALTH SERVICES HOLDINGS CORP., THE SUBSIDIARIES LISTED IN SCHEDULE A, AS GUARANTORS -AND- BANC OF AMERICA SECURITIES LLC FIRST UNION SECURITIES, INC. This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of October 30, 2001, by and among InSight Health Services Corp., a Delaware corporation (the "COMPANY"), InSight Health Services Holdings Corp., a Delaware corporation ("HOLDINGS"), the subsidiaries of the Company listed in Schedule A herein (the "SUBSIDIARY GUARANTORS," and, together with Holdings, the "GUARANTORS") and Banc of America Securities LLC and First Union Securities, Inc. (together, the "PURCHASERS"). The Purchasers are offering and selling the Company's 9-7/8% Senior Subordinated Notes due 2011 (the "NOTES") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated October 25, 2001 (the "PURCHASE AGREEMENT"), by and among the Company, the Guarantors and the Purchasers and pursuant to a Note Purchase Agreement, dated as of October 17, 2001, by and among InSight Health Services Acquisition Corp., the Company, the Guarantors, Banc of America Securities LLC and Banc of America Bridge LLC (the "NOTE PURCHASE Agreement"). In order to induce Banc of America Bridge LLC to purchase the Notes under the Note Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to them under the Indenture, dated as of October 30, 2001 (the "INDENTURE"), entered into by and among the Company, each Guarantor and State Street Bank and Trust Company, N.A., as Trustee, relating to the Notes and the Exchange Notes (as defined below). The parties hereby agree as follows: Section 1. Definitions. As used in this Agreement, the following capitalized terms shall have the following meanings: ACT: The Securities Act of 1933, as amended. AFFILIATE: As defined in Rule 144 under the Act. BROKER-DEALER: Any broker or dealer registered under the Exchange Act. CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture. CLOSING DATE: The date hereof. COMMISSION: The Securities and Exchange Commission. CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (a) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange Offer Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the period required pursuant to Section 3(b) hereof and (c) the delivery by the Company to the Registrar under the Indenture of Exchange Notes in the same aggregate principal amount as the 2 aggregate principal amount of Notes tendered by Holders thereof pursuant to the Exchange Offer. CONSUMMATION DEADLINE: As defined in Section 3(b) hereof. EFFECTIVENESS DEADLINE: As defined in Sections 3(a) and 4(a) hereof. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended. EXCHANGE NOTES: The Company's 9-7/8% Senior Subordinated Notes due 2011 to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as contemplated by Section 4 hereof. EXCHANGE OFFER: The exchange and issuance by the Company of a principal amount of Exchange Notes (which shall be registered pursuant to the Exchange Offer Registration Statement) equal to the outstanding principal amount of Notes that are tendered by such Holders in connection with such exchange and issuance. EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating to the Exchange Offer, including the related Prospectus. EXEMPT RESALES: The transactions in which the Purchasers propose to sell the Notes to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Act and pursuant to Regulation S under the Act. FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof. HOLDERS: As defined in Section 2 hereof. PROSPECTUS: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. RECOMMENCEMENT DATE: As defined in Section 6(d) hereof. REGISTRATION DEFAULT: As defined in Section 5 hereof. REGISTRATION STATEMENT: Any registration statement of the Company and the Guarantors relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case, (i) that is filed pursuant to the provisions of this Agreement and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. REGULATION S: Regulation S promulgated under the Act. RULE 144: Rule 144 promulgated under the Act. 3 SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof. SUSPENSION NOTICE: As defined in Section 6(d) hereof. TIA: The Trust Indenture Act of 1939 as in effect on the date of the Indenture. TRANSFER RESTRICTED SECURITIES: Each (A) Note, until the earliest to occur of (i) the date on which such Note is exchanged in the Exchange Offer for an Exchange Note which is entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (ii) the date on which such Note has been disposed of in accordance with a Shelf Registration Statement (and the purchasers thereof have been issued Exchange Notes) or (iii) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act or is saleable pursuant to Rule 144(k) under the Act (or similar provisions then in effect) and (B) Exchange Note held by a Broker-Dealer until the date on which such Exchange Note is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including the delivery of the Prospectus contained therein). Section 2. Holders. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "HOLDER") whenever such Person owns Transfer Restricted Securities. Section 3. Registered Exchange Offer. (a) Unless the Exchange Offer shall not be permitted by applicable federal law (after the procedures set forth in Section 6(a)(i) below have been complied with), the Company and the Guarantors shall (i) cause the Exchange Offer Registration Statement to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 120 days after the Closing Date (such 120th day being the "FILING DEADLINE"), (ii) use its best efforts to cause such Exchange Offer Registration Statement to become effective at the earliest possible time, but in no event later than 180 days after the Closing Date (such 180th day being the "EFFECTIVENESS DEADLINE") and (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause it to become effective, (B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer Registration Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting (i) registration of the Exchange Notes to be offered in exchange for the Notes that are Transfer Restricted Securities and (ii) resales of Exchange Notes by any Broker-Dealer that tendered Notes into the Exchange Offer that such Broker-Dealer acquired for its own account as a result of market making activities or other trading activities (other than Notes acquired directly from the Company or any of their respective Affiliates) as contemplated by Section 3(c) below. (b) The Company and the Guarantors shall use their respective reasonable best efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, 4 however, that in no event shall such period be less than 30 days. The Company and the Guarantors shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Exchange Notes shall be included in the Exchange Offer Registration Statement. The Company and the Guarantors shall use their respective reasonable best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 45 days thereafter, and in no event shall such Exchange Offer be Consummated later than 210 days after the Closing Date (such 210th day being the "CONSUMMATION DEADLINE"). (c) The Company shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Broker-Dealer who holds Transfer Restricted Securities that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities (other than Notes acquired directly from the Company or any of their respective Affiliates), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of Distribution" section shall also contain all other information with respect to such sales by such Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Transfer Restricted Securities held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in policy, rules or regulations after the date of this Agreement. See the Shearman & Sterling no-action letter (available July 2, 1993). Because any such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with its initial sale of any Exchange Notes received by such Broker-Dealer in the Exchange Offer, the Company and the Guarantors shall permit the use of the Prospectus contained in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such prospectus delivery requirement through the Consummation Deadline and thereafter as provided in the remainder of this paragraph. To the extent necessary to ensure that the prospectus contained in the Exchange Offer Registration Statement is available for sales of Exchange Notes by any Broker-Dealer that acquired Exchange Notes as a result of market-making or similar activities such that the Broker-Dealer would be required to deliver a prospectus under the Act upon a subsequent sale or other disposition of the Exchange Notes, then the Company and the Guarantors agree to use their respective reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented, amended and current as required by and subject to the provisions of Section 6(a) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of 180 days (as extended pursuant to Section 6(d)(i)) from the Consummation Deadline or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold pursuant thereto if any such Broker-Dealer desiring such action shall notify the Company in writing that such Broker-Dealer acquired Exchange Notes as a result of market-making or other similar activities such that the Broker-Dealer would be required to deliver a prospectus under the Act upon a subsequent sale or other disposition of the Exchange Notes. The Company and the Guarantors shall provide copies of the latest version of such Prospectus to such Broker-Dealers, in such number as such Broker-Dealers may reasonably request promptly upon such request, and 5 in no event later than two Business Days after the date of such request, at any time during such period. Section 4. Shelf Registration. (a) If (i) the Exchange Offer is not permitted by applicable law (after the Company and the Guarantors have complied with the procedures set forth in Section 6(a)(i) below) or (ii) any Holder of Transfer Restricted Securities shall notify the Company in writing within 30 days following the Consummation Deadline that (A) such Holder was prohibited by law or Commission policy from participating in the Exchange Offer or (B) such Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Notes acquired directly from the Company or any of their Affiliates, or (iii) the Exchange Offer has not been Consummated on or prior to the Consummation Deadline, then the Company and the Guarantors shall: (x) cause to be filed, on or prior to 45 days after the earliest of (i) the date on which the Company determines that the Exchange Offer Registration Statement cannot be filed as a result of clause (a)(i) above, (ii) the date on which the Company receives the notice specified in clause (a)(ii) above, or (iii) if the Exchange Offer has not been consummated on or prior to the Consummation Deadline, the Consummation Deadline (such earliest date, the "FILING DEADLINE"), a shelf registration statement pursuant to Rule 415 under the Act (which may be an amendment to the Exchange Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")), relating to all Transfer Restricted Securities, and (y) shall use their respective best efforts to cause such Shelf Registration Statement to become effective on or prior to 90 days after the Filing Deadline for the Shelf Registration Statement (such 90th day the "EFFECTIVENESS DEADLINE"). If, after the Company and the Guarantors filed an Exchange Offer Registration Statement that satisfies the requirements of Section 3(a) above, the Company and the Guarantors are required to file and make effective a Shelf Registration Statement solely because the Exchange Offer is not permitted under applicable federal law (i.e., clause (a)(i) above), then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (x) above; provided that, in such event, the Company and the Guarantors shall remain obligated to use best efforts to meet the Effectiveness Deadline set forth in clause (y). To the extent necessary to ensure that the Shelf Registration Statement is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a) and the other securities required to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and the Guarantors shall use their respective best efforts to keep any Shelf Registration Statement required by this Section 4(a) continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(b) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years (as extended pursuant to Section 6(c)(i)) following the Closing Date, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Shelf Registration Statement have been sold pursuant thereto. (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its 6 Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 days after receipt of a request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Act for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to liquidated damages pursuant to Section 5 hereof unless and until such Holder shall have provided all such information. Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. The Company shall not be obligated to supplement such Shelf Registration Statement after it has been declared effective by the Commission more than one time per quarterly period solely to reflect additional Holders. Section 5. Liquidated Damages. If (i) the Exchange Offer Registration Statement required by this Agreement is not filed with the Commission on or prior to the Filing Deadline, (ii) such Exchange Offer Registration Statement has not been declared effective by the Commission on or prior to the Effectiveness Deadline or the Exchange Offer has not been Consummated on or prior to the Consummation Deadline or (iii) a Shelf Registration Statement has not been declared effective on or prior to the Effectiveness Deadline (each such event referred to in clauses (i) through (iii), a "REGISTRATION DEFAULT"), then the Company will pay to each Holder of Transfer Restricted Securities affected thereby liquidated damages in an amount equal to $.05 per week per $1,000 in principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues for the first 30-day period immediately following the occurrence of a Registration Default referred to in clause (i) above or for the first 90-day period following the occurrence of a Registration Default referred to in clauses (ii) and (iii) above. The amount of the liquidated damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 30-day period in the case of clause (i) above or 90-day period in the case of clauses (ii) or (iii) above until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.30 per week per $1,000 in principal amount of Transfer Restricted Securities. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement, in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement and the Consummation of the Exchange Offer, in the case of (ii) above or (3) upon effectiveness of the Shelf Registration Statement, in the case of (iii) above, as applicable, the liquidated damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii) or (iii), as applicable, shall cease. All accrued liquidated damages shall be paid to the Holders entitled thereto, in the manner provided for the payment of interest in the Indenture, on each Interest Payment Date, as more fully set forth in the Indenture and the Notes. Notwithstanding the fact that any securities for which liquidated damages are due cease to be Transfer Restricted Securities, all obligations of the Company and the Guarantors to pay accrued liquidated damages with respect to such securities shall survive until such time as such obligations with respect to such securities shall have been satisfied in full. Section 6. Registration Procedures. (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Guarantors shall (x) comply with 7 all applicable provisions of Section 6(c) below, (y) use their respective reasonable best efforts to effect such exchange and to permit the resale of Exchange Notes by any Broker-Dealer that tendered in the Exchange Offer Notes that such Broker-Dealer acquired for its own account as a result of its market making activities or other trading activities (other than Notes acquired directly from the Company or any of their Affiliates) being sold in accordance with the intended method or methods of distribution thereof, and (z) comply with all of the following provisions: (i) If, following the date hereof there has been announced a change in Commission policy with respect to exchange offers such as the Exchange Offer, that in the reasonable opinion of counsel to the Company raises a substantial question as to whether the Exchange Offer is permitted by applicable federal law, the Company and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Transfer Restricted Securities. The Company and the Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level, but shall not be required to take commercially unreasonable action to effect a change of Commission policy. In connection with the foregoing, the Company and the Guarantors hereby agree to take all such other actions as may be requested by the Commission or otherwise reasonably required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission, (B) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff. (ii) As a condition to its participation in the Exchange Offer, each Holder of Transfer Restricted Securities (including, without limitation, any Holder who is a Broker-Dealer) shall furnish, upon the request of the Company, prior to the Consummation of the Exchange Offer, a written representation to the Company and the Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course of business. As a condition to its participation in the Exchange Offer each Holder using the Exchange Offer to participate in a distribution of the Exchange Notes shall acknowledge and agree that if the resales are of Exchange Notes obtained by such Holder in exchange for Notes acquired directly from the Company or an Affiliate thereof, it (1) could not, under Commission policy as in effect on the date of this Agreement, rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the 8 selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall provide a supplemental letter to the Commission (A) stating that the Company and the Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that neither the Company nor any Guarantor has entered into any arrangement or understanding with any Person to distribute the Exchange Notes to be received in the Exchange Offer and that, to the best of the Company's and each Guarantor's information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes received in the Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above, if applicable. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Guarantors shall: (i) comply with all the provisions of Section 6(c) below and use their respective reasonable best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company and the Guarantors will prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof, and (ii) issue, upon the request of any Holder or purchaser of Notes covered by any Shelf Registration Statement contemplated by this Agreement, Exchange Notes having an aggregate principal amount equal to the aggregate principal amount of Notes sold pursuant to the Shelf Registration Statement and surrendered to the Company for cancellation; the Company shall register Exchange Notes on the Shelf Registration Statement for this purpose and issue the Exchange Notes to the purchaser(s) of securities subject to the Shelf Registration Statement in the names as such purchaser(s) shall designate. (c) General Provisions. In connection with any Registration Statement and any related Prospectus required by this Agreement, the Company and the Guarantors shall: 9 (i) use their respective reasonable best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein (in light of the circumstances under which they were made) not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Guarantors shall file promptly an appropriate amendment to such Registration Statement curing such defect, and, if Commission review is required, use their respective reasonable best efforts to cause such amendment to be declared effective as soon as practicable. (ii) prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as the case may be; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) with respect to a Shelf Registration Statement, advise each selling Holder promptly and, if requested by such selling Holder, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and 10 the Guarantors shall use their respective reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) subject to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (v) furnish to the Purchasers and, with respect to a Shelf Registration Statement, each selling Holder named in any Registration Statement or Prospectus in connection with such exchange or sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders in connection with such sale, if any, for a period of at least five Business Days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which such Holders shall reasonably object within five Business Days after the receipt thereof. A Holder shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omits to state any material fact necessary to make the statements therein (in light of the circumstances under which they were made) not misleading or fails to comply with the applicable requirements of the Act; (vi) with respect to a Shelf Registration Statement, promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to each selling Holder, upon such selling Holder's reasonable request, in connection with such exchange or sale, if any; (vii) with respect to a Shelf Registration Statement, subject to appropriate confidentiality agreements being entered into, make available, at reasonable times, for inspection by each selling Holder and any attorney or accountant retained by such Holders, all financial and other records, pertinent corporate documents of the Company and the Guarantors and cause at reasonable times the Company's and the Guarantors' officers, directors and employees to supply all information reasonably requested by any such Holder, attorney or accountant at reasonable times in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness; (viii) with respect to a Shelf Registration Statement, if requested by any selling Holders in connection with such sale, promptly include in any Registration Statement or 11 Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such Holders may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as reasonably practicable after the Company is notified of the matters to be included in such Prospectus supplement or post-effective amendment; (ix) with respect to a Shelf Registration Statement, furnish to each selling Holder in connection with such exchange or sale, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) with respect to a Shelf Registration Statement, deliver to each Holder, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Holder reasonably may request; the Company and the Guarantors hereby consent to the use (in accordance with law, rules, regulations and orders) of the Prospectus and any amendment or supplement thereto by each selling Holder in connection with the public offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (xi) upon the request of any Holders who collectively hold an aggregate principal amount of Notes in excess of 20% of the outstanding Transferred Securities (the "REQUESTING HOLDERS") enter into an underwriting agreement and make such representations and warranties and take all such other actions in connection therewith as may be reasonable and customary in underwritten offerings in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any applicable Registration Statement contemplated by this Agreement as may be reasonably requested by any Requesting Holder in connection with any sale or resale pursuant to any applicable Registration Statement. In such connection, the Company and the Guarantors shall: (A) upon request of any Requesting Holder furnish (or in the case of paragraphs (2) and (3) below, use their best efforts to cause to be furnished) to each Requesting Holder, upon Consummation of the Exchange Offer or upon the effectiveness of the Shelf Registration Statement, as the case may be: (1) a certificate, dated such date, signed on behalf of the Company and each Guarantor by (x) the President or any Vice President and (y) a principal financial or accounting officer of the Company, and such Guarantor, confirming, as of the date thereof, the matters set forth in Section 5(e) of the Purchase Agreement and such other similar matters as such Holders may reasonably request; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company, covering 12 matters similar to those set forth in paragraphs (b), (c) and (d) of Section 5 of the Purchase Agreement and Exhibits A-1, A-2, B and C thereto, subject to the same conditions with respect thereto and to the delivery thereof and such other matter as such Requesting Holder may reasonably request which are customarily covered in Company counsel opinions to underwriters in underwritten public offerings, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company and the Guarantors, representatives of the independent public accountants for the Company and the Guarantors and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (relying as to materiality to the extent such counsel deems appropriate upon the statements of officers and other representatives of the Company and the Guarantors) and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation of the Exchange Offer, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial data and statistical data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated the date of Consummation of the Exchange Offer, or as of the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's independent accountants specified in the Purchase Agreement, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with underwritten public offerings, and covering the matters set forth in the comfort letters delivered pursuant to Section 5(a) of the Purchase Agreement subject to the same conditions with respect thereto and to the delivery thereof; and 13 (B) deliver such other documents and certificates as may be reasonably requested by the selling Holders to evidence compliance with the matters covered in clause (A) above and with any customary conditions contained in the any agreement entered into by the Company and the Guarantors pursuant to this clause (xi); (xii) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders and their counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders may reasonably request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement; provided, however, that neither the Company nor any Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xiii) in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer Restricted Securities in such denominations and such names as the selling Holders may request at least two Business Days prior to any sale of such Transfer Restricted Securities; (xiv) use their respective best efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xii) above; (xv) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of a Registration Statement covering such Transfer Restricted Securities and provide the Trustee under the Indenture with certificates for the Transfer Restricted Securities which are in a form eligible for deposit with The Depository Trust Company; (xvi) otherwise use their respective reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) covering a twelve-month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act); 14 (xvii) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection therewith, cooperate with the Trustee to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use its best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; (xviii) provide promptly to each Holder, upon request, each document filed with the Commission pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act if not obtainable from the Commission; and (xix) the Company and the Guarantors will be deemed not to have used their reasonable best efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if the Company or any of the Guarantors voluntarily and knowingly takes any action that would, or omits to take any action which omission would, result in any such Registration Statement not being declared effective or in the Holders of Registrable Securities covered thereby not being able to exchange or offer and sell such Registrable Securities during that period as and to the extent contemplated hereby, unless (i) such action is required by applicable law or (ii) such action is taken by the Company and the Guarantors in good faith and for valid business reasons (but not including avoidance of the Company's or the Guarantors', as applicable, obligations hereunder), including a material corporate transaction, so long as the Company and the Guarantors promptly comply with the requirements of Section 6(c)(iv) thereof, if applicable. (d) Restrictions on Selling Holders. With respect to a Shelf Registration Statement, each selling Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of the notice referred to in Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact or the happening of any event of the kind described in Section 6(c)(iii)(D) hereof, or upon receipt of a notice from the Company pending the announcement of a material corporate transaction that the Shelf Registration Statement is unusable (in each case, a "SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until (i) such selling Holder has received copies of the supplemented or amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such selling Holder is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will either (i) destroy any Prospectuses, other than permanent file copies, then in such Holder's possession which have been replaced by the Company with more recently dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of the Suspension Notice. The time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by a number of days equal to the number of days in the period from and 15 including the date of delivery of the Suspension Notice to the date of delivery of the Recommencement Date. Section 7. Registration Expenses. (a) All expenses incident to the Company's and the Guarantors' performance of or compliance with this Agreement will be borne, jointly and severally, by the Company and the Guarantors, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company and the Guarantors and, subject to Section 7(b) below, one counsel for the Holders of Transfer Restricted Securities chosen by the Holders of a majority of the outstanding Transfer Restricted Securities; (v) all application and filing fees in connection with listing the Exchange Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its and the Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Guarantors. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company and the Guarantors will reimburse the Purchasers and the Holders of Transfer Restricted Securities who are tendering Notes into the Exchange Offer and/or selling or reselling Notes or Exchange Notes pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Shearman & Sterling unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. Section 8. Indemnification. (a) The Company and the Guarantors agree, jointly and severally, to indemnify and hold harmless each Holder, its directors, officers, any underwriter in any underwritten public offering of Transfer Restricted Securities pursuant to a Shelf Registration Statement and each Person, if any, who controls such Holder or underwriter (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from and against (i) any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue 16 statement of a material fact contained in any Registration Statement (or any amendment or supplement thereto) pursuant to which Transfer Restricted Securities are registered under the Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, provided that (subject to Section 8(d) below) any such settlement is effected with the written consent of the Company and the Guarantors; and (iii) any and all expenses whatsoever, as incurred (including the fees and disbursements of counsel chosen by any indemnified party, subject to the limitations in Section 8(c) below), reasonably incurred in investigating, preparing or defending against any litigation or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company and the Guarantors by the Purchasers, such Holder or such underwriter expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto); provided, further, that the Company will not be liable to any Purchaser, Holder (in its capacity as Holder) or underwriter (or any person who controls such party within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) with respect to any such untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary Prospectus to the extent that the Company shall sustain the burden of proving that any such loss, liability, claim, damage or expense resulted from the fact that such Purchaser, Holder (in its capacity as Holder) or underwriter, as the case may be, sold Transfer Restricted Securities to a Person to whom such Purchaser, Holder (in its capacity as Holder) or underwriter, as the case may be, failed to send or give, at or prior to the written confirmation of the sale of such Securities a copy of the final Prospectus (as amended or supplemented) if the Company has previously furnished copies thereof (sufficiently in advance of the closing of such sale to allow for distribution of the final Prospectus in a timely manner) to such Purchaser, Holder (in its capacity as Holder) or underwriter, as the case may be, and the loss, liability, claim, damage or expense of such Purchaser, Holder (in its capacity as Holder) or underwriter, as the case may be, resulted solely from an untrue statement or omission or alleged untrue statement or omission of a material fact contained in or omitted from such preliminary Prospectus which was corrected in the final Prospectus. (b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantors, and their respective directors and officers, and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company, or the Guarantors to the same extent as the foregoing indemnity from the Company and the Guarantors set forth in section (a) above, but only with reference to information relating to such Holder furnished in writing to the Company by such Holder expressly for use in any Registration Statement. In no event shall any Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect 17 to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. (c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING person") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holder). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party within a reasonable period of time after notification by the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed promptly following receipt of invoice therefor as they are incurred. Such firm shall be designated in writing by a majority of the Holders, in the case of the parties indemnified pursuant to Section 8(a), and by the Company and Guarantors, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final non-appealable judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8(c) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the final terms of such proposed settlement as soon as practicable prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such 18 settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. (d) To the extent that the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Holders, on the other hand, from their sale of Transfer Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Company and the Guarantors, on the one hand, and of the Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantors, on the one hand, and of the Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or such Guarantor, on the one hand, or by the Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and judgments referred to above shall be deemed to include, subject to the limitations set forth in the third sentence of Section 8(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company, the Guarantors and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, no Holder, its directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No 19 person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several in proportion to the respective principal amount of Transfer Restricted Securities held by each Holder hereunder and not joint. Section 9. Rule 144A and Rule 144. The Company and each Guarantor agree with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon written request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. Section 10. Miscellaneous. (a) Remedies. The Company and the Guarantors acknowledge and agree that any failure by the Company and/or the Guarantors to comply with their respective obligations under Sections 3 and 4 hereof may result in material irreparable injury to the Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, any Purchaser or any Holder may obtain such relief as may be required to specifically enforce the Company's and the Guarantors' obligations under Sections 3 and 4 hereof. The Company and the Guarantors further agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. None of the Company or the Guarantors will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. None of the Company or the Guarantors has previously entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's or the Guarantors' securities under any agreement in effect on the date hereof. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 10(c)(i), the Company has obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities (excluding Transfer Restricted Securities held by the Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose Transfer Restricted Securities are being tendered pursuant to 20 the Exchange Offer, and that does not affect directly or indirectly the rights of other Holders whose Transfer Restricted Securities are not being tendered pursuant to such Exchange Offer, may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer. (d) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company and the Guarantors, on the one hand, and the Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), facsimile, or air courier guaranteeing overnight delivery: (1) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (2) (i) If to the Company or any Guarantor: InSight Health Services Corp. 4400 MacArthur Blvd. Suite 800 Newport Beach, CA 92660 Facsimile: 949-476-8006 Attention: Chief Financial Officer with copies to: InSight Health Services Corp. 4400 MacArthur Blvd. Suite 800 Newport Beach, CA 92660 Facsimile: 949-476-0137 Attention: General Counsel and to: J.W. Childs Associates, L.P. One Federal Street 21st Floor Boston, MA 02110 Facsimile: 617-753-1101 Attention: Edward D. Yun and to: 21 The Halifax Group, L.L.C. 1133 Connecticut Avenue N.W. Suite 700 Washington, D.C. 20036 Facsimile: 202-296-7133 Attention: David W. Dupree and to: Kaye Scholer LLP 245 Park Avenue New York, NY 10022 Facsimile: 212-836-8689 Attention: Stephen C. Koval, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if by facsimile; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. 22 (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 23 OPEN MRI, INC. By: /s/ Mark J. Tricolli ---------------------------- Name: Mark J. Tricolli Title: Authorized Person MAXUM HEALTH CORP. By: /s/ Mark J. Tricolli ---------------------------- Name: Mark J. Tricolli Title: Authorized Person RADIOSURGERY CENTERS, INC. By: /s/ Mark J. Tricolli ---------------------------- Name: Mark J. Tricolli Title: Authorized Person MAXUM HEALTH SERVICES CORP. By: /s/ Mark J. Tricolli ---------------------------- Name: Mark J. Tricolli Title: Authorized Person MRI ASSOCIATES, L.P. By: InSight Health Corp., its General Partner By: /s/ Mark J. Tricolli ---------------------------- Name: Mark J. Tricolli Title: Authorized Person 25 MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. By: /s/ Mark J. Tricolli ---------------------------- Name: Mark J. Tricolli Title: Authorized Person MAXUM HEALTH SERVICES OF DALLAS, INC. By: /s/ Mark J. Tricolli ---------------------------- Name: Mark J. Tricolli Title: Authorized Person NDDC, INC. By: /s/ Mark J. Tricolli ---------------------------- Name: Mark J. Tricolli Title: Authorized Person DIAGNOSTIC SOLUTIONS CORP. By: /s/ Mark J. Tricolli ---------------------------- Name: Mark J. Tricolli Title: Authorized Person BANC OF AMERICA SECURITIES LLC By: /s/ Raymond Cubero ---------------------------- Name: Raymond Cubero Title: Managing Director FIRST UNION SECURITIES, INC. By: /s/ Jeff Gore ---------------------------- Name: Jeff Gore Title: Vice President 26 SCHEDULE A SUBSIDIARY GUARANTORS GUARANTORS
Guarantor Jurisdiction of Organization - --------- ---------------------------- InSight Health Corp. Delaware Signal Medical Services, Inc. Delaware Open MRI, Inc. Delaware Maxum Health Corp. Delaware Radiosurgery Centers, Inc. Delaware Maxum Health Services Corp. Delaware MRI Associates, L.P. Indiana Maxum Health Services of North Texas, Inc. Texas Maxum Health Services of Dallas, Inc. Texas NDDC, Inc. Texas Diagnostic Solutions Corp. Delaware
27 EX-10.4 34 y55701ex10-4.txt CREDIT AGREEMENT Exhibit 10.4 EXECUTION COPY CREDIT AGREEMENT Dated as of October 17, 2001 among INSIGHT Health Services ACQUISITION Corp., as Borrower, InSight Health Services Holdings Corp. and THE SUBSIDIARIES OF THE BORROWER FROM TIME TO TIME PARTY HERETO, as Guarantors, THE LENDERS FROM TIME TO TIME PARTY HERETO, BANK OF AMERICA, N.A., as Administrative Agent, FIRST UNION NATIONAL BANK, as Syndication Agent, THE CIT GROUP/BUSINESS CREDIT, INC., as Documentation Agent, and BANC OF AMERICA SECURITIES LLC, as Lead Arranger and Book Manager TABLE OF CONTENTS SECTION 1 DEFINITIONS............................................................................................1 1.1 Definitions.....................................................................................1 1.2 Computation of Time Periods....................................................................33 1.3 Accounting Terms...............................................................................33 SECTION 2 CREDIT FACILITIES.....................................................................................34 2.1 Revolving Loans................................................................................34 2.2 Letter of Credit Subfacility...................................................................36 2.3 Delayed-Draw Term Loans........................................................................41 2.4 Tranche B Term Loan............................................................................45 SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES........................................................47 3.1 Default Rate...................................................................................47 3.2 Continuation and Conversion....................................................................47 3.3 Prepayments....................................................................................48 3.4 Termination and Reduction of Commitments.......................................................50 3.5 Fees...........................................................................................51 3.6 Capital Adequacy...............................................................................53 3.7 Limitation on Eurodollar Loans.................................................................53 3.8 Illegality.....................................................................................54 3.9 Requirements of Law............................................................................54 3.10 Treatment of Affected Loans....................................................................55 3.11 Taxes..........................................................................................56 3.12 Compensation...................................................................................57 3.13 Pro Rata Treatment.............................................................................58 3.14 Sharing of Payments............................................................................59 3.15 Payments, Computations, Etc....................................................................60 3.16 Evidence of Debt...............................................................................62 3.17 Replacement of Affected Lenders................................................................62 SECTION 4 GUARANTY..............................................................................................63 4.1 The Guaranty...................................................................................63 4.2 Obligations Unconditional......................................................................64 4.3 Reinstatement..................................................................................65 4.4 Certain Additional Waivers.....................................................................65 4.5 Remedies.......................................................................................65 4.6 Rights of Contribution.........................................................................65 4.7 Guarantee of Payment; Continuing Guarantee; Subordination......................................66 SECTION 5 CONDITIONS............................................................................................67 5.1 Closing Conditions.............................................................................67 5.2 Conditions to all Extensions of Credit.........................................................71 SECTION 6 REPRESENTATIONS AND WARRANTIES........................................................................72 6.1 Financial Condition............................................................................72
6.2 No Material Change.............................................................................73 6.3 Organization and Good Standing.................................................................73 6.4 Power; Authorization; Enforceable Obligations..................................................73 6.5 No Conflicts...................................................................................74 6.6 No Default.....................................................................................74 6.7 Ownership......................................................................................74 6.8 Indebtedness; Liens............................................................................74 6.9 Litigation.....................................................................................75 6.10 Taxes..........................................................................................75 6.11 Compliance with Law............................................................................75 6.12 ERISA..........................................................................................75 6.13 Corporate Structure; Capital Stock, etc........................................................77 6.14 Governmental Regulations, Etc..................................................................77 6.15 Purpose of Loans and Letters of Credit.........................................................77 6.16 Environmental Matters..........................................................................77 6.17 Intellectual Property..........................................................................78 6.18 Solvency.......................................................................................79 6.19 Investments....................................................................................79 6.20 Business Locations.............................................................................79 6.21 Disclosure.....................................................................................79 6.22 No Burdensome Restrictions.....................................................................79 6.23 Brokers' Fees..................................................................................79 6.24 Labor Matters..................................................................................80 6.25 Nature of Business.............................................................................80 SECTION 7 AFFIRMATIVE COVENANTS.................................................................................80 7.1 Information Covenants..........................................................................80 7.2 Preservation of Existence and Franchises.......................................................83 7.3 Books and Records..............................................................................83 7.4 Compliance with Law............................................................................83 7.5 Payment of Taxes and Other Claims..............................................................83 7.6 Insurance......................................................................................83 7.7 Use of Proceeds................................................................................84 7.8 Audits/Inspections.............................................................................84 7.9 Financial Covenants............................................................................84 7.10 New Subsidiaries...............................................................................86 7.11 Pledged Assets.................................................................................86 7.12 Interest Rate Management.......................................................................87 7.13 Intercompany Indebtedness of Joint Ventures....................................................87 7.14 Upstreaming of Income from Joint Ventures......................................................88 7.15 Further Assurances.............................................................................88 SECTION 8 NEGATIVE COVENANTS....................................................................................89 8.1 Indebtedness...................................................................................89 8.2 Liens..........................................................................................91 8.3 Nature of Business.............................................................................93 8.4 Consolidation, Merger, Dissolution, etc........................................................93
8.5 Asset Dispositions.............................................................................93 8.6 Investments....................................................................................94 8.7 Restricted Payments............................................................................98 8.8 Prepayment of Other Indebtedness, etc..........................................................99 8.9 Transactions with Insiders.....................................................................99 8.10 Fiscal Year; Organizational Documents.........................................................100 8.11 Limitation on Restricted Actions..............................................................100 8.12 Ownership of Subsidiaries and Joint Ventures; Limitations on Parent...........................101 8.13 Capital Expenditures..........................................................................101 8.14 No Further Negative Pledges...................................................................102 SECTION 9 EVENTS OF DEFAULT....................................................................................102 9.1 Events of Default.............................................................................102 9.2 Acceleration; Remedies........................................................................105 SECTION 10 AGENCY PROVISIONS.................................................................................. 105 10.1 Appointment and Authorization of Administrative Agent.........................................105 10.2 Delegation of Duties..........................................................................106 10.3 Liability of Administrative Agent.............................................................106 10.4 Reliance by Administrative Agent..............................................................107 10.5 Notice of Default.............................................................................107 10.6 Credit Decision; Disclosure of Information by Administrative Agent............................108 10.7 Indemnification of Administrative Agent.......................................................108 10.8 Administrative Agent in its Individual Capacity...............................................109 10.9 Successor Administrative Agent................................................................109 10.10 Borrower Assignment, Assumption and Release...................................................110 10.11 Other Administrative Agents; Lead Managers....................................................110 SECTION 11 MISCELLANEOUS.......................................................................................110 11.1 Notices.......................................................................................110 11.2 Right of Set-Off; Adjustments.................................................................111 11.3 Successors and Assigns........................................................................112 11.4 No Waiver; Remedies Cumulative................................................................115 11.5 Expenses; Indemnification.....................................................................115 11.6 Amendments, Waivers and Consents..............................................................116 11.7 Counterparts..................................................................................120 11.8 Headings......................................................................................120 11.9 Survival......................................................................................120 11.10 Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial........................120 11.11 Severability..................................................................................121 11.12 Entirety......................................................................................121 11.13 Binding Effect; Termination...................................................................122 11.14 Confidentiality...............................................................................122 11.15 Source of Funds...............................................................................123 11.16 Regulation D..................................................................................123 11.17 Conflict......................................................................................123
SCHEDULES Schedule 1.1A Scheduled Financial Information Schedule 1.1B Joint Ventures Schedule 2.1(a) Lenders Schedule 6.9 Litigation Schedule 6.12 ERISA Schedule 6.13 Subsidiaries Schedule 6.16 Environmental Disclosures Schedule 6.17 Intellectual Property Schedule 6.20(a) Mortgaged Properties Schedule 6.20(b) Collateral Locations Schedule 6.20(c) Chief Executive Offices/Principal Places of Business Schedule 6.23 Brokers' Fees Schedule 7.6 Insurance Schedule 8.1(b) Indebtedness Schedule 8.1(f) Terms of Subordination Schedule 8.2 Liens Schedule 8.6 Investments Schedule 8.9 Transactions with Affiliates EXHIBITS Exhibit 1.1A Form of Borrower Assignment, Assumption and Release Exhibit 1.1B Form of InSight Acquisition Note Exhibit 1.1C Form of Pledge Agreement Exhibit 1.1D Form of Security Agreement Exhibit 2.1(b)(i) Form of Notice of Borrowing Exhibit 2.1(e) Form of Revolving Note Exhibit 2.3(f) Form of Delayed-Draw Term Note Exhibit 2.4(f) Form of Tranche B Term Note Exhibit 3.2 Form of Notice of Continuation/Conversion Exhibit 7.1(c) Form of Officer's Compliance Certificate Exhibit 7.10 Form of Joinder Agreement Exhibit 11.3 Form of Assignment and Acceptance CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of October 17, 2001 (as amended, modified, restated or supplemented from time to time, the "Credit Agreement"), is by and among INSIGHT HEALTH SERVICES ACQUISITION CORP., a Delaware corporation ("InSight Acquisition"), INSIGHT HEALTH SERVICES HOLDINGS CORP., a Delaware corporation (the "Parent"), the Subsidiary Guarantors (as defined herein), the Lenders (as defined herein), and BANK OF AMERICA, N.A., as Administrative Agent for the Lenders (in such capacity, the "Administrative Agent"), FIRST UNION NATIONAL BANK, as Syndication Agent (in such capacity, the "Syndication Agent") and THE CIT GROUP/BUSINESS CREDIT, INC., as Documentation Agent (in such capacity, the "Documentation Agent"). W I T N E S S E T H WHEREAS, InSight Acquisition has requested that the Lenders provide credit facilities in an aggregate amount of $275,000,000 (the "Credit Facilities") for the purposes hereinafter set forth; WHEREAS, the Lenders have agreed to make available the requested Credit Facilities on the terms and conditions hereinafter set forth; and WHEREAS, the initial extensions of credit by the Lenders under the Credit Facilities shall be made available to InSight Acquisition and, upon consummation of the Transaction (hereinafter defined), InSight Health Services Corp., a Delaware corporation (the "Acquired Company"), shall assume, and InSight Acquisition shall be released from, the obligations of InSight Acquisition as the Borrower under the Credit Facilities, and the Acquired Company shall thereafter be the Borrower (as hereinafter defined) under the Credit Facilities; NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1 DEFINITIONS 1.1 DEFINITIONS. As used in this Credit Agreement, the following terms shall have the meanings specified below unless the context otherwise requires: "Acquired Company" shall have the meaning assigned to such term in the recitals hereto. "Acquisition", by any Person (the "Acquirer"), means the acquisition by such Acquirer, whether for cash, property, services, assumption of Indebtedness, securities or otherwise, in a single transaction or in a series of related transactions and whether or not involving a merger or consolidation, of (i) all of the Capital Stock of another Person (the "Target") or, if the Target is a Subsidiary of the Acquirer at the time of such transaction or becomes a Subsidiary of the Acquirer upon giving effect to such transaction, of any Capital Stock of such Target or (ii) all or substantially all of the Property of the Target. "Adjusted Base Rate" means the Base Rate plus the Applicable Percentage. "Adjusted Eurodollar Rate" means the Eurodollar Rate plus the Applicable Percentage. "Administrative Agency Services Address" means Bank of America, N.A., NC1-001-15-04, 101 North Tryon Street, Charlotte, North Carolina 28255, Attn: Administrative Agency Services, or such other address as may be identified by written notice from the Administrative Agent to the Borrower. "Administrative Agent" shall have the meaning assigned to such term in the heading hereof, together with any successors or assigns. "Administrative Agent-Related Persons" means the Administrative Agent (including any successor administrative agent), together with its Affiliates (including, in the case of Bank of America in its capacity as the Administrative Agent, Banc of America Securities LLC), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Administrative Agent's Fee Letter" means that certain fee letter agreement dated June 28, 2001 between the Bank of America, Banc of America Securities LLC and the Sponsors, as amended, modified, restated or supplemented from time to time. "Affiliate" means, with respect to any Person, any other Person (i) directly or indirectly controlling or controlled by or under direct or indirect common control with such Person or (ii) directly or indirectly owning or holding ten percent (10%) or more of the Capital Stock in such Person. For purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. Notwithstanding the foregoing, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Lenders and their respective Affiliates shall not be deemed to be "Affiliates" of any of the Credit Parties for purposes of the Credit Documents. "Applicable Lending Office" means, for each Lender, the office of such Lender (or of an Affiliate of such Lender) as such Lender may from time to time specify to the Administrative Agent and the Borrower by written notice as the office by which its Eurodollar Loans are made and maintained. "Applicable Percentage" means, for purposes of calculating the applicable interest rate for any day for any Loan, the applicable rate of the Revolving Commitment Unused Fee for any day for purposes of Section 3.5(a)(i), the applicable rate of the Standby Letter of Credit Fee for any day for purposes of Section 3.5(b)(i) or the applicable rate of the Trade Letter of Credit Fee for any day for purposes of Section 3.5(b)(ii), the appropriate applicable 2 percentage corresponding to the Senior Leverage Ratio in effect as of the most recent Calculation Date:
APPLICABLE PERCENTAGES ------------------------------------------------------------------------------------------------------ FOR FOR TRANCHE B TERM REVOLVING LOANS AND DELAYED-DRAW LOANS TERM LOANS SENIOR ------------------------ ------------------------ FOR STANDBY FOR TRADE FOR REVOLVING PRICING LEVERAGE EURODOLLAR BASE RATE EURODOLLAR BASE RATE LETTER OF LETTER OF COMMITMENT LEVEL RATIO LOANS LOANS LOANS LOANS CREDIT FEE CREDIT FEE UNUSED FEE - ------------------------------------------------------------------------------------------------------------------------------------ I greater than or equal to 2.25 to 1.0 3.25% 2.25% 3.50% 2.50% 3.25% 1.625% 0.50% II less than 2.25 to 1.0 but greater than or equal to 1.75 to 1.0 3.00% 2.00% 3.50% 2.50% 3.00% 1.50% 0.50% III less than 1.75 to 1.0 but greater than or equal to 1.25 to 1.0 2.75% 1.75% 3.25% 2.25% 2.75% 1.375% 0.50% IV less than 1.25 to 1.0 2.50% 1.50% 3.25% 2.25% 2.50% 1.25% 0.375%
The Applicable Percentages shall be determined and adjusted quarterly on the date (each a "Calculation Date") five (5) Business Days after the date by which the Credit Parties are required to provide the officer's certificate in accordance with the provisions of Section 7.1(c) for the most recently ended fiscal quarter of the Consolidated Parties; provided, however, that (i) the initial Applicable Percentages shall be based on Pricing Level II (as shown above) and shall remain at Pricing Level II until the Calculation Date for the fiscal quarter of the Consolidated Parties ending on March 31, 2002, on and after which time the Pricing Level shall be determined by the Senior Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Consolidated Parties preceding the applicable Calculation Date and (ii) if the Credit Parties fail to provide the officer's certificate to the Administrative Agency Services Address as required by Section 7.1(c) for the last day of the most recently ended fiscal quarter of the Consolidated Parties preceding the applicable Calculation Date, the Applicable Percentage from such Calculation Date shall be based on Pricing Level I until such time as an appropriate officer's certificate is provided, whereupon the Pricing Level shall be determined by the Senior Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Consolidated Parties preceding such Calculation Date. Each Applicable Percentage shall be effective from one Calculation Date until the next Calculation Date. Any adjustment in the Applicable Percentages shall be applicable to all existing Loans and Letters of Credit as well as any new Loans and Letters of Credit made or issued. "Application Period" means, in respect of any Asset Disposition, the period of 360 days (or such earlier date as provided for reinvestment of the proceeds thereof under the documents evidencing or governing any Subordinated Indebtedness) following the consummation of such Asset Disposition. 3 "Approved Fund" means any Person (other than a natural Person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. "Asset Disposition" means any disposition of any or all of the Property (including without limitation the Capital Stock of a Subsidiary or a Joint Venture) of any Consolidated Party whether by sale, lease, licensing, transfer or otherwise, but other than pursuant to any casualty or condemnation event; provided, however, that the term "Asset Disposition" shall be deemed to (i) include any "Asset Sale" (or any comparable term) under, and as defined in, the documents evidencing or governing any Subordinated Indebtedness and (ii) exclude any Equity Issuance. "Asset Disposition Prepayment Event" means, with respect to any Asset Disposition other than an Excluded Asset Disposition, the failure of the Credit Parties to apply (or cause to be applied) the Net Cash Proceeds of such Asset Disposition to Eligible Reinvestments during the Application Period for such Asset Disposition. "Assignment and Acceptance" means an Assignment and Acceptance substantially in the form of Exhibit 11.3. "Bank of America" means Bank of America, N.A. and its successors. "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time. "Bankruptcy Event" means, with respect to any Person, the occurrence of any of the following: (i) the entry of a decree or order for relief by a court or governmental agency in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or the appointment by a court or governmental agency of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or the ordering of the winding up or liquidation of its affairs by a court or governmental agency; or (ii) the commencement against such Person of an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or of any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or for the winding up or liquidation of its affairs, and such involuntary case or other case, proceeding or other action shall remain undismissed for a period of sixty (60) consecutive days, or the repossession or seizure by a creditor of such Person of a substantial part of its Property; or (iii) such Person shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or the taking possession by a receiver, liquidator, assignee, secured creditor, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or make any general 4 assignment for the benefit of creditors; or (iv) such Person shall be unable to, or shall admit in writing its inability to, pay its debts generally as they become due. "Base Rate" means, for any day, a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the Prime Rate. "Base Rate Loan" means any Loan bearing interest at a rate determined by reference to the Base Rate. "Borrower" means (i) until consummation of the Acquisition by InSight Acquisition of the Acquired Company pursuant to the Merger Agreement, InSight Acquisition and (ii) thereafter, the Acquired Company. "Borrower Assignment, Assumption and Release" means the Assignment, Assumption and Release dated as of the Closing Date in the form of Exhibit 1.1A to be executed by InSight Acquisition and the Acquired Company. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in Charlotte, North Carolina or New York, New York are authorized or required by law to close, except that, when used in connection with a Eurodollar Loan, such day shall also be a day on which dealings between banks are carried on in Dollar deposits in London, England. "Businesses" means, at any time, a collective reference to the businesses operated by the Consolidated Parties at such time. "Calculation Date" shall have the meaning assigned to such term in the definition of "Applicable Percentage" set forth in this Section 1.1. "Capital Lease" means, as applied to any Person, any lease of any Property (whether real, personal or mixed) by that Person as lessee which, in accordance with GAAP, is required to be accounted for as a capital lease on the balance sheet of that Person. "Capital Stock" means (i) in the case of a corporation, capital stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (iii) in the case of a partnership, partnership interests (whether general or limited), (iv) in the case of a limited liability company, membership interests and (v) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means, as at any date, (a) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (b) Dollar denominated time deposits and certificates of deposit of (i) any Lender, (ii) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (iii) any bank whose short-term commercial paper 5 rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank being an "Approved Bank"), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody's and maturing within twelve months of the date of acquisition, (d) repurchase agreements entered into by any Person with a bank or trust company (including any of the Lenders) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States of America in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations and (e) Investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by reputable financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing subdivisions (a) through (d). "Change of Control" means the occurrence of any of the following events: (a) the sale, lease, transfer or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Borrower and its Restricted Subsidiaries taken as a whole to any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act) other than the Sponsors and the Related Parties; (b) the Parent or the Borrower is liquidated or dissolved or adopts a plan of liquidation or dissolution; (c) prior to a Qualifying IPO, (1) the Parent shall fail to own directly 100% of the outstanding Capital Stock of the Borrower, (2) the Sponsors and the Related Parties shall fail to own beneficially, directly or indirectly, at least a majority of the outstanding Voting Stock of the Parent or (3) the Sponsors and the Related Parties shall fail to control, whether through ownership of Voting Stock, by contract or otherwise, a majority of the seats (excluding vacant seats) on the Parent's Board of Directors; (d) after a Qualifying IPO, (1) if the IPO Issuer is the Parent, the Parent shall fail to own directly 100% of the outstanding Capital Stock of the Borrower, (2) the Sponsors shall fail to own beneficially, directly or indirectly, at least 35% of the outstanding Voting Stock of the IPO Issuer, (3) any other "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act) other than the Sponsors and the Related Parties shall beneficially own, directly or indirectly, an amount of the outstanding Voting Stock of the IPO Issuer greater than the amount owned by the Sponsors and the Related Parties or (4) the Sponsors and the Related Parties shall fail to control, whether 6 through ownership of Voting Stock, by contract or otherwise, a majority of the seats (excluding vacant seats) on the IPO Issuer's Board of Directors; or (e) the occurrence of a "Change of Control" (or any comparable term) under, and as defined in, or the documents evidencing or governing any Subordinated Indebtedness. As used herein, "beneficial ownership" shall have the meaning provided in Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act. "Closing Date" means the date hereof. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute thereto, as interpreted by the rules and regulations issued thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections. "Collateral" means a collective reference to all real and personal Property (other than Excluded Property) with respect to which Liens in favor of the Administrative Agent are purported to be granted pursuant to and in accordance with the terms of the Collateral Documents. "Collateral Documents" means a collective reference to the Pledge Agreement, the Security Agreement and the Mortgage Instruments. "Commitment" means (i) with respect to each Lender, the Revolving Commitment of such Lender, the Delayed-Draw Term Loan Commitment and the Tranche B Term Loan Commitment of such Lender, (ii) with respect to the Issuing Lender, the LOC Commitment and (iii) with respect to the Fronting Bank, the Fronting Commitment. "Consolidated Capital Expenditures" means, as of any date for the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis, all capital expenditures, as determined in accordance with GAAP; provided, however, that (i) Consolidated Capital Expenditures shall not include (a) Eligible Reinvestments made with the proceeds of any Asset Disposition or Involuntary Disposition, (b) Acquisitions or (c) an Eligible Reinvestment of the proceeds of any Equity Issuance by any Consolidated Party to any of the Sponsors or the Related Parties and (ii) Consolidated Capital Expenditures for each of the fiscal quarters ending on March 31, 2001 and June 30, 2001 shall be equal to the amount indicated for Consolidated Capital Expenditures for such quarter on Schedule 1.1A. "Consolidated Cash Taxes" means, as of any date for the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis, the aggregate of all taxes, as determined in accordance with GAAP, to the extent the same are paid in cash during such period; provided, however, that Consolidated Cash Taxes for the four fiscal quarter period ending December 31, 2001 shall be calculated as Consolidated Cash Taxes for the fiscal quarter ending December 31, 2001 multiplied by 4; Consolidated Cash Taxes for the four fiscal quarter period ending March 31, 2002 shall 7 be calculated as Consolidated Cash Taxes for the two fiscal quarters ending March 31, 2002 multiplied by 2; and Consolidated Cash Taxes for the fiscal quarter ending June 30, 2002 shall be calculated as Consolidated Cash Taxes for the three fiscal quarters ending preceding June 30, 2002 multiplied by 1.33. "Consolidated EBITDA" means, as of any date for the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis, the sum of (i) Consolidated Net Income, plus (ii) an amount which, in the determination of Consolidated Net Income, has been deducted for (A) interest expense, (B) income taxes, (C) depreciation and amortization expense, (D) minority interests (provided that minority interests shall not constitute more than 5% of Consolidated EBITDA for any applicable period), (E) one-time cash expenses incurred in connection with the Transaction, (F) fees paid to the Sponsors pursuant to the Management Agreement to the extent that such fees (1) were permitted to be paid pursuant to Section 8.9 and (2) are attributable to services rendered during the applicable period, (G) other non-cash charges (excluding (1) the provision for bad debts in connection with uncollectible accounts receivable and (2) items representing an accrual of or reserve for cash expenses in any future period) and (H) one-time cash expenses incurred in connection with any Permitted Investment, all as determined in accordance with GAAP; provided, however, that (i) Consolidated EBITDA for each of the fiscal quarters ending on March 31, 2001 and June 30, 2001 shall be equal to the amount indicated for Consolidated EBITDA for such quarter on Schedule 1.1A and (ii) the portion of Consolidated EBITDA for any applicable period attributable to, without duplication, (A) Consolidated Parties which are not Credit Parties, (B) minority interests and (C) Investments in Unrestricted Joint Ventures, shall not exceed 32.5% of total Consolidated EBITDA for such period. "Consolidated Interest Expense" means, as of any date for the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis, interest expense (including the amortization of debt discount and premium, the interest component under Capital Leases and the implied interest component under Synthetic Leases), as determined in accordance with GAAP; provided, however, that Consolidated Interest Expense for the four fiscal quarter period ending December 31, 2001 shall be calculated as Consolidated Interest Expense for the fiscal quarter ending December 31, 2001 multiplied by 4; Consolidated Interest Expense for the four fiscal quarter period ending March 31, 2002 shall be calculated as Consolidated Interest Expense for the two fiscal quarters ending March 31, 2002 multiplied by 2; and Consolidated Interest Expense for the fiscal quarter ending June 30, 2002 shall be calculated as Consolidated Interest Expense for the three fiscal quarters ending June 30, 2002 multiplied by 1.33. "Consolidated Maintenance Capital Expenditures" means, for any period all Consolidated Capital Expenditures, other than any such Consolidated Capital Expenditure representing the purchase price of equipment, or the costs of construction or purchase price, for, or other costs associated with the acquisition or new construction of, an additional facility; provided, however, that Consolidated Maintenance Capital Expenditures for each of the fiscal quarters ending on March 31, 2001 and June 30, 2001 shall be equal to the amount indicated for Consolidated Maintenance Capital Expenditures for such quarter on Schedule 1.1A. 8 "Consolidated Net Income" means, as of any date for the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis, net income (excluding, without duplication, (i) extraordinary items and (ii) any amounts attributable to Investments in any Unrestricted Joint Venture to the extent that either (a) such amounts have not been distributed in cash to the Credit Parties during the applicable period, (b) such amounts were not earned by such Unrestricted Joint Venture during the applicable period or (c) there exists in respect of any future period any encumbrance or restriction on the ability of such Unrestricted Joint Venture to pay dividends or make any other distributions in cash on the Capital Stock of such Unrestricted Joint Venture held by the Credit Parties) after interest expense, income taxes and depreciation and amortization, all as determined in accordance with GAAP. "Consolidated Parties" means a collective reference to the Borrower and the Restricted Subsidiaries, and "Consolidated Party" means any one of them. The Acquired Company shall be deemed to be a Consolidated Party for all purposes of this Credit Agreement. "Consolidated Rental Expense" means, as of any date for the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis, rental expense under Operating Leases, as determined in accordance with GAAP; provided, however, that Consolidated Rental Expense for each of the fiscal quarters ending on March 31, 2001 and June 30, 2001 shall be equal to the amount indicated for Consolidated Rental Expense for such quarter on Schedule 1.1A. "Consolidated Scheduled Funded Indebtedness Payments" means, as of any date for the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis, the sum of all scheduled payments of principal on Funded Indebtedness, as determined in accordance with GAAP; provided, however, that Consolidated Scheduled Funded Indebtedness Payments for the four fiscal quarter period ending December 31, 2001 shall be calculated as Consolidated Scheduled Funded Indebtedness Payments for the fiscal quarter ending December 31, 2001 multiplied by 4; Consolidated Scheduled Funded Indebtedness Payments for the four fiscal quarter period ending March 31, 2002 shall be calculated as Consolidated Scheduled Funded Indebtedness Payments for the two fiscal quarters ending March 31, 2002 multiplied by 2; and Consolidated Scheduled Funded Indebtedness Payments for the fiscal quarter ending June 30, 2002 shall be calculated as Consolidated Scheduled Funded Indebtedness Payments for the three fiscal quarters ending preceding June 30, 2002 multiplied by 1.33. For purposes of this definition, "scheduled payments of principal" (i) shall be determined without giving effect to any reduction of such scheduled payments resulting from the application of any voluntary or mandatory prepayments made during the applicable period, (ii) shall be deemed to include the implied principal component of payments due on Capital Leases and Synthetic Leases and (iii) shall not include any voluntary prepayments or mandatory prepayments required pursuant to Section 3.3. "Consolidated Working Capital" means, as of any date with respect to the Consolidated Parties on a consolidated basis, the sum of accounts receivable plus inventory minus accounts payable, all as determined in accordance with GAAP. 9 "Continue", "Continuation" and "Continued" shall refer to the continuation pursuant to Section 3.2 or Sections 3.7 through 3.12, inclusive, of a Eurodollar Loan from one Interest Period to the next Interest Period. "Convert", "Conversion" and "Converted" shall refer to a conversion pursuant to Section 3.2 or Sections 3.7 through 3.12, inclusive, of a Base Rate Loan into a Eurodollar Loan. "Credit Documents" means a collective reference to this Credit Agreement, the Notes, the LOC Documents, each Joinder Agreement, the Administrative Agent's Fee Letter and the Collateral Documents (in each case as the same may be amended, modified, restated, supplemented, extended, renewed or replaced from time to time), and "Credit Document" means any one of them. "Credit Facilities" shall have the meaning assigned to such term in the recitals hereto. "Credit Parties" means a collective reference to the Borrower and the Guarantors, and "Credit Party" means any one of them. The Acquired Company shall be deemed to be a Credit Party for all purposes of this Credit Agreement. "Credit Party Obligations" means, without duplication, (i) all of the obligations of the Credit Parties to the Lenders (including the Issuing Lender) and the Administrative Agent, whenever arising, under this Credit Agreement, the Notes, the Collateral Documents or any of the other Credit Documents (including, but not limited to, any interest accruing after the occurrence of a Bankruptcy Event with respect to any Credit Party, regardless of whether such interest is an allowed claim under the Bankruptcy Code) and (ii) all liabilities and obligations, whenever arising, owing from the Borrower to any Lender, or any Affiliate of a Lender, arising under any Hedging Agreement. "Debt Issuance" means the issuance by any Consolidated Party of any Indebtedness of the type referred to in clause (a) or (b) of the definition thereof set forth in this Section 1.1. "Debt Issuance Prepayment Event" means the receipt by any Consolidated Party of proceeds from any Debt Issuance other than an Excluded Debt Issuance. "Default" means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Lender" means, at any time, any Lender that, as determined by the Administrative Agent, (a) has failed to make a Loan or purchase a Participation Interest required pursuant to the terms of this Credit Agreement within one Business Day of when due, (b) other than as set forth in (a) above, has failed to pay to the Administrative Agent or any Lender an amount owed by such Lender pursuant to the terms of this Credit Agreement within one Business Day of when due, unless such amount is subject to a good faith dispute or (c) has been deemed insolvent or has become subject to a bankruptcy or insolvency 10 proceeding or with respect to which (or with respect to any of the assets of which) a receiver, trustee or similar official has been appointed. "Delayed-Draw Term Loan Borrowing Request" means a written notice from the Borrower to the Administrative Agent requesting a Delayed-Draw Term Loan and specifying (i) that a Delayed-Draw Term Loan is requested, (ii) the date of the requested borrowing (which shall be a Business Day at least five (5) Business Days after the date of receipt of such notice by the Administrative Agent (or such later date as the Fronting Bank and the Administrative Agent may agree with the Borrower in order to minimize the incurrence of costs by the Borrower pursuant to Section 3.12(a) in connection with such borrowing)), (iii) the aggregate principal amount to be borrowed (which shall be at least $10,000,000 or an integral multiple of $1,000,000 in excess thereof) and (iv) whether the borrowing shall be comprised of Base Rate Loans, Eurodollar Loans or a combination thereof, and if Eurodollar Loans are requested, the Interest Period(s) therefor. "Delayed-Draw Term Loan Commitment" means, with respect to each Lender, the commitment of such Lender in an aggregate principal amount at any time outstanding of up to such Lender's Delayed-Draw Term Loan Commitment Percentage (if any) of the Delayed-Draw Term Loan Committed Amount, to make Delayed-Draw Term Loans in accordance with the provisions of Section 2.3(a). "Delayed-Draw Term Loan Commitment Percentage" means, for any Lender, the percentage identified as its Delayed-Draw Term Loan Commitment Percentage on Schedule 2.1(a), as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 11.3. "Delayed-Draw Term Loan Commitment Termination Date" means the earliest of (i) the date that the Delayed-Draw Term Loan Commitments shall have been terminated as provided herein, (ii) the date that the Delayed-Draw Term Loan Committed Amount shall have been reduced to zero ($0) and (iii) October 17, 2003. "Delayed-Draw Term Loan Commitment Unused Fee" shall have the meaning assigned to such term in Section 3.5(a)(ii). "Delayed-Draw Term Loan Commitment Unused Fee Calculation Period" shall have the meaning assigned to such term in Section 3.5(a)(ii). "Delayed-Draw Term Loan Committed Amount" shall have the meaning assigned to such term in Section 2.3(a). "Delayed-Draw Term Loan Funding Notice" shall have the meaning assigned to such term in Section 2.3(b)(i). "Delayed-Draw Term Loan Tranches 1, 2, 3 and 4" and "Delayed-Draw Term Loan Tranches" shall have the meaning assigned to such terms in Section 2.3(g). "Delayed-Draw Term Loans" shall have the meaning assigned to such term in Section 2.3(a). 11 "Delayed-Draw Term Note" shall have the meaning assigned to such term in Section 2.3(f). "Dollars" and "$" means dollars in lawful currency of the United States of America. "Domestic Subsidiary" means any direct or indirect Subsidiary of the Borrower which is incorporated or organized under the laws of any State of the United States of America or the District of Columbia. "Eligible Assignee" means (i) a Lender, (ii) an Affiliate of a Lender, (iii) an Approved Fund and (iv) any other Person (other than a natural Person) approved by the Administrative Agent, the Issuing Lender (in the case of any assignment of Revolving Loans and Revolving Commitments only) and, unless (x) such Person is taking delivery of an assignment in connection with physical settlement of a credit derivatives transaction or (y) an Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided, however, that neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee. "Eligible Reinvestment" means (i) any acquisition (whether or not constituting a capital expenditure, but not constituting an Acquisition) of assets or any business (or any substantial part thereof) used or useful in the same or a similar line of business as the Borrower and its Restricted Subsidiaries were engaged in on the Closing Date (or any reasonable extensions or expansions thereof) and (ii) any Permitted Acquisition. The term "Eligible Reinvestment" shall not include any item which is not a permitted application of proceeds of an "Asset Sale" (or any comparable term) under, and as defined in, the documents evidencing or governing any Subordinated Indebtedness. "Environmental Laws" means any and all applicable Federal, state, local and foreign statutes, laws (including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, the Toxic Substances Control Act, the Water Pollution Control Act, the Clean Air Act and the Hazardous Materials Transportation Act), regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "Equity Issuance" means any issuance by any Consolidated Party to any Person of (a) shares of its Capital Stock, (b) any shares of its Capital Stock pursuant to the exercise of options or warrants, (c) any shares of its Capital Stock pursuant to the conversion of any debt securities to equity or (d) any options or warrants relating to its Capital Stock. The term "Equity Issuance" shall not be deemed to include any Asset Disposition. 12 "Equity Issuance Prepayment Event" means the receipt by any Consolidated Party of proceeds from any Equity Issuance other than an Excluded Equity Issuance. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "ERISA Affiliate" means an entity which is under common control with any Consolidated Party within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes any Consolidated Party and which is treated as a single employer under Sections 414(b) or (c) of the Code. "ERISA Event" means (i) with respect to any Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA); (ii) the withdrawal by any Consolidated Party or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan; (iii) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (vi) the complete or partial withdrawal of any Consolidated Party or any ERISA Affiliate from a Multiemployer Plan; (vii) the conditions for imposition of a lien under Section 302(f) of ERISA exist with respect to any Plan; or (viii) the adoption of an amendment to any Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA. "Eurodollar Loan" means any Loan that bears interest at a rate based upon the Eurodollar Rate. "Eurodollar Rate" means for any Interest Period with respect to any Eurodollar Loan, a rate per annum determined by the Administrative Agent to be equal to the quotient obtained by dividing (a) the Interbank Offered Rate by (b) 1 minus the Eurodollar Reserve Percentage. "Eurodollar Reserve Percentage" means, for any day during any Interest Period, the reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). The Eurodollar Rate for each outstanding Eurodollar Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage. "Event of Default" shall have the meaning assigned to such term in Section 9.1. 13 "Excess Cash Flow" means, with respect to any fiscal year period of the Consolidated Parties on a consolidated basis, an amount equal to (a) Consolidated EBITDA (determined after adding back, but without duplication, any amounts deducted in determining Consolidated Net Income for such fiscal year period that were paid, incurred, assumed or accrued in violation of any of the provisions of this Credit Agreement) minus (b) Consolidated Capital Expenditures that are permitted to be made hereunder paid (or required to be paid) in cash (excluding any cash obtained through the incurrence of Indebtedness) minus (c) Consolidated Interest Expense in respect of Indebtedness that is permitted to be incurred hereunder paid (or required to be paid) in cash minus (d) Federal, state and other income taxes actually paid by the Consolidated Parties on a consolidated basis minus (e) Consolidated Scheduled Funded Indebtedness Payments that are permitted to be made hereunder, together with any optional prepayments of the Delayed-Draw Term Loans or the Tranche B Term Loans and any prepayments of Revolving Loans to the extent accompanied by a permanent reduction of the Revolving Committed Amount minus (f) Permitted Investments made in cash plus/minus (g) changes in Consolidated Working Capital other than as the result of the consummation of any Permitted Acquisition during such fiscal year; provided, however, that solely with respect to the calculation of Excess Cash Flow for fiscal year 2002, the applicable period for measuring the components thereof shall commence on the Closing Date and end on June 30, 2002). "Excess Proceeds" shall have the meaning assigned to such term in Section 7.6(b). "Excluded Asset Disposition" means, with respect to any Consolidated Party, any Asset Disposition consisting of (i) the sale, lease, license, transfer or other disposition of Property in the ordinary course of such Consolidated Party's business, (ii) the sale, lease, license, transfer or other disposition of Property no longer used or useful in the conduct of such Consolidated Party's business, (iii) any sale, lease, license, transfer or other disposition of Property by such Consolidated Party to any Credit Party, provided that the Credit Parties shall cause to be executed and delivered such documents, instruments and certificates as the Administrative Agent may request so as to cause the Credit Parties to be in compliance with the terms of Section 7.11 after giving effect to such transaction, (iv) any Involuntary Disposition by such Consolidated Party, (v) any Asset Disposition by such Consolidated Party constituting a Permitted Investment, (vi) if such Consolidated Party is not a Credit Party, any sale, lease, license, transfer or other disposition of Property by such Consolidated Party to any Consolidated Party that is not a Credit Party and (vii) other sales, leases, transfers or dispositions of other assets (other than Capital Stock in any Credit Party) provided that the aggregate net book value of the assets sold or otherwise disposed of by the Credit Parties in any such transaction shall not exceed $100,000; provided, however, that the term "Excluded Asset Disposition" shall not include any Asset Disposition to the extent that any portion of the proceeds of such Asset Disposition would be required under the documents evidencing or governing any Subordinated Indebtedness to be applied to permanently retire Indebtedness of the Consolidated Parties. "Excluded Debt Issuance" means any Debt Issuance permitted by Section 8.1. "Excluded Equity Issuance" means any Equity Issuance by any Consolidated Party to any Credit Party, any member of management of the Borrower, any of the Sponsors or any of the Related Parties; provided, however, that the term "Excluded Equity Issuance" 14 shall not include any Equity Issuance to the extent that any portion of the proceeds of such Equity Issuance would be required under the documents evidencing or governing any Subordinated Indebtedness to be applied to permanently retire Indebtedness of the Consolidated Parties. "Excluded Property" means, with respect to any Consolidated Party, including any Person that becomes a Consolidated Party after the Closing Date as contemplated by Section 7.10, (i) any owned real Property of such Consolidated Party which has a net book value of less than $100,000, provided that the aggregate net book value of all real Property of all of the Consolidated Parties excluded pursuant to this clause (i) shall not exceed $1,000,000, (ii) any leased real Property of such Consolidated Party which (a) is designated as an "Excluded Property" on Schedule 6.20(a) or (b) is acquired after the Closing Date and either (A) is subject to annual rental payments of less than $120,000 and has an initial lease term of less than ten years or (B) is being used for administrative purposes, (iii) any leased personal Property of such Consolidated Party, (iv) any personal Property of such Consolidated Party (other than motor vehicles) in respect of which perfection of a Lien is not either (A) governed by the Uniform Commercial Code or (B) effected by appropriate evidence of the Lien being filed in either the United States Copyright Office or the United States Patent and Trademark Office, (v) any Retained Rights and (vi) any Property of such Consolidated Party which, subject to the terms of Section 8.11 and Section 8.14, is subject to a Lien of the type described in Section 8.2(g) pursuant to documents which prohibit such Consolidated Party from granting any other Liens in such Property. "Executive Officer" of any Person means any of the chief executive officer, chief operating officer, president, vice president, chief financial officer or treasurer of such Person. "Extraordinary Receipt" means, with respect to any Person, any cash or Cash Equivalents in excess of $250,000 for any fiscal year received by or paid to or for the account of such Person not in the ordinary course of business, including, without limitation, tax refunds, pension plan reversions, proceeds of insurance (other than proceeds of an Involuntary Disposition or, to the extent such proceeds constitute compensation for lost earnings, of business interruption insurance), condemnation awards (and payments in lieu thereof), indemnity payments and any purchase price adjustments. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Bank of America on such day on such transactions as determined by the Administrative Agent. "Fees" means all fees payable pursuant to Section 3.5. 15 "FIRREA" means the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, as amended, including, without limitation, 12 CFR part 34.41 to 34.47. "Fixed Charge Coverage Ratio" means, as of the end of any fiscal quarter of the Consolidated Parties for the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis, the ratio of (a) the sum of (i) Consolidated EBITDA for such period plus (ii) Consolidated Rental Expense for such period to the extent paid (or required to be paid) in cash minus (iii) Consolidated Maintenance Capital Expenditures for such period to the extent paid (or required to be paid) in cash minus (iv) Consolidated Cash Taxes for such period to (b) the sum of (i) Consolidated Interest Expense for such period to the extent paid (or required to be paid) in cash plus (ii) Consolidated Scheduled Funded Indebtedness Payments for such period plus (iii) Consolidated Rental Expense for such period to the extent paid (or required to be paid) in cash. "Foreign Subsidiary" means any direct or indirect Subsidiary of the Borrower which is not a Domestic Subsidiary. "Fronting Bank" means Bank of America. "Fronting Commitment" means the commitment of the Fronting Bank to front Delayed-Draw Term Loans in an aggregate cumulative principal amount of up to the Delayed-Draw Term Loan Committed Amount. "Fully Satisfied" means, with respect to the Credit Party Obligations as of any date, that, as of such date, (a) all principal of and interest accrued to such date which constitute Credit Party Obligations shall have been paid in full in cash, (b) all fees, expenses and other amounts then due and payable which constitute Credit Party Obligations shall have been paid in full in cash, (c) all outstanding Letters of Credit shall have been (i) terminated, (ii) fully cash collateralized or (iii) secured by one or more letters of credit on terms and conditions, and with one or more financial institutions, reasonably satisfactory to the Issuing Lender and (d) the Commitments shall have been expired or terminated in full. "Funded Indebtedness" means, with respect to any Person, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (c) all obligations of such Person under conditional sale or other title retention agreements relating to Property purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (d) all obligations of such Person issued or assumed as the deferred purchase price of Property or services purchased by such Person (other than trade debt due within six months of the incurrence thereof) which would appear as liabilities on a balance sheet of such Person, (e) the implied principal component of all obligations of such Person under Capital Leases, (f) the maximum amount of all performance and standby 16 letters of credit issued or bankers' acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), (g) the principal portion of all obligations of such Person under Synthetic Leases, (h) the aggregate amount of uncollected accounts receivable of such Person subject at such time to a sale of receivables (or similar transaction) to the extent such transaction is effected with recourse to such Person (whether or not such transaction would be reflected on the balance sheet of such Person in accordance with GAAP), (i) all Funded Indebtedness of others secured by (or for which the holder of such Funded Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, Property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, but only to the extent that the aggregate amount of such Funded Indebtedness does not exceed the fair market value of Property, (j) all Guaranty Obligations of such Person with respect to Funded Indebtedness of another Person and (k) the Funded Indebtedness of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer to the extent such Indebtedness is recourse to such Person. "GAAP" means generally accepted accounting principles in the United States of America applied on a consistent basis and subject to the terms of Section 1.3 (except, in respect of Synthetic Leases, as otherwise treated herein). "Governmental Authority" means any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Guarantors" means a collective reference to the Parent and each of the Subsidiary Guarantors, together with their successors and permitted assigns, and "Guarantor " means any one of them. "Guaranty Obligations" means, with respect to any Person, without duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any Property constituting security therefor, (ii) to advance or provide funds or other support for the payment or purchase of any such Indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including without limitation keep well agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of Indebtedness of such other Person, (iii) to lease or purchase Property, securities or services primarily for the purpose of assuring the holder of such Indebtedness of the ability of the primary obligor to make payment of such primary obligation, or (iv) to otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof. The amount of any Guaranty Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made, unless such principal amount (or maximum principal amount) is not stated or determinable, in which case the amount of such Guaranty Obligation shall be such guaranteeing Person's maximum 17 reasonably anticipated liability in respect thereof, as determined by the Borrower in good faith. "Hedging Agreements" means any interest rate protection agreement. "Indebtedness" means, with respect to any Person, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (c) all obligations of such Person under conditional sale or other title retention agreements relating to Property purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (d) all obligations of such Person issued or assumed as the deferred purchase price of Property or services purchased by such Person (other than trade debt due within six months of the incurrence thereof) which would appear as liabilities on a balance sheet of such Person, (e) the implied principal component of all obligations of such Person under Capital Leases, (f) all obligations of such Person under Hedging Agreements, (g) the maximum amount of all performance and standby letters of credit issued or bankers' acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), (h) the principal portion of all obligations of such Person under Synthetic Leases, (i) the aggregate amount of uncollected accounts receivable of such Person subject at such time to a sale of receivables (or similar transaction) to the extent such transaction is effected with recourse to such Person (whether or not such transaction would be reflected on the balance sheet of such Person in accordance with GAAP), (j) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, Property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, but only to the extent that the aggregate amount of such Indebtedness does not exceed the fair market value of Property, (k) all Guaranty Obligations of such Person with respect to Indebtedness of another Person and (l) the Indebtedness of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer to the extent such Indebtedness is recourse to such Person. "Indemnified Party" shall have the meaning assigned to such term in Section 11.5(b). "InSight Acquisition" shall have the meaning assigned to such term in the heading hereof. "InSight Acquisition Note" means the promissory note dated the Closing Date in the form of Exhibit 1.1B to be executed by InSight Acquisition in favor of the Administrative Agent for the benefit of the Lenders. "Interbank Offered Rate" means for any Interest Period with respect to any Eurodollar Loan: (a) the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on the page of the Telerate screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such 18 Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period, or (b)if the rate referenced in the preceding clause (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period, or (c) if the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest (rounded upward to the next 1/100th of 1%) at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America's London Branch to major banks in the offshore Dollar market at their request at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period. "Interest Coverage Ratio" means, as of the end of any fiscal quarter of the Consolidated Parties for the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period to the extent paid (or required to be paid) in cash. "Interest Payment Date" means (a) as to Base Rate Loans, the last Business Day of each March, June, September and December, the date of repayment of principal of such Loan and the Maturity Date, and (b) as to Eurodollar Loans, the last day of each applicable Interest Period, the date of repayment of principal of such Loan and the Maturity Date, and in addition where the applicable Interest Period for a Eurodollar Loan is greater than three months, then also the date three months from the beginning of the Interest Period and each three months thereafter. "Interest Period" means, as to Eurodollar Loans, a period of one, two, three or six months' duration, as the Borrower may elect, commencing, in each case, on the date of the borrowing (including continuations and conversions thereof); provided, however, (a) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (b) no Interest Period shall extend beyond the Maturity Date and (c) where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last Business Day of such calendar month. "Investment" in any Person means (a) any Acquisition of such Person, (b) any other acquisition of Capital Stock, bonds, notes, debentures, partnership, joint ventures or other ownership interests or other securities of such other Person, (c) any deposit with, or advance, loan or other extension of credit to, such Person (other than deposits made in the ordinary 19 course of business) or (d) any other capital contribution to or investment in such Person, including, without limitation, any Guaranty Obligations (including any support for a letter of credit issued on behalf of such Person) incurred for the benefit of such Person and any Asset Disposition to such Person for consideration less than the fair market value (as determined by the board of directors (or comparable governing body) of the applicable transferor) of the Property disposed in such transaction, but excluding any Restricted Payment to such Person. Investments which are capital contributions or purchases of Capital Stock which have a right to participate in the profits of the issuer thereof shall be valued at the amount (or, in the case of any Investment made with Property other than cash, the book value of such Property) actually contributed or paid (including cash and non-cash consideration and any assumption of Indebtedness) to purchase such Capital Stock as of the date of such contribution or payment. Investments which are loans, advances, extensions of credit or Guaranty Obligations shall be valued at the principal amount of such loan, advance or extension of credit outstanding as of the date of determination or, as applicable, the principal amount of the loan or advance outstanding as of the date of determination actually guaranteed by such Guaranty Obligation. "Involuntary Disposition" means any loss of, damage to or destruction of, or any condemnation or other taking for public use of, any Property of any Consolidated Party. "Involuntary Disposition Prepayment Event" means, with respect to any Involuntary Disposition, the failure of the Credit Parties to apply (or cause to be applied) an amount equal to the Excess Proceeds of such Involuntary Disposition, if any, either (i) to prepay the Loans (and cash collateralize the LOC Obligations) in accordance with the terms of Section 3.3(b)(iii)(B) or (ii) to make Eligible Reinvestments (including but not limited to the repair or replacement of the Property affected by such Involuntary Disposition) within the period of 360 days following the date of receipt of such Excess Proceeds, subject to the terms and conditions of Section 7.6(b). "IPO Issuer" means, in respect of a Qualifying IPO, the Person (as between the Parent or the Borrower and subject to the definition of the term "Change of Control" set forth in this Section 1.1) that is the issuer of the common Capital Stock offered in such Qualifying IPO. "Issuing Lender" means Bank of America. "Joinder Agreement" means a Joinder Agreement substantially in the form of Exhibit 7.10 hereto, executed and delivered by a new Guarantor in accordance with the provisions of Section 7.10. "Joint Venture" means a Person which meets the following criteria: (a) such Person was organized pursuant to an express joint venture, partnership or limited liability company agreement; (b) such Person is a venture among two or more Persons and, except for purposes of the definition of "Indebtedness" set forth in this Section 1.1, at 20 least one of such Persons is, and one of such Persons is not, the Borrower or a Wholly Owned Subsidiary of the Borrower; (c) such Person operates a business for profit; (d) each of the venturers has contributed or will contribute capital, materials, services or knowledge; (e) each applicable Credit Party's share of profits and losses of the venture is proportionate with the Capital Stock of such Person held by such Credit Party; and (f) concurrently with the initial Investment by any of the Credit Parties in such Person by the Credit Parties, such Person is designated by the Credit Parties in writing to the Administrative Agent as a "Joint Venture" for purposes of this Credit Agreement. The term "Joint Venture" shall, in any event, (i) include the Persons identified on Schedule 1.1B and (ii) exclude any Person which is a Subsidiary of the Borrower as of the Closing Date and which is not identified on Schedule 1.1B as a Joint Venture. "Lender" means any of the Persons identified as a "Lender" on the signature pages hereto, and any Person which may become a Lender by way of assignment in accordance with the terms hereof, together with their successors and permitted assigns. "Letter of Credit" means any letter of credit issued by the Issuing Lender for the account of the Borrower in accordance with the terms of Section 2.2. "Lien" means any mortgage, deed of trust, pledge, hypothecation, collateral assignment, deposit arrangement, security interest, encumbrance, lien (statutory or otherwise), preference, priority or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof). "Loan" or "Loans" means the Revolving Loans, the Delayed-Draw Term Loans and/or the Tranche B Term Loan (or a portion of any Revolving Loan, any Delayed-Draw Term Loan or the Tranche B Term Loan bearing interest at the Adjusted Base Rate or the Adjusted Eurodollar Rate and referred to as a Base Rate Loan or a Eurodollar Loan), individually or collectively, as appropriate. "LOC Commitment" means the commitment of the Issuing Lender to issue Letters of Credit in an aggregate face amount at any time outstanding (together with the amounts of any unreimbursed drawings thereon) of up to the LOC Committed Amount. "LOC Committed Amount" shall have the meaning assigned to such term in Section 2.2. 21 "LOC Documents" means, with respect to any Letter of Credit, such Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (i) the rights and obligations of the parties concerned or at risk or (ii) any collateral security for such obligations. "LOC Obligations" means, at any time, without duplication, the sum of (i) the maximum amount which is, or at any time thereafter may become, available to be drawn under Letters of Credit then outstanding plus (ii) the aggregate amount of all drawings under Letters of Credit honored by the Issuing Lender but not theretofore reimbursed by the Borrower. "Management Agreement" means that certain management agreement dated as of [the Closing Date] among J.W. Childs Advisors II, L.P., Halifax Genpar, L.P., the Parent and the Borrower, as the same may be amended, modified, restated or supplemented from time to time to the extent not adverse in any material respect to the Lenders. "Master Assignment Agreement" means that certain Master Assignment and Acceptance Agreement dated as of the Closing Date among Bank of America, as the "Assignor" and the Persons identified therein as "Assignees" and the Administrative Agent. "Material Adverse Effect" means a material adverse effect on (i) the condition (financial or otherwise), operations, business, assets or liabilities of the Consolidated Parties taken as a whole, (ii) the ability of any Credit Party to perform any material obligation under the Credit Documents to which it is a party or (iii) the material rights and remedies of the Administrative Agent and the Lenders under the Credit Documents. "Materials of Environmental Concern" means any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Laws, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. "Maturity Date" means (i) as to the Revolving Loans, Letters of Credit (and the related LOC Obligations), October 17, 2007 and (ii) as to the Delayed-Draw Term Loans and the Tranche B Term Loan, October 17, 2008. "Merger Agreement" means that certain Agreement and Plan of Merger by and among the Parent, InSight Acquisition and the Acquired Company dated as of June 29, 2001, as it may be amended on or prior to the Closing Date. "Moody's" means Moody's Investors Service, Inc., or any successor or assignee of the business of such company in the business of rating securities. 22 "Mortgage Instruments" shall have the meaning assigned such term in Section 7.15. "Mortgage Policies" shall have the meaning assigned such term in Section 7.15. "Mortgaged Properties" shall have the meaning assigned such term in Section 7.15. "Multiemployer Plan" means a Plan which is a "multiemployer plan" as defined in Sections 3(37) or 4001(a)(3) of ERISA. "Multiple Employer Plan" means a Plan (other than a Multiemployer Plan) which any Consolidated Party or any ERISA Affiliate and at least one employer other than the Consolidated Parties or any ERISA Affiliate are contributing sponsors. "Net Cash Proceeds" means the aggregate cash or Cash Equivalents proceeds received by any Consolidated Party in respect of any Asset Disposition, Equity Issuance, Debt Issuance or Involuntary Disposition, net of (a) direct costs incurred in connection therewith (including, without limitation, legal, accounting and investment banking fees, and sales commissions), (b) taxes paid or payable as a result thereof and (c) in the case of any Asset Disposition, the amount necessary to retire any Indebtedness secured by a Permitted Lien (ranking senior to any Lien of the Administrative Agent) on the related Property; it being understood that "Net Cash Proceeds" shall include, without limitation, any cash or Cash Equivalents received upon the sale or other disposition of any non-cash consideration received by any such Consolidated Party in any Asset Disposition, Equity Issuance, Debt Issuance or Involuntary Disposition. In addition, the "Net Cash Proceeds" of any Asset Disposition shall include any other amounts which constitute "Net Proceeds" (or any comparable term) of such transaction under, and as defined in, the documents evidencing or governing any Subordinated Indebtedness. "Note" or "Notes" means the Revolving Notes, the Delayed-Draw Term Notes and/or the Tranche B Term Notes, individually or collectively, as appropriate. "Notice of Borrowing" means a written notice of borrowing in substantially the form of Exhibit 2.1(b)(i), as required by Section 2.1(b)(i) or Section 2.4(b). "Notice of Continuation/Conversion" means the written notice of continuation or conversion in substantially the form of Exhibit 3.2, as required by Section 3.2. "Operating Lease" means, as applied to any Person, any lease (including, without limitation, leases which may be terminated by the lessee at any time) of any Property (whether real, personal or mixed) which is not a Capital Lease other than any such lease in which that Person is the lessor. "Other Taxes" shall have the meaning assigned to such term in Section 3.11(b). "Parent" means the Person identified as such in the heading hereof, together with any permitted successors and assigns. 23 "Participant" shall have the meaning assigned to such term in Section 11.3(d). "Participation Interest" means a purchase by a Lender of a participation in Letters of Credit or LOC Obligations as provided in Section 2.2 or in any Loans as provided in Section 3.14. "Patient Receivables" means, with respect to any Consolidated Party, the patient accounts of such Consolidated Party existing or hereinafter created, any and all rights to receive payments due on such accounts from any obligor or other third-party payor under or in respect of such accounts (including, without limitation, all insurance companies, Blue Cross/Blue Shield, Medicare, Medicaid and health maintenance organizations), and all proceeds of, or in any way derived, whether directly or indirectly, from any of the foregoing (including, without limitation, all interest, finance charges and other amounts payable by an obligor in respect thereof). "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereof. "Permitted Acquisition" means an Acquisition by the Borrower or any Restricted Subsidiary of the Borrower permitted pursuant to the terms of Section 8.6(i). "Permitted Asset Disposition" means any Asset Disposition permitted by Section 8.5. "Permitted Investments" means, at any time, Investments by the Consolidated Parties permitted to exist at such time pursuant to the terms of Section 8.6. "Permitted Liens" means, at any time, Liens in respect of Property of the Consolidated Parties permitted to exist at such time pursuant to the terms of Section 8.2. "Person" means any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise (whether or not incorporated) or any Governmental Authority. "Plan" means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which any Consolidated Party or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" within the meaning of Section 3(5) of ERISA. "Pledge Agreement" means the pledge agreement dated as of the Closing Date in the form of Exhibit 1.1C to be executed in favor of the Administrative Agent by each of the Credit Parties, as amended, modified, restated or supplemented from time to time. "Prime Rate" means, for any day, the per annum rate of interest in effect for such day as publicly announced from time to time by Bank of America as its "prime rate." Such rate is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is 24 used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Principal Amortization Payment" means a principal payment on the Delayed-Draw Term Loans as set forth in Section 2.3(d) or on the Tranche B Term Loans as set forth in Section 2.4(d). "Principal Amortization Payment Date" means the date a Principal Amortization Payment is due. "Principal Office" means the principal office of Bank of America, presently located at Charlotte, North Carolina. "Pro Forma Basis" means, for purposes of calculating (utilizing the principles set forth in the second paragraph of Section 1.3) compliance with each of the financial covenants set forth in Section 7.9(a)-(c) in respect of a proposed transaction, that such transaction shall be deemed to have occurred as of the first day of the four fiscal quarter period ending as of the most recent fiscal quarter end preceding the date of such transaction with respect to which the Administrative Agent has received the Required Financial Information. As used herein, "transaction" shall mean (i) any incurrence or assumption of Indebtedness as referred to in Section 8.1(i) or (j), (ii) any Asset Disposition as referred to in Section 8.5(d) or (iii) any Acquisition as referred to in Section 8.6(i). In connection with any calculation of the financial covenants set forth in Section 7.9(a)-(c) upon giving effect to a transaction on a Pro Forma Basis: (A) for purposes of any such calculation in respect of any incurrence or assumption of Indebtedness as referred to in Section 8.1(i) or (j), any Indebtedness which is retired in connection with such incurrence or assumption shall be excluded and deemed to have been retired as of the first day of the applicable period; (B) for purposes of any such calculation in respect of any Asset Disposition as referred to in Section 8.5(d), (1) income statement items (whether positive or negative) attributable to the Property disposed of shall be excluded and (2) any Indebtedness which is retired in connection with such transaction shall be excluded and deemed to have been retired as of the first day of the applicable period; and (C) for purposes of any such calculation in respect of any Acquisition as referred to in Section 8.6(i), (1) any Indebtedness incurred or assumed by any Consolidated Party in connection with such transaction (including the Person or Property acquired) and any Indebtedness of the Person or Property acquired which is not retired in connection with such transaction (x) shall be deemed to have been incurred as of the first day of the applicable period and (y) if such Indebtedness has a floating or formula rate, shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant 25 date of determination, (2) income statement items (whether positive or negative) attributable to the Person or Property acquired shall be included beginning as of the first day of the applicable period and (3) pro forma adjustments may be included to the extent that such adjustments would give effect to events that are (x) directly attributable to such transaction, (y) expected to have a continuing impact on the Consolidated Parties and (z) factually supportable. "Pro Forma Compliance Certificate" means a certificate of an Executive Officer of the Borrower delivered to the Administrative Agent in connection with (i) any incurrence, assumption or retirement of Indebtedness as referred to in Section 8.1(i) or (j), (ii) any Asset Disposition as referred to in Section 8.5(d) or (iii) any Acquisition as referred to in Section 8.6(i), as applicable, and containing reasonably detailed calculations, upon giving effect to the applicable transaction on a Pro Forma Basis, of the Senior Leverage Ratio, the Total Leverage Ratio and the Interest Coverage Ratio as of the most recent fiscal quarter end preceding the date of the applicable transaction with respect to which the Administrative Agent shall have received the Required Financial Information. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Qualifying IPO" means an Equity Issuance by the Parent (or, subject to the definition of the term "Change of Control" set forth in this Section 1.1, of the common Capital Stock of the Borrower) consisting of an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8) of its common Capital Stock (i) pursuant to an effective registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act (whether alone or in connection with a secondary public offering) and (ii) resulting in gross proceeds to the Parent (or the Borrower, as applicable) of at least $30,000,000. "Real Properties" means, at any time, a collective reference to each of the facilities and real properties owned or leased and operated by the Consolidated Parties at such time. "Register" shall have the meaning assigned to such term in Section 11.3(c). "Related Party" means (i) any controlling stockholder, partner, member, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Sponsor or (ii) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more of the Sponsors and/or such other Persons referred to in the immediately preceding clause (i). "Regulation D, T, U, or X" means Regulation D, T, U or X, respectively, of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Reportable Event" means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the notice requirement has been waived by regulation. 26 "Required Financial Information" means, with respect to the applicable Calculation Date, (i) the financial statements of the Consolidated Parties required to be delivered pursuant to Section 7.1(a) or (b) for the fiscal period or quarter ending as of such Calculation Date, and (ii) the certificate of an Executive Officer of the Borrower required by Section 7.1(c) to be delivered with the financial statements described in clause (i) above. "Required Delayed-Draw Term Lenders" means, at any time, Lenders (other than Defaulting Lenders) holding in the aggregate at least a majority of the unfunded Delayed-Draw Term Loan Commitments (and Participation Interests therein) and the outstanding Delayed-Draw Term Loans (and Participation Interests therein). "Required Lenders" means, at any time, Lenders (other than Defaulting Lenders) holding in the aggregate at least a majority of (i) the unfunded Commitments (and Participation Interests therein) and the outstanding Loans and LOC Obligations (and Participation Interests therein) or (ii) if the Commitments have been terminated, the outstanding Loans, LOC Obligations and Participation Interests (including the Participation Interests of the Issuing Lender in any Letters of Credit). "Required Revolving Lenders" means, at any time, Lenders (other than Defaulting Lenders) holding in the aggregate at least a majority of (i) the Revolving Commitments (and Participation Interests therein) or (ii) if the Revolving Commitments have been terminated, the outstanding Revolving Loans and LOC Obligations (and Participation Interests in the Revolving Loans and LOC Obligations (including the Participation Interests of the Issuing Lender in any Letters of Credit)). "Required Tranche B Term Lenders" means, at any time, Lenders (other than Defaulting Lenders) holding in the aggregate at least a majority of the outstanding Tranche B Term Loan (and Participation Interests therein). "Required Unfunded Delayed-Draw Term Lenders" means, at any time, Lenders (other than Defaulting Lenders) holding in the aggregate at least a majority of the unfunded Delayed-Draw Term Loan Commitments (and Participation Interests therein). "Requirement of Law" means, as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or to which any of its material property is subject. "Restricted Payment" means (i) any dividend or other payment or distribution, direct or indirect, on account of any shares of any class of Capital Stock of any Consolidated Party, now or hereafter outstanding (including without limitation any payment on account thereof in connection with any dissolution, merger, consolidation or disposition involving any Consolidated Party), or to the holders, in their capacity as such, of any shares of any class of Capital Stock of any Consolidated Party, now or hereafter outstanding (other than dividends or distributions payable in Capital Stock of the applicable Person, dividends or distributions 27 payable (directly or indirectly through Subsidiaries) to any Credit Party other than the Parent and, in the case of Joint Ventures only, dividends or distributions paid ratably to each of the holders of the Capital Stock of such Person), (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of Capital Stock of any Consolidated Party, now or hereafter outstanding, (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of Capital Stock of any Consolidated Party, now or hereafter outstanding, (iv) any payment or prepayment of principal of, premium, if any, or interest on, including any redemption, purchase, retirement, defeasance, sinking fund or similar payment with respect to, any Subordinated Indebtedness, (v) any payment or prepayment of principal of, or premium or interest on, any Indebtedness of a Consolidated Party held by any of the Sponsors or the Related Parties or Affiliates and (vi) any loan or advance to the Parent. "Restricted Subsidiary" means any direct or indirect Subsidiary of the Borrower which is not an Unrestricted Joint Venture. Notwithstanding anything to the contrary contained in any of the Credit Documents, Toms River Imaging Associates, L.P. shall be deemed to be a Restricted Subsidiary of the Borrower for purposes of the Credit Documents so long as the Credit Parties own at least 50% of the Voting Stock thereof. "Retained Rights" means, with respect to any Patient Receivable owing from any Governmental Authority, the right of any Consolidated Party to have unfettered control over such Patient Receivable, including, without limitation, the collection thereof and discretion over the transfer thereof to any party (including the Administrative Agent) and to enforce the claim giving rise to such Patient Receivable against such Governmental Authority, in the absence of a court order in the manner expressly contemplated under 42 USC Section 1395 and applicable state law. "Revolving Commitment" means, with respect to each Lender, the commitment of such Lender in an aggregate principal amount at any time outstanding of up to such Lender's Revolving Commitment Percentage (if any) of the Revolving Committed Amount, (i) to make Revolving Loans in accordance with the provisions of Section 2.1(a) and (ii) to purchase Participation Interests in Letters of Credit in accordance with the provisions of Section 2.2(c). "Revolving Commitment Percentage" means, for any Lender, the percentage identified as its Revolving Commitment Percentage on Schedule 2.1(a), as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 11.3. "Revolving Commitment Unused Fee" shall have the meaning assigned to such term in Section 3.5(a)(i). "Revolving Commitment Unused Fee Calculation Period" shall have the meaning assigned to such term in Section 3.5(a)(i). "Revolving Committed Amount" shall have the meaning assigned to such term in Section 2.1(a). 28 "Revolving Loans" shall have the meaning assigned to such term in Section 2.1(a). "Revolving Note" shall have the meaning assigned to such term in Section 2.1(e). "S&P" means Standard & Poor's Ratings Group, a division of The McGraw Hill Companies, Inc., or any successor or assignee of the business of such division in the business of rating securities. "Securities Act" means the Securities Act of 1933, as amended, and all regulations issued pursuant thereto. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended, and all regulations issued pursuant thereto. "Security Agreement" means the security agreement dated as of the Closing Date in the form of Exhibit 1.1D to be executed in favor of the Administrative Agent by each of the Credit Parties, as amended, modified, restated or supplemented from time to time. "Senior Leverage Ratio" means, as of the end of any fiscal quarter of the Consolidated Parties for the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis, the ratio of (a) Funded Indebtedness other than Subordinated Indebtedness of the Consolidated Parties on a consolidated basis on the last day of such period to (b) Consolidated EBITDA for such period. "Single Employer Plan" means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan. "Solvent" or "Solvency" means, with respect to any Person as of a particular date, that on such date (i) such Person is able to pay its debts and other liabilities, contingent obligations and other commitments as they mature in the ordinary course of business, (ii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature in their ordinary course, (iii) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person's Property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged or is to engage, (iv) the fair value of the Property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person and (v) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Sponsors" means a collective reference to J.W. Childs Associates, L.P., J.W. Childs Equity Partners II, L.P., The Halifax Group, L.L.C, Halifax Capital Partners, L.P. and their respective Affiliates. 29 "Standby Letter of Credit Fee" shall have the meaning assigned to such term in Section 3.5(b)(i). "Subordinated Indebtedness" means (i) any Indebtedness of the Credit Parties evidenced by the Subordinated Notes and, after the exchange thereof, the Subordinated Remarketed Notes and the related guarantees thereof, and (ii) any other Indebtedness (including, without limitation, Indebtedness of the Credit Parties permitted pursuant to Section 8.1(f) or Section 8.1(g)) which (a) is subordinated to the Credit Party Obligations on terms no less favorable to the Credit Parties or the Lenders than the Subordinated Notes, as reasonably determined by the Administrative Agent, (b) is subject to covenants and default provisions relating to the Parent and the Consolidated Parties that are not, when taken as a whole, more restrictive than the covenants and default provisions contained in the Subordinated Note Purchase Agreement and the Subordinated Notes, as reasonably determined by the Administrative Agent, and (c) is not subject to any mandatory payments, prepayments, redemptions or repurchases of principal at any time prior to the date 180 days after the final Maturity Date hereunder. "Subordinated Note" means any one of the [__]% Notes due 2011 issued by the Borrower pursuant to the Subordinated Note Purchase Agreement, as such Subordinated Notes may be amended, modified, restated or supplemented and in effect from time to time in accordance with the terms hereof. "Subordinated Note Indenture" means the indenture to be entered into by and among the Borrower, the Guarantors and the indenture trustee, pursuant to which the Subordinated Remarketed Notes will be issued, as such Subordinated Note Indenture may be amended, modified, restated or supplemented and in effect from time to time in accordance with the terms hereof. "Subordinated Note Purchase Agreement" means the Note Purchase Agreement, dated as of the Closing Date, by and among the Borrower, the Guarantors and Banc of America Bridge LLC, as such Subordinated Note Purchase Agreement may be amended, modified, restated or supplemented and in effect from time to time in accordance with the terms hereof. "Subordinated Remarketed Note" means any one of the senior subordinated notes of the Borrower to be issued in exchange for the Subordinated Notes pursuant to the Subordinated Note Indenture, which notes shall have (a) terms which, taken as a whole, are not materially less favorable to the Borrower and the Guarantors than the Subordinated Notes and (b) subordination provisions no less favorable to the Lenders than the Subordinated Notes, as such Subordinated Remarketed Notes may be amended, modified, restated or supplemented and in effect from time to time in accordance with the terms hereof. "Subsidiary" means, as to any Person at any time, (a) any corporation (including any Joint Venture) more than 50% of whose Capital Stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at such time, any class or classes of such corporation shall 30 have or might have voting power by reason of the happening of any contingency) is at such time owned by such Person directly or indirectly through Subsidiaries, and (b) any partnership, association, joint venture or other entity (including any Joint Venture) of which such Person directly or indirectly through Subsidiaries owns at such time more than 50% of the Capital Stock. Notwithstanding anything to the contrary contained in any of the Credit Documents, Toms River Imaging Associates, L.P. shall be deemed to be a Subsidiary of the Borrower for purposes of the Credit Documents so long as the Credit Parties own at least 50% of the Voting Stock thereof. "Subsidiary Guarantor" means each of the Persons identified as a "Subsidiary Guarantor" on the signature pages hereto and each Person which may hereafter execute a Joinder Agreement pursuant to Section 7.10, together with their successors and permitted assigns, and "Subsidiary Guarantor" means any one of them. "Synthetic Lease" means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an Operating Lease under GAAP. "Taxes" shall have the meaning assigned to such term in Section 3.11(a). "Total Leverage Ratio" means, as of the end of any fiscal quarter of the Consolidated Parties for the four fiscal quarter period ending on such date with respect to the Consolidated Parties on a consolidated basis, the ratio of (a) Funded Indebtedness (including, without limitation, Subordinated Indebtedness) of the Consolidated Parties on a consolidated basis on the last day of such period to (b) Consolidated EBITDA for such period. "Trade Letter of Credit Fee" shall have the meaning assigned to such term in Section 3.5(b)(ii). "Tranche B Term Loan" shall have the meaning assigned to such term in Section 2.4(a). "Tranche B Term Loan Commitment" means, with respect to each Lender, the commitment of such Lender to make its portion of the Tranche B Term Loan in a principal amount equal to such Lender's Tranche B Term Loan Percentage (if any) of the Tranche B Term Loan Committed Amount. "Tranche B Term Loan Committed Amount" shall have the meaning assigned to such term in Section 2.4(a). "Tranche B Term Loan Percentage" means, for any Lender, the percentage identified as its Tranche B Term Loan Percentage on Schedule 2.1(a), as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 11.3. 31 "Tranche B Term Note" shall have the meaning assigned to such term in Section 2.4(f). "Transaction" means (a) the Acquisition, pursuant to the Merger Agreement, of the Acquired Company by the Parent through a merger of InSight Acquisition, its wholly-owned Subsidiary, with and into the Acquired Company, with (i) the Acquired Company being the continuing or surviving corporation of such merger and becoming a Wholly Owned Subsidiary of the Parent and (ii) each issued and outstanding share of common Capital Stock of the Acquired Company being converted into the right to receive $18 in cash, (b) the refinancing of substantially all of the Funded Indebtedness of the Acquired Company and its Subsidiaries existing at the time of the events described in the foregoing clause (a) (including, without limitation, pursuant to the tender offer to repurchase the Acquired Company's outstanding 9-5/8% senior subordinated notes due 2008), and (c) the related financings, equity contributions and other transactions referred to in Section 5.1(h). "Unrestricted Joint Venture" means (i) each Person which is a Joint Venture as of the Closing Date and is designated on Schedule 1.1B as an "Unrestricted Joint Venture", (ii) any Joint Venture acquired or created by the Credit Parties after the Closing Date and which is not a direct or indirect Subsidiary of the Borrower, (iii) any Joint Venture acquired or created by the Credit Parties after the Closing Date and which is a direct or indirect Subsidiary of the Borrower designated by the Credit Parties in writing to the Administrative Agent concurrently with the acquisition or creation of such Joint Venture as an "Unrestricted Joint Venture" for purposes of this Credit Agreement and (iv) any Joint Venture with respect to which the Borrower shall not have, directly or indirectly, control (whether through ownership of Voting Stock of such Joint Venture, by contract or otherwise) over the making of dividends and other payments or distributions on account of all of the Capital Stock of such Joint Venture. Any Unrestricted Joint Venture which is a direct or indirect Subsidiary of the Borrower (other than any Joint Venture described in clause (iv) of the immediately preceding sentence) may be designated a Restricted Subsidiary so long as at the time of and immediately after giving effect to such designation, no Default or Event of Default shall exist hereunder; provided, however, that any Unrestricted Joint Venture which has been designated a Restricted Subsidiary shall not at any time thereafter be designated an Unrestricted Joint Venture. "Unused Delayed-Draw Term Loan Committed Amount" means, for any period, the amount by which (a) the then applicable Delayed-Draw Term Loan Committed Amount exceeds (b) the daily average sum for such period of the outstanding aggregate principal amount of all Delayed-Draw Term Loans. "Unused Revolving Committed Amount" means, for any period, the amount by which (a) the then applicable Revolving Committed Amount exceeds (b) the daily average sum for such period of (i) the outstanding aggregate principal amount of all Revolving Loans plus (ii) the outstanding aggregate principal amount of all LOC Obligations. "Voting Stock" means, with respect to any Person, Capital Stock issued by such Person the holders of which are ordinarily, in the absence of contingencies, entitled to vote 32 for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency. "Wholly Owned Subsidiary" means any Person 100% of whose Voting Stock is at the time owned by the Borrower directly or indirectly through other Persons 100% of whose Voting Stock is at the time owned, directly or indirectly, by the Borrower. 1.2 COMPUTATION OF TIME PERIODS. For purposes of computation of periods of time hereunder, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." 1.3 ACCOUNTING TERMS. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall be prepared, in accordance with GAAP applied on a consistent basis; provided, however, that calculations of the implied principal component of all obligations under any Synthetic Lease or the implied interest component of any rent paid under any Synthetic Lease shall be made by the Borrower in accordance with accepted financial practice and consistent with the terms of such Synthetic Lease. All calculations made for the purposes of determining compliance with this Credit Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with the most recent annual or quarterly financial statements delivered pursuant to Section 7.1 (or, prior to the delivery of the first financial statements pursuant to Section 7.1, consistent with the financial statements as at June 30, 2001), but, in any event, after elimination for minority interests; provided, however, if (a) the Credit Parties shall object to determining such compliance on such basis at the time of delivery of such financial statements due to any change in GAAP or the rules promulgated with respect thereto or (b) the Administrative Agent or the Required Lenders shall so object in writing within 60 days after delivery of such financial statements, then such calculations shall be made on a basis consistent with the most recent financial statements delivered by the Credit Parties to the Lenders as to which no such objection shall have been made. Notwithstanding the above, the parties hereto acknowledge and agree that, for purposes of all calculations made under the financial covenants set forth in Section 7.9 (including without limitation for purposes of the definitions of "Applicable Percentage" and "Pro Forma Basis" set forth in Section 1.1), (i) after consummation of any Asset Disposition (A) income statement items (whether positive or negative) and capital expenditures attributable to the Property disposed of shall be excluded to the extent relating to any period occurring prior to the date of such transaction and (B) Indebtedness which is retired shall be excluded and deemed to have been retired as of the first day of the applicable period and (ii) after consummation of any Acquisition (A) income statement items (whether positive or negative) and capital expenditures attributable to the Person or Property acquired shall, to the extent not otherwise included in such income statement items for the Consolidated Parties in accordance with GAAP or in accordance with any defined terms set forth in Section 1.1, be included to the extent relating to any period applicable in such calculations, (B) to the extent not retired in connection with such Acquisition, Indebtedness of the Person or Property acquired shall be deemed to have been incurred as of the first day of the applicable period and (C) pro forma adjustments may be included to the extent 33 that such adjustments would give effect to items that are (x) directly attributable to such transaction, (y) expected to have a continuing impact on the Consolidated Parties and (z) factually supportable. SECTION 2 CREDIT FACILITIES 2.1 REVOLVING LOANS. (a) Revolving Commitment. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make available to the Borrower such Lender's Revolving Commitment Percentage of revolving credit loans requested by the Borrower in Dollars ("Revolving Loans") from time to time from the Closing Date until the Maturity Date, or such earlier date as the Revolving Commitments shall have been terminated as provided herein; provided, however, that (i) the sum of the aggregate outstanding principal amount of Revolving Loans shall not exceed FIFTY MILLION DOLLARS ($50,000,000) (as such aggregate maximum amount may be reduced from time to time as provided in Section 3.4, the "Revolving Committed Amount"), (ii) with regard to each Lender individually, the sum of such Lender's outstanding Revolving Loans plus such Lender's Participation Interests in Letters of Credit and LOC Obligations shall not exceed such Lender's Revolving Commitment Percentage of the Revolving Committed Amount and (iii) the sum of the aggregate outstanding principal amount of Revolving Loans plus LOC Obligations shall not exceed the Revolving Committed Amount. Revolving Loans may consist of Base Rate Loans or Eurodollar Loans, or a combination thereof, as the Borrower may request; provided, however, that no more than ten (10) Eurodollar Loans which are Revolving Loans shall be outstanding hereunder at any time (it being understood that, for purposes hereof, Eurodollar Loans with different Interest Periods shall be considered as separate Eurodollar Loans, even if they begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurodollar Loan with a single Interest Period). Revolving Loans hereunder may be repaid and reborrowed in accordance with the provisions hereof. (b) Revolving Loan Borrowings. (i) Notice of Borrowing. The Borrower shall request a Revolving Loan borrowing by written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent not later than 12:00 Noon (Charlotte, North Carolina time) on the Business Day prior to the date of the requested borrowing in the case of Base Rate Loans, and on the third Business Day prior to the date of the requested borrowing in the case of Eurodollar Loans. Each such request for borrowing shall be irrevocable and shall specify (A) that a Revolving Loan is requested, (B) the date of the requested borrowing (which shall be a Business Day), (C) the aggregate principal amount to be borrowed, and (D) whether the borrowing shall be comprised of Base Rate Loans, Eurodollar Loans or a combination thereof, and if Eurodollar Loans are requested, the Interest Period(s) therefor. If the Borrower shall fail to 34 specify in any such Notice of Borrowing (I) an applicable Interest Period in the case of a Eurodollar Loan, then such notice shall be deemed to be a request for an Interest Period of one month or (II) the interest rate option of a Revolving Loan requested, then such notice shall be deemed to be a request for a Base Rate Loan hereunder. The Administrative Agent shall give notice to each affected Lender promptly upon receipt of each Notice of Borrowing pursuant to this Section 2.1(b)(i), the contents thereof and each such Lender's share of any borrowing to be made pursuant thereto. (ii) Minimum Amounts. Except for Revolving Loans made for the purpose of reimbursing the Issuing Lender in respect of a drawing under a Letter of Credit pursuant to Section 2.2(e), each Eurodollar Loan or Base Rate Loan that is a Revolving Loan shall be in a minimum aggregate principal amount of $1,000,000 and integral multiples of $500,000 in excess thereof (or the remaining amount of the Revolving Committed Amount, if less). (iii) Advances. Each Lender will make its Revolving Commitment Percentage of each Revolving Loan borrowing available to the Administrative Agent for the account of the Borrower as specified in Section 3.15(a), or in such other manner as the Administrative Agent may specify in writing, by 2:00 P.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing in Dollars and in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent by crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. (c) Repayment. The Borrower hereby promises to pay the principal amount of all outstanding Revolving Loans in full on the Maturity Date, unless accelerated sooner pursuant to Section 9.2. (d) Interest. Subject to the provisions of Section 3.1, (i) Base Rate Loans. During such periods as Revolving Loans shall be comprised in whole or in part of Base Rate Loans, such Base Rate Loans shall bear interest at a per annum rate equal to the Adjusted Base Rate. (ii) Eurodollar Loans. During such periods as Revolving Loans shall be comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans shall bear interest at a per annum rate equal to the Adjusted Eurodollar Rate. The Borrower hereby promises to pay interest on Revolving Loans in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). (e) Revolving Notes. The Borrower hereby agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender a promissory note evidencing the Revolving Loans of such Lender, substantially in the form of Exhibit 2.1(e), with appropriate insertions as to date and principal amount (a "Revolving Note"). 35 2.2 LETTER OF CREDIT SUBFACILITY. (a) Issuance. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, the Issuing Lender agrees to issue, and each Lender having a Revolving Commitment severally agrees to participate in the issuance by the Issuing Lender of, standby and trade Letters of Credit in Dollars from time to time from the Closing Date until the date thirty (30) days prior to the Maturity Date as the Borrower may request, in a form acceptable to the Issuing Lender; provided, however, that (i) the LOC Obligations outstanding shall not at any time exceed TEN MILLION DOLLARS ($10,000,000) (the "LOC Committed Amount") and (ii) the sum of the aggregate outstanding principal amount of Revolving Loans plus LOC Obligations shall not at any time exceed (A) the Revolving Committed Amount. No Letter of Credit shall (x) have an original expiry date more than one year from the date of issuance (provided that any such Letter of Credit may contain customary "evergreen" provisions pursuant to which the expiry date is automatically extended by a specific time period of one year or less unless the Issuing Lender gives notice to the beneficiary of such Letter of Credit at least a specified time period prior to the expiry date then in effect) or (y) as originally issued or as extended, have an expiry date extending beyond the date thirty (30) days prior to the Maturity Date. Each Letter of Credit shall comply with the related LOC Documents. The issuance date of each Letter of Credit shall be a Business Day. (b) Notice and Reports. The request for the issuance of a Letter of Credit shall be submitted by the Borrower to the Issuing Lender at least three (3) Business Days prior to the requested date of issuance. The Issuing Lender will provide to the Administrative Agent, at least quarterly and more frequently upon request of the Administrative Agent (or any Lender through the Administrative Agent), who will in turn, disseminate to each of the Lenders a detailed report specifying the Letters of Credit which are then issued and outstanding and any activity with respect thereto which may have occurred since the date of the prior report, and including therein, among other things, the beneficiary, the face amount and the expiry date, as well as any payment or expirations which may have occurred. (c) Participation. Each Lender with a Revolving Commitment, upon issuance of a Letter of Credit, shall be deemed to have purchased without recourse a Participation Interest from the Issuing Lender in such Letter of Credit and the obligations arising thereunder and any collateral relating thereto, in each case in an amount equal to its pro rata share of the obligations under such Letter of Credit (based on the respective Revolving Commitment Percentages of the Lenders) and (subject to clause (iii) of the initial proviso to Section 2.1(a)) shall absolutely, unconditionally and irrevocably assume and be obligated to pay to the Issuing Lender and discharge when due, its pro rata share of the obligations arising under such Letter of Credit. Without limiting the scope and nature of each Lender's Participation Interest in any Letter of Credit, to the extent that the Issuing Lender has not been reimbursed as required hereunder or under any such Letter of Credit, each such Lender shall pay to the Administrative Agent for the account of the Issuing Lender its pro rata share of such unreimbursed drawing in same day funds on the day of notification by the Administrative Agent of an unreimbursed drawing pursuant to the provisions of subsection (d) below. The obligation of each Lender to so reimburse the Issuing Lender shall be absolute and unconditional and shall not be affected by the occurrence of a Default, 36 an Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of the Borrower to reimburse the Issuing Lender under any Letter of Credit, together with interest as hereinafter provided. (d) Reimbursement. In the event of any drawing under any Letter of Credit, the Issuing Lender will promptly notify the Borrower and the Administrative Agent. Unless the Borrower shall immediately notify the Administrative Agent and the Issuing Lender that the Borrower intends to otherwise reimburse the Issuing Lender for such drawing, the Borrower shall be deemed to have requested that the Lenders make a Revolving Loan in the amount of the drawing as provided in subsection (e) below on the related Letter of Credit, the proceeds of which will be used to satisfy the related reimbursement obligations. The Borrower promises to reimburse the Issuing Lender on the day of drawing under any Letter of Credit (either with the proceeds of a Revolving Loan obtained hereunder or otherwise) in same day funds. If the Borrower shall fail to reimburse the Issuing Lender as provided hereinabove, the Borrower promises to pay the Issuing Lender interest on the unreimbursed amount of such drawing on demand at a per annum rate equal to the Adjusted Base Rate plus 2%. The Borrower's reimbursement obligations hereunder shall be absolute and unconditional under all circumstances irrespective of any rights of setoff, counterclaim or defense to payment the Borrower may claim or have against the Issuing Lender, the Administrative Agent, the Lenders, the beneficiary of the Letter of Credit drawn upon or any other Person, including without limitation any defense based on any failure of the Borrower or any other Credit Party to receive consideration or the legality, validity, regularity or unenforceability of the Letter of Credit. The Issuing Lender will promptly notify the Administrative Agent, who shall in turn, promptly notify the other affected Lenders of the amount of any unreimbursed drawing and each Lender shall promptly pay to the Administrative Agent for the account of the Issuing Lender in Dollars and in immediately available funds, the amount of such Lender's pro rata share of such unreimbursed drawing. Such payment shall be made on the day such notice is received by such Lender from the Administrative Agent if such notice is received at or before 2:00 P.M. (Charlotte, North Carolina time), and otherwise such payment shall be made at or before 12:00 Noon (Charlotte, North Carolina time) on the Business Day next succeeding the day such notice is received. If such Lender does not pay such amount to the Administrative Agent for the account of the Issuing Lender in full upon such request, such Lender shall, on demand, pay to the Administrative Agent for the account of the Issuing Lender interest on the unpaid amount during the period from the date of such drawing until such Lender pays such amount to the Administrative Agent for the account of the Issuing Lender in full at a rate per annum equal to, if paid within two (2) Business Days of the date that such Lender is required to make payments of such amount pursuant to the preceding sentence, the Federal Funds Rate and thereafter at a rate equal to the Base Rate. Each Lender's obligation to make such payment to the Issuing Lender, and the right of the Issuing Lender to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and without regard to the termination of this Credit Agreement or the Commitments hereunder, the existence of a Default or Event of Default or the acceleration of the obligations of the Borrower hereunder and shall be made without any offset, abatement, withholding or reduction whatsoever. Simultaneously with the making of each such payment by a Lender to the Administrative Agent for the account of the Issuing Lender, such Lender shall, automatically and without any further action on the part of the Administrative Agent, the Issuing Lender or such Lender, acquire a Participation Interest in an amount equal to such payment (excluding the portion of such payment constituting 37 interest owing to the Issuing Lender) in the related unreimbursed drawn portion of the LOC Obligation and in the interest thereon and in the related LOC Documents, and shall have a claim against the Borrower with respect thereto. (e) Repayment with Revolving Loans. On any day on which the Borrower shall have requested, or been deemed to have requested, a Revolving Loan advance to reimburse a drawing under a Letter of Credit, the Administrative Agent shall give notice to the Lenders that a Revolving Loan has been requested or deemed requested by the Borrower to be made in connection with a drawing under a Letter of Credit, in which case (subject to clause (iii) of the initial proviso to Section 2.1(a)) a Revolving Loan advance comprised of Base Rate Loans (or Eurodollar Loans to the extent the Borrower has complied with the procedures of Section 2.1(b)(i) with respect thereto) shall be immediately made to the Borrower by all affected Lenders (notwithstanding any termination of the Commitments pursuant to Section 9.2) pro rata based on the respective Revolving Commitment Percentages of the Lenders (determined before giving effect to any termination of the Commitments pursuant to Section 9.2) and the proceeds thereof shall be paid directly to the Administrative Agent for the account of the Issuing Lender for application to the respective LOC Obligations. Each such Lender hereby irrevocably agrees (subject to clause (iii) of the initial proviso to Section 2.1(a)) to make its pro rata share of each such Revolving Loan immediately upon any such request or deemed request in the amount, in the manner and on the date specified in the preceding sentence notwithstanding (i) the amount of such borrowing may not comply with the minimum amount for advances of Revolving Loans otherwise required hereunder, (ii) whether any conditions specified in Section 5.2 are then satisfied, (iii) whether a Default or an Event of Default then exists, (iv) failure for any such request or deemed request for Revolving Loan to be made by the time otherwise required hereunder, (v) whether the date of such borrowing is a date on which Revolving Loans are otherwise permitted to be made hereunder or (vi) any termination of the Commitments relating thereto immediately prior to or contemporaneously with such borrowing. In the event that any Revolving Loan cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower or any other Credit Party), then each such Lender hereby agrees that it shall forthwith purchase (as of the date such borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Issuing Lender such Participation Interests in the outstanding LOC Obligations as shall be necessary to cause each such Lender to share in such LOC Obligations ratably (based upon the respective Revolving Commitment Percentages of the Lenders (determined before giving effect to any termination of the Commitments pursuant to Section 9.2)), provided that at the time any purchase of Participation Interests pursuant to this sentence is actually made, the purchasing Lender shall be required to pay to the Issuing Lender, to the extent not paid to the Issuing Lender by the Borrower in accordance with the terms of subsection (d) above, interest on the principal amount of Participation Interests purchased for each day from and including the day upon which such borrowing would otherwise have occurred to but excluding the date of payment for such Participation Interests, at the rate equal to, if paid within two (2) Business Days of the date of the Revolving Loan advance, the Federal Funds Rate, and thereafter at a rate equal to the Base Rate. 38 (f) Designation of Consolidated Parties as Account Parties. Notwithstanding anything to the contrary set forth in this Credit Agreement, including without limitation Section 2.2(a), a Letter of Credit issued hereunder may contain a statement to the effect that such Letter of Credit is issued for the account of any Restricted Subsidiary of the Borrower, provided that notwithstanding such statement, the Borrower shall be the actual account party for all purposes of this Credit Agreement for such Letter of Credit and such statement shall not affect the Borrower's reimbursement obligations hereunder with respect to such Letter of Credit. (g) Renewal, Extension. The renewal or extension of any Letter of Credit shall, for purposes hereof, be treated in all respects the same as the issuance of a new Letter of Credit hereunder. (h) Uniform Customs and Practices. The Issuing Lender may have the Letters of Credit be subject to The Uniform Customs and Practice for Documentary Credits (the "UCP") or the International Standby Practices 1998 (the "ISP98"), in either case as published as of the date of issue by the International Chamber of Commerce, in which case the UCP or the ISP98, as applicable, may be incorporated therein and deemed in all respects to be a part thereof. (i) Indemnification; Nature of Issuing Lender's Duties. (i) In addition to its other obligations under this Section 2.2, the Borrower hereby agrees to pay, and protect, indemnify and save each Lender harmless from and against, any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) that such Lender may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit or (B) the failure of such Lender to honor a drawing under a Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority (all such acts or omissions, herein called "Government Acts"). (ii) As between the Borrower and the Lenders (including the Issuing Lender), the Borrower shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. No Lender (including the Issuing Lender) shall be responsible: (A) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (C) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (D) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under a Letter of Credit or of the proceeds thereof; and (E) for any consequences arising from causes beyond the control of such Lender, including, without limitation, 39 any Government Acts. None of the above shall affect, impair, or prevent the vesting of the Issuing Lender's rights or powers hereunder. (iii) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by any Lender (including the Issuing Lender), under or in connection with any Letter of Credit or the related certificates, if taken or omitted in good faith, shall not put such Lender under any resulting liability to the Borrower or any other Credit Party. It is the intention of the parties that this Credit Agreement shall be construed and applied to protect and indemnify each Lender (including the Issuing Lender) against any and all risks involved in the issuance of the Letters of Credit, all of which risks are hereby assumed by the Borrower (on behalf of itself and each of the other Credit Parties), including, without limitation, any and all Government Acts. No Lender (including the Issuing Lender) shall, in any way, be liable for any failure by such Lender or anyone else to pay any drawing under any Letter of Credit as a result of any Government Acts or any other cause beyond the control of such Lender. (iv) Nothing in this subsection (i) is intended to limit the reimbursement obligations of the Borrower contained in subsection (d) above. The obligations of the Borrower under this subsection (i) shall survive the termination of this Credit Agreement. No act or omission of any current or prior beneficiary of a Letter of Credit shall in any way affect or impair the rights of the Lenders (including the Issuing Lender) to enforce any right, power or benefit under this Credit Agreement. (v) Notwithstanding anything to the contrary contained in this subsection (i), the Borrower shall have no obligation to indemnify any Lender (including the Issuing Lender) in respect of any liability incurred by such Lender (A) arising out of the gross negligence or willful misconduct of such Lender, as determined by a court of competent jurisdiction, or (B) caused by such Lender's failure to pay under any Letter of Credit after presentation to it of a request strictly complying with the terms and conditions of such Letter of Credit, as determined by a court of competent jurisdiction, unless such payment is prohibited by any law, regulation, court order or decree. (j) Responsibility of Issuing Lender. It is expressly understood and agreed that the obligations of the Issuing Lender hereunder to the Lenders are only those expressly set forth in this Credit Agreement and that the Issuing Lender shall be entitled to assume that the conditions precedent set forth in Section 5.2 have been satisfied unless it shall have acquired actual knowledge that any such condition precedent has not been satisfied; provided, however, that nothing set forth in this Section 2.2 shall be deemed to prejudice the right of any Lender to recover from the Issuing Lender any amounts made available by such Lender to the Issuing Lender pursuant to this Section 2.2 in the event that it is determined by a court of competent jurisdiction that the payment with respect to a Letter of Credit constituted gross negligence or willful misconduct on the part of the Issuing Lender. (k) Conflict with LOC Documents. In the event of any conflict between this Credit Agreement and any letter of credit application, this Credit Agreement shall control. 40 2.3 DELAYED-DRAW TERM LOANS. (a) Term Commitment. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, (i) the Fronting Bank severally agrees, to the extent, in each case, that the Administrative Agent has received corresponding payments from other Lenders pursuant to clause (ii) below, to make available to the Borrower up to seven (7) advances of term loans in Dollars ("Delayed-Draw Term Loans") from time to time from the Closing Date until the Delayed-Draw Term Loan Commitment Termination Date and (ii) each Lender severally agrees, for the benefit of the Borrower, to purchase from the Fronting Bank such Lender's Delayed-Draw Term Loan Commitment Percentage of each such Delayed-Draw Term Loan advanced by the Fronting Bank; provided, however, that (i) the aggregate principal amount of all Delayed-Draw Term Loans shall not exceed SEVENTY-FIVE MILLION DOLLARS ($75,000,000) (as such aggregate maximum amount may be reduced from time to time as provided in Section 3.4, the "Delayed-Draw Term Loan Committed Amount") and (ii) with regard to each Lender individually, such Lender shall not be required to purchase outstanding Delayed-Draw Term Loans in an aggregate amount exceeding such Lender's Delayed-Draw Term Loan Commitment Percentage of the Delayed-Draw Term Loan Committed Amount. Delayed-Draw Term Loans may consist of Base Rate Loans or Eurodollar Loans, or a combination thereof, as the Borrower may request (subject to the terms of this Section 2.3); provided, however, that no more than ten (10) Eurodollar Loans which are Delayed-Draw Term Loans shall be outstanding hereunder at any time (it being understood that, for purposes hereof, Eurodollar Loans with different Interest Periods shall be considered as separate Eurodollar Loans, even if they begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurodollar Loan with a single Interest Period). Amounts repaid or prepaid on the Delayed-Draw Term Loans may not be reborrowed. (b) Delayed-Draw Term Loan Borrowings. (i) Borrowing Mechanics. On each occasion occurring prior to the date ten (10) Business Days prior to the Delayed-Draw Term Loan Commitment Termination Date (and at least 30 days after the immediately preceding date of a Delayed-Draw Term Loan borrowing, if any) that either (x) the aggregate principal amount of Revolving Loans equals or exceeds $20,000,000 (or the remaining amount of the Delayed-Draw Term Loan Committed Amount, if less) or (y) the Borrower delivers to the Administrative Agent a Delayed-Draw Term Loan Borrowing Request for a Delayed-Draw Term Loan of at least $10,000,000 (or an integral multiple of $1,000,000 in excess thereof), the Borrower shall be deemed to have requested a Delayed-Draw Term Loan borrowing (which request shall be irrevocable) to refinance such Revolving Loans (A) in an aggregate principal amount equal to the Revolving Loans outstanding on the date such borrowing request is deemed to have been made, (B) to be funded on the date ten (10) Business Days thereafter (or such later date as the Fronting Bank and the Administrative Agent may agree with the Borrower in order to minimize the incurrence of costs by the Borrower pursuant to Section 3.12(a) in connection with such borrowing) and (C) unless the Borrower shall specify otherwise in a written notice (or telephonic 41 notice promptly confirmed in writing) to the Administrative Agent not later than 12:00 Noon (Charlotte, North Carolina time) on the third Business Day prior to the date of the applicable borrowing, to consist of a Base Rate Loan. The Administrative Agent shall give notice (a "Delayed-Draw Term Loan Funding Notice") to the Fronting Bank and each affected Lender promptly upon the occurrence of any request or deemed request for a Delayed-Draw Term Loan pursuant to this Section 2.3(b)(i), specifying the aggregate principal amount of such Delayed-Draw Term Loan, whether such Delayed-Draw Term Loan shall be comprised of Base Rate Loans, Eurodollar Loans or a combination thereof, and if Eurodollar Loans are requested, the Interest Period(s) therefor and the portion of such Delayed-Draw Term Loan which each such Lender is required to purchase. (ii) Minimum Amounts. Each Eurodollar Loan or Base Rate Loan that is a Delayed-Draw Term Loan shall be in a minimum aggregate principal amount of $10,000,000 and integral multiples of $1,000,000 in excess thereof (or the remaining amount of the Delayed-Draw Term Loan Committed Amount, if less). (iii) Advances. In respect of each proposed Delayed-Draw Term Loan advance, (A) each Lender will make available to the Administrative Agent (for the account of the Fronting Bank) as specified in Section 3.15(a), or in such other manner as the Administrative Agent may specify in writing, by 2:00 P.M. (Charlotte, North Carolina time) on the date specified in the applicable Delayed-Draw Term Loan Funding Notice in Dollars and in immediately available funds, an amount equal to such Lender's Delayed-Draw Term Loan Commitment Percentage of such proposed Delayed-Draw Term Loan borrowing, as payment by such Lender of the purchase price for the assignment by the Fronting Bank to such Lender of such Lender's ratable share of such Delayed-Draw Term Loan borrowing (which amounts shall be held in trust by the Administrative Agent until (1) the Fronting Bank has made available to the Administrative Agent corresponding funds representing the proceeds of the related Delayed-Draw Term Loan and (2) the Administrative Agent has made the proceeds of such Delayed-Draw Term Loan available to the Borrower in the manner provided below) and (B) the Fronting Bank will make available to the Administrative Agent (for the account of the Borrower) by 2:30 P.M. (Charlotte, North Carolina time) on the applicable borrowing date in Dollars and in immediately available funds, an amount equal to the amount of the proposed Delayed-Draw Term Loan or, if less, an amount corresponding to the aggregate amount of funds delivered by other Lenders to the Administrative Agent (for the account of the Fronting Bank) in connection with such Delayed-Draw Term Loan. Funds so deposited with the Administrative Agent by the Fronting Bank will then be made available to the Borrower by the Administrative Agent by crediting the account of the Borrower on the books of such office with the amount made available to the Administrative Agent by the Fronting Bank and in like funds as received by the Administrative Agent. (c) Delayed-Draw Term Loan Assignments. Concurrently with making the proceeds of a Delayed-Draw Term Loan borrowing available to the Borrower pursuant to Section 2.3(b)(iii) above, the Administrative Agent shall turn over to the Fronting Bank the funds deposited with, and held in trust by, the Administrative Agent by the Lenders in 42 connection with such Delayed-Draw Term Loan borrowing, whereupon, in each case, automatically the Fronting Bank shall be deemed to have irrevocably sold and assigned to each Lender holding at such time a Delayed-Draw Term Loan Commitment (each such Lender being referred to in this Section 2.3(c), an "Delayed-Draw Term Lender"), without recourse to the Fronting Bank (except that the Fronting Bank shall be deemed to represent to each Delayed-Draw Term Lender that (i) the Fronting Bank is the legal and beneficial owner of the interest in the Delayed-Draw Term Loan purported to be assigned to such Delayed-Draw Term Lender and (ii) such interest in the Delayed-Draw Term Loan is free and clear of any adverse claim), and each Delayed-Draw Term Lender shall be deemed to have purchased and assumed from the Fronting Bank, without recourse to the Fronting Bank (except in respect of the deemed representations of the Fronting Bank set forth above), an interest in the Fronting Bank's rights and obligations under the Credit Agreement with respect to such Delayed-Draw Term Loan in an amount equal to such Lender's Delayed-Draw Term Loan Commitment Percentage of such Delayed-Draw Term Loan. The Administrative Agent shall make appropriate entries in the Register in respect of each assignment of Delayed-Draw Term Loans effected pursuant to the terms of this Section 2.3(c). (d) Repayment of Delayed-Draw Term Loans. The Borrower hereby promises to pay the aggregate principal amount of the Delayed-Draw Term Loans outstanding as of the Delayed-Draw Term Loan Commitment Termination Date in twenty (20) consecutive quarterly installments as follows (as such installments may hereafter be adjusted as a result of prepayments made pursuant to Section 3.3), unless accelerated sooner pursuant to Section 9.2: 43
DELAYED-DRAW TERM LOAN PRINCIPAL AMORTIZATION PAYMENT (% OF TOTAL DELAYED-DRAW TERM LOANS OUTSTANDING AT THE PRINCIPAL AMORTIZATION PAYMENT DELAYED-DRAW TERM LOAN DATES COMMITMENT TERMINATION DATE) Each March 31, June 30, September 30 and December 31 from and including December 31, 2003 through and including September 30, 2007 0.25% December 31, 2007, March 31, 2008, June 30, 2008 and the Maturity Date 24.0%
(e) Interest. Subject to the provisions of Section 3.1, the Delayed-Draw Term Loans shall bear interest at a per annum rate equal to: (i) Base Rate Loans. During such periods as the Delayed-Draw Term Loans shall be comprised in whole or in part of Base Rate Loans, such Base Rate Loans shall bear interest at a per annum rate equal to the Adjusted Base Rate. (ii) Eurodollar Loans. During such periods as the Delayed-Draw Term Loans shall be comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans shall bear interest at a per annum rate equal to the Adjusted Eurodollar Rate. The Borrower hereby promises to pay interest on the Delayed-Draw Term Loans in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). (f) Delayed-Draw Term Notes. The Borrower hereby agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender a promissory note evidencing the Delayed-Draw Term Loans of such Lender, substantially in the form of Exhibit 2.3(f), with appropriate insertions as to date and principal amount (a "Delayed-Draw Term Note"). 44 (g) Delayed-Draw Term Loan Tranches. Notwithstanding any other provision to the contrary contained in this Credit Agreement, for purposes of administration of the Delayed-Draw Term Loans: (i) The term loan facility described in this Section 2.3 shall be deemed to consist of three (3) separate $20,000,000 tranches (respectively, "Delayed-Draw Term Loan Tranches 1, 2 and 3") and one (1) separate $15,000,000 tranche ("Delayed-Draw Term Loan Tranche 4", and collectively with Delayed-Draw Term Loan Tranches 1, 2 and 3, the "Delayed-Draw Term Loan Tranches"). (ii) As of the Closing Date (and prior to giving effect to any assignments of Delayed-Draw Term Loans or Delayed-Draw Term Loan Commitments), each Lender's Delayed-Draw Term Loan Commitment shall be allocated ratably over each of the four (4) Delayed-Draw Term Loan Tranches. (iii) Advances of Delayed-Draw Term Loans (A) shall be funded from the Delayed-Draw Term Loan Tranches in chronological order, beginning with Delayed-Draw Term Loan Tranche 1, and (B) shall not be funded under the next succeeding chronologically higher Delayed-Draw Term Loan Tranche until availability under the chronologically lower Delayed-Draw Term Loan Tranche shall have been fully utilized. 2.4 TRANCHE B TERM LOAN. (a) Tranche B Term Commitment. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make available to the Borrower on the Closing Date such Lender's Tranche B Term Loan Percentage of a term loan in Dollars (the "Tranche B Term Loan") in the aggregate principal amount of ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (the "Tranche B Term Loan Committed Amount"). The full principal amount of the Tranche B Term Loan shall be disbursed on the Closing Date as a Base Rate Loan, and no portion of the Tranche B Term Loan shall consist of a Eurodollar Loan until the date which is 5 Business Days after the Closing Date. Thereafter, the Tranche B Term Loan may consist of Base Rate Loans or Eurodollar Loans, or a combination thereof, as the Borrower may request; provided, however, that no more than five (5) Eurodollar Loans which are Tranche B Term Loans shall be outstanding hereunder at any time (it being understood that, for purposes hereof, Eurodollar Loans with different Interest Periods shall be considered as separate Eurodollar Loans, even if they begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurodollar Loan with a single Interest Period). Amounts repaid on the Tranche B Term Loan may not be reborrowed. (b) Borrowing Procedures. The Borrower shall submit an appropriate Notice of Borrowing for the Tranche B Term Loan to the Administrative Agent not later than 12:00 Noon (Charlotte, North Carolina time) on the Closing Date. Such Notice of Borrowing shall be irrevocable and shall specify (i) that the funding of a Tranche B Term Loan is requested and (ii) that the funding of the Tranche B Term Loan shall be comprised of Base Rate 45 Loans. Each Lender shall make its Tranche B Term Loan Percentage of the Tranche B Term Loan available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in Schedule 2.1(a), or at such other office as the Administrative Agent may designate in writing, by 2:00 P.M. (Charlotte, North Carolina time) on the Closing Date in Dollars and in funds immediately available to the Administrative Agent. (c) Minimum Amounts. Each Eurodollar Loan or Base Rate Loan that is part of the Tranche B Term Loan shall be in an aggregate principal amount that is not less than $5,000,000 and integral multiples of $1,000,000 (or the then remaining principal balance of the Tranche B Term Loan, if less). (d) Repayment of Tranche B Term Loan. The Borrower hereby promises to pay the outstanding principal amount of the Tranche B Term Loan in twenty-eight (28) consecutive quarterly installments as follows (as such installments may hereafter be adjusted as a result of prepayments made pursuant to Section 3.3), unless accelerated sooner pursuant to Section 9.2:
TRANCHE B TERM PRINCIPAL LOAN PRINCIPAL AMORTIZATION AMORTIZATION PAYMENT DATES PAYMENT Each March 31, June 30, September 30 and December 31 from and including December 31, 2001 through and including September 30, 2007 $375,000 December 31, 2007, March 31, 2008, June 30, 2008 and the Maturity Date $35,250,000
(e) Interest. Subject to the provisions of Section 3.1, the Tranche B Term Loan shall bear interest at a per annum rate equal to: (i) Base Rate Loans. During such periods as the Tranche B Term Loan shall be comprised in whole or in part of Base Rate Loans, such Base Rate Loans shall bear interest at a per annum rate equal to the Adjusted Base Rate. (ii) Eurodollar Loans. During such periods as the Tranche B Term Loan shall be comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans shall bear interest at a per annum rate equal to the Adjusted Eurodollar Rate. 46 The Borrower hereby promises to pay interest on the Tranche B Term Loan in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). (f) Tranche B Term Notes. The Borrower hereby agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender a promissory note evidencing the Tranche B Term Loans of such Lender, substantially in the form of Exhibit 2.3(f), with appropriate insertions as to date and principal amount (a "Tranche B Term Note"). SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES 3.1 DEFAULT RATE. Upon the occurrence, and during the continuance, of an Event of Default under Section 9.1(a), (i) the principal of and, to the extent permitted by law, interest on the Loans and any other amounts owing hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate 2% greater than the rate which would otherwise be applicable (or if no rate is applicable, whether in respect of interest, fees or other amounts, then the Adjusted Base Rate plus 2%) and (ii) the Standby Letter of Credit Fee and the Trade Letter of Credit shall accrue at a per annum rate 2% greater than the rate which would otherwise be applicable. 3.2 CONTINUATION AND CONVERSION. The Borrower shall have the option, on any Business Day, to continue existing Loans into a subsequent permissible Interest Period or to convert Loans into Loans of another interest rate type; provided, however, that (i) except as provided in Section 3.8, Eurodollar Loans may be converted into Base Rate Loans or continued as Eurodollar Loans for new Interest Periods only on the last day of the Interest Period applicable thereto, (ii) Loans continued as, or converted into, Eurodollar Loans shall be subject to the terms of the definition of "Interest Period" set forth in Section 1.1 and shall be in such minimum amounts as provided in, with respect to Revolving Loans, Section 2.1(b)(ii), with respect to Delayed-Draw Term Loans, Section 2.3(b)(ii), or, with respect to the Tranche B Term Loan, Section 2.4(c), (iii) no more than ten (10) Eurodollar Loans which are Revolving Loans, ten (10) Eurodollar Loans which are Delayed-Draw Term Loans and five (5) Eurodollar Loans which are Tranche B Term Loans shall be outstanding hereunder at any time (it being understood that, for purposes hereof, Eurodollar Loans with different Interest Periods shall be considered as separate Eurodollar Loans, even if they begin on the same date, although borrowings, continuations and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurodollar Loan with a single Interest Period) and (iv) any request for continuation or conversion of a Eurodollar Loan which shall fail to specify an Interest Period shall be deemed to be a request for an Interest Period of one month. Each such continuation or conversion shall be effected by the Borrower by giving a Notice of Continuation/Conversion (or telephonic notice promptly confirmed in writing) to the office of the Administrative Agent specified in Schedule 2.1(a), or at such other office as the Administrative Agent may designate in writing, prior to 11:00 A.M. (Charlotte, North Carolina time) on the Business Day of, in the case of the conversion of a Eurodollar Loan into a Base Rate Loan, and on 47 the third Business Day prior to, in the case of the continuation of a Eurodollar Loan as, or conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the proposed continuation or conversion, specifying the date of the proposed continuation or conversion, the Loans to be so continued or converted, the types of Loans into which such Loans are to be converted and, if appropriate, the applicable Interest Periods with respect thereto. In the event the Borrower fails to request continuation or conversion of any Eurodollar Loan in accordance with this Section 3.2, or any such conversion or continuation is not permitted or required by this Section 3.2, then such Eurodollar Loan shall be automatically converted into a Base Rate Loan at the end of the Interest Period applicable thereto. The Administrative Agent shall give each Lender notice as promptly as practicable of any such proposed continuation or conversion affecting any Loan. 3.3 PREPAYMENTS. (a) Voluntary Prepayments. The Borrower shall have the right to prepay Loans in whole or in part from time to time upon prior notice to the Administrative Agent; provided, however, that (i) each partial prepayment of Loans shall be in a minimum principal amount of $1,000,000 and integral multiples of $500,000 in excess thereof (or the then remaining principal balance of the Revolving Loans, the Delayed-Draw Term Loans or the Tranche B Term Loan, as applicable, if less) and (ii) any prepayment of the Delayed-Draw Term Loans or the Tranche B Term Loan shall be applied ratably to the Delayed-Draw Term Loans and the Tranche B Term Loan (in each case ratably to remaining Principal Amortization Payments). Subject to the foregoing terms, amounts prepaid under this Section 3.3(a) shall be applied as the Borrower may elect; provided that if the Borrower shall fail to specify with respect to any voluntary prepayment, such voluntary prepayment shall be applied first to Revolving Loans and then ratably to the Delayed-Draw Term Loans and the Tranche B Term Loan (in each case ratably to remaining Principal Amortization Payments), in each case first to Base Rate Loans and then to Eurodollar Loans in direct order of Interest Period maturities. All prepayments under this Section 3.3(a) shall be subject to Section 3.12, but otherwise without premium or penalty, and shall be accompanied by interest on the principal amount prepaid through the date of prepayment. The Administrative Agent shall promptly notify each affected Lender of receipt by the Administrative Agent of any notice from the Borrower pursuant to this Section 3.3(a). (b) Mandatory Prepayments. (i) (A) Revolving Committed Amount. If at any time, the sum of the aggregate outstanding principal amount of Revolving Loans plus LOC Obligations shall exceed the Revolving Committed Amount, the Borrower promptly shall prepay the Revolving Loans and (after all Revolving Loans have been repaid) cash collateralize the LOC Obligations, in an amount sufficient to eliminate such excess. (B) LOC Committed Amount. If at any time, the sum of the aggregate principal amount of LOC Obligations shall exceed the LOC Committed Amount, the Borrower promptly shall cash collateralize the LOC Obligations in an amount sufficient to eliminate such excess. 48 (ii) Excess Cash Flow. Within 100 days after the end of each fiscal year (commencing with the fiscal year ending June 30, 2002), the Borrower shall prepay the Loans in an amount equal to 75% (if the Senior Leverage Ratio as of the end of such fiscal year is equal to or greater than 2.0 to 1.0) or 50% (if the Senior Leverage Ratio as of the end of such fiscal year is less than 2.0 to 1.0) of Excess Cash Flow for such prior fiscal year (such prepayment to be applied as set forth in clause (vii) below). (iii) (A) Asset Dispositions. Promptly following the occurrence of any Asset Disposition Prepayment Event, the Borrower shall prepay the Loans in an aggregate amount equal to 100% of the Net Cash Proceeds of the related Asset Disposition not applied (or caused to be applied) by the Credit Parties during the related Application Period to make Eligible Reinvestments as contemplated by the terms of Section 8.5(f) (such prepayment to be applied as set forth in clause (vii) below). (B) Involuntary Dispositions. Promptly following the occurrence of an Involuntary Disposition Prepayment Event, the Borrower shall prepay the Loans in an aggregate amount equal to 100% of the Excess Proceeds (such prepayment to be applied as set forth in clause (vii) below). (iv) Extraordinary Receipts. Promptly following the receipt by any Credit Party of any Extraordinary Receipts, the Borrower shall prepay the Loans in an aggregate amount equal to 100% of such Extraordinary Receipts (such prepayment to be applied as set forth in clause (vii) below). (v) Debt Issuances. Promptly following the occurrence of a Debt Issuance Prepayment Event, the Borrower shall prepay the Loans in an aggregate amount equal to 100% of the Net Cash Proceeds of the related Debt Issuance (such prepayment to be applied as set forth in clause (vii) below). (vi) Equity Issuances. Promptly following the occurrence of an Equity Issuance Prepayment Event, the Borrower shall prepay the Loans in an aggregate amount equal to 100% of the Net Cash Proceeds of the related Equity Issuance (such prepayment to be applied as set forth in clause (vii) below). (vii) Application of Mandatory Prepayments. All amounts required to be paid pursuant to this Section 3.3(b) shall be applied as follows: (A) with respect to all amounts prepaid pursuant to Section 3.3(b)(i)(A), to Revolving Loans and (after all Revolving Loans have been repaid) to a cash collateral account in respect of LOC Obligations, (B) with respect to all amounts prepaid pursuant to Section 3.3(b)(i)(B), to a cash collateral account in respect of LOC Obligations and (C) with respect to all amounts prepaid pursuant to Section 3.3(b)(ii), (iii), (iv), (v) or (vi), pro rata to the Delayed-Draw Term Loans and the Tranche B Term Loan (in each case ratably to remaining Principal Amortization Payments). Within the parameters of the applications set forth above, prepayments shall be applied first to Base Rate Loans and then to Eurodollar Loans in direct order of Interest Period maturities. All prepayments under this Section 3.3(b) shall be subject to Section 3.12, but otherwise 49 without premium or penalty, and shall be accompanied by interest on the principal amount prepaid through the date of prepayment. (viii) Prepayment Account. If the Borrower is required to make a mandatory prepayment of Eurodollar Loans under this Section 3.3(b), the Borrower shall have the right, in lieu of making such prepayment in full, to deposit an amount equal to such mandatory prepayment with the Administrative Agent in a cash collateral account maintained (pursuant to documentation reasonably satisfactory to the Administrative Agent) by and in the sole dominion and control of the Administrative Agent. Any amounts so deposited shall be held by the Administrative Agent as collateral for the prepayment of such Eurodollar Loans and shall be applied to the prepayment of the applicable Eurodollar Loans at the end of the current Interest Periods applicable thereto. At the request of the Borrower, amounts so deposited shall be invested by the Administrative Agent in Cash Equivalents maturing prior to the date or dates on which it is anticipated that such amounts will be applied to prepay such Eurodollar Loans; any interest earned on such Cash Equivalents will be for the account of the Borrower and the Borrower will deposit with the Administrative Agent the amount of any loss on any such Cash Equivalents to the extent necessary in order that the amount of the prepayment to be made with the deposited amounts may not be reduced. 3.4 TERMINATION AND REDUCTION OF COMMITMENTS. (a) Voluntary Reductions. (i) Revolving Committed Amount. The Borrower may from time to time permanently reduce or terminate the Revolving Committed Amount in whole or in part (in minimum aggregate amounts of $2,000,000 or in integral multiples of $500,000 in excess thereof (or, if less, the full remaining amount of the then applicable Revolving Committed Amount)) upon three (3) Business Days' prior written notice to the Administrative Agent; provided, however, that (i) the Revolving Committed Amount may not be reduced or terminated prior to the Delayed-Draw Term Loan Commitment Termination Date, and (ii) no such termination or reduction of the Revolving Committed Amount shall be made which would cause the sum of the aggregate outstanding principal amount of Revolving Loans plus LOC Obligations to exceed the Revolving Committed Amount, unless, concurrently with such termination or reduction, the Revolving Loans are repaid to the extent necessary to eliminate such excess. The Administrative Agent shall promptly notify each affected Lender of receipt by the Administrative Agent of any notice from the Borrower pursuant to this Section 3.4(a)(i). (ii) Delayed-Draw Term Loan Committed Amount. The Borrower may from time to time permanently reduce or terminate the Delayed-Draw Term Loan Committed Amount in whole or in part (in minimum aggregate amounts of $2,000,000 or in integral multiples of $500,000 in excess thereof (or, if less, the full remaining amount of the then applicable Delayed-Draw Term Loan Committed Amount)) upon three (3) Business Days' prior written notice to the Administrative Agent; provided, however, that no such termination or reduction of the 50 Delayed-Draw Term Loan Committed Amount shall be made which would cause the Delayed-Draw Term Loan Committed Amount to be less than the outstanding principal amount of Revolving Loans with respect to which a request for a Delayed-Draw Term Loan to refinance such Revolving Loans is in effect pursuant to Section 2.3(b). The Administrative Agent shall promptly notify each affected Lender of receipt by the Administrative Agent of any notice from the Borrower pursuant to this Section 3.4(a)(ii). (b) Tranche B Term Loan Commitments. The Tranche B Term Loan Commitment of each Lender, if any, shall automatically terminate at such time as such Lender shall have made available to the Borrower such Lender's share of the Tranche B Term Loan. (c) Delayed-Draw Term Loan Commitments. Unless terminated sooner pursuant to Section 3.4(a)(ii) or Section 9.2, (i) concurrently with the making of each Delayed-Draw Term Loan, the Delayed-Draw Term Loan Committed Amount automatically shall be permanently reduced by the amount of such Delayed-Draw Term Loan and (ii) the Delayed-Draw Term Loan Commitments and the Fronting Commitment shall automatically terminate on the Delayed-Draw Term Loan Commitment Termination Date. (d) Maturity Date. Unless terminated sooner pursuant to Section 3.4(a)(i) or Section 9.2, the Revolving Commitments and the LOC Commitment shall automatically terminate on the Maturity Date. (e) General. The Borrower shall pay to the Administrative Agent for the account of the Lenders in accordance with the terms of Section 3.5(a)(i) or Section 3.5(a)(ii), as applicable, (i) on the date of each termination or reduction of the Revolving Committed Amount, the Revolving Commitment Unused Fee accrued through the date of such termination or reduction on the amount of the Revolving Committed Amount so terminated or reduced and (ii) on the date of each termination or reduction of the Delayed-Draw Term Loan Committed Amount, the Delayed-Draw Term Loan Commitment Unused Fee accrued through the date of such termination or reduction on the amount of the Delayed-Draw Term Loan Committed Amount so terminated or reduced. 3.5 FEES. (a) Unused Fees. (i) Revolving Commitment Unused Fee. In consideration of the Revolving Commitments of the Lenders hereunder, the Borrower promises to pay to the Administrative Agent for the account of each Lender a fee (the "Revolving Commitment Unused Fee") on the Unused Revolving Committed Amount computed at a per annum rate for each day during the applicable Revolving Commitment Unused Fee Calculation Period (hereinafter defined) at a rate equal to the Applicable Percentage in effect from time to time. The Revolving Commitment Unused Fee shall commence to accrue on the Closing Date and shall be due and payable in arrears on the last Business Day of each March, June, September and 51 December (and on any date that the Revolving Committed Amount is reduced and on the Maturity Date) for the immediately preceding quarter (or portion thereof) (each such quarter or portion thereof for which the Revolving Commitment Unused Fee is payable hereunder being herein referred to as an "Revolving Commitment Unused Fee Calculation Period"), beginning with the payment due on December 31, 2001. (ii) Delayed-Draw Term Loan Commitment Unused Fee. In consideration of the Delayed-Draw Term Loan Commitments of the Lenders hereunder, the Borrower promises to pay to the Administrative Agent for the account of each Lender a fee (the "Delayed-Draw Term Loan Commitment Unused Fee") on the Unused Delayed-Draw Term Loan Committed Amount computed at a per annum rate for each day during the applicable Delayed-Draw Term Loan Commitment Unused Fee Calculation Period (hereinafter defined) at a rate of 2.00%. The Delayed-Draw Term Loan Commitment Unused Fee shall commence to accrue on the Closing Date and shall be due and payable in arrears on the last Business Day of each March, June, September and December (and on any date that the Delayed-Draw Term Loan Committed Amount is reduced and on the Delayed-Draw Term Loan Commitment Termination Date) for the immediately preceding quarter (or portion thereof) (each such quarter or portion thereof for which the Delayed-Draw Term Loan Commitment Unused Fee is payable hereunder being herein referred to as an "Delayed-Draw Term Loan Commitment Unused Fee Calculation Period"), beginning with the payment due on December 31, 2001. (b) Letter of Credit Fees. (i) Standby Letter of Credit Issuance Fee. In consideration of the issuance of standby Letters of Credit hereunder, the Borrower promises to pay to the Administrative Agent for the account of each Lender a fee (the "Standby Letter of Credit Fee") on such Lender's Revolving Commitment Percentage of the average daily maximum amount available to be drawn under each such standby Letter of Credit computed at a per annum rate for each day from the date of issuance to the date of expiration equal to the Applicable Percentage. The Standby Letter of Credit Fee will be payable quarterly in arrears on the last Business Day of each March, June, September and December for the immediately preceding quarter (or a portion thereof). (ii) Trade Letter of Credit Drawing Fee. In consideration of the issuance of trade Letters of Credit hereunder, the Borrower promises to pay to the Administrative Agent for the account of each Lender a fee (the "Trade Letter of Credit Fee") on such Lender's Revolving Commitment Percentage of the average daily maximum amount available to be drawn under each such trade Letter of Credit computed at a per annum rate for each day from the date of issuance to the date of expiration equal to the Applicable Percentage. The Trade Letter of Credit Fee will be payable quarterly in arrears on the last Business Day of each March, June, September and December for the immediately preceding quarter (or a portion thereof). 52 (iii) Issuing Lender Fees. In addition to the Standby Letter of Credit Fee payable pursuant to clause (i) above and the Trade Letter of Credit Fee payable pursuant to clause (ii) above, the Borrower promises to pay to the Administrative Agent for the account of the Issuing Lender without sharing by the other Lenders (i) a letter of credit fronting fee of 0.25% on the average daily maximum amount available to be drawn under each Letter of Credit computed at a per annum rate for each day from the date of issuance to the date of expiration (which fronting fee shall be payable quarterly in arrears on the last Business Day of each March, June, September and December for the immediately preceding quarter (or a portion thereof)) and (ii) the customary charges from time to time of the Issuing Lender with respect to the issuance, amendment, transfer, administration, cancellation and conversion of, and drawings under, such Letters of Credit. (c) Administrative Agent's Fees. The Borrower hereby (i) absolutely accepts and assumes all of the duties, obligations and liabilities of the Sponsors in, to and under the Administrative Agent's Fee Letter to the same extent as if the Borrower had executed the Administrative Agent's Fee Letter (whereupon the Sponsors shall be automatically released from their duties, obligations and liabilities under the Administrative Agent's Fee Letter) and (ii) promises to pay to the Administrative Agent, for its own account, for the account of the Issuing Lender and for the account of Banc of America Securities LLC, as applicable, the fees referred to in the Administrative Agent's Fee Letter. 3.6 CAPITAL ADEQUACY. If any Lender has determined, after the date hereof, that the adoption or the becoming effective of, or any change in, or any change by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof in the interpretation or administration of, any applicable law, rule or regulation regarding capital adequacy, or compliance by such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy), then, upon notice from such Lender to the Borrower, the Borrower shall be obligated to pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. Each determination by any such Lender of amounts owing under this Section shall, absent manifest error, be conclusive and binding on the parties hereto. 3.7 LIMITATION ON EURODOLLAR LOANS. If on or prior to the first day of any Interest Period for any Eurodollar Loan: (a) the Administrative Agent determines (which determination shall be conclusive) that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period; or 53 (b) the Required Lenders determine (which determination shall be conclusive) and notify the Administrative Agent that the Eurodollar Rate will not adequately and fairly reflect the cost to the Lenders of funding Eurodollar Loans for such Interest Period; then the Administrative Agent shall give the Borrower and the Lenders prompt notice thereof, and so long as such condition remains in effect, the Lenders shall be under no obligation to make additional Eurodollar Loans, Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar Loans and the Borrower shall, on the last day(s) of the then current Interest Period(s) for the outstanding Eurodollar Loans, either prepay such Eurodollar Loans or Convert such Eurodollar Loans into Base Rate Loans in accordance with the terms of this Credit Agreement. 3.8 ILLEGALITY. Notwithstanding any other provision of this Credit Agreement, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to make, maintain, or fund Eurodollar Loans hereunder, then such Lender shall (i) promptly notify the Borrower thereof and such Lender's obligation to make or Continue Eurodollar Loans and to Convert Base Rate Loans into Eurodollar Loans shall be suspended until such time as such Lender may again make, maintain, and fund Eurodollar Loans (in which case the provisions of Section 3.10 shall be applicable) and (ii) use reasonable efforts to change the jurisdiction of its Applicable Lending Office or designate a different Applicable Lending Office so that it is once again lawful for such Lender make, maintain and fund Eurodollar Loans (in which case the provisions of Section 3.10 shall be applicable) if such change or redesignation, as the case may be, in the reasonable judgment of such Lender, is not otherwise disadvantageous to such Lender. 3.9 REQUIREMENTS OF LAW. If, after the date hereof, the adoption of any applicable law, rule, or regulation, or any change in any applicable law, rule, or regulation, or any change in the interpretation or administration thereof by any Governmental Authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank, or comparable agency: (i) shall subject such Lender (or its Applicable Lending Office) to any tax, duty, or other charge with respect to any Eurodollar Loans, its Notes, or its obligation to make Eurodollar Loans, or change the basis of taxation of any amounts payable to such Lender (or its Applicable Lending Office) under this Credit Agreement or its Notes in respect of any Eurodollar Loans (other than taxes imposed on the overall net income of such Lender by the jurisdiction in which such Lender has its principal office or such Applicable Lending Office); (ii) shall impose, modify, or deem applicable any reserve, special deposit, assessment, or similar requirement (other than the Eurodollar Reserve Percentage utilized in the determination of the Adjusted Eurodollar Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender (or its Applicable Lending Office), including the Commitment of such Lender hereunder; or 54 (iii) shall impose on such Lender (or its Applicable Lending Office) or the London interbank market any other condition affecting this Credit Agreement or its Notes or any of such extensions of credit or liabilities or commitments; and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making, Converting into, Continuing, or maintaining any Eurodollar Loans or to reduce any sum received or receivable by such Lender (or its Applicable Lending Office) under this Credit Agreement or its Notes with respect to any Eurodollar Loans, then the Borrower shall pay to such Lender on demand such amount or amounts as will compensate such Lender for such increased cost or reduction. If any Lender requests compensation by the Borrower under this Section 3.9, the Borrower may, by notice to such Lender (with a copy to the Administrative Agent), suspend the obligation of such Lender to make or Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar Loans, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of Section 3.10 shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested. Each Lender shall promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section 3.9 and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming compensation under this Section 3.9 shall furnish to the Borrower and the Administrative Agent a statement setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. 3.10 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to make any Eurodollar Loan or to Continue, or to Convert Base Rate Loans into, Eurodollar Loans shall be suspended pursuant to Section 3.7, 3.8 or 3.9 hereof, such Lender's Eurodollar Loans shall be automatically Converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for such Eurodollar Loans (or, in the case of a Conversion, on such earlier date as such Lender may specify to the Borrower with a copy to the Administrative Agent) and, unless and until such Lender gives notice as provided below that the circumstances specified in Section 3.7, 3.8 or 3.9 hereof that gave rise to such Conversion no longer exist: (a) to the extent that such Lender's Eurodollar Loans have been so Converted, all payments and prepayments of principal that would otherwise be applied to such Lender's Eurodollar Loans shall be applied instead to its Base Rate Loans; and (b) all Loans that would otherwise be made or Continued by such Lender as Eurodollar Loans shall be made or Continued instead as Base Rate Loans, and all Base Rate Loans of such Lender that would otherwise be Converted into Eurodollar Loans shall remain as Base Rate Loans. If such Lender gives notice to the Borrower (with a copy to the Administrative Agent) that the circumstances specified in Section 3.7, 3.8 or 3.9 hereof that gave rise to the Conversion of such Lender's Eurodollar Loans pursuant to this Section 3.10 no longer exist (which such Lender agrees 55 to do promptly upon such circumstances ceasing to exist) at a time when Eurodollar Loans made by other Lenders are outstanding, such Lender's Base Rate Loans shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurodollar Loans, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Eurodollar Loans and by such Lender are held pro rata (as to principal amounts, interest rate basis, and Interest Periods) in accordance with their respective Commitments. 3.11 TAXES. (a) Any and all payments by any Credit Party to or for the account of any Lender or the Administrative Agent hereunder or under any other Credit Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent, taxes imposed on its income, and branch profits taxes and franchise taxes imposed on it, other than any such taxes imposed on a Lender or the Administrative Agent solely as a result of the activities of the Borrower or any of the other Credit Parties (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as "Taxes"). If any Credit Party shall be required by law to deduct any Taxes from or in respect of any sum payable under this Credit Agreement or any other Credit Document to any Lender or the Administrative Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.11) such Lender or the Administrative Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Credit Party shall make such deductions, (iii) such Credit Party shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, and (iv) such Credit Party shall furnish to the Administrative Agent or the affected Lender (as the case may be), at its address referred to in Section 11.1, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Credit Agreement or any other Credit Document or from the execution or delivery of, or otherwise with respect to, this Credit Agreement or any other Credit Document (hereinafter referred to as "Other Taxes"). (c) The Borrower agrees to indemnify each Lender and the Administrative Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 3.11) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto. (d) Each Lender that is not a United States person under Section 7701(a)(30) of the Code (a "Foreign Lender"), on or prior to the date of its execution and delivery of this Credit Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from 56 time to time thereafter if requested in writing by the Borrower or the Administrative Agent (but only so long as such Lender remains lawfully able to do so), shall provide the Borrower and the Administrative Agent with (i) (A) Internal Revenue Service Form W-8 BEN, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States of America is a party which reduces to zero the rate of withholding tax on payments of interest, (B) Internal Revenue Service Form W-8ECI, or any successor form prescribed by the Internal Revenue Service, certifying that the income receivable pursuant to this Credit Agreement is effectively connected with the conduct of a trade or business in the United States of America, or (C) any other form or certificate required by any taxing authority (including any certificate required by Sections 871(h) and 881(c) of the Code), certifying that such Lender is entitled to an exemption from tax on payments pursuant to this Credit Agreement or any of the other Credit Documents, and (ii) Internal Revenue Service Form W-8BEN, W-8ECI or W-9, as appropriate, or any successor form prescribed by the Internal Revenue Service. Each Foreign Lender who does not deliver a Form W-8ECI represents that all services performed hereunder with respect to any fees received or to be received will have been, and will be, performed outside of the United States of America. (e) For any period with respect to which a Lender has failed to comply with the provisions of Section 3.11(d) (unless such failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 3.11(a) or 3.11(b) with respect to Taxes imposed by the United States of America; provided, however, that should a Lender, which is otherwise exempt from withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes. (f) If any Credit Party is required to pay additional amounts to or for the account of any Lender pursuant to this Section 3.11, then such Lender will agree to use reasonable efforts to change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Lender, is not otherwise disadvantageous to such Lender. (g) Without prejudice to the survival of any other agreement of the Credit Parties hereunder, the agreements and obligations of the Credit Parties contained in this Section 3.11 shall survive the repayment of the Loans, LOC Obligations and other obligations under the Credit Documents and the termination of the Commitments hereunder. 3.12 COMPENSATION. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of: (a) any Continuation, Conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); 57 (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, Continue or Convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; or (c) any assignment of a Eurodollar Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 3.17; including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing. For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.12, each Lender shall be deemed to have funded each Eurodollar Loan made by it at the Interbank Offered Rate for such Loan by a matching deposit or other borrowing in the applicable offshore Dollar interbank market for a comparable amount and for a comparable period, whether or not such Eurodollar Loan was in fact so funded. The covenants of the Borrower set forth in this Section 3.12 shall survive the repayment of the Loans, LOC Obligations and other obligations under the Credit Documents and the termination of the Commitments hereunder. 3.13 PRO RATA TREATMENT. Except to the extent otherwise provided herein: (a) Loans. Each payment or (subject to the terms of Section 3.3) prepayment of principal of any Loan or reimbursement obligations arising from drawings under Letters of Credit, each payment of interest on the Loans or reimbursement obligations arising from drawings under Letters of Credit, each payment of Revolving Commitment Unused Fees, each payment of Delayed-Draw Term Loan Commitment Unused Fees, each payment of the Standby Letter of Credit Fee, each payment of the Trade Letter of Credit Fee, each reduction of the Revolving Committed Amount and each conversion or extension of any Loan, shall be allocated pro rata among the Lenders in accordance with the respective principal amounts of their outstanding Loans of the applicable type and Participation Interests in Loans of the applicable type and Letters of Credit. (b) Advances. No Lender shall be responsible for the failure or delay by any other Lender in its obligation to make its ratable share of a borrowing (or, in the case of a Delayed-Draw Term Loan borrowing, a purchase of assignments from the Fronting Bank) hereunder; provided, however, that the failure of any Lender to fulfill its obligations hereunder shall not relieve any other Lender of its obligations hereunder. Unless the Administrative Agent shall have been notified by any Lender prior to the date of any requested borrowing that such Lender does not intend to make available to the Administrative Agent its ratable share of such borrowing (and/or, in the case of a Delayed-Draw Term Loan borrowing, a purchase of assignments from the Fronting Bank) to be made on such date, the Administrative Agent (and/or, in the case of a Delayed-Draw 58 Term Loan borrowing, the Fronting Bank) may assume that such Lender has made such amount available to the Administrative Agent on the date of such borrowing, and the Administrative Agent (and, in the case of a Delayed-Draw Term Loan borrowing, the Fronting Bank) in reliance upon such assumption, may (in its (or their, as applicable) sole discretion but without any obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent (or, in the case of a Delayed-Draw Term Loan borrowing, the Fronting Bank), the Administrative Agent (or, in the case of a Delayed-Draw Term Loan borrowing, the Fronting Bank) shall be able to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon demand therefor by the Administrative Agent (or, in the case of a Delayed-Draw Term Loan borrowing, the Fronting Bank), the Administrative Agent will promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent (or, in the case of a Delayed-Draw Term Loan borrowing, the Fronting Bank). The Administrative Agent (or, in the case of a Delayed-Draw Term Loan borrowing, the Fronting Bank) shall also be entitled to recover from the Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent (or the Fronting Bank, as applicable) to the Borrower to the date such corresponding amount is recovered by the Administrative Agent (or the Fronting Bank, as applicable) at a per annum rate equal to (i) from the Borrower at the applicable rate for the applicable borrowing pursuant to the Notice of Borrowing or the Delayed-Draw Term Loan Funding Notice and (ii) from a Lender at the Federal Funds Rate. 3.14 SHARING OF PAYMENTS. The Lenders agree among themselves that, in the event that any Lender shall obtain payment in respect of any Loan, LOC Obligations or any other obligation owing to such Lender under this Credit Agreement through the exercise of a right of setoff, banker's lien or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, in excess of its pro rata share of such payment as provided for in this Credit Agreement, such Lender shall promptly purchase from the other Lenders a participation interest in such Loans, LOC Obligations and other obligations in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Credit Agreement. The Lenders further agree among themselves that if payment to a Lender obtained by such Lender through the exercise of a right of setoff, banker's lien, counterclaim or other event as aforesaid shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a participation interest theretofore sold, return its share of that benefit (together with its share of any accrued interest payable with respect thereto) to each Lender whose payment shall have been rescinded or otherwise restored. The Borrower agrees that any Lender so purchasing such a participation interest may, to the fullest extent permitted by law, exercise all rights of payment, including setoff, banker's lien or counterclaim, with respect to such participation interest as fully as if such Lender were a holder of such Loan, LOC Obligations or other obligation in the amount of such participation interest. Except as otherwise expressly provided in this Credit Agreement, if any Lender shall fail to remit to the Administrative Agent or any other Lender an 59 amount payable by such Lender to the Administrative Agent or such other Lender pursuant to this Credit Agreement on the date when such amount is due, such payments shall be made together with interest thereon for each date from the date such amount is due until the date such amount is paid to the Administrative Agent or such other Lender at a rate per annum equal to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 3.14 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders under this Section 3.14 to share in the benefits of any recovery on such secured claim. 3.15 PAYMENTS, COMPUTATIONS, ETC. (a) Generally. Except as otherwise specifically provided herein, all payments hereunder shall be made to the Administrative Agent in Dollars in immediately available funds, without condition or deduction for any counterclaim, defense, recoupment or setoff of any kind, at the Administrative Agent's office specified in Schedule 2.1(a) not later than 2:00 P.M. (Charlotte, North Carolina time) on the date when due. Payments received after such time shall be deemed to have been received on the next succeeding Business Day. The Administrative Agent may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Borrower or any other Credit Party maintained with the Administrative Agent (with notice to the Borrower or such other Credit Party). The Borrower shall, at the time it makes any payment under this Credit Agreement, specify to the Administrative Agent the Loans, LOC Obligations, Fees, interest or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails so to specify, or if such application would be inconsistent with the terms hereof, the Administrative Agent shall distribute such payment to the Lenders in such manner as the Administrative Agent may determine to be appropriate in respect of obligations owing by the Borrower hereunder, subject to the terms of Section 3.13(a) and Section 3.15(b)). The Administrative Agent will distribute such payments to such Lenders, if any such payment is received prior to 2:00 P.M. (Charlotte, North Carolina time) on a Business Day in like funds as received prior to the end of such Business Day and otherwise the Administrative Agent will distribute such payment to such Lenders on the next succeeding Business Day. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest and Fees for the period of such extension), except that in the case of Eurodollar Loans, if the extension would cause the payment to be made in the next following calendar month, then such payment shall instead be made on the next preceding Business Day. Except as expressly provided otherwise herein, all computations of interest and fees shall be made on the basis of actual number of days elapsed over a year of 360 days, except with respect to computation of interest on Base Rate Loans which shall be calculated based on a year of 365 or 366 days, as appropriate. Interest shall accrue from and include the date of borrowing, but exclude the date of payment. (b) Allocation of Payments After Acceleration. Notwithstanding any other provisions of this Credit Agreement to the contrary, after acceleration of the Credit Party Obligations pursuant to Section 9.2, all amounts collected or received by the Administrative Agent or any Lender on account of the Credit Party Obligations or any other amounts 60 outstanding under any of the Credit Documents or in respect of the Collateral shall be paid over or delivered as follows: FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable attorneys' fees) of the Administrative Agent in connection with enforcing the rights of the Lenders under the Credit Documents and any protective advances made by the Administrative Agent with respect to the Collateral under or pursuant to the terms of the Collateral Documents; SECOND, to payment of any fees owed to the Administrative Agent; THIRD, to the payment of all of the Credit Party Obligations consisting of accrued fees and interest (including, without limitation, accrued fees and interest arising under any Hedging Agreement between the Borrower and any Lender, or any Affiliate of a Lender); FOURTH, to the payment of the outstanding principal amount of the Credit Party Obligations (including, without limitation, the outstanding principal amount arising under any Hedging Agreement between the Borrower and any Lender, or any Affiliate of a Lender and the payment or cash collateralization of the outstanding LOC Obligations); FIFTH, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation, reasonable attorneys' fees) of each of the Lenders in connection with enforcing its rights under the Credit Documents or otherwise with respect to the Credit Party Obligations owing to such Lender; SIXTH, to all other Credit Party Obligations and other obligations which shall have become due and payable under the Credit Documents or otherwise and not repaid pursuant to clauses "FIRST" through "FIFTH" above; and SEVENTH, to the payment of the surplus, if any, to whomever may be lawfully entitled to receive such surplus. In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; (ii) each of the Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans and LOC Obligations held by such Lender bears to the aggregate then outstanding Loans and LOC Obligations) of amounts available to be applied pursuant to clauses "THIRD", "FOURTH", "FIFTH" and "SIXTH" above; and (iii) to the extent that any amounts available for distribution pursuant to clause "FIFTH" above are attributable to the issued but undrawn amount of outstanding Letters of Credit, such amounts shall be held by the Administrative Agent in a cash collateral account and applied (A) first, to reimburse the Issuing Lender from time to time for any drawings under such Letters of Credit and (B) then, following the expiration of all Letters of Credit, to all other obligations of the types described in clauses "FIFTH" and "SIXTH" above in the manner provided in this Section 3.15(b). 61 3.16 EVIDENCE OF DEBT. (a) Each Lender shall maintain an account or accounts evidencing each Loan made by such Lender to the Borrower from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Credit Agreement. Each Lender will make reasonable efforts to maintain the accuracy of its account or accounts and to promptly update its account or accounts from time to time, as necessary. (b) The Administrative Agent shall maintain the Register pursuant to Section 11.3(c), and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount, type and Interest Period of each such Loan hereunder, (ii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from or for the account of any Credit Party and each Lender's share thereof. The Administrative Agent will make reasonable efforts to maintain the accuracy of the subaccounts referred to in the preceding sentence and to promptly update such subaccounts from time to time, as necessary. (c) The entries made in the accounts, Register and subaccounts maintained pursuant to clause (b) of this Section 3.16 (and, if consistent with the entries of the Administrative Agent, clause (a)) shall be prima facie evidence of the existence and amounts of the obligations of the Credit Parties therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain any such account, such Register or such subaccount, as applicable, or any error therein, shall not in any manner affect the obligation of the Credit Parties to repay the Credit Party Obligations owing to such Lender. 3.17 REPLACEMENT OF AFFECTED LENDERS. If (i) any Lender having a Revolving Commitment or a Delayed-Draw Term Loan Commitment becomes a Defaulting Lender or otherwise defaults in its Revolving Commitment or Delayed-Draw Term Loan Commitment, as applicable, (ii) any Credit Party is required to make any payments to any Lender under Section 3.6, Section 3.9 or Section 3.11 in excess of the proportionate amount (based on the respective Commitments and/or Loans of the Lenders) of corresponding payments required to be made to the other Lenders or (iii) any Lender is unable or unwilling to make, maintain, and fund Eurodollar Loans as contemplated by Section 3.8, the Borrower shall have the right, if no Event of Default then exists, to replace such Lender (the "Replaced Lender") with one or more other Eligible Assignee or Eligible Assignees, none of whom shall constitute a Defaulting Lender at the time of such replacement (collectively, the "Replacement Lender"), provided that (a) at the time of any replacement pursuant to this Section 3.17, the Replaced Lender and Replacement Lender shall enter into an Assignment and Acceptance pursuant to which the Replacement Lender shall acquire all or a portion, as the case may be, of the Commitments and outstanding Loans of, and participation in Letters of Credit by, the Replaced Lender and (b) all obligations of the Borrower owing to the Replaced Lender relating to the Loans so replaced (including, without limitation, such increased costs and excluding those specifically described in clause (a) above in respect of which the assignment purchase price has been, or is concurrently being paid) shall be paid in full to such Replaced Lender concurrently with such replacement. Upon the execution of the appropriate Assignment 62 and Acceptance, the payment of amounts referred to in clauses (a) and (b) above and, if so requested by the Replacement Lender, delivery to the Replacement Lender of the appropriate Note or Notes executed by the Borrower, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder with respect to such replaced Loans, except with respect to indemnification provisions under this Credit Agreement, which shall survive as to such Replaced Lender. Notwithstanding anything to the contrary contained above, (1) the Lender that acts as the Issuing Lender may not be replaced hereunder at any time that it has Letters of Credit outstanding hereunder unless arrangements reasonably satisfactory to the Issuing Lender (including the furnishing of a back-up standby letter of credit in form and substance, and issued by an issuer reasonably satisfactory to such Issuing Lender or the depositing of cash collateral into a cash collateral account maintained with the Administrative Agent in amounts and pursuant to arrangements reasonably satisfactory to such Issuing Lender) have been made with respect to such outstanding Letters of Credit and (2) the Lender that acts as the Administrative Agent may not be replaced hereunder except in accordance with the terms of Section 10.9. The Replaced Lender shall be required to deliver for cancellation its applicable Notes to be canceled on the date of replacement, or if any such Note is lost or unavailable, such other assurances or indemnification therefor as the Borrower may reasonably request. SECTION 4 GUARANTY 4.1 THE GUARANTY. Each of the Guarantors hereby jointly and severally guarantees to each Lender, each Affiliate of a Lender that enters into a Hedging Agreement, and the Administrative Agent as hereinafter provided, as primary obligor and not as surety, the prompt payment of the Credit Party Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof. The Guarantors hereby further agree that if any of the Credit Party Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise), the Guarantors will, jointly and severally, promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Credit Party Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) in accordance with the terms of such extension or renewal. Notwithstanding any provision to the contrary contained herein or in any other of the Credit Documents or Hedging Agreements, the obligations of each Guarantor under this Credit Agreement and the other Credit Documents shall be limited to an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under Section 548 of the Bankruptcy Code or any comparable provisions of any applicable state law. 63 4.2 OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantors under Section 4.1 are joint and several, absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Credit Documents or Hedging Agreements, or any other agreement or instrument referred to therein, or any substitution, release, subordination, impairment or exchange of any other guarantee of or security for any of the Credit Party Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 4.2 that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances. Each Guarantor agrees that such Guarantor shall have no right of subrogation, indemnity, reimbursement or contribution (including, without limitation, any right of contribution under Section 4.6 hereof) against the Borrower or any other Guarantor for amounts paid under this Section 4 until such time as the Credit Party Obligations have been Fully Satisfied. Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall not alter or impair the liability of any Guarantor hereunder which shall remain absolute and unconditional as described above: (a) at any time or from time to time, without notice to any Guarantor, the time for any performance of or compliance with any of the Credit Party Obligations shall be extended, or such performance or compliance shall be waived; (b) any of the acts mentioned in any of the provisions of any of the Credit Documents, any Hedging Agreement between any Consolidated Party and any Lender, or any Affiliate of a Lender, or any other agreement or instrument referred to in the Credit Documents or such Hedging Agreements shall be done or omitted; (c) the maturity of any of the Credit Party Obligations shall be accelerated, or any of the Credit Party Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Credit Documents, any Hedging Agreement between any Consolidated Party and any Lender, or any Affiliate of a Lender, or any other agreement or instrument referred to in the Credit Documents or such Hedging Agreements shall be waived or any other guarantee of any of the Credit Party Obligations or any security therefor shall be released, subordinated, impaired or exchanged in whole or in part or otherwise dealt with; (d) any Lien granted to, or in favor of, the Administrative Agent or any Lender or Lenders as security for any of the Credit Party Obligations shall fail to attach or be perfected; or (e) any of the Credit Party Obligations shall be determined to be void or voidable (including, without limitation, for the benefit of any creditor of any Guarantor) or shall be subordinated to the claims of any Person (including, without limitation, any creditor of any Guarantor). With respect to its obligations hereunder, each Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against any 64 Person under any of the Credit Documents, any Hedging Agreement between any Consolidated Party and any Lender, or any Affiliate of a Lender, or any other agreement or instrument referred to in the Credit Documents or such Hedging Agreements, or against any other Person under any other guarantee of, or security for, any of the Credit Party Obligations. 4.3 REINSTATEMENT. The obligations of the Guarantors under this Section 4 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Credit Party Obligations is rescinded or must be otherwise restored by any holder of any of the Credit Party Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify the Administrative Agent and each Lender on demand for all reasonable costs and expenses (including, without limitation, fees and expenses of counsel) incurred by the Administrative Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 4.4 CERTAIN ADDITIONAL WAIVERS. Without limiting the generality of the provisions of this Section 4, each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. Sections 26-7 through 26-9, inclusive, to the extent applicable. Each Guarantor further agrees that such Guarantor shall have no right of recourse to security for the Credit Party Obligations, except through the exercise of rights of subrogation pursuant to Section 4.2 and through the exercise of rights of contribution pursuant to Section 4.6. 4.5 REMEDIES. The Guarantors agree that, to the fullest extent permitted by law, as between the Guarantors, on the one hand, and the Administrative Agent and the Lenders, on the other hand, the Credit Party Obligations may be declared to be forthwith due and payable as provided in Section 9.2 (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 9.2) for purposes of Section 4.1 notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing the Credit Party Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or the Credit Party Obligations being deemed to have become automatically due and payable), the Credit Party Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Guarantors for purposes of Section 4.1. The Guarantors acknowledge and agree that their obligations hereunder are secured in accordance with the terms of the Collateral Documents and that the Lenders may exercise their remedies thereunder in accordance with the terms thereof. 4.6 RIGHTS OF CONTRIBUTION. The Guarantors hereby agree as among themselves that, if any Guarantor shall make an Excess Payment (as defined below), such Guarantor shall have a right of contribution from each other Guarantor in an amount equal to such other Guarantor's Contribution Share (as defined below) of such Excess Payment. The payment obligations of any Guarantor under this Section 4.6 shall be 65 subordinate and subject in right of payment to the Credit Party Obligations until such time as the Credit Party Obligations have been Fully Satisfied, and none of the Guarantors shall exercise any right or remedy under this Section 4.6 against any other Guarantor until such Credit Party Obligations have been Fully Satisfied. For purposes of this Section 4.6, (a) "Excess Payment" shall mean the amount paid by any Guarantor in excess of its Pro Rata Share of any Guaranteed Obligations; (b) "Pro Rata Share" shall mean, for any Guarantor in respect of any payment of Credit Party Obligations, the ratio (expressed as a percentage) as of the date of such payment of Guaranteed Obligations of (i) the amount by which the aggregate present fair salable value of all of its assets and properties exceeds the amount of all debts and liabilities of such Guarantor (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder) to (ii) the amount by which the aggregate present fair salable value of all assets and other properties of all of the Credit Parties exceeds the amount of all of the debts and liabilities (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of the Credit Parties hereunder) of the Credit Parties; provided, however, that, for purposes of calculating the Pro Rata Shares of the Guarantors in respect of any payment of Credit Party Obligations, any Guarantor that became a Guarantor subsequent to the date of any such payment shall be deemed to have been a Guarantor on the date of such payment and the financial information for such Guarantor as of the date such Guarantor became a Guarantor shall be utilized for such Guarantor in connection with such payment; and (c) "Contribution Share" shall mean, for any Guarantor in respect of any Excess Payment made by any other Guarantor, the ratio (expressed as a percentage) as of the date of such Excess Payment of (i) the amount by which the aggregate present fair salable value of all of its assets and properties exceeds the amount of all debts and liabilities of such Guarantor (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder) to (ii) the amount by which the aggregate present fair salable value of all assets and other properties of the Credit Parties other than the maker of such Excess Payment exceeds the amount of all of the debts and liabilities (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of the Credit Parties) of the Credit Parties other than the maker of such Excess Payment; provided, however, that, for purposes of calculating the Contribution Shares of the Guarantors in respect of any Excess Payment, any Guarantor that became a Guarantor subsequent to the date of any such Excess Payment shall be deemed to have been a Guarantor on the date of such Excess Payment and the financial information for such Guarantor as of the date such Guarantor became a Guarantor shall be utilized for such Guarantor in connection with such Excess Payment. This Section 4.6 shall not be deemed to affect any right of subrogation, indemnity, reimbursement or contribution that any Guarantor may have under applicable law against the Borrower in respect of any payment of Guaranteed Obligations which are (together with any rights of contribution under this Section 4.6) governed by and subject to the second (2nd) sentence of section 4.2 hereof. Notwithstanding the foregoing, all rights of contribution against any Guarantor shall terminate from and after such time, if ever, that such Guarantor shall be relieved of its obligations pursuant to Section 8.5. 4.7 GUARANTEE OF PAYMENT; CONTINUING GUARANTEE; SUBORDINATION. The guarantee in this Section 4 is a guaranty of payment and not of collection, is a continuing guarantee, and shall apply to all Credit Party Obligations whenever arising. Any Indebtedness of the Borrower or any guarantor (including any other Guarantor) of the Credit Party Obligations now or hereafter held by any Guarantor is subordinated in right of payment to the Credit Party Obligations or the Guaranteed Obligations (as the case may be), and any 66 payment on any such Indebtedness of the Borrower or any guarantor (including any other Guarantor) of the Credit Party Obligations held by a Guarantor collected or received by such Guarantor during the continuance of a Default or an Event of Default, and any amount paid to a Guarantor on account of any subrogation, indemnity, reimbursement, indemnification or contribution rights referred to in Section 4.2 or Section 4.6 hereof when all Credit Party Obligations have not been Fully Satisfied, shall be held in trust for the Administrative Agent on behalf of the Lenders and shall forthwith be paid over to Administrative Agent for the benefit of the Lenders to be credited and applied against the Credit Party Obligations. SECTION 5 CONDITIONS 5.1 CLOSING CONDITIONS. The obligation of the Lenders to enter into this Credit Agreement and to make the initial Loans or the Issuing Lender to issue the initial Letter of Credit, whichever shall occur first, shall be subject to satisfaction of the following conditions: (a) Executed Credit Documents. Receipt by the Administrative Agent of duly executed copies of: (i) the InSight Acquisition Note, (ii) the Borrower Assignment, Assumption and Release, (iii) this Credit Agreement, (iv) the Notes, (v) the Pledge Agreement, (vi) the Security Agreement and (vii) the Administrative Agent's Fee Letter. (b) Corporate Documents. Receipt by the Administrative Agent of the following: (i) Charter Documents. Copies of the articles or certificates of incorporation or other charter documents of each Credit Party certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation or organization and certified by a secretary or assistant secretary of such Credit Party to be true and correct as of the Closing Date. (ii) Bylaws. A copy of the bylaws of each Credit Party certified by a secretary or assistant secretary of such Credit Party to be true and correct as of the Closing Date. (iii) Resolutions. Copies of resolutions of the Board of Directors of each Credit Party approving and adopting the Credit Documents to which it is a party, the transactions contemplated therein and authorizing execution and delivery thereof, certified by a secretary or assistant secretary of such Credit Party to be true and correct and in force and effect as of the Closing Date. (iv) Good Standing. Copies of (A) certificates of good standing, existence or its equivalent with respect to each Credit Party certified as of a recent date by the 67 appropriate Governmental Authorities of the state or other jurisdiction of incorporation or organization and each other jurisdiction in which the failure to so qualify and be in good standing could reasonably be expected to have a Material Adverse Effect and (B) to the extent available, a certificate indicating payment of all corporate or comparable franchise taxes certified as of a recent date by the appropriate governmental taxing authorities. (v) Incumbency. An incumbency certificate of each Credit Party certified by a secretary or assistant secretary to be true and correct as of the Closing Date. (c) Opinions of Counsel. The Administrative Agent shall have received, in each case dated as of the Closing Date, addressed to the Administrative Agent and the Lenders and in form and substance reasonably satisfactory to the Administrative Agent: (i) a legal opinion of Kaye Scholer LLP, counsel for the Credit Parties; and (ii) a legal opinion of special local counsel for each Credit Party not organized in the State of Delaware or the State of New York. (d) Personal Property Collateral. The Administrative Agent shall have received: (i) searches of Uniform Commercial Code filings in the jurisdiction of the chief executive office of each Credit Party and each jurisdiction where any Collateral is located or where a filing would need to be made in order to perfect the Administrative Agent's security interest in the Collateral, copies of the financing statements on file in such jurisdictions and evidence that no Liens exist other than Permitted Liens; (ii) UCC financing statements for each appropriate jurisdiction as is necessary, in the Administrative Agent's sole discretion, to perfect the Administrative Agent's security interest in the Collateral; (iii) searches of ownership of, and Liens on, intellectual property of each Credit Party in the appropriate governmental offices; (iv) all certificates evidencing any certificated Capital Stock pledged to the Administrative Agent pursuant to the Pledge Agreement, together with duly executed in blank, undated stock powers attached thereto (unless, with respect to the pledged Capital Stock of any Foreign Subsidiary, such stock powers are deemed unnecessary by the Administrative Agent in its reasonable discretion under the law of the jurisdiction of incorporation of such Person); (v) duly executed notices of grant of security interest in the form required by the Security Agreement as are necessary, in the Administrative Agent's sole discretion, to perfect the Administrative Agent's security interest in the Collateral; 68 (vi) all instruments and chattel paper having a value in excess of $25,000 in the possession of any of the Credit Parties, together with allonges or assignments as may be necessary or appropriate to perfect the Administrative Agent's security interest in the Collateral; and (vii) duly executed consents as are necessary, in the Administrative Agent's reasonable discretion, to perfect the Administrative Agent's security interest in the Collateral. (e) Availability. Immediately after giving effect to the Transaction on the Closing Date, the aggregate outstanding principal amount of the Revolving Credit Loans and LOC Obligations shall not exceed $5 million. (f) Evidence of Insurance. Receipt by the Administrative Agent of copies of insurance policies or certificates of insurance of the Consolidated Parties evidencing liability and casualty insurance meeting the requirements set forth in the Credit Documents, including, but not limited to, naming the Administrative Agent as additional insured (in the case of liability insurance) or loss payee (in the case of hazard insurance) on behalf of the Lenders. (g) Government Consent. Receipt by the Administrative Agent of evidence that all governmental, shareholder and material third party consents (including Hart-Scott-Rodino clearance) and approvals necessary in connection with the Transaction and expiration of all applicable waiting periods without any action being taken by any authority that could restrain, prevent or impose any material adverse conditions on the Transaction or that could seek or threaten any of the foregoing, and no law or regulation shall be applicable which in the reasonable judgment of the Administrative Agent could have such effect. (h) Consummation of Transaction. The Transaction shall have been consummated in accordance with the terms of the Merger Agreement and in compliance with applicable law and regulatory approvals, all material conditions precedent to the obligations of the buyer under the Merger Agreement shall have been satisfied, and the Administrative Agent shall be satisfied that (i) the Parent shall have received approximately $100 million and that immediately thereafter the Parent shall have contributed such amount, net of reasonable expenses payable to third parties, to the Borrower in exchange for common Capital Stock of the Borrower, (ii) the Borrower shall have received gross proceeds of $200 million from the issuance by the Borrower of the Subordinated Notes, (iii) the tender offer to repurchase the Acquired Company's outstanding 9-5/8% senior subordinated notes due 2008 shall have been consummated in accordance with the terms of that certain Offer to Purchase and Consent Solicitation Statement dated August 15, 2001 and the documents related thereto and (iv) after giving effect to the Transaction, including the application on the Closing Date of the proceeds of the related financings and equity contributions, (A) the contribution described in clause (i) above shall constitute at least 22% of the total capitalization of the Borrower, (B) the Consolidated Parties shall have no Indebtedness except for Indebtedness permitted under Section 8.1, and (C) the aggregate outstanding principal amount of all Funded Indebtedness of the Consolidated Parties (other than Indebtedness arising under this 69 Credit Agreement and the Subordinated Notes) shall not exceed $12 million. The Merger Agreement shall not have been altered, amended or otherwise changed or supplemented or any condition therein waived in any such case in a manner adverse to the Lenders without the prior written consent of the Administrative Agent. The Administrative Agent shall have received (i) a copy, certified by an Executive Officer of the Borrower as true and complete, of the Merger Agreement as originally executed and delivered, together with all exhibits and schedules and (ii) a copy, certified by an Executive Officer of the Borrower as true and complete, of the Subordinated Note Purchase Agreement as originally executed and delivered, together with all exhibits and schedules thereto. (i) Financial Information. The Administrative Agent shall have received the financial information described in Sections 6.1(a), (b) and (c). (j) Officer's Certificates. The Administrative Agent shall have received a certificate or certificates executed by an Executive Officer of the Borrower as of the Closing Date, in form and substance satisfactory to the Administrative Agent, stating that (A) each Credit Party is in compliance with all existing financial obligations, (B) all governmental, shareholder and third party consents and approvals, if any, with respect to the Credit Documents and the transactions contemplated thereby have been obtained, (C) no action, suit, investigation or proceeding is pending or threatened in any court or before any arbitrator or governmental instrumentality that purports to affect any Credit Party or any transaction contemplated by the Credit Documents, if such action, suit, investigation or proceeding could reasonably be expected to have a Material Adverse Effect, (D) the transactions contemplated by the Merger Agreement have been consummated in accordance with the terms thereof and (E) immediately after giving effect to the Transaction, (1) no Default or Event of Default exists, (2) all representations and warranties contained herein and in the other Credit Documents are true and correct in all material respects and (3) on the basis of income statement items and capital expenditures for the 12-month period ending on the last day of the most recently ended calendar month at least fifteen (15) days prior to the Closing Date and balance sheet items as of the Closing Date after giving effect to the Transaction, the Credit Parties would be in pro forma compliance with each of the financial covenants set forth in Section 7.9 as of the first date provided for the measurement of each of such financial covenants in accordance with the terms thereof. (k) Solvency. The Administrative Agent shall have received (i) a certificate executed by an Executive Officer of the Borrower as of the Closing Date, in form and substance reasonably satisfactory to the Administrative Agent, regarding the Solvency of the Credit Parties on a consolidated basis and (ii) an opinion from Murray, Devine & Co. as to the Solvency of the Credit Parties on a consolidated basis after giving effect to the Transaction. (l) Fees and Expenses. Payment by the Credit Parties to the Lenders and the Administrative Agent of all fees and expenses relating to the Credit Facilities which are due and payable on the Closing Date, including, without limitation, payment to the Administrative Agent of the fees set forth in the Administrative Agent's Fee Letter. The parties hereto acknowledge that (i) the initial Loans made on the Closing Date will be evidenced by the InSight Acquisition Note, (ii) the proceeds of such initial Loans will be made 70 available to InSight Acquisition and used by InSight Acquisition to pay a portion of the cash consideration required to consummate the acquisition by InSight Acquisition of the Acquired Company and (iii) upon consummation of the acquisition by InSight Acquisition of the Acquired Company, InSight Acquisition will cause the Acquired Company to (A) assume the obligations of InSight Acquisition as Borrower in respect of the Credit Facilities pursuant to the Borrower Assignment, Assumption and Release and (B) to execute and deliver an appropriate Revolving Note, Delayed-Draw Term Note and Tranche B Term Note to each applicable Lender, whereupon InSight Acquisition will be released by the Administrative Agent on behalf of the Lenders from its obligations as Borrower pursuant to the Borrower Assignment, Assumption and Release and the Administrative Agent will mark the InSight Acquisition Note cancelled and promptly return it to the Borrower. For purposes of satisfaction of the conditions precedent set forth in this Section 5.1 relating to the Acquired Company, InSight Acquisition hereby agrees, upon consummation of the acquisition by InSight Acquisition of the Acquired Company, InSight Acquisition will cause the Acquired Company to deliver all documents and other matters required pursuant to this Section 5.1, and each of the Administrative Agent and Lenders agrees that as a result of such undertaking and the due performance thereof by InSight Acquisition the conditions precedent set forth in this Section 5.1 relating to the Acquired Company shall be deemed to have been satisfied. 5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT. The obligations of each Lender to make, convert or extend any Loan and of the Issuing Lender to issue or extend any Letter of Credit (including the initial Loans and the initial Letter of Credit) are subject to satisfaction of the following conditions in addition to satisfaction on the Closing Date of the conditions set forth in Section 5.1: (a) The Borrower shall have delivered (i) in the case of any Loan (or any portion thereof), an appropriate Notice of Borrowing (or in the case of a request for a Delayed-Draw Term Loan, the Administrative Agent shall have delivered a Delayed-Draw Term Loan Funding Notice) or Notice of Continuation/Conversion or (ii) in the case of any Letter of Credit, the Issuing Lender shall have received an appropriate request for issuance in accordance with the provisions of Section 2.2(b); (b) The representations and warranties set forth in Section 6 shall, subject to the limitations set forth therein, be true and correct in all material respects as of such date (except for those which expressly relate to an earlier date which shall be true and correct as of such earlier date); (c) There shall not have been commenced against any Consolidated Party an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or for the winding up or liquidation of its affairs, and such involuntary case or other case, proceeding or other action shall remain undismissed; (d) No Default or Event of Default shall exist and be continuing either prior to or after giving effect thereto; and 71 (e) Immediately after giving effect to the making of such Loan, in the case of a request for a Revolving Loan, (and the application of the proceeds thereof) or to the issuance of such Letter of Credit, as the case may be, (i) the sum of the aggregate outstanding principal amount of Revolving Loans plus LOC Obligations shall not exceed the Revolving Committed Amount and (ii) the LOC Obligations shall not exceed the LOC Committed Amount. The delivery of each Notice of Borrowing and each request for a Letter of Credit pursuant to Section 2.2(b) shall constitute a representation and warranty by the Credit Parties of the correctness of the matters specified in subsections (b), (c), (d) and (e) above. SECTION 6 REPRESENTATIONS AND WARRANTIES The Credit Parties hereby represent to the Administrative Agent and each Lender that: 6.1 FINANCIAL CONDITION. (a) The audited consolidated and consolidating balance sheets and income statements of the Consolidated Parties for the fiscal year ended June 30, 2001 (including the notes thereto) (i) have been audited by Arthur Andersen LLP, (ii) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby and (iii) present fairly (on the basis disclosed in the footnotes to such financial statements) the consolidated financial condition, results of operations and cash flows of the Consolidated Parties as of such date and for such periods. The unaudited interim balance sheets of the Consolidated Parties as at the end of, and the related unaudited interim statements of earnings and of cash flows for, each fiscal month period ending after June 30, 2001 but at least 30 days prior to the Closing Date (i) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby and (ii) present fairly (on the basis disclosed in the footnotes to such financial statements) the consolidated and consolidating financial condition, results of operations and cash flows of the Consolidated Parties as of such date and for such periods. During the period from June 30, 2001 to and including the Closing Date, there has been no sale, transfer or other disposition by any Consolidated Party of any material part of the business or property of the Consolidated Parties, taken as a whole, and no purchase or other acquisition by any of them of any business or property (including any Capital Stock of any other Person) material in relation to the consolidated financial condition of the Consolidated Parties, taken as a whole, in each case, which is not reflected in the foregoing financial statements or in the notes thereto or has not otherwise been disclosed in writing to the Lenders on or prior to the Closing Date. As of the Closing Date, the Borrower and its Subsidiaries have no material liabilities (contingent or otherwise) that, in conformity with GAAP should be, but are not reflected in the foregoing financial statements or in the notes thereto. (b) The pro forma consolidated balance sheet, income statement and statement of cash flows of the Consolidated Parties as of the Closing Date after giving effect to the Transaction and reflecting estimated purchase accounting adjustments is based upon 72 reasonable assumptions made known to the Lenders and upon information not known to be incorrect or misleading in any material respect. (c) The annual projections (including projected balance sheets, income statements and cash flow statements) for each fiscal year ending after the Closing Date and through the Maturity Date were prepared in good faith on the basis of the assumptions stated therein, which assumptions are fair in light of then existing conditions (it being understood that projections are subject to uncertainties and contingencies and that no assurance can be given that any projection will be realized). (d) The financial statements delivered pursuant to Section 7.1(a) and (b) have been prepared in accordance with GAAP (except as may otherwise be permitted under Section 7.1(a) and (b)) and present fairly (on the basis disclosed in the footnotes to such financial statements) the consolidated and consolidating financial condition, results of operations and cash flows of the Consolidated Parties as of such date and for such periods. 6.2 NO MATERIAL CHANGE. Since June 30, 2001, there has been no development or event relating to or affecting a Consolidated Party which has had or could reasonably be expected to have a Material Adverse Effect. 6.3 ORGANIZATION AND GOOD STANDING. Each of the Consolidated Parties (a) is duly organized, validly existing and is in good standing under the laws of the jurisdiction of its incorporation or organization, (b) has the corporate or other necessary power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged and (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, other than in such jurisdictions where the failure to be so qualified and in good standing would not have a Material Adverse Effect. 6.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each of the Credit Parties has the corporate or other necessary power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party, and in the case of the Borrower, to obtain extensions of credit hereunder, and has taken all necessary corporate or other necessary action to authorize the borrowings and other extensions of credit on the terms and conditions of this Credit Agreement and to authorize the execution, delivery and performance of the Credit Documents to which it is a party. No consent or authorization of, filing with, notice to or other similar act by or in respect of, any Governmental Authority or any other Person is required to be obtained or made by or on behalf of any Credit Party in connection with the borrowings or other extensions of credit hereunder, with the execution, delivery, performance, validity or enforceability of the Credit Documents to which such Credit Party is a party or with the consummation of the Transaction, except for (i) consents, authorizations, notices and filings which have been obtained or made and (ii) filings to perfect the Liens created by the Collateral Documents. This Credit Agreement has been, and each other Credit Document to which any Credit Party is a party will be, 73 duly executed and delivered on behalf of the Credit Parties. This Credit Agreement constitutes, and each other Credit Document to which any Credit Party is a party when executed and delivered will constitute, a legal, valid and binding obligation of such Credit Party enforceable against such party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 6.5 NO CONFLICTS. Neither the execution and delivery of the Credit Documents, nor the consummation of the transactions contemplated therein, nor performance of and compliance with the terms and provisions thereof by such Credit Party will (a) violate or conflict with any provision of its articles or certificate of incorporation or bylaws or other organizational or governing documents of such Person, (b) violate, contravene or conflict with any Requirement of Law or any other law, regulation (including, without limitation, Regulation U or Regulation X), order, writ, judgment, injunction, decree or permit applicable to it, if the effect thereof could reasonably be expected to have a Material Adverse Effect, (c) violate, contravene or conflict with contractual provisions of, or cause an event of default under, any indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which it is a party or by which it may be bound, if the effect thereof could reasonably be expected to have a Material Adverse Effect, or (d) result in or require the creation of any Lien (other than those contemplated in or created in connection with the Credit Documents) upon or with respect to its properties. 6.6 NO DEFAULT. No Consolidated Party is in default in any respect under any contract, lease, loan agreement, indenture, mortgage, security agreement or other agreement or obligation to which it is a party or by which any of its properties is bound which default could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred or exists except as previously disclosed in writing to the Lenders. 6.7 OWNERSHIP. Each Consolidated Party is the owner of, and has good and marketable title to, all of its respective assets and none of such assets is subject to any Lien other than Permitted Liens. 6.8 INDEBTEDNESS; LIENS. (a) Except as otherwise permitted under Section 8.1, the Consolidated Parties have no Indebtedness. (b) Except as otherwise permitted under Section 8.2, there are no Liens on the Property of any the Consolidated Parties. 74 6.9 LITIGATION. Except as disclosed in Schedule 6.9, there does not exist (i) any order, decree, judgment, ruling or injunction which restrains the consummation of the acquisition of the Acquired Company in the manner contemplated by the Merger Agreement or (ii) any pending or threatened action, suit or legal, equitable, arbitration or administrative proceeding against any Consolidated Party which could reasonably be expected to have a Material Adverse Effect. 6.10 TAXES. Each Consolidated Party has filed, or caused to be filed, all material tax returns (Federal, state, local and foreign) required to be filed and paid (a) all amounts of taxes shown thereon to be due (including interest and penalties) and (b) all other material taxes, fees, assessments and other governmental charges (including mortgage recording taxes, documentary stamp taxes and intangibles taxes) owing by it, except for such taxes (i) which are not yet delinquent or (ii) that are being contested in good faith and by proper proceedings in a manner which stays enforcement thereof, and against which adequate reserves are being maintained in accordance with GAAP. No Credit Party is aware as of the Closing Date of any proposed tax assessments against it or any other Consolidated Party. 6.11 COMPLIANCE WITH LAW. Each Consolidated Party is in compliance with all Requirements of Law and all other laws, rules, regulations, orders and decrees (including without limitation Environmental Laws) applicable to it, or to its properties, unless such failure to comply could not reasonably be expected to have a Material Adverse Effect. 6.12 ERISA. Except as disclosed and described in Schedule 6.12 attached hereto: (a) During the five-year period prior to the date on which this representation is made or deemed made: (i) no ERISA Event has occurred which could have a Material Adverse Effect, and, to the best knowledge of the Executive Officers of the Credit Parties, no event or condition has occurred or exists as a result of which any ERISA Event could reasonably be expected to occur, with respect to any Plan; (ii) no "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, has occurred with respect to any Plan; (iii) each Plan has been maintained, operated, and funded in compliance with its own terms and in material compliance with the provisions of ERISA, the Code, and any other applicable Federal or state laws; and (iv) no Lien in favor of the PBGC or a Plan has arisen or is reasonably likely to arise on account of any Plan. (b) The actuarial present value of all "benefit liabilities" (as defined in Section 4001(a)(16) of ERISA), whether or not vested, under each Single Employer Plan, as of the last annual valuation date prior to the date on which this representation is made or deemed made (determined, in each case, in accordance with Financial Accounting Standards Board Statement 87, utilizing the actuarial assumptions used in such Plan's most recent 75 actuarial valuation report), did not exceed as of such valuation date the fair market value of the assets of such Plan in an amount which would have a Material Adverse Effect. (c) Neither any Consolidated Party nor any ERISA Affiliate has incurred, or, to the best knowledge of the Executive Officers of the Credit Parties, could be reasonably expected to incur, any withdrawal liability under ERISA to any Multiemployer Plan or Multiple Employer Plan. Neither any Consolidated Party nor any ERISA Affiliate would become subject to any withdrawal liability under ERISA that would have a Material Adverse Effect if any Consolidated Party or any ERISA Affiliate were to withdraw completely from all Multiemployer Plans and Multiple Employer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. Neither any Consolidated Party nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization (within the meaning of Section 4241 of ERISA), is insolvent (within the meaning of Section 4245 of ERISA), or has been terminated (within the meaning of Title IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Executive Officers of the Credit Parties, reasonably expected to be in reorganization, insolvent, or terminated. (d) No prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has occurred with respect to a Plan which has subjected or may subject any Consolidated Party or any ERISA Affiliate to any material liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which any Consolidated Party or any ERISA Affiliate has agreed or is required to indemnify any Person against any such liability. (e) Neither any Consolidated Party nor any ERISA Affiliates has any material liability with respect to "expected post-retirement benefit obligations" within the meaning of the Financial Accounting Standards Board Statement 106. Each Plan which is a welfare plan (as defined in Section 3(1) of ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code apply has been administered in compliance in all material respects with such sections. (f) Neither the execution and delivery of this Credit Agreement nor the consummation of the financing transactions contemplated thereunder will involve any transaction which is subject to the prohibitions of Sections 404, 406 or 407 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. The representation by the Credit Parties in the preceding sentence is made in reliance upon and subject to the accuracy of the Lenders' representation in Section 11.15 with respect to their source of funds and is subject, in the event that the source of the funds used by the Lenders in connection with this transaction is an insurance company's general asset account, to the application of Prohibited Transaction Class Exemption 95-60, 60 Fed. Reg. 35,925 (1995), compliance with the regulations issued under Section 401(c)(1)(A) of ERISA, or the issuance of any other prohibited transaction exemption or similar relief, to the effect that assets in an insurance company's general asset account do not constitute assets of an "employee benefit plan" within the meaning of Section 3(3) of ERISA or a "plan" within the meaning of Section 4975(e)(1) of the Code. 76 6.13 CORPORATE STRUCTURE; CAPITAL STOCK, ETC. The corporate capital and ownership structure of the Consolidated Parties as of the Closing Date after giving effect to the Transaction is as described in Schedule 6.13A. Set forth on Schedule 6.13B is a complete and accurate list as of the Closing Date with respect to the Borrower and each of its direct and indirect Subsidiaries of (i) jurisdiction of incorporation, (ii) number of shares of each class of Capital Stock outstanding, (iii) number and percentage of outstanding shares of each class owned (directly or indirectly) by the Consolidated Parties and (iv) number and effect, if exercised, of all outstanding options, warrants, rights of conversion or purchase and all other similar rights with respect thereto as of the Closing Date. The outstanding Capital Stock of all such Persons is validly issued, fully paid and non-assessable and is owned in the manner set forth on Schedule 6.13B, free and clear of all Liens (other than Permitted Liens). Other than as set forth in Schedule 6.13B, neither the Borrower nor any of its Subsidiaries has outstanding any securities convertible into or exchangeable for its Capital Stock nor does any such Person have outstanding any rights to subscribe for or to purchase or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to its Capital Stock. 6.14 GOVERNMENTAL REGULATIONS, ETC. (a) None of the transactions contemplated by this Credit Agreement (including, without limitation, the direct or indirect use of the proceeds of the Loans) will violate or result in a violation of the Securities Act, the Securities Exchange Act or any of Regulations U and X. (b) None of the Consolidated Parties is (i) an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended, (ii) a "holding company" as defined in, or otherwise subject to regulation under, the Public Utility Holding Company Act of 1935, as amended or (iii) subject to regulation under any other Federal or state statute or regulation (other than usury laws) which limits its ability to incur Indebtedness. 6.15 PURPOSE OF LOANS AND LETTERS OF CREDIT. The proceeds of the Loans shall be used solely by the Borrower to effect the Transaction, to pay fees and expenses related to the Transaction and to provide for working capital and general corporate purposes of the Borrower and its Subsidiaries (including, without limitation, the development of new service locations and Permitted Acquisitions). The Letters of Credit shall be used only for or in connection with appeal bonds, reimbursement obligations arising in connection with surety and reclamation bonds, reinsurance, domestic or international trade transactions and obligations not otherwise aforementioned relating to transactions entered into by the applicable account party in the ordinary course of business. 6.16 ENVIRONMENTAL MATTERS. Except as disclosed and described in Schedule 6.16 attached hereto or except as could not reasonably be expected to have a Material Adverse Effect: 77 (a) Each of the Real Properties and all operations at the Real Properties are in compliance with all applicable Environmental Laws, there is no violation of any Environmental Law with respect to the Real Properties or the Businesses, and there are no conditions relating to the Real Properties or the Businesses that could give rise to liability under any applicable Environmental Laws. (b) None of the Real Properties contains any Materials of Environmental Concern at, on or under the Real Properties in amounts or concentrations that constitute a violation of, or could give rise to liability under, Environmental Laws. (c) No Consolidated Party has received any written notice of, or inquiry from any Governmental Authority regarding, any violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Real Properties or the Businesses. (d) Materials of Environmental Concern have not been transported or disposed of from the Real Properties, or generated, treated, stored or disposed of at, on or under any of the Real Properties or any other location, in each case by or on behalf of any Consolidated Party in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law. (e) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Executive Officers of the Credit Parties, threatened, under any Environmental Law to which any Consolidated Party is or will be named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Consolidated Parties, the Real Properties or the Businesses. (f) There has been no release, or threat of release, of Materials of Environmental Concern at or from the Real Properties, or arising from the operations (including, without limitation, disposal) of any Consolidated Party in connection with the Real Properties or otherwise in connection with the Businesses, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws. 6.17 INTELLECTUAL PROPERTY. Each Consolidated Party owns, or has the legal right to use, all trademarks, service marks, trade names, trade dress, patents, copyrights, technology, know-how and processes (the "Intellectual Property") necessary for each of them to conduct its business as currently conducted except for those the failure to own or have such legal right to use could not reasonably be expected to have a Material Adverse Effect. Set forth on Schedule 6.17 is a list of all Intellectual Property registered or pending registration as of the Closing Date with the United States Copyright Office or the United States Patent and Trademark Office and owned by each Consolidated Party or that any Consolidated Party has the right to use. Except as provided on Schedule 6.17, no claim has been asserted and is pending by any Person challenging or questioning the use of the Intellectual Property or the validity or effectiveness of the Intellectual Property, nor does any Credit Party know of any such claim, and, to the knowledge of the Executive Officers of the Credit Parties, the use of the Intellectual Property 78 by any Consolidated Party or the granting of a right or a license in respect of the Intellectual Property from any Consolidated Party does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. As of the Closing Date, none of the Intellectual Property of the Consolidated Parties is subject to any licensing agreement or similar arrangement except as set forth on Schedule 6.17. 6.18 SOLVENCY. The Credit Parties are Solvent on a consolidated basis. 6.19 INVESTMENTS. All Investments of each Consolidated Party are (i) Permitted Investments and (ii) to the extent consisting of any deposit with, or advance, loan or other extension of credit to, another Person (other than deposits made in the ordinary course of business) and existing as of the Closing Date, are set forth on Schedule 8.6. 6.20 BUSINESS LOCATIONS. Set forth on Schedule 6.20(a) is a list of all Real Properties located in the United States of America as of the Closing Date. Set forth on Schedule 6.20(b) is a list of all locations where any tangible personal property of a Credit Party is located as of the Closing Date. Set forth on Schedule 6.20(c) is the chief executive office, jurisdiction of incorporation or formation and principal place of business of each Credit Party as of the Closing Date. 6.21 DISCLOSURE. Neither this Credit Agreement nor any financial statements delivered to the Lenders nor any other document, certificate or statement furnished to the Lenders by or on behalf of any Consolidated Party in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading. 6.22 NO BURDENSOME RESTRICTIONS. No Consolidated Party is a party to any agreement or instrument or subject to any other obligation or any charter or corporate restriction or any provision of any applicable law, rule or regulation which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 6.23 BROKERS' FEES. Except as disclosed and described in Schedule 6.23, no Consolidated Party has any obligation to any Person in respect of any finder's, broker's, investment banking or other similar fee in connection with any of the transactions contemplated under the Credit Documents. 79 6.24 LABOR MATTERS. There are no collective bargaining agreements or Multiemployer Plans covering the employees of a Consolidated Party as of the Closing Date and, as of the Closing Date, none of the Consolidated Parties has suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five years. 6.25 NATURE OF BUSINESS. As of the Closing Date, the Consolidated Parties are engaged in the business of providing diagnostic imaging services and ancillary services to the healthcare industry. SECTION 7 AFFIRMATIVE COVENANTS Each Credit Party hereby covenants and agrees that until such time as this Credit Agreement has been terminated in accordance with the terms of Section 11.13: 7.1 INFORMATION COVENANTS. The Credit Parties will furnish, or cause to be furnished, to the Administrative Agent (which will promptly furnish to the Lenders): (a) Annual Financial Statements. As soon as available, and in any event within 100 days after the close of each fiscal year of the Borrower, (i) a consolidated balance sheet and income statement of the Consolidated Parties as of the end of such fiscal year, together with related consolidated statements of retained earnings and cash flows for such fiscal year, in each case setting forth in comparative form consolidated figures for the preceding fiscal year, all such financial information described in this clause (i) to be in reasonable form and detail and audited by independent certified public accountants of recognized national standing reasonably acceptable to the Administrative Agent and whose opinion shall be to the effect that such financial statements have been prepared in accordance with GAAP (except for changes with which such accountants concur) and shall not be limited as to the scope of the audit or qualified as to the status of the Consolidated Parties as a going concern or any other material qualifications or exceptions and (ii) consolidating balance sheets and income statements of the Consolidated Parties as of the end of such fiscal year, together with related consolidating statements of retained earnings and cash flows for such fiscal year, in each case setting forth in comparative form consolidating figures for the preceding fiscal year, all such financial information described in this clause (ii) to be in reasonable form and detail and reasonably acceptable to the Administrative Agent, and accompanied by a certificate of an Executive Officer of the Borrower to the effect that such financial statements fairly present in all material respects the financial condition of the Consolidated Parties and have been prepared in accordance with GAAP. (b) Quarterly Financial Statements. As soon as available, and in any event within 50 days after the close of each of the first three fiscal quarters of each fiscal year of 80 the Borrower, consolidated and consolidating balance sheets and income statements of the Consolidated Parties as of the end of such fiscal quarter, together with related consolidated statements of retained earnings and cash flows for such fiscal quarter, in each case setting forth in comparative form consolidated and consolidating figures, as applicable, for the corresponding period of the preceding fiscal year, all such financial information described above to be in reasonable form and detail and reasonably acceptable to the Administrative Agent, and accompanied by a certificate of an Executive Officer of the Borrower to the effect that such quarterly financial statements fairly present in all material respects the financial condition of the Consolidated Parties and have been prepared in accordance with GAAP, subject to changes resulting from audit and normal year-end audit adjustments. (c) Officer's Certificate. At the time of delivery of the financial statements provided for in Sections 7.1(a) and 7.1(b) above, a certificate of an Executive Officer of the Borrower substantially in the form of Exhibit 7.1(c), (i) demonstrating compliance with (A) the financial covenants contained in Section 7.9 by calculation thereof as of the end of each such fiscal period, (B) Section 8.1 and (C) Section 8.6 and (ii) stating that no Default or Event of Default exists, or if any Default or Event of Default does exist, specifying the nature and extent thereof and what action the Credit Parties propose to take with respect thereto. (d) Annual Business Plan and Budgets. Not later than 30 days after the end of each fiscal year of the Borrower, beginning with the fiscal year ending June 30, 2002, an annual business plan and budget of the Consolidated Parties containing, among other things, pro forma financial statements for the next fiscal year. (e) Compliance With Certain Provisions of the Credit Agreement. Within 100 days after the end of each fiscal year of the Borrower, a certificate containing information regarding (i) the calculation of Excess Cash Flow and (ii) the amount of all Asset Dispositions (other than any Asset Disposition constituting a transaction of the type described in clause (i), (ii), (iii), (vi) or (vii) of the definition of "Excluded Asset Disposition" set forth in Section 1.1), Debt Issuances, Equity Issuances, Acquisitions, Investments in Joint Ventures and all repayments and returns of principal or capital on Investments in Joint Ventures and all other returns on Investments in Joint Ventures that occurred during the prior fiscal year. (f) Accountant's Certificate. Within the period for delivery of the annual financial statements provided in Section 7.1(a), a certificate of the accountants conducting the annual audit stating that they have reviewed this Credit Agreement as it relates to accounting and other financial matters and stating further whether, in the course of their audit, they have become aware of any Default or Event of Default and, if any such Default or Event of Default exists, specifying the nature and extent thereof, provided that such accountants shall not be liable by reason of any failure to obtain knowledge of any such Default or Event of Default that would not be disclosed in the course of their audit examination. (g) Auditor's Reports. Promptly upon receipt thereof, a copy of any other report or "management letter" submitted by independent accountants to any Consolidated Party in connection with any annual, interim or special audit of the books of such Person. 81 (h) Reports. Promptly upon transmission or receipt thereof, copies of any filings and registrations with, and reports to or from, the Securities and Exchange Commission, or any successor agency, and copies of all financial statements, proxy statements, notices and reports as any Consolidated Party shall send to a holder of any Subordinated Indebtedness in its capacity as such a holder. (i) Notices. Upon any Executive Officer of a Credit Party obtaining knowledge thereof, the Credit Parties will give written notice to the Administrative Agent promptly of (i) the occurrence of an event or condition consisting of a Default or Event of Default, specifying the nature and existence thereof and what action the Credit Parties propose to take with respect thereto, and (ii) the occurrence of any of the following with respect to any Consolidated Party (A) the pendency or commencement of any litigation, arbitral or governmental proceeding against such Person which if adversely determined is reasonably likely to have a Material Adverse Effect or (B) the institution of any proceedings against such Person with respect to, or the receipt of notice by such Person of potential liability or responsibility for violation, or alleged violation of any Federal, state or local law, rule or regulation, including but not limited to, Environmental Laws, which violation or liability could reasonably be expected to have a Material Adverse Effect. (j) ERISA. Upon any Executive Officer of a Credit Party obtaining knowledge thereof, the Credit Parties will give written notice to the Administrative Agent promptly (and in any event within ten (10) Business Days) of: (i) any event or condition, including, but not limited to, any Reportable Event, that constitutes, or might reasonably lead to, an ERISA Event; (ii) with respect to any Multiemployer Plan, the receipt of notice as prescribed in ERISA or otherwise of any withdrawal liability assessed against the Credit Parties or any ERISA Affiliates, or of a determination that any Multiemployer Plan is in reorganization or insolvent (both within the meaning of Title IV of ERISA); (iii) the failure to make full payment on or before the due date (including extensions) thereof of all amounts which any Consolidated Party or any ERISA Affiliate is required to contribute to each Plan pursuant to its terms and as required to meet the minimum funding standard set forth in ERISA and the Code with respect thereto; or (iv) any change in the funding status of any Plan that could have a Material Adverse Effect, together with a description of any such event or condition or a copy of any such notice and a statement by an Executive Officer of the Borrower briefly setting forth the details regarding such event, condition, or notice, and the action, if any, which has been or is being taken or is proposed to be taken by the Credit Parties with respect thereto. Promptly upon request, the Credit Parties shall furnish the Administrative Agent and the Lenders with such additional information concerning any Plan as may be reasonably requested, including, but not limited to, copies of each annual report/return (Form 5500 series), as well as all schedules and attachments thereto required to be filed with the Department of Labor and/or the Internal Revenue Service pursuant to ERISA and the Code, respectively, for each "plan year" (within the meaning of Section 3(39) of ERISA). (k) Other Information. With reasonable promptness upon any such request, such other information regarding the business, properties or financial condition of any Consolidated Party as any Lender (through the Administrative Agent) or the Required Lenders may reasonably request. 82 7.2 PRESERVATION OF EXISTENCE AND FRANCHISES. Except as a result of or in connection with a dissolution, merger or disposition of a Subsidiary not prohibited by Section 8.4 or Section 8.5, each Credit Party will, and will cause each of its Restricted Subsidiaries to, do all things necessary to preserve and keep in full force and effect its existence, rights, franchises and authority. 7.3 BOOKS AND RECORDS. Each Credit Party will, and will cause each of its Restricted Subsidiaries to, keep complete and accurate books and records of its transactions in accordance with good accounting practices on the basis of GAAP (including the establishment and maintenance of appropriate reserves). 7.4 COMPLIANCE WITH LAW. Each Credit Party will, and will cause each of its Restricted Subsidiaries to, comply with all laws, rules, regulations and orders, and all applicable restrictions imposed by all Governmental Authorities, applicable to it and its Property if noncompliance with any such law, rule, regulation, order or restriction could reasonably be expected to have a Material Adverse Effect. 7.5 PAYMENT OF TAXES AND OTHER CLAIMS. Each Credit Party will, and will cause each of its Restricted Subsidiaries to, pay and discharge (a) all material taxes, assessments and governmental charges or levies imposed upon it, or upon its income or profits, or upon any of its properties, before they shall become delinquent and (b) all lawful claims (including claims for labor, materials and supplies) which, if unpaid, might give rise to a Lien other than a Permitted Lien upon any of its properties; provided, however, that no such Person shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith by appropriate proceedings in a manner which stays payment thereof and as to which adequate reserves therefor have been established in accordance with GAAP, unless the failure to make any such payment could reasonably be expected to have a Material Adverse Effect. 7.6 INSURANCE. (a) Each Credit Party will, and will cause each of its Restricted Subsidiaries to, at all times maintain in full force and effect insurance (including worker's compensation insurance, liability insurance, casualty insurance and business interruption insurance) in such amounts, covering such risks and liabilities and with such deductibles or self-insurance retentions as are in accordance with normal industry practice. The Administrative Agent shall be named as loss payee, assignee or mortgagee, as its interest may appear, and/or additional insured with respect to any such insurance providing coverage in respect of any Collateral, and each provider of any such insurance shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to the Administrative Agent, that it will give the Administrative Agent thirty (30) days prior written notice before any such policy or policies shall be altered or canceled. The present insurance coverage of the Consolidated Parties is outlined as to carrier, policy number, expiration date, type and amount on Schedule 7.6. 83 (b) In the event that the Consolidated Parties receive Net Cash Proceeds in excess of $250,000 in aggregate amount during any fiscal year of the Consolidated Parties ("Excess Proceeds") on account of Involuntary Dispositions, the Credit Parties shall, within the period of 360 days following the date of receipt of such Excess Proceeds, apply (or cause to be applied) an amount equal to such Excess Proceeds to (i) make Eligible Reinvestments (including but not limited to the repair or replacement of the related Property) or (ii) prepay the Loans (and cash collateralize LOC Obligations) in accordance with the terms of Section 3.3(b)(iii)(B). All insurance proceeds received by any Credit Party shall be subject to the security interest of the Administrative Agent (for the ratable benefit of the Lenders) under the Collateral Documents. Pending final application of any Excess Proceeds, the Credit Parties may apply such Excess Proceeds to temporarily reduce the Revolving Loans or to make Permitted Investments. 7.7 USE OF PROCEEDS. The Borrower will use the proceeds of the Loans and will use the Letters of Credit solely for the purposes set forth in Section 6.15. 7.8 AUDITS/INSPECTIONS. Upon reasonable notice and during normal business hours, each Credit Party will, and will cause each of its Restricted Subsidiaries to, permit representatives appointed by the Administrative Agent, including, without limitation, independent accountants, agents, attorneys, and appraisers to visit and inspect its property, including its books and records, its accounts receivable and inventory, its facilities and its other business assets, and to make photocopies or photographs thereof and to write down and record any information such representative obtains and shall permit the Administrative Agent or its representatives to investigate and verify the accuracy of information provided to the Lenders and to discuss all such matters with the officers, employees and representatives of such Person; provided, however, that, unless an Event of Default shall exist, the Administrative Agent shall not exercise its rights under this sentence more often than two times during any calendar year (only one of such times to be at the expense of the Credit Parties). The Credit Parties agree that the Administrative Agent, and its representatives, may conduct an annual audit of the Collateral, at the expense of the Credit Parties. 7.9 FINANCIAL COVENANTS. (a) Senior Leverage Ratio. The Senior Leverage Ratio, as of the last day of each fiscal quarter of the Consolidated Parties set forth below, shall be less than or equal to:
FISCAL YEAR SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 2002 NA 2.50 to 1.00 2.50 to 1.00 2.50 to 1.00 2003 2.50 to 1.00 2.50 to 1.00 2.50 to 1.00 2.50 to 1.00 2004 2.50 to 1.00 2.50 to 1.00 2.50 to 1.00 2.25 to 1.00 2005 2.25 to 1.00 2.25 to 1.00 2.25 to 1.00 2.00 to 1.00
84
FISCAL YEAR SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 2006 2.00 to 1.00 2.00 to 1.00 2.00 to 1.00 1.75 to 1.00 2007 1.75 to 1.00 1.75 to 1.00 1.75 to 1.00 1.75 to 1.00 2008 1.75 to 1.00 1.75 to 1.00 1.75 to 1.00 1.50 to 1.00 THEREAFTER 1.50 to 1.00 1.50 to 1.00 1.50 to 1.00 1.50 to 1.00
(b) Total Leverage Ratio. The Total Leverage Ratio, as of the last day of each fiscal quarter of the Consolidated Parties set forth below, shall be less than or equal to:
FISCAL YEAR SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 2002 NA 5.10 to 1.00 5.10 to 1.00 5.10 to 1.00 2003 5.00 to 1.00 5.00 to 1.00 4.90 to 1.00 4.75 to 1.00 2004 4.75 to 1.00 4.75 to 1.00 4.75 to 1.00 4.50 to 1.00 2005 4.50 to 1.00 4.50 to 1.00 4.50 to 1.00 4.25 to 1.00 2006 4.25 to 1.00 4.25 to 1.00 4.25 to 1.00 4.00 to 1.00 2007 4.00 to 1.00 4.00 to 1.00 4.00 to 1.00 3.75 to 1.00 2008 3.75 to 1.00 3.75 to 1.00 3.75 to 1.00 3.50 to 1.00 THEREAFTER 3.50 to 1.00 3.50 to 1.00 3.50 to 1.00 3.50 to 1.00
(c) Interest Coverage Ratio. The Interest Coverage Ratio, as of the last day of each fiscal quarter of the Consolidated Parties set forth below, shall be greater than or equal to:
FISCAL YEAR SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 2002 NA 2.00 to 1.00 2.00 to 1.00 2.00 to 1.00 2003 2.00 to 1.00 2.00 to 1.00 2.10 to 1.00 2.10 to 1.00 2004 2.10 to 1.00 2.10 to 1.00 2.20 to 1.00 2.25 to 1.00 2005 2.25 to 1.00 2.25 to 1.00 2.25 to 1.00 2.25 to 1.00 2006 2.25 to 1.00 2.25 to 1.00 2.25 to 1.00 2.50 to 1.00 2007 2.50 to 1.00 2.50 to 1.00 2.50 to 1.00 2.50 to 1.00 THEREAFTER 2.75 to 1.00 2.75 to 1.00 2.75 to 1.00 2.75 to 1.00
(d) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio, as of the last day of each fiscal quarter of the Consolidated Parties set forth below, shall be greater than or equal to:
FISCAL YEAR SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 2002 NA 1.10 to 1.00 1.10 to 1.00 1.10 to 1.00 2003 1.10 to 1.00 1.10 to 1.00 1.10 to 1.00 1.10 to 1.00
85
FISCAL YEAR SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 2004 1.15 to 1.00 1.15 to 1.00 1.15 to 1.00 1.20 to 1.00 2005 1.20 to 1.00 1.20 to 1.00 1.20 to 1.00 1.20 to 1.00 2006 1.20 to 1.00 1.20 to 1.00 1.20 to 1.00 1.25 to 1.00 THEREAFTER 1.25 to 1.00 1.25 to 1.00 1.25 to 1.00 1.25 to 1.00
7.10 NEW SUBSIDIARIES. As soon as practicable and in any event within 30 days after (a) any Person becomes a direct or indirect Subsidiary of any Credit Party, (b) any Joint Venture becomes a Wholly Owned Subsidiary or (c) any direct or indirect Subsidiary of any Credit Party guarantees the Borrower's obligations under any Subordinated Indebtedness, the Credit Parties shall (i) provide the Administrative Agent with written notice thereof and (ii) in the case of any such Person which (A) is or has become a Domestic Subsidiary that is a Wholly Owned Subsidiary or (B) has guaranteed the Borrower's obligations under any Subordinated Indebtedness, cause such Person to: (1) execute a Joinder Agreement in substantially the same form as Exhibit 7.10, (2) deliver such other documentation as the Administrative Agent may reasonably request in connection with the foregoing, including, without limitation, items of the types required to be delivered pursuant to Section 5.1(b), (c) and (d) and Section 7.15 with respect to a Person of such type, all in form, content and scope reasonably satisfactory to the Administrative Agent and (3) otherwise comply with Section 7.11 in respect of such Person. 7.11 PLEDGED ASSETS. Each Credit Party will (i) cause all of its owned and leased real and personal Property other than Excluded Property to be subject at all times to first priority, perfected and, in the case of real Property (whether leased or owned), title insured Liens in favor of the Administrative Agent to secure the Credit Party Obligations pursuant to the terms and conditions of the Collateral Documents or, with respect to any such Property acquired subsequent to the Closing Date, such other additional security documents as the Administrative Agent shall reasonably request, subject in any case to Permitted Liens and (ii) deliver such other documentation as the Administrative Agent may reasonably request in connection with the foregoing, including, without limitation, appropriate UCC-1 financing statements, real estate title insurance policies, surveys, environmental reports, landlord's waivers, certified resolutions and other organizational and authorizing documents of such Person, favorable opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to above and the perfection of the Administrative Agent's Liens thereunder) and other items of the types required to be delivered pursuant to Section 5.1(d) and Section 7.15, all in form, content and scope reasonably satisfactory to the Administrative Agent. Without limiting the generality of the above, the Credit Parties will cause (A) 100% of the issued and outstanding Capital Stock in the Borrower, (B) 100% of the issued and outstanding Capital Stock in each Wholly Owned Subsidiary which is not a Foreign Subsidiary, 86 (C) to the extent permitted under such Person's organizational or governing documents, all of the issued and outstanding Capital Stock owned by the Credit Parties in each Joint Venture which is not an Unrestricted Joint Venture, (D) all of the loan and security documents required by Section 7.13 and relating to Indebtedness owing by any Joint Venture to any Credit Party, and (E) 65% (or such greater percentage that, due to a change in an applicable Requirement of Law after the date hereof, (1) could not reasonably be expected to cause the undistributed earnings of such Foreign Subsidiary as determined for United States federal income tax purposes to be treated as a deemed dividend to such Foreign Subsidiary's United States parent and (2) could not reasonably be expected to cause any material adverse tax consequences) of the issued and outstanding Capital Stock entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued and outstanding Capital Stock not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) (but in any event not to exceed 80% of the aggregate value of the Capital Stock of any Foreign Subsidiary) in each Foreign Subsidiary directly owned by the Borrower or any Domestic Subsidiary, to be subject at all times to a first priority, perfected Lien in favor of the Administrative Agent pursuant to the terms and conditions of the Collateral Documents or such other security documents as the Administrative Agent shall reasonably request. 7.12 INTEREST RATE MANAGEMENT. The Credit Parties shall at all times cause at least 40% of total Funded Indebtedness of the Consolidated Parties to bear interest at a fixed rate of interest. 7.13 INTERCOMPANY INDEBTEDNESS OF JOINT VENTURES. The Credit Parties shall (i) cause (A) to the extent possible through the exercise of commercially reasonable efforts by the Credit Parties, all advances, loans and other extensions of credit to any Joint Venture set forth on Schedule 8.6 and (B) all advances, loans and other extensions of credit to any Joint Venture (other than such extensions of credit for working capital not to exceed $300,000 which are required to be made to InSight Providence Ventures PET, LLC in connection with the formation thereof) made on or after the Closing Date, to be (1) evidenced and governed by such promissory notes and other definitive loan documentation as the Administrative Agent shall reasonably request and (2) fully secured by first priority, perfected Liens on Property of such Person on terms reasonably satisfactory to the Administrative Agent (which loan documentation and related collateral and collateral documentation shall, by the terms thereof, be fully assignable to the Administrative Agent) and (ii) deliver such other documentation as the Administrative Agent may reasonably request in connection with the foregoing, all in form, content and scope reasonably satisfactory to the Administrative Agent, including, without limitation, (A) appropriate UCC-1 financing statements, (B) landlord's waivers, (C) certified resolutions and other organizational and authorizing documents of the applicable Joint Ventures, and (D) in the case of advances, loans and/or other extensions of credit to any single Joint Venture in excess of $250,000 in the aggregate or in excess of $1,000,000 in the aggregate to all Joint 87 Ventures collectively, favorable opinions of counsel to such Joint Ventures covering the legality, validity, binding effect and enforceability of the documentation referred to above and the perfection of the applicable Credit Party's Liens thereunder. 7.14 UPSTREAMING OF INCOME FROM JOINT VENTURES. The Credit Parties will cause each Joint Venture that is not an Unrestricted Joint Venture to distribute to the Credit Parties from time to time (but in any event at least annually) the Credit Parties' ratable share of the cash flow available from operations (net of cash expenses) of such Joint Venture. 7.15 FURTHER ASSURANCES. Within ninety (90) days after the Closing Date (or such later date as the Administrative Agent shall reasonably determine), the Administrative Agent shall have received, in form and substance reasonably satisfactory to the Administrative Agent: (a) fully executed and notarized mortgages, deeds of trust or deeds to secure debt (each, as the same may be amended, modified, restated or supplemented from time to time, a "Mortgage Instrument" and collectively the "Mortgage Instruments") encumbering the fee interest and/or leasehold interest of any Credit Party in each of the Real Properties designated in Schedule 6.20(a) which are not identified on such Schedule as "Excluded Properties" (each a "Mortgaged Property" and collectively the "Mortgaged Properties"); (b) in the case of each leasehold Mortgaged Property, (i) such estoppel letters, consents and waivers from the landlords on such Mortgaged Property as may be obtained by the Credit Parties using commercially reasonable efforts, which estoppel letters shall be in the form and substance reasonably satisfactory to the Administrative Agent and (ii) evidence that the applicable lease, a memorandum of lease with respect thereto, or other evidence of such lease in form and substance reasonably satisfactory to the Administrative Agent, has been or will be recorded in all places to the extent necessary to enable the Mortgage Instrument encumbering such leasehold interest to effectively create a valid and enforceable first priority lien (subject to Permitted Liens) on such leasehold interest in favor of the Administrative Agent (or such other Person as may be required or desired under local law) for the benefit of Lenders; (c) maps or plats of an as-built survey of each owned Mortgaged Property certified to the Administrative Agent and the title insurance company issuing the policies referred to in Section 7.15(d) (the "Title Insurance Company") in a manner reasonably satisfactory to each of the Administrative Agent and the Title Insurance Company, dated a date reasonably satisfactory to each of the Administrative Agent and the Title Insurance Company by an independent professional licensed land surveyor, which maps or plats and the surveys on which they are based shall be in form and content reasonably satisfactory to the Administrative Agent and be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and 88 Mapping in 1997 with all items from Table A thereof completed, except for Nos. 5 and 12; (d) ALTA mortgagee title insurance policies issued by Chicago Title Insurance Company (the "Mortgage Policies"), in amounts not less than the respective amounts designated in Schedule 6.20(a) with respect to any particular Mortgaged Property, assuring the Administrative Agent that each of the Mortgage Instruments creates a valid and enforceable first priority mortgage lien on the applicable Mortgaged Property, free and clear of all defects and encumbrances except Permitted Liens and standard exceptions and exclusions from coverage (as modified by the terms of any endorsements), which Mortgage Policies shall otherwise be in form and substance reasonably satisfactory to the Administrative Agent and shall include such endorsements as are reasonably requested by the Administrative Agent; (viii) evidence as to (i) whether any Mortgaged Property is in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards (a "Flood Hazard Property") and (ii) if any Mortgaged Property is a Flood Hazard Property, (A) the applicable Credit Party's written acknowledgment of receipt of written notification from the Administrative Agent (1) as to the fact that such Mortgaged Property is a Flood Hazard Property and (2) as to whether the community in which each such Flood Hazard Property is located is participating in the National Flood Insurance Program and (B) copies of insurance policies or certificates of insurance of the Consolidated Parties evidencing flood insurance reasonably satisfactory to the Administrative Agent and naming the Administrative Agent as sole loss payee on behalf of the Lenders; (ix) a legal opinion of special local counsel for the Credit Parties for each state in which any Mortgaged Property is located; and (x) in the case of any personal property Collateral located at a premises leased by a Credit Party, such estoppel letters, consents and waivers from the landlords on such real property as may be obtained by the Credit Parties using commercially reasonable efforts. SECTION 8 NEGATIVE COVENANTS Each Credit Party hereby covenants and agrees that until such time as this Credit Agreement has been terminated in accordance with the terms of Section 11.13: 8.1 INDEBTEDNESS. The Credit Parties will not permit any Consolidated Party to contract, create, incur, assume or permit to exist any Indebtedness, except: 89 (a) Indebtedness arising under this Credit Agreement and the other Credit Documents; (b) Indebtedness set forth in Schedule 8.1(b) (and renewals, replacements, refinancings and extensions thereof on terms and conditions that, taken as a whole, are no less favorable to such Person than such existing Indebtedness, provided that no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing (plus premiums, accrued interest and costs of refinancing)); (c) (i) purchase money Indebtedness (including obligations in respect of Capital Leases or Synthetic Leases) (A) hereafter incurred by the Borrower or any of its Restricted Subsidiaries to finance the purchase of fixed assets or (B) assumed or acquired by the Borrower and its Restricted Subsidiaries in connection with any transaction otherwise permitted by this Credit Agreement, (ii) unsecured Indebtedness assumed by the Borrower and its Restricted Subsidiaries in connection with a Permitted Acquisition and (iii) unsecured Indebtedness (in addition to Indebtedness permitted pursuant to Section 8.1(f)) of the Borrower issued to the seller to pay a portion of the purchase price for any Person or Property acquired in a Permitted Acquisition, provided that (A) the aggregate principal amount of all such Indebtedness for all such Persons shall not exceed at any one time outstanding (1) during the period from the Closing Date through and including March 31, 2005, $40,000,000 and (2) at any time thereafter, $60,000,000; (B) the aggregate principal amount of all such Indebtedness for all such Persons that are Joint Ventures shall not exceed at any one time outstanding (1) during the period from the Closing Date through and including March 31, 2005, $10,000,000, and (2) at any time thereafter, $15,000,000; (C) such Indebtedness when incurred shall not exceed the purchase price of the asset(s) financed; and (D) no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing (plus premiums, accrued interest and costs of refinancing); (d) obligations of the Borrower in respect of Hedging Agreements entered into in order to manage existing or anticipated interest rate or exchange rate risks and not for speculative purposes; (e) intercompany Indebtedness and Guaranty Obligations permitted under Section 8.6; (f) unsecured Subordinated Indebtedness of the Borrower to the seller issued to pay a portion of the purchase price for any Person or Property acquired in a Permitted Acquisition; (g) unsecured Indebtedness of the Borrower subordinated to the Credit Party Obligations on the terms set forth in Schedule 8.1(g); (h) unsecured Subordinated Indebtedness of the Borrower issued pursuant to the Subordinated Note Purchase Agreement on the Closing Date (and any Subordinated Indebtedness issued in exchange for the Subordinated Notes, including the Subordinated Remarketed Notes and any notes issued for the Subordinated Remarketed Notes on identical 90 terms pursuant to the registration rights agreement attached as an exhibit to the Subordinated Note Purchase Agreement), and Guaranty Obligations of any Guarantor with respect thereto, in an aggregate principal amount not to exceed $200,000,000 (together with any accumulated, pay-in-kind or capitalized interest thereon); (i) other unsecured Subordinated Indebtedness of the Borrower, and Guaranty Obligations of any Guarantor with respect thereto (including Indebtedness issued pursuant to the Subordinated Note Purchase Agreement or the Subordinated Note Indenture after the Closing Date), provided that (i) the Borrower shall have delivered to the Administrative Agent a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to the incurrence of such Indebtedness and to the concurrent retirement of any other Indebtedness of any Consolidated Party, the Credit Parties would be in compliance with the financial covenants set forth in Section 7.9(a)-(c) and (ii) the aggregate principal amount of such Indebtedness (together with any accumulated, pay-in-kind or capitalized interest thereon) shall not exceed $100,000,000 at any time outstanding; and (j) other unsecured Indebtedness hereafter incurred by the Borrower or any Guarantor provided that (i) the loan documentation with respect to such Indebtedness shall not contain covenants or default provisions relating to any Consolidated Party that are more restrictive than the covenants and default provisions contained in the Credit Documents, (ii) the Borrower shall have delivered to the Administrative Agent a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to the incurrence of such Indebtedness and to the concurrent retirement of any other Indebtedness of any Consolidated Party, the Credit Parties would be in compliance with the financial covenants set forth in Section 7.9(a)-(c) and (iii) the aggregate principal amount of such Indebtedness shall not exceed at any one time outstanding (A) during the period from the Closing Date through and including March 31, 2005, $10,000,000 and (B) at any time thereafter, $15,000,000. 8.2 LIENS. The Credit Parties will not permit any Consolidated Party to contract, create, incur, assume or permit to exist any Lien with respect to any of its Property, whether now owned or hereafter acquired, except for: (a) Liens in favor of the Administrative Agent to secure the Credit Party Obligations; (b) Liens (other than Liens created or imposed under ERISA) for taxes, assessments or governmental charges or levies not yet due and payable or delinquent or Liens for taxes being contested in good faith by appropriate proceedings in a manner which stays enforcement thereof for which adequate reserves determined in accordance with GAAP have been established; (c) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and suppliers and other Liens imposed by law or pursuant to customary reservations or retentions of title arising in the ordinary course of business (other 91 than with respect to obligations for the payment of borrowed money), provided that such Liens secure only amounts not more than 30 days past due and payable or, if due and payable, are unfiled and no other action has been taken to enforce the same or are being contested in good faith by appropriate proceedings in a manner which stays enforcement thereof for which adequate reserves determined in accordance with GAAP have been established; (d) Liens (other than Liens created or imposed under ERISA) incurred or deposits made by any Consolidated Party in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (e) Liens in connection with any judgment which is not the basis for the existence of an Event of Default pursuant to Section 9.1(h); (f) easements, rights-of-way, restrictions (including zoning restrictions), minor defects or irregularities in title and other similar charges or encumbrances not, in any material respect, impairing the value or use of the encumbered Property for its intended purposes; (g) Liens on Property of any Person securing purchase money Indebtedness (including Capital Leases and Synthetic Leases) of such Person permitted under Section 8.1(c)(i), provided that any such Lien attaches to such Property concurrently with or within 90 days after the acquisition thereof and secures only the repayment of such purchase money Indebtedness (including Capital Leases and Synthetic Leases); (h) any interest of title of a lessor under, and Liens arising from UCC financing statements (or equivalent filings, registrations or agreements in foreign jurisdictions) relating to, leases permitted by this Credit Agreement; (i) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (j) Liens deemed to exist in connection with Investments in repurchase agreements permitted under Section 8.6; (k) normal and customary rights of setoff upon deposits of cash in favor of banks or other depository institutions; (l) Liens of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection; (m) Liens of sellers of goods to the Borrower and any of its Restricted Subsidiaries arising under Article 2 of the Uniform Commercial Code or similar provisions of applicable law in the ordinary course of business, covering only the goods sold and securing only the unpaid purchase price for such goods and related expenses; 92 (n) any interest of title of a buyer in connection with, and Liens arising from UCC financing statements relating to, a sale of receivables permitted by this Credit Agreement; (o) Liens in favor of any Credit Party to secure intercompany Indebtedness and Guaranty Obligations permitted under Section 8.6; (p) to the extent constituting a Lien, Retained Rights; and (q) Liens existing as of the Closing Date and set forth on Schedule 8.2 (and renewals, replacements, refinancings and extensions thereof to the extent permitted under Section 8.1), provided that no such Lien shall at any time be extended to or cover any Property other than the Property subject thereto on the Closing Date. 8.3 NATURE OF BUSINESS. The Credit Parties will not permit any Consolidated Party to substantially alter the character or conduct of the business conducted by such Person as of the Closing Date. 8.4 CONSOLIDATION, MERGER, DISSOLUTION, ETC. Except for the Transaction and in connection with a Permitted Asset Disposition or a Qualifying IPO, the Credit Parties will not permit any Consolidated Party to enter into any transaction of merger or consolidation or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution); provided that, notwithstanding the foregoing provisions of this Section 8.4 but subject to the terms of Sections 7.10 and 7.11, (a) the Borrower may be merged or consolidated with or into any of its Restricted Subsidiaries provided that the Borrower shall be the continuing or surviving corporation, (b) any Credit Party other than the Parent or the Borrower may be merged or consolidated with or into any other Credit Party other than the Parent or the Borrower, (c) any Consolidated Party which is not a Credit Party may be merged or consolidated with or into any Credit Party other than the Parent provided that such Credit Party shall be the continuing or surviving corporation, (d) any Consolidated Party which is not a Credit Party may be merged or consolidated with or into any other Consolidated Party which is not a Credit Party, (e) any Restricted Subsidiary of the Borrower may be merged or consolidated with or into any Person that is not a Credit Party in connection with an Asset Disposition permitted under Section 8.5, (f) the Borrower or any Restricted Subsidiary of the Borrower may be merged or consolidated with or into any Person other than a Consolidated Party in connection with a Permitted Acquisition provided that, if such transaction involves the Borrower, the Borrower shall be the continuing or surviving corporation and (g) any Restricted Subsidiary may dissolve, liquidate or wind up its affairs at any time provided that such dissolution, liquidation or winding up, as applicable, could not reasonably be expected to have a Material Adverse Effect. 8.5 ASSET DISPOSITIONS. The Credit Parties will not permit any Consolidated Party to make any Asset Disposition other than an Excluded Asset Disposition unless (a) the consideration paid in connection therewith shall be (i) at least 75% cash or Cash Equivalents, (ii) received by the applicable Consolidated 93 Parties contemporaneously with the consummation of such Asset Disposition and (iii) in an amount not less than the fair market value of the Property disposed of, (b) such transaction does not involve the sale or other disposition of a minority equity interest in any Consolidated Party other than a Joint Venture, (c) such transaction does not involve a sale or other disposition of receivables other than receivables owned by or attributable to other Property concurrently being disposed of in a transaction otherwise permitted under this Section 8.5, (d) if the book value of the assets disposed of pursuant to such Asset Disposition exceeds $1,000,000, the Borrower shall have delivered to the Administrative Agent no later than five (5) Business Days prior to such Asset Disposition (i) a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to such transaction, the Credit Parties would be in compliance with the financial covenants set forth in Section 7.9(a)-(c) and (ii) a certificate of an Executive Officer of the Borrower specifying the anticipated date of such Asset Disposition, briefly describing the assets to be sold or otherwise disposed of and setting forth the net book value of such assets, the aggregate consideration and the Net Cash Proceeds to be received for such assets in connection with such Asset Disposition, (e) no Default or Event of Default exists, and (f) the Credit Parties shall, within the Application Period, apply (or cause to be applied) an amount equal to the Net Cash Proceeds of such Asset Disposition to (i) make Eligible Reinvestments or (ii) prepay the Loans (and cash collateralize LOC Obligations) in accordance with the terms of Section 3.3(b)(iii)(A). Pending final application of the Net Cash Proceeds of any Asset Disposition, the Consolidated Parties may apply such Net Cash Proceeds to temporarily reduce the Revolving Loans or to make Investments in Cash Equivalents. Upon a sale of assets or the sale of Capital Stock of a Consolidated Party permitted by this Section 8.5, the Administrative Agent shall (to the extent applicable) deliver to the Credit Parties, upon the Credit Parties' request and at the Credit Parties' expense, such documentation as is reasonably necessary to evidence the release of the Administrative Agent's security interest, if any, in such assets or Capital Stock, including, without limitation, amendments or terminations of UCC financing statements, if any, the return of stock certificates, if any, and the release of such Consolidated Party from all of its obligations, if any, under the Credit Documents. 8.6 INVESTMENTS. The Credit Parties will not permit any Consolidated Party to make any Investments, except for: (a) Investments consisting of cash and Cash Equivalents; (b) Investments consisting of accounts receivable created, acquired or made by any Consolidated Party in the ordinary course of business; (c) Investments consisting of Capital Stock, obligations, securities or other property received by any Consolidated Party in settlement of accounts receivable (created in the ordinary course of business); (d) Investments made prior to and existing as of the Closing Date and, if such Investments consist of any deposit with, or advance, loan or other extension of credit to, another Person (other than deposits made in the ordinary course of business), are set forth in Schedule 8.6; 94 (e) Investments consisting of advances, loans and/or other extensions of credit to officers, directors and employees of the Borrower or any of its Restricted Subsidiaries made (i) in the ordinary course of business in an amount not to exceed $500,000 in the aggregate at any one time outstanding or (ii) in connection with the purchase by such Persons of Capital Stock of the Parent so long as the cash proceeds of such purchase received by the Parent are contemporaneously remitted by the Parent to the Borrower as a capital contribution; (f) Investments in any Person other than the Parent which is a Credit Party (including any Joint Venture which is a Credit Party) prior to giving effect to such Investment; (g) Investments made after the Closing Date in Joint Ventures which are not Credit Parties (including any such Investment which involves or constitutes a Permitted Acquisition) in an aggregate principal amount (to the extent not financed with the proceeds of any Equity Issuance by any Consolidated Party to any of the Sponsors or the Related Parties in connection with such Investments) not to exceed at any time outstanding an amount equal to: (i) (A) $65,000,000 plus (ii) an amount equal to the sum, without duplication, of (A) all repayments and returns (other than payments of principal on advances, loans and/or other extensions of credit) to Credit Parties after the Closing Date of principal or capital on Investments in Joint Ventures permitted pursuant to this clause (g) or Section 8.6(d), plus (B) all payments to Credit Parties after the Closing Date of interest and fees in respect of advances, loans and/or other extensions of credit to Joint Ventures permitted pursuant to this clause (g) or Section 8.6(d), plus (C) all payments to Credit Parties after the Closing Date of principal on advances, loans and/or other extensions of credit to Joint Ventures permitted pursuant to Section 8.6(d), plus (D) the principal balance of all advances, loans and/or other extensions of credit to any Joint Venture which is outstanding at such time as such Joint Venture becomes a Wholly Owned Subsidiary, but only to the extent that such advances, loans and/or other extensions of credit are set forth in Schedule 8.6, plus (E) all other dividends, payments or distributions (other than payments of principal on advances, loans and/or other extensions of credit to Joint Ventures permitted pursuant to this clause (g) or Section 8.6(d)) to Credit Parties after the Closing Date in respect of Investments in Joint Ventures permitted pursuant to this clause (g), in the case of each of clauses (A), (B), (C), (D) and (E) above, to the extent paid in cash or Cash Equivalents (or, in respect of clause (A) with respect to an Investment made with Property other than cash, upon return of such Property, to the extent of an amount equal to the lesser of the book value of such Property at the time of such Investment or the fair market value of such Property at the time of such return) to the Credit Parties after the Closing Date plus (E) the Net Cash Proceeds received 95 by Credit Parties after the Closing Date from any Asset Disposition involving the Capital Stock of Joint Ventures; provided, however, notwithstanding the foregoing provisions of this clause (g), that Investments made after the Closing Date in Unrestricted Joint Ventures (including any such Investment which involves or constitutes a Permitted Acquisition), shall not exceed an aggregate principal amount at any time outstanding equal to: (i) (A) $5,000,000 plus (ii) an amount equal to the sum, without duplication, of (A) all repayments and returns (other than payments of principal on advances, loans and/or other extensions of credit) to Credit Parties after the Closing Date of principal or capital on Investments in Unrestricted Joint Ventures permitted pursuant to this clause (g), plus (B) all payments to Credit Parties after the Closing Date of interest and fees in respect of advances, loans and/or other extensions of credit to Unrestricted Joint Ventures permitted pursuant to this clause (g) or Section 8.6(d), plus (C) all payments to Credit Parties after the Closing Date of principal on advances, loans and/or other extensions of credit to Unrestricted Joint Ventures permitted pursuant to Section 8.6(d), plus (D) the principal balance of all advances, loans and/or other extensions of credit to any Unrestricted Joint Venture which is outstanding at such time as such Unrestricted Joint Venture becomes a Wholly Owned Subsidiary, but only to the extent that such advances, loans and/or other extensions of credit are set forth in Schedule 8.6, plus (E) all other dividends, payments or distributions (other than payments of principal on advances, loans and/or other extensions of credit to Unrestricted Joint Ventures permitted pursuant to this clause (g) or Section 8.6(d)) to Credit Parties after the Closing Date in respect of Investments in Unrestricted Joint Ventures permitted pursuant to this clause (g) or Section 8.6(d), in the case of each of clauses (A), (B), (C), (D) and (E) above, to the extent paid in cash or Cash Equivalents (or, in respect of clause (A) with respect to an Investment made with Property other than cash, upon return of such Property, to the extent of an amount equal to the lesser of the book value of such Property at the time of such Investment or the fair market value of such Property at the time of such return) to the Credit Parties after the Closing Date plus (E) the Net Cash Proceeds received by Credit Parties after the Closing Date from any Asset Disposition involving the Capital Stock of Unrestricted Joint Ventures; provided further, however, that (i) all Investments in Joint Ventures made for the purpose of financing working capital or capital expenditures and (ii) to the extent possible through the exercise of commercially reasonable efforts by the Credit Parties, all other Investments in Joint Ventures (including any such Investment which involves or constitutes a Permitted Acquisition), shall be made in the form of a loan or loans evidenced, governed and secured by loan and security documents of the type described in Section 7.13; 96 (h) any Eligible Reinvestment of the proceeds of any Involuntary Disposition as contemplated by Section 7.6(b) or of any Asset Disposition as contemplated by Section 8.5(f); or (i) Investments consisting of an Acquisition by the Borrower or any Restricted Subsidiary of the Borrower, provided that (i) the Property acquired (or the Property of the Person acquired) in such Acquisition is used or useful in the same or a similar line of business as the Borrower and its Restricted Subsidiaries were engaged in on the Closing Date (or any reasonable extensions or expansions thereof), (ii) the Administrative Agent shall have received all items in respect of the Capital Stock or Property acquired in such Acquisition required to be delivered by the terms of Section 7.10 and/or Section 7.11, (iii) in the case of an Acquisition of the Capital Stock of another Person, the board of directors (or other comparable governing body) of such other Person shall have duly approved such Acquisition, (iv) the Borrower shall have delivered to the Administrative Agent (A) a Pro Forma Compliance Certificate demonstrating that, upon giving effect to such Acquisition (and the incurrence or assumption of any Indebtedness by the Credit Parties (including the acquired Person or Property) in connection therewith) on a Pro Forma Basis, the Credit Parties would be in compliance with the financial covenants set forth in Section 7.9(a)-(c) and (B) a certificate of an Executive Officer of the Borrower (1) demonstrating that, upon giving effect to such Acquisition, at least 80% of Consolidated EBITDA for the most recently ended fiscal year period for each of the Consolidated Parties and the acquired Person or Property preceding the date of such Acquisition with respect to which the Administrative Agent shall have received the Required Financial Information has been audited in accordance with GAAP, in the case of the Borrower, as required by Section 7.1(a) and, in the case of the acquired Person or Property, by an independent certified public accountants of recognized national standing reasonably acceptable to the Administrative Agent (whose opinion shall not be limited as to the scope or qualified as to going concern status or any other material qualifications or exceptions) and (2) to the extent that audited financial information for the acquired Person or Property is required under the terms of the foregoing clause (1), certifying that the quarterly financial statements with respect to the Person or Property acquired for each fiscal quarter period ending after the date of the last audit and immediately prior to the date of such Acquisition have been prepared in accordance with GAAP (subject to audit adjustments and the absence of footnotes) and reviewed by independent certified public accountants of recognized national standing reasonably acceptable to the Administrative Agent, (v) the representations and warranties made by the Credit Parties in any Credit Document shall be true and correct in all material respects at and as if made as of the date of such Acquisition (after giving effect thereto) except to the extent such representations and warranties expressly relate to an earlier date which shall be true and correct as of such earlier date, (vi) after giving effect to such Acquisition, there shall be at least $10,000,000 of availability existing under the Revolving Committed Amount, (vii) the aggregate consideration (including cash and non-cash consideration, any assumption of Indebtedness, any earn-out payments (as reasonably valued by the Borrower), and any proceeds of any Equity Issuance by any Consolidated Party to any of the Sponsors or the Related Parties in connection with such Acquisition) and any assumption of Indebtedness) paid by the Consolidated Parties in respect of any single Acquisition shall not exceed (A) $30,000,000, for any such Acquisition consummated during the period from the Closing Date until the March 31, 2005 and (B) $40,000,000 for any such Acquisition consummated thereafter and (viii) the aggregate consideration 97 (including cash and non-cash consideration, any assumption of Indebtedness and any earn-out payments (as reasonably valued by the Borrower), but excluding the proceeds of any Equity Issuance by any Consolidated Party to any of the Sponsors or the Related Parties in connection with such Acquisition) paid by the Consolidated Parties in respect of all Acquisitions consummated during any applicable period shall not exceed (1) $45,000,000, for the period from the Closing Date until the first anniversary of the Closing Date, (2) $45,000,000, for the period from the first anniversary of the Closing Date until the second anniversary of the Closing Date and (3) $40,000,000, for each subsequent 12-month period thereafter beginning on an anniversary of the Closing Date and ending on a day immediately preceding an anniversary of the Closing Date; provided, however, that for purposes of the foregoing clause (viii), to the extent that any portion of the aggregate Acquisition consideration limitation (determined without giving effect to the operation of this proviso) is not used during any applicable 12-month period, such unused available amount may be carried forward and used during the next 12-month period only; provided, however, that with respect to any applicable 12-month period, Acquisitions made during such 12-month period shall be deemed to be made first with respect to the applicable limitation for such 12-month period and then with respect to any carry-forward from the preceding 12-month period. 8.7 RESTRICTED PAYMENTS. The Credit Parties will not permit any Consolidated Party to, directly or indirectly, declare, order, make or set apart any sum for or pay any Restricted Payment, except (a) as permitted by Section 8.6, Section 8.8 or Section 8.9, (b) Restricted Payments by any Consolidated Party to the Parent for its proportionate share of the tax liability of the affiliated group of corporations that file consolidated federal income tax returns (or that file state or local income tax returns on a consolidated basis), provided that any refunds received by the Parent attributable to the Borrower or any of its Subsidiaries shall promptly be returned by the Parent to the Borrower through a contribution or purchase of common Capital Stock of the Borrower from the Borrower, (c) Restricted Payments by any Consolidated Party to the Parent in amounts required for the Parent to pay franchise taxes and other fees required to maintain its existence and provide for all other customary operating costs of the Parent to the extent attributable to the ownership and operation of the Borrower and its Restricted Subsidiaries, including, without limitation, in respect of director fees and expenses, administrative, legal and accounting services provided by third parties and other customary costs and expenses including all costs and expenses with respect to filings with the Securities and Exchange Commission, (d) Restricted Payments by any Consolidated Party to the Parent to the extent necessary to enable the payment of management fees permitted under Section 8.9(f) and (e) the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Borrower, options on any such shares or related stock appreciation rights or similar securities, or any dividend, distribution or advance to the Parent for the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Parent, options on any such shares or related stock appreciation rights or similar securities, in each case held by officers, directors or employees or former officers, directors or employees (or their estates or beneficiaries under their estates) of the Borrower, the Parent or any Subsidiary of the Borrower, as applicable, or by any employee benefit plan of the Borrower, the Parent or any Subsidiary of the Borrower, as applicable, upon death, disability, retirement or termination of employment or pursuant to the terms of any employee benefit plan or any other agreement under which such shares of stock or 98 related rights were issued; provided that the aggregate amount of cash applied by the Consolidated Parties for such purchase, redemption, acquisition, cancellation or other retirement of such shares of Capital Stock of the Borrower or the Parent after the Closing Date does not exceed $7,500,000 in the aggregate (excluding for purposes of calculating such amount the aggregate amount received by any Person in connection with such purchase, redemption, acquisition, cancellation or other retirement of such shares that is concurrently used to repay loans permitted to be made to such Person by the Borrower pursuant to Section 8.6(e)). 8.8 PREPAYMENT OF OTHER INDEBTEDNESS, ETC. The Credit Parties will not permit any Consolidated Party to (a) if any Default or Event of Default has occurred and is continuing or would be directly or indirectly caused as a result thereof, (i) amend or modify any of the terms of any Indebtedness of such Consolidated Party if such amendment or modification would add or change any terms in a manner adverse to such Consolidated Party, or shorten the final maturity or average life to maturity or require any payment to be made sooner than originally scheduled or increase the interest rate applicable thereto, or (ii) except for the exchange of the Subordinated Notes for (A) the Subordinated Remarketed Notes or (B) notes with identical terms as the Subordinated Remarketed Notes registered pursuant to the registration rights agreement attached as an exhibit to the Subordinated Note Purchase Agreement, make (or give any notice with respect thereto) any voluntary or optional payment or prepayment or redemption or acquisition for value of (including without limitation, by way of depositing money or securities with the trustee with respect thereto before due for the purpose of paying when due), refund, refinance or exchange of any other Indebtedness of such Consolidated Party, (b) amend or modify any of the terms of any Subordinated Indebtedness if such amendment or modification would add or change any terms in a manner adverse to the Consolidated Parties, or shorten the final maturity or average life to maturity thereof or require any payment to be made sooner than originally scheduled or increase the interest rate applicable thereto or change any subordination provision thereof, (c) make interest payments (including payment of accrued interest and premium, if any, payable in connection with a redemption of any Subordinated Indebtedness permitted under this Section 8.8) or any other payments in respect of any Subordinated Indebtedness in violation of the subordination provisions of the documents evidencing or governing such Subordinated Indebtedness or (d) except for the exchange of the Subordinated Notes for (A) the Subordinated Remarketed Notes or (B) notes with identical terms as the Subordinated Remarketed Notes registered pursuant to the registration rights agreement attached as an exhibit to the Subordinated Note Purchase Agreement, make (or give any notice with respect thereto) any voluntary or optional payment or prepayment, redemption, acquisition for value or defeasance of (including without limitation, by way of depositing money or securities with the trustee with respect thereto before due for the purpose of paying when due), refund, refinance or exchange of any Subordinated Indebtedness. 8.9 TRANSACTIONS WITH INSIDERS. The Credit Parties will not permit any Consolidated Party to enter into or permit to exist any transaction or series of transactions with any Executive Officer, director or Affiliate of such Person other than (a) advances of working capital to any Credit Party other than the Parent, (b) transfers of cash and assets to any Credit Party other than the Parent, (c) intercompany transactions not prohibited by Section 8.1, Section 8.2, Section 8.4, Section 8.5, Section 8.6 or Section 8.7, (d) normal compensation and reimbursement of expenses of officers and directors, (e) Equity 99 Issuances to Affiliates, (f) so long as no Event of Default under Section 9.1(a) is in existence, the payment of fees of the Sponsors contemplated by the Management Agreement in an aggregate amount not to exceed $500,000 during any fiscal year of the Borrower, (g) the transactions set forth on Schedule 8.9 (and renewals or replacements thereof on terms, in each case taken as a whole, not more disadvantageous to the applicable Consolidated Parties) and (h) except as otherwise specifically limited in this Credit Agreement, other transactions which are entered into in the ordinary course of such Person's business on terms and conditions substantially as favorable to such Person as would be obtainable by it in a comparable arms-length transaction with a Person other than an Executive Officer, director or Affiliate. 8.10 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS. The Credit Parties will not permit any Consolidated Party to (i) change its fiscal year or (ii) if the effect thereof could reasonably be expected to have a Material Adverse Effect, amend, modify or change its articles of incorporation (or corporate charter or other similar organizational document) or bylaws (or other similar document). 8.11 LIMITATION ON RESTRICTED ACTIONS. The Credit Parties will not permit any Consolidated Party to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Person to (a) pay dividends or make any other distributions to any Credit Party on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, (b) pay any Indebtedness or other obligation owed to any Credit Party, (c) make advances, loans and/or other extensions of credit to any Credit Party, (d) sell, lease or transfer any of its Property to any Credit Party, (d) in the case of any Consolidated Party which is a Joint Venture, to borrow money from and pledge its Property to the Credit Parties in the manner contemplated by Section 7.13, (e) except in the case of any Consolidated Party which is a Joint Venture, (i) pledge its Property (other than Excluded Property) pursuant to the Credit Documents or any renewals, refinancings, exchanges, refundings or extension thereof or (ii) act as a Credit Party pursuant to the Credit Documents or any renewals, refinancings, exchanges, refundings or extension thereof, except (in respect of any of the matters referred to in clauses (a)-(e)(i) above) for such encumbrances or restrictions existing under or by reason of (i) this Credit Agreement and the other Credit Documents, (ii) the Subordinated Note Purchase Agreement and the Subordinated Notes, in each case as in effect as of the Closing Date (or the documents evidencing or governing any other Subordinated Indebtedness issued on comparable terms, including the Subordinated Remarketed Notes to be issued under the Subordinated Note Indenture), (iii) applicable law, (iv) any document or instrument governing Indebtedness incurred pursuant to Section 8.1(c)(i), provided that any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith, (v) any Permitted Lien or any document or instrument governing any Permitted Lien, provided that any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien, (vi) customary restrictions and conditions contained in any agreement relating to the sale of any Property permitted under Section 8.5 pending the consummation of such sale, (vii) customary non-assignment provisions in leases, licenses or other contracts entered into in the ordinary course of business or (viii) in the case of any Joint Venture which is not a Credit Party in respect of any of the matters referred to in clauses (c)-(e) above, restrictions in such Person's organizational or governing documents. 100 8.12 OWNERSHIP OF SUBSIDIARIES AND JOINT VENTURES; LIMITATIONS ON PARENT. Notwithstanding any other provisions of this Credit Agreement to the contrary: (a) The Credit Parties will not (i) permit any Person (other than the Borrower or any Wholly Owned Subsidiary of the Borrower) to own any Capital Stock of any Subsidiary of the Borrower which is not a Joint Venture, except (A) to qualify directors where required by applicable law or to satisfy other requirements of applicable law with respect to the ownership of Capital Stock of Foreign Subsidiaries or (B) as a result of or in connection with a dissolution, merger, consolidation or disposition of a Subsidiary not prohibited by Section 8.4 or Section 8.5 or (ii) permit any Subsidiary of the Borrower which is not a Joint Venture to issue or have outstanding any shares of preferred Capital Stock. (b) The Credit Parties will not permit the Parent to (i) hold any assets other than the Capital Stock of the Borrower or (ii) engage in any business other than (A) owning the Capital Stock of the Borrower and activities incidental or related thereto, (B) acting as a Guarantor hereunder and pledging its assets to the Administrative Agent, for the benefit of the Lenders, pursuant to the Collateral Documents to which it is a party and (C) acting as a guarantor in respect of any Subordinated Indebtedness. 8.13 CAPITAL EXPENDITURES. The Credit Parties will not permit Consolidated Capital Expenditures for any fiscal year (excluding Consolidated Capital Expenditures to the extent funded with the proceeds of any Equity Issuance by any Consolidated Party to any of the Sponsors or the Related Parties in connection with such Consolidated Capital Expenditures) to exceed the amount set forth below: (i) for each of the fiscal years ending June 30, 2002, June 30, 2003 and June 30, 2004 the greater of (A) $65,000,000 and (B) fifty percent (50%) of Consolidated EBITDA for the most recently ended fiscal year preceding the date of determination with respect to which the Administrative Agent shall have received the Required Financial Information; and (ii) for the fiscal year ending June 30, 2005 and for any fiscal year thereafter, the greater of (A) $75,000,000 and (B) fifty percent (50%) of Consolidated EBITDA for the most recently ended fiscal year preceding the date of determination with respect to which the Administrative Agent shall have received the Required Financial Information. To the extent that any portion of the Consolidated Capital Expenditures limitation (determined without giving effect to the operation of this sentence) is not used during any fiscal year, such unused available amount may be carried forward and used during the next fiscal year only; provided, however, that with respect to any fiscal year, Consolidated Capital Expenditures made during such fiscal year shall be deemed to be made first with respect to the applicable limitation for such fiscal year and then with respect to any carry-forward from the preceding fiscal year. 101 8.14 NO FURTHER NEGATIVE PLEDGES. The Credit Parties will not permit any Consolidated Party to enter into, assume or become subject to any agreement prohibiting or otherwise restricting the existence of any Lien upon any of its Property in favor of the Administrative Agent (for the benefit of the Lenders) for the purpose of securing the Credit Party Obligations, whether now owned or hereafter acquired, or requiring the grant of any security for any obligation if such Property is given as security for the Credit Party Obligations, except (a) in connection with any document or instrument governing Indebtedness incurred pursuant to Section 8.1(c)(i), provided that any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith, (b) in connection with any Permitted Lien or any document or instrument governing any Permitted Lien, provided that any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien, (c) pursuant to customary restrictions and conditions contained in any agreement relating to the sale of any Property permitted under Section 8.5, pending the consummation of such sale, (d) customary non-assignment provisions in leases, licenses or other contracts entered into in the ordinary course of business or (e) in the case of any Joint Venture which is not a Credit Party, restrictions in such Person's organizational or governing documents. SECTION 9 EVENTS OF DEFAULT 9.1 EVENTS OF DEFAULT. An Event of Default shall exist upon the occurrence and during the continuance of any of the following specified events (each an "Event of Default"): (a) Payment. Any Credit Party shall (i) default in the payment when due of any principal of any of the Loans or of any reimbursement obligations arising from drawings under Letters of Credit, or (ii) default, and such default shall continue for five (5) or more Business Days, in the payment when due of any interest on the Loans or on any reimbursement obligations arising from drawings under Letters of Credit, or of any Fees or other amounts owing hereunder, under any of the other Credit Documents or in connection herewith or therewith; or (b) Representations. Any representation, warranty or statement made or deemed to be made by any Credit Party herein, in any of the other Credit Documents, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove untrue in any material respect on the date as of which it was deemed to have been made; or (c) Covenants. Any Credit Party shall 102 (i) default in the due performance or observance of any term, covenant or agreement contained in Sections 7.2, 7.7, 7.9, 7.10 or 7.11 or Section 8; (ii) default in the due performance or observance of any term, covenant or agreement contained in Sections 7.1(a), (b) or (c) and such default shall continue unremedied for a period of at least five (5) Business Days after the earlier of an Executive Officer of a Credit Party becoming aware of such default or notice thereof by the Administrative Agent; or (iii) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsections (a), (b), (c)(i) or (c)(ii) of this Section 9.1) contained in this Credit Agreement or any other Credit Document and such default shall continue unremedied for a period of at least 30 days after the earlier of an Executive Officer of a Credit Party becoming aware of such default or notice thereof by the Administrative Agent; or (d) Other Credit Documents. Except as a result of or in connection with a dissolution, merger or disposition of a Subsidiary not prohibited by Section 8.4 or Section 8.5, any Credit Document shall fail to be in full force and effect or to give the Administrative Agent and/or the Lenders the Liens, rights, powers and privileges purported to be created thereby, or any Credit Party shall so state in writing; or (e) Guaranties. Except as the result of or in connection with a dissolution, merger or disposition of a Subsidiary not prohibited by Section 8.4 or Section 8.5, the guaranty given by any Guarantor hereunder (including any Person after the Closing Date in accordance with Section 7.10) or any provision thereof shall cease to be in full force and effect, or any Guarantor (including any Person after the Closing Date in accordance with Section 7.10) hereunder or any Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under such guaranty, or any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any guaranty; or (f) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect to any Consolidated Party; or (g) Defaults under Other Indebtedness. With respect to any Indebtedness (other than Indebtedness outstanding under this Credit Agreement) in excess of $2,500,000 in the aggregate for the Consolidated Parties taken as a whole, (A) either (1) default in any payment shall occur and continue (beyond the applicable grace period with respect thereto, if any) with respect to any such Indebtedness, or (2) a default in the observance or performance relating to such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event or condition shall occur or exist, the effect of which default or other event or condition is to cause, or permit, the holder or holders of such Indebtedness (or trustee or agent on behalf of such holders) to cause (determined without regard to whether any notice or lapse of time is required), any such Indebtedness to become due prior to its stated maturity; or (B) any such Indebtedness shall be declared due and payable, or required to be prepaid other than by a regularly scheduled 103 required payment or customary mandatory prepayment, prior to the stated maturity thereof; or (h) Judgments. One or more judgments or decrees shall be entered against one or more of the Consolidated Parties involving a liability of $2,500,000 or more in the aggregate (to the extent not paid or fully covered by insurance provided by a carrier who has acknowledged coverage and has the ability to perform) and any such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 30 days from the entry thereof; or (i) ERISA. Any of the following events or conditions, if such event or condition could involve possible taxes, penalties, and other liabilities in an aggregate amount in excess of $2,500,000, occurs: (i) any "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, shall exist with respect to any Plan, or any lien shall arise on the assets of any Consolidated Party or any ERISA Affiliate in favor of the PBGC or a Plan; (ii) an ERISA Event shall occur with respect to a Single Employer Plan, which is, in the reasonable opinion of the Administrative Agent, likely to result in the termination of such Plan for purposes of Title IV of ERISA; (iii) an ERISA Event shall occur with respect to a Multiemployer Plan or Multiple Employer Plan, which is, in the reasonable opinion of the Administrative Agent, likely to result in (A) the termination of such Plan for purposes of Title IV of ERISA, or (B) any Consolidated Party or any ERISA Affiliate incurring any liability in connection with a withdrawal from, reorganization of (within the meaning of Section 4241 of ERISA), or insolvency (within the meaning of Section 4245 of ERISA) of such Plan; or (iv) any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall occur which may subject any Consolidated Party or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which any Consolidated Party or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability; or (j) Subordinated Debt Documentation. (i) There shall occur and be continuing any "Event of Default" (or any comparable term) under, and as defined in, the Subordinated Note Purchase Agreement (or, after the exchange of the Subordinated Notes for Subordinated Remarketed Notes, the Subordinated Note Indenture), (ii) any of the Credit Party Obligations for any reason shall cease to be "Designated Senior Indebtedness" (or any comparable term) under, and as defined in, the documents evidencing or governing any Subordinated Indebtedness, (iii) any Indebtedness other the Credit Party Obligations shall constitute "Designated Senior Indebtedness" (or any comparable term) under, and as defined in, the documents evidencing or governing any Subordinated Indebtedness or (iv) the subordination provisions of the documents evidencing or governing any Subordinated Indebtedness shall, in whole or in part, terminate, cease to be effective or cease to be legally valid, binding and enforceable against any holder of the applicable Subordinated Indebtedness; or (k) Ownership. There shall occur a Change of Control. 104 9.2 ACCELERATION; REMEDIES. Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may or, upon the request and direction of the Required Lenders, shall, by written notice to the Credit Parties take any of the following actions: (a) Termination of Commitments. Declare the Commitments terminated whereupon the Commitments shall be immediately terminated. (b) Acceleration. Declare the unpaid Credit Party Obligations to be due, whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Credit Parties. (c) Cash Collateral. Direct the Borrower to pay (and the Borrower hereby promises to pay, upon receipt of such notice) to the Administrative Agent additional cash, to be held by the Administrative Agent, for the benefit of the Lenders, in a cash collateral account as additional security for the LOC Obligations in respect of subsequent drawings under all then outstanding Letters of Credit in an amount equal to the maximum aggregate amount which may be drawn under all Letters of Credits then outstanding. (d) Enforcement of Rights. Enforce any and all rights and interests created and existing under the Credit Documents including, without limitation, all rights and remedies existing under the Collateral Documents, all rights and remedies against a Guarantor and all rights of set-off. Notwithstanding the foregoing, if an Event of Default specified in Section 9.1(f) shall occur with respect to the Borrower, then, without the giving of any notice or other action by the Administrative Agent or the Lenders, (i) the Commitments automatically shall terminate, (ii) all of the outstanding Credit Party Obligations automatically shall immediately become due and payable and (iii) the Borrower automatically shall be obligated (and hereby promises) to pay to the Administrative Agent additional cash, to be held by the Administrative Agent, for the benefit of the Lenders, in a cash collateral account as additional security for the LOC Obligations in respect of subsequent drawings under all then outstanding Letters of Credit in an amount equal to the maximum aggregate amount which may be drawn under all Letters of Credits then outstanding. SECTION 10 AGENCY PROVISIONS 10.1 APPOINTMENT AND AUTHORIZATION OF ADMINISTRATIVE AGENT. (a) Each Lender hereby irrevocably (subject to Section 10.9) appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Credit Agreement and each other Credit Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Credit Agreement or any other Credit Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary 105 contained elsewhere herein or in any other Credit Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Credit Agreement or any other Credit Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term "Administrative Agent" herein and in the other Credit Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. (b) The Issuing Lender shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith until such time (and except for so long) as the Administrative Agent may agree at the request of the Required Lenders to act for the Issuing Lender with respect thereto; provided, however, that the Issuing Lender shall have all of the benefits and immunities (i) provided to the Administrative Agent in this Section 10 with respect to any acts taken or omissions suffered by the Issuing Lender in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term "Administrative Agent" as used in this Section 10 included the Issuing Lender with respect to such acts or omissions, and (ii) as additionally provided herein with respect to the Issuing Lender. 10.2 DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Credit Agreement or any other Credit Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct. 10.3 LIABILITY OF ADMINISTRATIVE AGENT. No Administrative Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Credit Agreement or any other Credit Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by any Credit Party or any officer thereof, contained herein or in any other Credit Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Credit Agreement or any other Credit Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Credit Agreement or any other Credit Document, or for any failure of any Credit Party or any other party to any Credit Document to perform its obligations hereunder or thereunder. No Administrative Agent-Related Person shall be under any obligation 106 to any Lender or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Credit Agreement or any other Credit Document, or to inspect the properties, books or records of any Credit Party or any Affiliate thereof. 10.4 RELIANCE BY ADMINISTRATIVE AGENT. (a) The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Credit Party), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under any Credit Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Credit Agreement or any other Credit Document in accordance with a request or consent of the Required Lenders or all the Lenders, if required hereunder, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and participants. Where this Credit Agreement expressly permits or prohibits an action unless the Required Lenders or all the Lenders, if required hereunder, otherwise determine, the Administrative Agent shall, and in all other instances, the Administrative Agent may, but shall not be required to, initiate any solicitation for the consent or a vote of the Lenders. (b) For purposes of determining compliance with the conditions specified in Section 5.1, each Lender that has signed this Credit Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender. 10.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Borrower referring to this Credit Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". The Administrative Agent will promptly notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default or Event of Default as may be directed by the Required Lenders in accordance with Section 9.2; provided, however, that unless and until the Administrative Agent has received any such direction, the Administrative Agent may (but shall not be obligated to) 107 take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders. 10.6 CREDIT DECISION; DISCLOSURE OF INFORMATION BY ADMINISTRATIVE AGENT. Each Lender acknowledges that no Administrative Agent-Related Person has made any representation or warranty to it, and that no act by the Administrative Agent hereinafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Credit Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Administrative Agent-Related Person to any Lender as to any matter, including whether Administrative Agent-Related Persons have disclosed material information in their possession. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon any Administrative Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Credit Parties and their respective Subsidiaries, and all applicable Requirements of Law relating to the transactions contemplated hereby, and made its own decision to enter into this Credit Agreement and to extend credit to the Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Administrative Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Credit Agreement and the other Credit Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and the other Credit Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent herein, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Credit Parties or any of their respective Affiliates which may come into the possession of any Administrative Agent-Related Person. 10.7 INDEMNIFICATION OF ADMINISTRATIVE AGENT. The Lenders shall indemnify upon demand each Administrative Agent-Related Person (to the extent any Credit Party is required to reimburse such Administrative Agent - Related Party and such Administrative Agent-Related Party is not so reimbursed by or on behalf of any Credit Party and without limiting the obligation of any Credit Party to do so), pro rata, and hold harmless each Administrative Agent-Related Person from and against any and all claims, damages, losses, liabilities, costs, and expenses (including, without limitation, reasonable attorneys' fees) that may be incurred by or asserted or awarded against any Administrative Agent-Related Person, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation, or proceeding or preparation of defense in connection therewith) the Credit Documents, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Loans, except to the extent such claim, damage, loss, liability, cost, or expense resulted from such Administrative Agent-Related Person's gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the Required Lenders or all the Lenders, if required hereunder, shall be deemed to constitute gross negligence or willful misconduct for 108 purposes of this Section. Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including reasonable attorneys fees and the allocated costs of internal counsel) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Credit Agreement, any other Credit Document, or any document contemplated by or referred to herein, to the extent that the Credit Parties are required to reimburse the Administrative Agent hereunder and the Administrative Agent is not reimbursed for such expenses by or on behalf of the Credit Parties. The undertaking in this Section shall survive termination of the Commitments, the payment of all Credit Party Obligations hereunder and the resignation or replacement of the Administrative Agent. 10.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. Bank of America and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Credit Parties and their respective Affiliates as though Bank of America were not the Administrative Agent or the Issuing Lender hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Bank of America or its Affiliates may receive information regarding any Credit Party or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Credit Party or such Affiliate) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them. With respect to its Loans, Bank of America shall have the same rights and powers under this Credit Agreement as any other Lender and may exercise such rights and powers as though it were not the Administrative Agent or the Issuing Lender, and the terms "Lender" and "Lenders" include Bank of America in its individual capacity. 10.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders. If the Administrative Agent resigns under this Credit Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders which successor administrative agent shall be consented to by the Borrower at all times other than during the existence of an Event of Default (which consent of the Borrower shall not be unreasonably withheld or delayed). If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Borrower, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor administrative agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 10 and Sections 11.5 and 11.9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Credit Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following 109 a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. 10.10 BORROWER ASSIGNMENT, ASSUMPTION AND RELEASE. Without limiting the generality of any of the foregoing provisions of this Section 9, each Lender hereby authorizes the Administrative Agent on its behalf to execute and deliver the Borrower Assignment, Assumption and Release. 10.11 OTHER ADMINISTRATIVE AGENTS; LEAD MANAGERS. None of the Lenders identified on the facing page or signature pages of this Credit Agreement as a "syndication agent", "documentation agent", "co-agent" or "lead manager" shall have any right, power, obligation, liability, responsibility or duty under this Credit Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Credit Agreement or in taking or not taking action hereunder. SECTION 11 MISCELLANEOUS 11.1 NOTICES. Except as otherwise expressly provided herein, all notices and other communications shall have been duly given and shall be effective (a) when delivered, (b) when transmitted via telecopy (or other facsimile device) to the number set out below, (c) the Business Day following the day on which the same has been delivered prepaid (or pursuant to an invoice arrangement) to a reputable national overnight air courier service, or (d) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties at the address, in the case of the Credit Parties and the Administrative Agent, set forth below, and, in the case of the Lenders, set forth on Schedule 2.1(a), or at such other address as such party may specify by written notice to the other parties hereto: 110 if to any Credit Party: c/o InSight Health Services Corp. 4400 MacArthur Boulevard Suite 800 Newport Beach, CA 92660 Attn: Thomas V. Croal, CFO (with a copy to General Counsel) Telephone: (949) 476-0733 Telecopy: (949) 851-5981 if to the Administrative Agent: Bank of America, N.A. Independence Center, 15th Floor NC1-001-15-04 101 North Tryon Street Charlotte, North Carolina 28255 Attn: Administrative Agency Services, Erik Truette Telephone: (704) 388-1108 Telecopy: (704) 409-0028 with a copy to: Bank of America, N.A. NC1-007-13-06 100 North Tryon Street Charlotte, NC 28255 Attn: Peter D. Griffith Telephone: (704) 386-7104 Telecopy: (704) 386-9607 and Bank of America, N.A. CA5-701-05-19 1455 Market Street San Francisco, CA 94103 Attn: Kathleen Carry Telephone: (415) 436-4001 Telecopy: (415) 503-5001 11.2 RIGHT OF SET-OFF; ADJUSTMENTS. Upon the occurrence and during the continuance of any Event of Default, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the 111 credit or the account of any Credit Party against any and all of the obligations of such Person now or hereafter existing under this Credit Agreement, under the Notes, under any other Credit Document or otherwise, irrespective of whether such Lender shall have made any demand hereunder or thereunder and although such obligations may be unmatured. Each Lender agrees promptly to notify any affected Credit Party after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 11.2 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. 11.3 SUCCESSORS AND ASSIGNS. (a) The provisions of this Credit Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that none of the Credit Parties may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by any Credit Party without such consent shall be null and void). Nothing in this Credit Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Indemnified Parties) any legal or equitable right, remedy or claim under or by reason of this Credit Agreement. (b) Any Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Credit Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this subsection (b), its Participation Interests) at the time owing to it); provided that: (i) except in the case of (A) an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it, (B) subject to the terms of Section 11.3(b)(ii), an assignment by any Lender of all of such Lender's Delayed-Draw Term Loan Commitment and Delayed-Draw Term Loans outstanding under any particular Delayed-Draw Term Loan Tranche and (C) an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment or outstanding principal balance of Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent, shall not be less than $1,000,000, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Credit Agreement with respect to the Loans or the Commitments assigned, except that this clause (ii) shall not prohibit any Lender which holds a Delayed-Draw Term Loan Commitment from assigning all or a portion of its outstanding Delayed-Draw Term Loans separate and apart from such Lender's unfunded 112 Delayed-Draw Term Loan Commitment, and vice versa; provided, however, that prior to the Delayed-Draw Term Loan Commitment Termination Date, no Lender may assign all or any portion of its Delayed-Draw Term Loans outstanding under any Delayed-Draw Term Loan Tranche unless such assignment is accompanied by an assignment of a ratable percentage of the remaining Delayed-Draw Term Loan Commitment of the assigning Lender in respect of the applicable Delayed-Draw Term Loan Tranche; and (iii) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500. Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c), from and after the effective date specified in each Assignment and Acceptance, the Eligible Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Credit Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Credit Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Credit Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.11, 3.12 and 11.5). Upon request, the Borrower (at its expense) shall execute and deliver new or replacement Notes to the assigning Lender and the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Credit Agreement that does not comply with this subsection shall be treated for purposes of this Credit Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section 11.3. Notwithstanding any provision to the contrary contained in this Section 11.3 or elsewhere in this Credit Agreement, each assignment of Delayed-Draw Term Loans effected pursuant to the terms of Section 2.3(c) shall constitute an assignment of Loans which is permitted under this Section 11.3. (c) The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at its address referred to in Section 11.1 a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans and LOC Obligations owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Credit Parties, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Credit Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Credit Parties and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Any Lender may, without the consent of, or notice to, the Credit Parties or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and/or obligations under this Credit Agreement (including all or a portion of its Commitments and/or the Loans 113 (including such Lender's Participation Interests) owing to it); provided that (i) such Lender's obligations under this Credit Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Credit Parties, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Credit Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Credit Agreement and to approve any amendment, modification or waiver of any provision of this Credit Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification that would (i) postpone any date upon which any payment of money is scheduled to be paid to such Participant, (ii) reduce the principal, interest, fees or other amounts payable to such Participant, (iii) except as the result of or in connection with a dissolution, merger or disposition of a Consolidated Party not prohibited by Section 8.4 or 8.5, release all or substantially all of the Guarantors from their obligations under the Credit Documents or (iv) except as the result of or in connection with an Asset Disposition not prohibited by Section 8.5, release all or substantially all of the Collateral. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.6, 3.9, 3.11 and 3.12 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.2 as though it were a Lender, provided such Participant agrees to be subject to Section 3.14 as though it were a Lender. (e) A Participant shall not be entitled to receive any greater payment under Section 3.6, 3.9, 3.11 or 3.12 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant. A Participant that is not a United States person under Section 7701(a)(30) of the Code shall not be entitled to the benefits of Section 3.11 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.11(d) as though it were a Lender. (f) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Credit Agreement (including under its Notes, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (g) Any Lender that is a fund that invests in bank loans may create a security interest in all or any portion of the Loans owing to it and the Note or Notes held by it to the trustee for holders of obligations owed, or securities issued, by such fund as security for such obligations or securities, provided, that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this Section 11.3, (i) no such pledge shall release the pledging Lender from any of its obligations hereunder and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the 114 Credit Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise. (h) If the consent of the Borrower to an assignment or to an Eligible Assignee is required hereunder (including a consent to an assignment which does not meet the minimum assignment threshold specified in clause (i) of the proviso to the first sentence of Section 11.3(b)), the Borrower shall be deemed to have given its consent five (5) Business Days after confirmation (such confirmation not to be unreasonably withheld or delayed) by an Executive Officer of the Borrower of receipt of notice of such proposed assignment by the assigning Lender (through the Administrative Agent) unless such consent is expressly refused by the Borrower prior to such fifth Business Day. (i) Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Commitment and Loans pursuant to subsection (b) above, Bank of America may, upon 30 days' notice to the Borrower and the Lenders, resign as Issuing Lender. In the event of any such resignation as Issuing Lender, the Borrower shall be entitled to appoint from among the Lenders a successor Issuing Lender hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of Bank of America as Issuing Lender. Bank of America shall retain all the rights and obligations of the Issuing Lender hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as Issuing Lender and all LOC Obligations with respect thereto (including the right to require the Lenders to make Revolving Loans or fund their Participation Interests pursuant to Section 2.2). (j) Notwithstanding anything to the contrary contained in any Credit Document, the Master Assignment Agreement shall be deemed to be an Assignment and Acceptance executed in compliance with this Section 11.3. 11.4 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of the Administrative Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Administrative Agent or any Lender and any of the Credit Parties shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Lender would otherwise have. No notice to or demand on any Credit Party in any case shall entitle the Credit Parties to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or the Lenders to any other or further action in any circumstances without notice or demand. 11.5 EXPENSES; INDEMNIFICATION. (a) The Credit Parties jointly and severally agree to pay on demand all costs and expenses of the Administrative Agent in connection with the syndication, preparation, execution, delivery, administration, modification, and amendment of this 115 Credit Agreement, the other Credit Documents, and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and expenses of counsel for the Administrative Agent (including the cost of internal counsel) with respect thereto and with respect to advising the Administrative Agent as to its rights and responsibilities under the Credit Documents. The Credit Parties further jointly and severally agree to pay on demand all costs and expenses of the Administrative Agent and the Lenders, if any (including, without limitation, reasonable attorneys' fees and expenses and the cost of internal counsel), in connection with any work-out or restructuring relating to the Credit Facilities or any enforcement (whether through negotiations, legal proceedings, or otherwise) of any of the Credit Documents. (b) The Credit Parties jointly and severally agree to indemnify and hold harmless each Administrative Agent-Related Person and each Lender and each of their Affiliates and their respective officers, directors, employees, agents, advisors and trustees (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities, costs, and expenses (including, without limitation, reasonable attorneys' fees) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation, or proceeding or preparation of defense in connection therewith) the Credit Documents, any of the transactions contemplated herein or therein or the actual or proposed use of the proceeds of the Loans, except to the extent such claim, damage, loss, liability, cost, or expense resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 11.5 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any of the Credit Parties, their respective directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. The Credit Parties agree not to assert any claim against any Administrative Agent-Related Party, any Lender, any of their Affiliates, or any of their respective directors, officers, employees, attorneys, agents, advisors and trustees, on any theory of liability, for special, indirect, consequential, or punitive damages arising out of or otherwise relating to the Credit Documents, any of the transactions contemplated herein or therein or the actual or proposed use of the proceeds of the Loans. (c) Without prejudice to the survival of any other agreement of the Credit Parties hereunder, the agreements and obligations of the Credit Parties contained in this Section 11.5 shall survive the repayment of the Credit Party Obligations and the termination of the Commitments hereunder. 11.6 AMENDMENTS, WAIVERS AND CONSENTS. Neither this Credit Agreement nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing entered into by, or approved in writing by, each of the Credit Parties party thereto and the Required Lenders, provided, however, that: 116 (a) without the consent of each Lender affected thereby, neither this Credit Agreement nor any other Credit Document may be amended, changed, waived, discharged or terminated so as to (i) extend the maturity of any Commitment or the final maturity of any Loan or of any reimbursement obligation, or any portion thereof, arising from drawings under Letters of Credit, or extend or waive any Principal Amortization Payment of any Loan, or any portion thereof, (ii) reduce the rate or extend the time of payment of interest on any Loan or of any reimbursement obligation, or any portion thereof, arising from drawings under Letters of Credit (other than as a result of waiving the applicability of any post-default increase in interest rates) or of any Fees, (iii) reduce or waive the principal amount of any Loan or of any reimbursement obligation, or any portion thereof, arising from drawings under Letters of Credit, (iv) increase the Revolving Commitment, Delayed-Draw Term Loan Commitment or Tranche B Term Loan Commitment of a Lender over the amount thereof in effect (it being understood and agreed that a waiver of any condition precedent set forth in Section 5.2 or of any Default or Event of Default or mandatory reduction in the Commitments shall not constitute a change in the terms of any Commitment of any Lender), (v) except as the result of or in connection with an Asset Disposition not prohibited by Section 8.5, release all or substantially all of the Collateral, (vi) except as the result of or in connection with a dissolution, merger or disposition of a Consolidated Party not prohibited by Section 8.4 or Section 8.5, release the Borrower or any other material Credit Party from its obligations under the Credit Documents, (vii) amend, modify or waive any provision of Section 3.13, Section 3.15(b) or this Section 11.6(a), (viii) reduce any percentage specified in the definition of Required Lenders, (ix) agree to subordinate, in favor of any Person, any of the Credit Party Obligations or any claims in respect thereof; or (x) consent to the assignment or transfer by the Borrower or any other material Credit Party of any of its rights and obligations under (or in respect of) the Credit Documents except as permitted thereby; 117 (b) without the consent of the Required Revolving Lenders, no Default or Event of Default may be waived for purposes of Section 5.2(d) in respect of any proposed Revolving Loan borrowing or Letter of Credit issuance or extension; (c) without the consent of the Required Unfunded Delayed-Draw Term Lenders, no Default or Event of Default may be waived for purposes of Section 5.2(d) in respect of any proposed Delayed-Draw Term Loan borrowing; (d) without the consent of the Required Revolving Lenders and, prior to the Delayed-Draw Term Loan Commitment Termination Date, the Required Unfunded Delayed-Draw Term Lenders, no amendment, change, waiver, discharge or termination of Section 5.2, Section 7.9, Section 7.10, Section 7.11, Section 8 or this Section 11.6(d) shall be effective; (e) without the consent of the Administrative Agent, no provision of Section 10 or this Section 11.6(e) may be amended, changed, waived, discharged or terminated; (f) without the consent of the Issuing Lender, (i) no provision of Section 2.2, Section 3.5(b)(iii) or this Section 11.6(f) may be amended, changed, waived, discharged or terminated in a manner that is adverse to the Issuing Lender and (ii) the terms of the LOC Commitment may not be changed; (g) without the consent of the Fronting Bank, (ii) no provision of Section 2.3 or this Section 11.6(g) may be amended, changed, waived, discharged or terminated in a manner that is adverse to the Fronting Bank and (ii) the terms of the Fronting Commitment may not be changed; (h) only Lenders holding (i) Revolving Commitments (and/or Participation Interests therein) or (ii) if the Revolving Commitments have been terminated, Revolving Loans and/or LOC Obligations (and/or Participation Interests in the Revolving Loans and LOC Obligations (including the Participation Interests of the Issuing Lender in any Letters of Credit)), shall be entitled, subject to Section 11.6(a) and Section 11.6(f), to approve any amendment, change, waiver, discharge or termination of Section 2.1, Section 2.2, Section 3.3(b)(i), Section 3.4(a)(i) or (e), Section 3.5(a)(i), (b)(i) or (b)(ii), or Section 11.6(b) or (h), and no such amendment, change, waiver, discharge or termination shall be effective unless such amendment, change, waiver, discharge or termination is in writing entered into by, or approved in writing by, each of the Credit Parties party thereto and the Required Revolving Lenders; provided, however, that no amendment, change, waiver, discharge or termination pursuant to this Section 11.6(h) that would increase the Revolving Committed Amount shall be effective unless such amendment, change, waiver, discharge or termination has been approved by the Required Lenders; (i) only Lenders holding unfunded Delayed-Draw Term Loan Commitments (and/or Participation Interests therein) and outstanding Delayed-Draw Term Loans (and Participation Interests therein) shall be entitled, subject to Section 11.6(a) and Section 11.6(g), to approve any amendment, change, waiver, discharge or termination of Section 2.3 or this Section 11.6(i), and no such amendment, change, waiver, discharge or termination shall be effective unless such amendment, change, waiver, discharge or 118 termination is in writing entered into by, or approved in writing by, each of the Credit Parties party thereto and the Required Delayed-Draw Term Lenders; provided, however, that no amendment, change, waiver, discharge or termination pursuant to this Section 11.6(i) that would increase the Delayed-Draw Term Loan Committed Amount shall be effective unless such amendment, change, waiver, discharge or termination has been approved by the Required Lenders; (j) only Lenders holding a portion of the Tranche B Term Loan (and/or Participation Interests therein) shall be entitled, subject to Section 11.6(a), to approve any amendment, change, waiver, discharge or termination of Section 2.4 or this Section 11.6(j), and no such amendment, change, waiver, discharge or termination shall be effective unless such amendment, change, waiver, discharge or termination is in writing entered into by, or approved in writing by, each of the Credit Parties party thereto and the Required Tranche B Term Lenders; provided, however, that no amendment, change, waiver, discharge or termination pursuant to this Section 11.6(j) that would increase the Tranche B Term Loan Committed Amount shall be effective unless such amendment, change, waiver, discharge or termination has been approved by the Required Lenders; (k) only Lenders holding unfunded Delayed-Draw Term Loan Commitments (and/or Participation Interests therein) shall be entitled, subject to Section 11.6(a) and Section 11.6(g), to approve any amendment, change, waiver, discharge or termination of Section 11.6(c) or (k), and no such amendment, change, waiver, discharge or termination shall be effective unless such amendment, change, waiver, discharge or termination is in writing entered into by, or approved in writing by, each of the Credit Parties party thereto and the Required Unfunded Delayed-Draw Term Lenders; (l) only Lenders holding (i) Revolving Commitments (and/or Participation Interests therein) or (if the Revolving Commitments have been terminated) Revolving Loans and/or LOC Obligations (and/or Participation Interests in the Revolving Loans and LOC Obligations (including the Participation Interests of the Issuing Lender in any Letters of Credit)) and/or (ii) unfunded Delayed-Draw Term Loan Commitments (and/or Participation Interests therein), shall be entitled, subject to Section 11.6(a), to approve any amendment, change, waiver, discharge or termination of Section 11.6(d) or (l), and no such amendment, change, waiver, discharge or termination shall be effective unless such amendment, change, waiver, discharge or termination is in writing entered into by, or approved in writing by, each of the Credit Parties party thereto, the Required Revolving Lenders and the Required Unfunded Delayed-Draw Term Lenders; and (m) only Lenders holding (i) unfunded Delayed-Draw Term Loan Commitments (and/or Participation Interests therein), (ii) a portion of the Delayed-Draw Term Loans (and Participation Interests therein) and/or (iii) a portion of the Tranche B Term Loan (and/or Participation Interests therein), shall be entitled, subject to Section 11.6(a), to approve any amendment, change, waiver, discharge or termination of Section 3.3(b)(ii), (iii), (iv), (v), or (vi) or of this Section 11.6(m), and no such amendment, change, waiver, discharge or termination shall be effective unless such amendment, change, waiver, discharge or termination is in writing entered into by, or approved in writing by, each of the Credit Parties party thereto, the Required Unfunded Delayed-Draw Term Lenders and the Required Tranche B Term Lenders; and 119 (n) no amendment, change, waiver, discharge or termination of Section 3.3(b)(vii) shall be effective unless such amendment, change, waiver, discharge or termination is in writing entered into by, or approved in writing by, each of the Credit Parties party thereto, the Required Revolving Lenders, the Required Delayed-Draw Term Lenders and the Required Tranche B Term Lenders. Notwithstanding the fact that the consent of all the Lenders is required in certain circumstances as set forth above, (x) each Lender is entitled to vote as such Lender sees fit on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent provisions set forth herein and (y) the Required Lenders shall determine whether or not to allow a Credit Party to use cash collateral in the context of a bankruptcy or insolvency proceeding and such determination shall be binding on all of the Lenders. 11.7 COUNTERPARTS. This Credit Agreement may be executed in any number of counterparts, each of which when so executed shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Credit Agreement to produce or account for more than one such counterpart for each of the parties hereto. Delivery by facsimile by any of the parties hereto of an executed counterpart of this Credit Agreement shall be as effective as an original executed counterpart hereof and shall be deemed a representation that an original executed counterpart hereof will be delivered. 11.8 HEADINGS. The headings of the sections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit Agreement. 11.9 SURVIVAL. All indemnities set forth herein, including, without limitation, in Section 2.2(i), 3.11, 3.12, 10.5 or 11.5 shall survive the execution and delivery of this Credit Agreement, the making of the Loans, the issuance of the Letters of Credit, the repayment of the Loans, LOC Obligations and other obligations under the Credit Documents and the termination of the Commitments hereunder, and all representations and warranties made by the Credit Parties herein shall survive until this Credit Agreement shall be terminated in accordance with the terms of Section 11.13(b). 11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. (a) THIS CREDIT AGREEMENT AND, UNLESS OTHERWISE EXPRESSLY PROVIDED THEREIN, THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). Any legal action or proceeding with respect to this Credit Agreement or any other 120 Credit Document may be brought in the courts of the State of New York in New York County, or of the United States for the Southern District of New York, and, by execution and delivery of this Credit Agreement, each of the Credit Parties hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the nonexclusive jurisdiction of such courts. Each of the Credit Parties further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at the address set out for notices pursuant to Section 11.1, such service to become effective three (3) days after such mailing. Nothing herein shall affect the right of the Administrative Agent or any Lender to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against any Credit Party in any other jurisdiction. (b) Each of the Credit Parties hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Credit Agreement or any other Credit Document brought in the courts referred to in subsection (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (c) EACH PARTY TO THIS CREDIT AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY CREDIT DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY CREDIT DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS CREDIT AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 11.11 SEVERABILITY. If any provision of any of the Credit Documents is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 11.12 ENTIRETY. This Credit Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein. 121 11.13 BINDING EFFECT; TERMINATION. (a) This Credit Agreement shall become effective at such time on or after the Closing Date when it shall have been executed by each Credit Party and the Administrative Agent, and the Administrative Agent shall have received copies hereof (telefaxed or otherwise) which, when taken together, bear the signatures of each Lender, and thereafter this Credit Agreement shall be binding upon and inure to the benefit of each Credit Party, the Administrative Agent and each Lender and their respective successors and assigns. (b) The term of this Credit Agreement shall be until the Credit Party Obligations are Fully Satisfied. 11.14 CONFIDENTIALITY. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its (and its Affiliates') directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent requested by any regulatory authority; (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process; provided, however, that, prior to disclosure pursuant to this clause (c), reasonable efforts shall be made to give the Borrower notice of request for disclosure and the Borrower shall be given a reasonable opportunity, at its expense, to prevent the disclosure or have the Information maintained as confidential under a protective order; (d) to any other party to this Credit Agreement; (e) in connection with the exercise of any remedies hereunder or any of the other Credit Documents or any suit, action or proceeding relating to this Credit Agreement or any of the other Credit Documents or the enforcement of rights hereunder or thereunder; (f) to any Lender, any Affiliate of a Lender or any Approved Fund, or, with the consent of the Borrower (not to be unreasonably withheld) or, if an Event of Default has occurred and is continuing, subject to an agreement containing provisions substantially the same as those of this Section 11.14, to any other prospective Eligible Assignee of or Participant in connection with an assignment or participation pursuant to Section 11.3; (g) with the consent of the Borrower; (h) to the extent that, other than as a result of a breach of this Section 11.14, such Information (i) becomes publicly available or (ii) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than the Consolidated Parties, other than as a result of a breach by such source of a confidentiality agreement with any Consolidated Party with respect to which breach the Person proposing to disclose Information in accordance with this Section 11.14(i)(ii) has actual knowledge; or (i) to the National Association of Insurance Commissioners or any other similar organization or any nationally recognized rating agency that requires access to information about a Lender's or its Affiliates' investment portfolio in connection with ratings issued with respect to such Lender or its Affiliates. For the purposes of this Section 11.14, "Information" means all information received from the Credit Parties relating to the Consolidated Parties or their business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Consolidated Parties. Any Person required to maintain the confidentiality of Information as provided in this Section 11.14 shall be considered to have complied with its obligation to do so if 122 such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. 11.15 SOURCE OF FUNDS. Each of the Lenders hereby represents and warrants to the Borrower that at least one of the following statements is an accurate representation as to the source of funds to be used by such Lender in connection with the financing hereunder: (a) no part of such funds constitutes assets allocated to any separate account maintained by such Lender in which any employee benefit plan (or its related trust) has any interest; (b) to the extent that any part of such funds constitutes assets allocated to any separate account maintained by such Lender, such Lender has disclosed to the Borrower the name of each employee benefit plan whose assets in such account exceed 10% of the total assets of such account as of the date of such purchase (and, for purposes of this clause (b), all employee benefit plans maintained by the same employer or employee organization are deemed to be a single plan); (c) to the extent that any part of such funds constitutes assets of an insurance company's general account, such insurance company has complied with all of the requirements of the regulations issued under Section 401(c)(1)(A) of ERISA; or (d) such funds constitute assets of one or more specific benefit plans which such Lender has identified in writing to the Borrower. As used in this Section 11.15, the terms "employee benefit plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 11.16 REGULATION D. Each of the Lenders hereby represents and warrants to the Borrower that it is a commercial lender, other financial institution or other "accredited" investor (as defined in SEC Regulation D) which makes or acquires or loans on the ordinary course of business and that it will make or acquire Loans for its own account in the ordinary course of business. 11.17 CONFLICT. To the extent that there is a conflict or inconsistency between any provision hereof, on the one hand, and any provision of any Credit Document, on the other hand, this Credit Agreement shall control. 123 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Credit Agreement to be duly executed and delivered as of the date first above written. BORROWER: INSIGHT HEALTH SERVICES ACQUISITION CORP. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- PARENT: INSIGHT HEALTH SERVICES HOLDINGS CORP. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- SUBSIDIARY GUARANTORS: INSIGHT HEALTH SERVICES CORP. INSIGHT HEALTH CORP. OPEN MRI, INC. MAXUM HEALTH CORP. RADIOSURGERY CENTERS, INC. MAXUM HEALTH SERVICES CORP. DIAGNOSTIC SOLUTIONS CORP. MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. MAXUM HEALTH SERVICES OF DALLAS, INC. NDDC, INC. SIGNAL MEDICAL SERVICES, INC. MRI ASSOCIATES, L.P. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Signatures Continued] ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A., in its capacity as Administrative Agent By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- LENDERS: BANK OF AMERICA, N.A., individually in its capacity as a Lender and in its capacity as Issuing Lender By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- -------------------------------- By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- -------------------------------- By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- EXHIBIT 1.1A FORM OF BORROWER ASSIGNMENT, ASSUMPTION AND RELEASE This ASSIGNMENT, ASSUMPTION AND RELEASE AGREEMENT (this "Assignment"), dated as of October 17, 2001, is by and among INSIGHT HEALTH SERVICES ACQUISITION CORP., a Delaware corporation, as assignor (the "Assignor"), INSIGHT HEALTH SERVICES CORP., a Delaware corporation, as assignee (the "Assignee") and BANK OF AMERICA, N.A., in its capacity as administrative agent (the "Administrative Agent") under that certain Credit Agreement dated as of the date hereof among the Assignor, the Assignee, the other Credit Parties defined therein, the Administrative Agent, The CIT Group/Business Credit, Inc., as Documentation Agent, First Union National Bank, as Syndication Agent, and the Lenders defined therein (the "Credit Agreement"). All of the defined terms in the Credit Agreement are incorporated herein by reference. The Assignor has agreed to assign to the Assignee, and the Assignee has agreed to assume from the Assignor, all of the rights, interests, duties, obligations and liabilities of the Assignor as Borrower in, to and under the Credit Agreement and the other Credit Documents. Accordingly, the parties hereto agree as follows: 1. Assignment and Assumption. Effective as of the date hereof, (a) the Assignor hereby assigns, transfers and conveys to the Assignee all of the rights, interests, duties, obligations and liabilities of the Assignor as Borrower in, to and under the Credit Documents and (b) the Assignee hereby (i) assumes and accepts all of the rights, interests, duties, obligations and liabilities of the Assignor as Borrower in, to and under the Credit Documents to the same extent as if the Assignee, in fact, had executed the Credit Documents in the capacity of "Borrower" and (ii) promises to pay to the Lenders and the Administrative Agent all of the Credit Party Obligations of the Borrower outstanding at, or incurred on or after, the date hereof, at the times and in the manner set forth in the Credit Agreement. 2. Release. The Administrative Agent, on behalf of the Lenders, confirms that, automatically upon the effectiveness of the assignment and acceptance pursuant to Paragraph 1 above, the Assignor shall be released and discharged from any duties, obligations and liabilities as Borrower under the Credit Documents. Furthermore, the Sponsors are hereby released of their obligations under that certain commitment letter agreement dated June 28, 2001 between Bank of America, N.A., Banc of America Securities LLC and the Sponsors (other than those obligations contained in numbered paragraphs 2 and 6 thereof). 3. Representations of Assignee. The Assignee hereby reaffirms the representations and warranties set forth in Section 6 of the Credit Agreement. 4. Notices to Assignee. The address of the Assignee for purposes of all notices and other communications is as set forth in Section 11.1 of the Credit Agreement. 5. No Modifications. Except as expressly provided for herein, nothing contained in this Assignment shall amend or modify, or be deemed to amend or modify, the Credit Agreement or any other Credit Document. 6. Governing Law. This Assignment and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the state of New York. 7. Counterparts. This Assignment may be executed in several counterparts, each of which shall be deemed an original, and all such counterparts shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have duly executed this Assignment as of the date set forth above. ASSIGNOR: INSIGHT HEALTH SERVICES ACQUISITION CORP., a Delaware corporation By: ----------------------------------------- Name: ----------------------------------- Title: ----------------------------------- ASSIGNEE: INSIGHT HEALTH SERVICES CORP., a Delaware corporation By: ----------------------------------------- Name: ----------------------------------- Title: ----------------------------------- ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A., as Administrative Agent By: ----------------------------------------- Name: ----------------------------------- Title: -----------------------------------
2 EXHIBIT 1.1B FORM OF INSIGHT ACQUISITION NOTE $___________ October 17, 2001 FOR VALUE RECEIVED, INSIGHT HEALTH SERVICES ACQUISITION CORP., a Delaware corporation ("InSight Acquisition"), hereby promises to pay to the order of BANK OF AMERICA, N.A., as administrative agent (the "Administrative Agent") for, and for the benefit of, the lenders (the "Lenders") party to the Credit Agreement dated as of the date hereof among InSight Acquisition, the Guarantors, the Lenders, The CIT Group/Business Credit, Inc., as Documentation Agent, First Union National Bank, as Syndication Agent, and the Administrative Agent (as it may be amended, modified, restated or supplemented from time to time, the "Credit Agreement"; all capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement), at the office of Bank of America, N. A. at 101 North Tryon Street, Independence Center, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the holder hereof may designate), ON DEMAND, in Dollars and in immediately available funds, the principal amount of _____________ MILLION DOLLARS ($____________) or, if less than such principal amount, the aggregate unpaid principal amount of all Revolving Loans, Delayed-Draw Term Loans and Tranche B Term Loans made by the Administrative Agent (or any Lender) to InSight Acquisition pursuant to the Credit Agreement, and to pay interest on the unpaid principal amount hereof from time to time outstanding, in like money, at said office, ON DEMAND and at the rates selected in accordance with the Credit Agreement. This Note shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, InSight Acquisition has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written. INSIGHT HEALTH SERVICES ACQUISITION CORP. By: ------------------------ Name: ---------------------- Title: --------------------- EXHIBIT 1.1C FORM OF PLEDGE AGREEMENT THIS PLEDGE AGREEMENT (this "Pledge Agreement") is entered into as of October 17, 2001 among INSIGHT HEALTH SERVICES CORP., a Delaware corporation (the "Borrower"), INSIGHT HEALTH SERVICES HOLDINGS CORP., a Delaware corporation (the "Parent") and certain Subsidiaries of the Borrower (individually a "Guarantor", and collectively the "Guarantors"; together with the Borrower, individually a "Obligor", and collectively the "Obligors") and BANK OF AMERICA, N.A., in its capacity as administrative agent (in such capacity, the "Administrative Agent") for the lenders from time to time party to the Credit Agreement described below (the "Lenders"). RECITALS WHEREAS, pursuant to that certain Credit Agreement dated as of the date hereof (as amended, modified, extended, renewed or replaced from time to time, the "Credit Agreement") among the Borrower, the Guarantors, the Lenders, the Administrative Agent, The CIT Group/Business Credit, Inc., as Documentation Agent, and First Union National Bank, as Syndication Agent, the Lenders have agreed to make Loans and issue Letters of Credit upon the terms and subject to the conditions set forth therein; and WHEREAS, it is a condition precedent to the effectiveness of the Credit Agreement and the obligations of the Lenders to make their respective Loans and to issue Letters of Credit under the Credit Agreement that the Obligors shall have executed and delivered this Pledge Agreement to the Administrative Agent for the ratable benefit of the Lenders. NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement. For purposes of this Pledge Agreement, the term "Lender" shall include any Affiliate of any Lender which has entered into a Hedging Agreement with any Credit Party. 2. Pledge and Grant of Security Interest. To secure the prompt payment and performance in full when due, whether by lapse of time or otherwise, of the Obligor Obligations (as defined in Section 3 hereof), each Obligor hereby pledges to the Administrative Agent, for the benefit of the Lenders, and grants to the Administrative Agent, for the benefit of the Lenders, a continuing security interest in any and all right, title and interest of such Obligor in and to the following, whether now owned or existing or owned, acquired, or arising hereafter (collectively, the "Pledged Collateral"): (a) Pledged Shares. (i) 100% (or, if less, the full amount owned by such Obligor) of the issued and outstanding shares of Capital Stock owned by such Obligor of the Borrower set forth on Schedule 2(a) attached hereto and (ii) 100% (or, if less, the full amount owned by such Obligor) of the issued and outstanding shares of Capital Stock owned by such Obligor of each Domestic Subsidiary set forth on Schedule 2(a) attached hereto, in each case together with the certificates (or other agreements or instruments), if any, representing such shares, and all options and other rights, contractual or otherwise, with respect thereto (collectively, together with the shares of Capital Stock described in Section 2(b) and 2(c) below, the "Pledged Shares"), including, but not limited to, the following: (y) all shares or securities representing a dividend on any of the Pledged Shares, or representing a distribution or return of capital upon or in respect of the Pledged Shares, or resulting from a stock split, revision, reclassification or other exchange therefor, and any subscriptions, warrants, rights or options issued to the holder of, or otherwise in respect of, the Pledged Shares; and (z) without affecting the obligations of the Obligors under any provision prohibiting such action hereunder or under the Credit Agreement, in the event of any consolidation or merger involving the issuer of any Pledged Shares and in which such issuer is not the surviving corporation, all shares of each class of the Capital Stock of the successor corporation formed by or resulting from such consolidation or merger. (b) Additional Shares. (i) 100% (or, if less, the full amount owned by such Obligor) of the issued and outstanding shares of Capital Stock owned by such Obligor of any Person which hereafter becomes a Wholly-Owned Subsidiary (other than a Foreign Subsidiary or a Subsidiary which is an Unrestricted Joint Venture), and (ii) 65% (or such greater percentage that, due to a change in an applicable Requirement of Law after the date hereof, (i) could not reasonably be expected to cause the undistributed earnings of such Foreign Subsidiary as determined for United States federal income tax purposes to be treated as a deemed dividend to such Foreign Subsidiary's United States parent and (ii) could not reasonably be expected to cause any material adverse tax consequences) of the issued and outstanding shares of each class of Capital Stock or other ownership interests entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% (or, if less, the full amount owned by such Obligor) of the issued and outstanding shares of each class of Capital Stock or other ownership interests not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) owned by such Obligor of each Foreign Subsidiary (provided, however, that in no event shall the aggregate value of the Capital Stock of a Foreign Subsidiary pledged hereunder exceed 80%), including, without limitation, the certificates representing such shares. (c) Other Equity Interests. To the extent permitted under such Person's organizational or governing documents, 100% (or, if less, the full amount owned by such 2 Obligor) of the issued and outstanding shares of Capital Stock owned by such Obligor in each Joint Venture which is not an Unrestricted Joint Venture. (d) Proceeds. All proceeds of the foregoing, however and whenever acquired and in whatever form. Without limiting the generality of the foregoing, it is hereby specifically understood and agreed that an Obligor may from time to time hereafter deliver additional shares of stock to the Administrative Agent as collateral security for the Obligor Obligations. Upon delivery to the Administrative Agent, such additional shares of stock shall be deemed to be part of the Pledged Collateral of such Obligor and shall be subject to the terms of this Pledge Agreement whether or not Schedule 2(a) is amended to refer to such additional shares. 3. Security for Obligor Obligations. The security interest created hereby in the Pledged Collateral of each Obligor constitutes continuing collateral security for all of the Credit Party Obligations, now existing or hereafter arising pursuant to the Credit Documents, owing from the Borrower or any other Credit Party to any Lender, any Affiliate of a Lender or the Administrative Agent, howsoever evidenced, created, incurred or acquired, whether primary, secondary, direct, contingent, or joint and several, including, without limitation, all liabilities arising under Hedging Agreements and all obligations and liabilities incurred in connection with collecting and enforcing the foregoing (collectively, the "Obligor Obligations"). 4. Delivery of the Pledged Collateral. Each Obligor hereby agrees that: (a) Each Obligor shall deliver to the Administrative Agent (i) simultaneously with or prior to the execution and delivery of this Pledge Agreement, all certificates representing Pledged Shares to be pledged by such Obligor hereunder and (ii) promptly upon the receipt thereof by or on behalf of an Obligor, all other certificates and instruments constituting Pledged Collateral to be pledged by such Obligor hereunder. Prior to delivery to the Administrative Agent, all such certificates and instruments constituting Pledged Collateral to be pledged by such Obligor hereunder shall be held in trust by such Obligor for the benefit of the Administrative Agent pursuant hereto. All such certificates shall be delivered in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, substantially in the form provided in Exhibit 4(a) attached hereto. (b) Additional Securities. If such Obligor shall receive by virtue of its being or having been the owner of any Pledged Collateral, any (i) stock certificate, including without limitation, any certificate representing a stock dividend or distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock splits, spin-off or split-off, promissory notes or other instrument; (ii) option or right, whether as an addition to, substitution for, or an exchange for, any Pledged Collateral or otherwise; (iii) dividends payable in securities; or (iv) distributions of securities in connection with a partial or total liquidation, dissolution or reduction of capital, capital surplus or paid-in surplus, then such Obligor shall receive such stock certificate, instrument, option, right or distribution 3 in trust for the benefit of the Administrative Agent, shall segregate it from such Obligor's other property and shall deliver it forthwith to the Administrative Agent in the exact form received together with any necessary endorsement and/or appropriate stock power duly executed in blank, substantially in the form provided in Exhibit 4(a), to be held by the Administrative Agent as Pledged Collateral and as further collateral security for the Obligor Obligations. (c) Financing Statements. Each Obligor shall execute and deliver to the Administrative Agent such UCC or other applicable financing statements as may be reasonably requested by the Administrative Agent in order to perfect and protect the security interest created hereby in the Pledged Collateral to be pledged by such Obligor hereunder. 5. Representations and Warranties. Each Obligor hereby represents and warrants to the Administrative Agent, for the benefit of the Lenders, that until such time as the Credit Party Obligations are Fully Satisfied: (a) Authorization of Pledged Shares. The Pledged Shares are duly authorized and validly issued, are fully paid and nonassessable and the issuance thereof did not violate the preemptive rights of any Person. All other shares of stock constituting Pledged Collateral will be duly authorized and validly issued, fully paid and nonassessable and the issuance thereof will not violate the preemptive rights of any Person. (b) Title. Each Obligor has good and indefeasible title to the Pledged Collateral pledged by such Obligor hereunder and will at all times be the legal and beneficial owner of such Pledged Collateral free and clear of any Lien, other than Permitted Liens. To the knowledge of such Obligor, there exists no "adverse claim" within the meaning of Section 8-302 of the Uniform Commercial Code as in effect in the State of New York as of the date hereof (the "UCC") with respect to the Pledged Shares of such Obligor. (c) Exercising of Rights. The exercise by the Administrative Agent of its rights and remedies hereunder will not violate any law or governmental regulation in effect on the date of this Pledge Agreement or any material contractual restriction binding on or affecting an Obligor or any of its property. (d) Legal Name and Location of Obligor. Such Obligor's exact legal name is as shown in this Pledge Agreement. Each Obligor's state of formation, chief executive office and chief place of business are (and for the four months prior to the Closing Date have been) located at the locations set forth on Schedule 6.20(c) to the Credit Agreement, and each Obligor keeps its books and records at such locations. Except in connection with the Transaction, no Obligor has in the past four months changed its name, been party to a merger, consolidation or other change in structure or used any tradename except as set forth in Schedule 5(d) attached hereto. 4 (e) Obligor's Authority. No authorization, approval or action by, and no notice or filing with any Governmental Authority or with the issuer of any Pledged Shares (other than that which has been obtained) is required either (i) for the pledge made by an Obligor or for the granting of the security interest by an Obligor pursuant to this Pledge Agreement or (ii) for the exercise by the Administrative Agent or the Lenders of their rights and remedies hereunder (except as may be required by laws affecting the offering and sale of securities). (f) Security Interest/Priority. This Pledge Agreement creates a valid security interest in favor of the Administrative Agent for the benefit of the Lenders, in the Pledged Collateral. The taking possession by the Administrative Agent of the certificates representing any certificated Pledged Shares and all other certificates and instruments constituting Pledged Collateral will perfect and establish the first priority of the Administrative Agent's security interest in such Pledged Shares and, when properly perfected by filing or registration, in all other Pledged Collateral securing the Obligor Obligations. Except as set forth in this Section 5(f), no action is necessary to perfect or otherwise protect such security interest. (g) No Other Shares. As of the Closing Date, no Obligor owns any shares of Capital Stock in any Wholly-Owned Subsidiary other than as set forth on Schedule 2(a) attached hereto. 6. Covenants. Each Obligor hereby covenants that until such time as the Credit Party Obligations are Fully Satisfied such Obligor shall: (a) Defense of Title. Warrant and defend title to and ownership of the Pledged Collateral of such Obligor at its own expense against the claims and demands of all other parties claiming an interest therein, keep the Pledged Collateral free from all Liens, except for Permitted Liens, and not sell, exchange, transfer, assign, lease or otherwise dispose of Pledged Collateral of such Obligor or any interest therein, except as permitted under the Credit Agreement and the other Credit Documents. (b) Further Assurances. Each Obligor hereby authorizes the Administrative Agent to prepare and file such financing statements (including renewal statements) or amendments thereof or supplements thereto or other instruments as the Administrative Agent may from time to time reasonably deem necessary or appropriate in order to perfect and maintain the security interests granted hereunder in accordance with the UCC. Each Obligor shall promptly execute and deliver at its expense all further instruments and documents and take all further action that may be reasonably necessary and desirable or that the Administrative Agent may reasonably request in order to (i) perfect and protect the security interest created hereby in the Pledged Collateral of such Obligor (including without limitation any and all action necessary to reasonably satisfy the Administrative Agent that the Administrative Agent has obtained a first priority perfected security interest in any Capital Stock); (ii) enable the Administrative Agent to exercise and enforce its rights and remedies hereunder in respect of the Pledged Collateral of such Obligor; and (iii) otherwise effect the purposes of this Pledge Agreement, including, 5 without limitation and if requested by the Administrative Agent, delivering to the Administrative Agent irrevocable proxies in respect of the Pledged Collateral of such Obligor. (c) Amendments. Not make or consent to any amendment or other modification or waiver with respect to any of the Pledged Collateral of such Obligor or enter into any agreement or allow to exist any restriction with respect to any of the Pledged Collateral of such Obligor other than pursuant hereto or as not prohibited by the Credit Agreement. (d) Compliance with Securities Laws. File all reports and other information now or hereafter required to be filed by such Obligor with the United States Securities and Exchange Commission and any other Governmental Authority in connection with the ownership of the Pledged Collateral of such Obligor. 7. Advances by Lenders. On failure of any Obligor to perform any of the covenants and agreements contained herein and upon written notice to such Obligor, the Administrative Agent may, at its sole option and in its sole discretion, perform the same and in so doing may expend such sums as the Administrative Agent may reasonably deem advisable in the performance thereof, including, without limitation, the payment of any taxes, a payment to obtain a release of a Lien or potential Lien, expenditures made in defending against any adverse claim and all other expenditures which the Administrative Agent or the Lenders may make for the protection of the security hereof or which may be compelled to make by operation of law. All such sums and amounts so expended shall be repayable by the Obligors on a joint and several basis promptly upon timely notice thereof and demand therefor, shall constitute additional Obligor Obligations and shall bear interest from the date said amounts are expended until the date five Business Days thereafter at the rate for Revolving Loans that are Base Rate Loans, and thereafter at the default rate specified in Section 3.1 of the Credit Agreement for Revolving Loans that are Base Rate Loans. No such performance of any covenant or agreement by the Administrative Agent or the Lenders on behalf of any Obligor, and no such advance or expenditure therefor, shall relieve the Obligors of any Default or Event of Default. The Lenders may make any payment hereby authorized in accordance with any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien, title or claim except to the extent such payment is being contested in good faith by an Obligor in appropriate proceedings in a manner which stays payment thereof and against which adequate reserves are being maintained in accordance with GAAP. 8. Events of Default. The occurrence of an event which under the Credit Agreement would constitute an Event of Default shall be an Event of Default hereunder (an "Event of Default"). 9. Remedies. (a) General Remedies. Upon the occurrence of an Event of Default and during the continuation thereof, the Administrative Agent and the Lenders shall have, in respect of the Pledged Collateral of any Obligor, in addition to levy of attachment, 6 garnishment and the rights and remedies provided herein, in the Credit Documents, in the Hedging Agreements between any Obligor and any Lender, or any Affiliate of a Lender, or by law, the rights and remedies of a secured party under the UCC or any other applicable law. (b) Sale of Pledged Collateral. Upon the occurrence of an Event of Default and during the continuation thereof, without limiting the generality of this Section and without notice, the Administrative Agent may, in its sole discretion, sell or otherwise dispose of or realize upon the Pledged Collateral, or any part thereof, in one or more parcels, at public or private sale, at any exchange or broker's board or elsewhere, at such price or prices and on such other terms as are commercially reasonable, for cash, credit or for future delivery or otherwise in accordance with applicable law. To the extent permitted by law, any Lender may in such event, bid for the purchase of such securities. Each Obligor agrees that, to the extent notice of sale shall be required by law and has not been waived by such Obligor, any requirement of reasonable notice shall be met if notice, specifying the place of any public sale or the time after which any private sale is to be made, is personally served on or mailed, postage prepaid, to such Obligor, in accordance with the notice provisions of Section 11.1 of the Credit Agreement at least 10 days before the time of such sale. The Administrative Agent shall not be obligated to make any sale of Pledged Collateral of such Obligor regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (c) Private Sale. Upon the occurrence of an Event of Default and during the continuation thereof, the Obligors recognize that the Administrative Agent may deem it impracticable to effect a public sale of all or any part of the Pledged Shares or any of the securities constituting Pledged Collateral and that the Administrative Agent may, therefore, determine to make one or more private sales of any such securities to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof. Each Obligor acknowledges that any such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have been obtained at a public sale and, notwithstanding the foregoing, agrees that such private sale shall be deemed to have been made in a commercially reasonable manner and that the Administrative Agent shall have no obligation to delay sale of any such securities for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act. Each Obligor further acknowledges and agrees that any offer to sell such securities which has been (i) publicly advertised on a bona fide basis in a newspaper or other publication of general circulation in the financial community of New York, New York (to the extent that such offer may be advertised without prior registration under the Securities Act), or (ii) made privately in the manner described above shall be deemed to involve a "public sale" under the UCC, notwithstanding that such sale may not constitute a "public offering" under the Securities Act, and the Administrative Agent may, in such event, bid for the purchase of such securities. 7 (d) Retention of Pledged Collateral. In addition to the rights and remedies hereunder, upon the occurrence and during the continuance of an Event of Default the Administrative Agent shall have the rights afforded to a secured party under Sections 9-620 and 9-621 (or similar provision) of the UCC. The Administrative Agent shall not be deemed to have retained any Pledged Collateral pledged by any Obligor in satisfaction of any Obligor Obligations unless and until the Administrative Agent shall have entered into a written agreement with such Obligor to that effect. (e) Deficiency. In the event that the proceeds of any sale, collection or realization are insufficient to pay all amounts to which the Administrative Agent or the Lenders are legally entitled, the Obligors shall be jointly and severally liable for the deficiency, together with interest thereon at the default rate specified in Section 3.1 of the Credit Agreement for Revolving Loans that are Base Rate Loans, together with the costs of collection and the reasonable fees of any attorneys employed by the Administrative Agent to collect such deficiency. Any surplus remaining after the full payment and satisfaction of the Obligor Obligations shall be returned to the Obligors or to whomsoever a court of competent jurisdiction shall determine to be entitled thereto. 10. Rights of the Administrative Agent. (a) Power of Attorney. In addition to other powers of attorney contained herein, each Obligor hereby designates and appoints the Administrative Agent, on behalf of the Lenders, and each of its designees or agents as attorney-in-fact of such Obligor, irrevocably and with power of substitution, with authority to take any or all of the following actions upon the occurrence and during the continuance of an Event of Default: (i) to demand, collect, settle, compromise, adjust and give discharges and releases concerning the Pledged Collateral pledged by such Obligor hereunder, all as the Administrative Agent may reasonably determine; (ii) to commence and prosecute any actions at any court for the purposes of collecting any of the Pledged Collateral pledged by such Obligor hereunder and enforcing any other right in respect thereof; (iii) to defend, settle or compromise any action brought and, in connection therewith, give such discharge or release as the Administrative Agent may deem reasonably appropriate; (iv) to pay or discharge taxes, liens, security interests, or other encumbrances levied or placed on or threatened against the Pledged Collateral pledged by such Obligor hereunder; (v) to direct any parties liable for any payment under any of the Pledged Collateral to make payment of any and all monies due 8 and to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (vi) to receive payment of and receipt for any and all monies, claims, and other amounts due and to become due at any time in respect of or arising out of any Pledged Collateral pledged by such Obligor hereunder; (vii) to sign and endorse any drafts, assignments, proxies, stock powers, verifications, notices and other documents relating to the Pledged Collateral pledged by such Obligor hereunder; (viii) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem reasonably appropriate; (ix) execute and deliver all assignments, conveyances, statements, financing statements, renewal financing statements, pledge agreements, affidavits, notices and other agreements, instruments and documents that the Administrative Agent may reasonably determine necessary in order to perfect and maintain the security interests and liens granted in this Pledge Agreement and in order to fully consummate all of the transactions contemplated therein; (x) to exchange any of the Pledged Collateral pledged by such Obligor hereunder or other property upon any merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof and, in connection therewith, deposit any of the Pledged Collateral of such Obligor with any committee, depository, transfer agent, registrar or other designated agency upon such terms as the Administrative Agent may reasonably determine; (xi) to sign an instrument in writing, sanctioning the transfer of any or all of the Pledged Shares of such Obligor into the name of the Administrative Agent or one or more of the Lenders or into the name of any transferee to whom the Pledged Shares of such Obligor or any part thereof may be sold pursuant to Section 10 hereof; and (xii) to do and perform all such other acts and things as the Administrative Agent may reasonably deem to be necessary, proper or convenient in connection with the Pledged Collateral pledged by such Obligor hereunder to the extent permitted by applicable law and to effect the purposes of this Pledge Agreement. This power of attorney is a power coupled with an interest and shall be irrevocable for so long as any of the Credit Party Obligations are not Fully Satisfied. The Administrative Agent shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Administrative Agent in this Pledge Agreement, and shall not be liable for any failure to do so or any 9 delay in doing so. This power of attorney is conferred on the Administrative Agent solely to protect, preserve and realize upon its security interest in Pledged Collateral. (b) Performance by the Administrative Agent of Obligor's Obligations. If any Obligor fails to perform any agreement or obligation contained herein, the Administrative Agent itself may perform, or cause performance of, such agreement or obligation, and the expenses of the Administrative Agent incurred in connection therewith shall be payable by the Obligors on a joint and several basis pursuant to Section 13 hereof. (c) Assignment by the Administrative Agent. The Administrative Agent may from time to time assign the Obligor Obligations and the Pledged Collateral to any successor Administrative Agent appointed in accordance with Section 10.9 of the Credit Agreement, and the assignee shall be entitled to all of the rights and remedies of the Administrative Agent under this Pledge Agreement in relation thereto. (d) The Administrative Agent's Duty of Care. Other than the exercise of reasonable care to assure the safe custody of the Pledged Collateral while being held by the Administrative Agent hereunder, the Administrative Agent shall have no duty or liability to preserve rights pertaining thereto, it being understood and agreed that Obligors shall be responsible for preservation of all rights in the Pledged Collateral of such Obligor, and the Administrative Agent shall be relieved of all responsibility for Pledged Collateral upon surrendering it or tendering the surrender of it to the Obligors. The Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if such Pledged Collateral is accorded treatment substantially equal to that which the Administrative Agent accords its own property, which shall be no less than the treatment employed by a reasonable and prudent agent in the industry, it being understood that the Administrative Agent shall not have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Pledged Collateral, whether or not the Administrative Agent has or is deemed to have knowledge of such matters; or (ii) taking any necessary steps to preserve rights against any parties with respect to any Pledged Collateral. (e) Voting Rights in Respect of the Pledged Collateral. (i) Subject to clause (ii) below, to the extent permitted by law, each Obligor may exercise any and all voting and other consensual rights pertaining to the Pledged Collateral of such Obligor or any part thereof for any purpose not inconsistent with the terms of this Pledge Agreement or the Credit Agreement; and (ii) Upon the occurrence and during the continuance of an Event of Default, all rights of an Obligor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to clause (i) above shall upon written notice from the Administrative Agent stating its intention to exercise its rights under this Section 10(e)(ii) cease and all such rights shall thereupon 10 become vested in the Administrative Agent which shall then have the sole right to exercise such voting and other consensual rights. (f) Dividend Rights in Respect of the Pledged Collateral. (i) Subject to clause (ii) below, each Obligor may receive and retain any and all dividends (other than stock dividends and other dividends constituting Pledged Collateral which are addressed hereinabove) or interest paid in respect of the Pledged Collateral to the extent they are allowed under the Credit Agreement. (ii) Upon the occurrence and during the continuance of an Event of Default: (A) upon written notice from the Administrative Agent stating its intention to exercise its rights under Section 10(e)(ii), all rights of an Obligor to receive the dividends and interest payments which it would otherwise be authorized to receive and retain pursuant to clause (i) above shall cease and all such rights shall thereupon be vested in the Administrative Agent which shall then have the sole right to receive and hold as Pledged Collateral such dividends and interest payments; and (B) all dividends and interest payments which are received by an Obligor contrary to the provisions of paragraph (A) of this Section shall be received in trust for the benefit of the Administrative Agent, shall be segregated from other property or funds of such Obligor, and shall be forthwith paid over to the Administrative Agent as Pledged Collateral in the exact form received, to be held by the Administrative Agent as Pledged Collateral and as further collateral security for the Obligor Obligations. (g) Release of Pledged Collateral. The Administrative Agent may release any of the Pledged Collateral from this Pledge Agreement or may substitute any of the Pledged Collateral for other Pledged Collateral without altering, varying or diminishing in any way the force, effect, lien, pledge or security interest of this Pledge Agreement as to any Pledged Collateral not expressly released or substituted, and this Pledge Agreement shall continue as a first priority lien on all Pledged Collateral not expressly released or substituted. 11. Application of Proceeds. After acceleration of the Credit Party Obligations pursuant to Section 9.2 of the Credit Agreement, any payments in respect of the Obligor Obligations and any proceeds of any Pledged Collateral, when received by the Administrative Agent or any of the Lenders in cash or its equivalent, will be applied in reduction of the Obligor Obligations in the order set forth in Section 3.15(b) of the Credit Agreement, and each Obligor irrevocably waives the right to direct the application of such payments and proceeds. 12. Costs of Counsel. At all times hereafter, the Obligors agree to promptly pay upon demand any and all reasonable costs and expenses of the Administrative Agent or the Lenders, 11 (a) as required under Section 11.5 of the Credit Agreement and (b) as necessary to protect the Pledged Collateral or to exercise any rights or remedies under this Pledge Agreement or with respect to any Pledged Collateral. All of the foregoing costs and expenses shall constitute Obligor Obligations hereunder secured by the Pledged Collateral. 13. Continuing Agreement. (a) This Pledge Agreement shall be a continuing agreement in every respect and shall remain in full force and effect until such time as the Credit Party Obligations are Fully Satisfied. At such time as the Credit Party Obligations are Fully Satisfied, this Pledge Agreement shall be automatically terminated and the Administrative Agent and the Lenders shall, upon the request and at the expense of the Obligors, forthwith release all of its liens and security interests hereunder and shall execute and deliver all UCC termination statements and/or other documents reasonably requested by the Obligors evidencing such termination. Notwithstanding the foregoing all releases and indemnities provided hereunder shall survive termination of this Pledge Agreement. (b) This Pledge Agreement shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Obligor Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender as a preference, fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar law, all as though such payment had not been made; provided that in the event payment of all or any part of the Obligor Obligations is rescinded or must be restored or returned, all reasonable costs and expenses (including without limitation any reasonable legal fees and disbursements) incurred by the Administrative Agent or any Lender in defending and enforcing such reinstatement shall be deemed to be included as a part of the Obligor Obligations secured by the Pledged Collateral. 14. Amendments; Waivers; Modifications. This Pledge Agreement and the provisions hereof may not be amended, waived, modified, changed, discharged or terminated except as set forth in Section 11.6 of the Credit Agreement. 15. Successors in Interest. This Pledge Agreement shall create a continuing security interest in the Collateral and shall be binding upon each Obligor, its successors and assigns and shall inure, together with the rights and remedies of the Administrative Agent and the Lenders hereunder, to the benefit of the Administrative Agent and the Lenders and their successors and permitted assigns; provided, however, that none of the Obligors may assign its rights or delegate its duties hereunder without the prior written consent of each Lender or the Required Lenders, as required by the Credit Agreement. 16. Notices. All notices required or permitted to be given under this Pledge Agreement shall be in conformance with Section 11.1 of the Credit Agreement. 17. Counterparts. This Pledge Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of 12 which shall constitute one and the same instrument. It shall not be necessary in making proof of this Pledge Agreement to produce or account for more than one such counterpart. 18. Headings. The headings of the sections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Pledge Agreement. 19. Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial. THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The terms of Section 11.10 of the Credit Agreement are incorporated herein by reference, mutatis mutandis, and the parties hereto agree to such terms. 20. Severability. If any provision of this Pledge Agreement is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 21. Entirety. This Pledge Agreement, the other Credit Documents and the Hedging Agreements between any Obligor and any Lender, or any Affiliate of a Lender, represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents, the Hedging Agreements between any Obligor and any Lender, or any Affiliate of a Lender, or the transactions contemplated herein and therein. 22. Survival. All representations and warranties of the Obligors hereunder shall survive the execution and delivery of this Pledge Agreement, the other Credit Documents and the Hedging Agreements between any Obligor and any Lender, or any Affiliate of a Lender, the delivery of the Notes and the making of the Loans and the issuance of the Letters of Credit under the Credit Agreement. 23. Other Security. To the extent that any of the Obligor Obligations are now or hereafter secured by property other than the Pledged Collateral (including, without limitation, real and other personal property owned by an Obligor), or by a guarantee, endorsement or property of any other Person, then the Administrative Agent and the Lenders shall have the right to proceed against such other property, guarantee or endorsement upon the occurrence and during the continuance of any Event of Default, and the Administrative Agent and the Lenders have the right, in their sole discretion, to determine which rights, security, liens, security interests or remedies the Administrative Agent and the Lenders shall at any time pursue, relinquish, subordinate, modify or take with respect thereto, without in any way modifying or affecting any of them or any of the Administrative Agent's and the Lenders' rights or the Obligor Obligations under this Pledge Agreement, under any other of the Credit Documents or under any Hedging Agreement between any Obligor and any Lender, or any Affiliate of a Lender. 13 24. Joint and Several Obligations of Obligors. (a) Each of the Obligors is accepting joint and several liability hereunder in consideration of the financial accommodation to be provided by the Lenders under the Credit Agreement, for the mutual benefit, directly and indirectly, of each of the Obligors and in consideration of the undertakings of each of the Obligors to accept joint and several liability for the obligations of each of them. (b) Each of the Obligors jointly and severally hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Obligors with respect to the payment and performance of all of the Obligor Obligations arising under this Pledge Agreement, the other Credit Documents and the Hedging Agreements between any Obligor and any Lender, or any Affiliate of a Lender, it being the intention of the parties hereto that all the Obligor Obligations shall be the joint and several obligations of each of the Obligors without preferences or distinction among them. (c) Notwithstanding any provision to the contrary contained herein, in any other of the Credit Documents or in any Hedging Agreement between any Obligor and any Lender, or any Affiliate of a Lender, the obligations of each Guarantor under the Credit Agreement and the other Credit Documents shall be limited to an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under Section 548 of the Bankruptcy Code or any comparable provisions of any applicable state law. 25. Rights of Required Lenders. All rights of the Administrative Agent hereunder, if not exercised by the Administrative Agent, may be exercised by the Required Lenders, who shall give notice to the Obligors of any such exercise. [remainder of page intentionally left blank] 14 Each of the parties hereto has caused a counterpart of this Pledge Agreement to be duly executed and delivered as of the date first above written. BORROWER: INSIGHT HEALTH SERVICES CORP. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- GUARANTORS: INSIGHT HEALTH SERVICES HOLDINGS CORP. INSIGHT HEALTH CORP. OPEN MRI, INC. MAXUM HEALTH CORP. RADIOSURGERY CENTERS, INC. MAXUM HEALTH SERVICES CORP. DIAGNOSTIC SOLUTIONS CORP. MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. MAXUM HEALTH SERVICES OF DALLAS, INC. NDDC, INC. SIGNAL MEDICAL SERVICES, INC. MRI ASSOCIATES, L.P. By: ----------------------------------------- Name: -------------------------------------- Title: -------------------------------------
Accepted and agreed to as of the date first above written. BANK OF AMERICA, N.A., as Administrative Agent By: -------------------------------------------------- Name: ------------------------------------------------ Title: ----------------------------------------------- 15 Schedule 2(a) to Pledge Agreement dated as of October 17, 2001 in favor of Bank of America, N.A. as Administrative Agent PLEDGED SHARES OBLIGOR: <>
Name of Subsidiary Number of Shares Certificate Number Percentage Ownership - ------------------ ---------------- ------------------ -------------------- Subsidiaries
OBLIGOR:
Name of Subsidiary Number of Shares Certificate Number Percentage Ownership - ------------------ ---------------- ------------------ -------------------- Subsidiaries
16 SCHEDULE 5(d) MERGERS, CONSOLIDATIONS, CHANGE IN STRUCTURE OR USE OF TRADENAMES 17 Exhibit 4(a) to Pledge Agreement dated as of October 17, 2001 in favor of Bank of America, N.A. as Administrative Agent Irrevocable Stock Power FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to the following shares of Capital Stock of _____________________, a ____________ corporation:
No. of Shares Certificate No. ------------- ---------------
and irrevocably appoints __________________________________ its agent and attorney-in-fact to transfer all or any part of such Capital Stock and to take all necessary and appropriate action to effect any such transfer. The agent and attorney-in-fact may substitute and appoint one or more persons to act for him. The effectiveness of a transfer pursuant to this stock power shall be subject to any and all transfer restrictions referenced on the face of the certificates evidencing such interest or in the certificate of incorporation or bylaws of the subject corporation, to the extent they may from time to time exist. ----------------------------------------- By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 18 SCHEDULE 1.1F FORM OF SECURITY AGREEMENT THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as of October 17, 2001 among INSIGHT HEALTH SERVICES CORP., a Delaware corporation (the "Borrower"), INSIGHT HEALTH SERVICES HOLDINGS CORP., a Delaware corporation (the "Parent") and certain Subsidiaries of the Borrower (individually a "Guarantor" and collectively the "Guarantors"; together with the Borrower, individually an "Obligor", and collectively the "Obligors") and BANK OF AMERICA, N.A., in its capacity as administrative agent (in such capacity, the "Administrative Agent") for the lenders from time to time party to the Credit Agreement described below (the "Lenders"). RECITALS WHEREAS, pursuant to that certain Credit Agreement, dated as of the date hereof (as amended, modified, extended, renewed or replaced from time to time, the "Credit Agreement"), among the Borrower, the Guarantors, the Lenders, The CIT Group/Business Credit, Inc., as Documentation Agent, First Union National Bank, as Syndication Agent, and the Administrative Agent, the Lenders have agreed to make Loans and issue Letters of Credit upon the terms and subject to the conditions set forth therein; and WHEREAS, it is a condition precedent to the effectiveness of the Credit Agreement and the obligations of the Lenders to make their respective Loans and to issue Letters of Credit under the Credit Agreement that the Obligors shall have executed and delivered this Security Agreement to the Administrative Agent for the ratable benefit of the Lenders. NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Definitions. (a) Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement, and the following terms which are defined in the Uniform Commercial Code in effect in the State of New York on the date hereof are used herein as so defined: Accessions, Accounts, As-Extracted Collateral, Chattel Paper, Commercial Tort Claims, Consumer Goods, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Farm Products, Fixtures, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter-of-Credit Rights, Manufactured Homes, Proceeds, Software, Standing Timber, Supporting Obligation and Tangible Chattel Paper. For purposes of this Security Agreement, the term "Lender" shall include any Affiliate of any Lender which has entered into a Hedging Agreement with any Credit Party. (b) In addition, the following terms shall have the following meanings: "Copyright Licenses": any written or oral agreement, naming any Obligor as licensor or licensee, granting any right under any Copyright including, without limitation, any thereof referred to in Schedule 6.17 to the Credit Agreement. "Copyrights": (a) all registered United States copyrights in all Works, now existing or hereafter created or acquired, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, registrations, recordings and applications in the United States Copyright office including, without limitation, any thereof referred to in Schedule 6.17 to the Credit Agreement, and (b) all renewals thereof including, without limitation, any thereof referred to Schedule 6.17 to the Credit Agreement. "Patent License": all agreements, whether written or oral, providing for the grant by or to an Obligor of any right to manufacture, use or sell any invention covered by a Patent, including, without limitation, any thereof referred to in Schedule 6.17 to the Credit Agreement. "Patents": (a) all letters patent of the United States or any other country and all reissues and extensions thereof, including, without limitation, any thereof referred to in Schedule 6.17 to the Credit Agreement, and (b) all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, including, without limitation, any thereof referred to in Schedule 6.17 to the Credit Agreement. "Secured Obligations": the collective reference to all of the Credit Party Obligations, now existing or hereafter arising pursuant to the Credit Documents, owing from the Borrower or any other Credit Party to any Lender or the Administrative Agent, howsoever evidenced, created, incurred or acquired, whether primary, secondary, direct, contingent, or joint and several, including, without limitation, all liabilities arising under Hedging Agreements between any Obligor and any Lender and all obligations and liabilities incurred in connection with collecting and enforcing the foregoing. "Trademark License": means any agreement, written or oral, providing for the grant by or to an Obligor of any right to use any Trademark, including, without limitation, any thereof referred to in Schedule 6.17 to the Credit Agreement. "Trademarks": (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and the goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, including, without limitation, any thereof referred to in Schedule 6.17 to the Credit Agreement, and (b) all renewals thereof. 2 "Work": any work which is subject to copyright protection pursuant to Title 17 of the United States Code. 2. Grant of Security Interest in the Collateral. To secure the prompt payment and performance in full when due, whether by lapse of time, acceleration, mandatory prepayment or otherwise, of the Secured Obligations, each Obligor hereby grants to the Administrative Agent, for the benefit of the Lenders, a continuing security interest in, and a right to set off against, any and all right, title and interest of such Obligor in and to the personal property of the Obligors (to the extent not constituting Excluded Property), whether now owned or existing or owned, acquired, or arising hereafter, and wherever located (collectively, the "Collateral") including, without limitation, the following: (a) all Accounts; (b) all cash and Cash Equivalents; (c) all Chattel Paper; (d) those certain Commercial Tort Claims of the Obligors set forth on Schedule 2(d) attached hereto; (e) all Copyrights; (f) all Copyright Licenses; (g) all Deposit Accounts; (h) all Documents; (i) all Equipment; (j) all Fixtures; (k) all General Intangibles; (l) all Instruments; (m) all Inventory; (n) all Investment Property; (o) all Letter-of-Credit Rights; (p) all Patents; (q) all Patent Licenses; 3 (r) all Software; (s) all Supporting Obligations; (t) all Trademarks; (u) all Trademark Licenses; (v) all Accessions; and (w) Proceeds of any and all of the foregoing. The Obligors and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and agree that the security interest created hereby in the Collateral (i) constitutes continuing collateral security for all of the Secured Obligations, whether now existing or hereafter arising and (ii) is not to be construed as an assignment of any Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks or Trademark Licenses. 3. Provisions Relating to Accounts. Anything herein to the contrary notwithstanding, each of the Obligors shall remain liable under each of the Accounts to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to each such Account. Neither the Administrative Agent nor any Lender shall have any obligation or liability under any Account (or any agreement giving rise thereto) by reason of or arising out of this Security Agreement or the receipt by the Administrative Agent or any Lender of any payment relating to such Account pursuant hereto, nor shall the Administrative Agent or any Lender be obligated in any manner to perform any of the obligations of an Obligor under or pursuant to any Account (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Account (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. 4. Representations and Warranties. Each Obligor hereby represents and warrants to the Administrative Agent, for the benefit of the Lenders, that until such time as the Credit Party Obligations are Fully Satisfied: (a) Legal Name; Jurisdiction of Organization; Chief Executive Office; Books & Records. Each Obligor's exact legal name is as shown on this Security Agreement. Each Obligor's state of formation, chief executive office and chief place of business are (and for the four months prior to the Closing Date have been) located at the locations set forth on Schedule 6.20(c) to the Credit Agreement, and each Obligor keeps its books and records at such locations. Except in connection with the Transaction, no Obligor has in the past four months changed its name, been party to a merger, consolidation or other change in structure or used any tradename except as set forth in Schedule 4(a) attached hereto. 4 (b) Location of Collateral. The locations of all Collateral owned by each Obligor is as shown on Schedule 6.20(b) to the Credit Agreement. Set forth on Schedule 4(b) attached hereto is a list of all motor vehicles (including states of registration and vehicle identification numbers) owned as of the Closing Date which contain or are used to transport mobile MRI or other imaging equipment. (c) Ownership. Each Obligor is the legal and beneficial owner of the Collateral pledged by it hereunder and has the right to pledge, sell, assign or transfer the same. (d) Security Interest/Priority. This Security Agreement creates a valid security interest in favor of the Administrative Agent, for the benefit of the Lenders, in the Collateral pledged by such Obligor hereunder and, when properly perfected by filing, shall constitute a valid perfected security interest in such Collateral, to the extent such security can be perfected by filing under the UCC, free and clear of all Liens except for Permitted Liens. (e) Types of Collateral. None of the Collateral consists of, or is the Proceeds of, (i) As-Extracted Collateral, (ii) Consumer Goods, (iii) Farm Products, (iv) Manufactured Homes or (v) Standing Timber. (f) Accounts. (i) Each Account arises out of (A) a bona fide sale of goods sold and delivered by such Obligor (or is in the process of being delivered) or (B) services theretofore actually rendered by such Obligor to, the account debtor named therein, and (ii) no Account of an Obligor in excess of $25,000 is evidenced by any Instrument or Chattel Paper unless such Instrument or Chattel Paper has been theretofore endorsed over and delivered to, or submitted to the control of, the Administrative Agent. (g) Inventory. No Inventory is held by an Obligor pursuant to consignment, sale or return, sale on approval or similar arrangement. (h) Copyrights, Patents and Trademarks. (i) Schedule 6.17 to the Credit Agreement includes all Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks and Trademark Licenses owned by the Obligors in their own names as of the date hereof. (ii) To the best of each Obligor's knowledge, each Copyright, Patent and Trademark of such Obligor is valid, subsisting, unexpired, enforceable and has not been abandoned except as otherwise permitted under the Credit Agreement. (iii) None of such Copyrights, Patents and Trademarks is the subject of any licensing or franchise agreement. 5. Covenants. Each Obligor covenants that until such time as the Credit Party Obligations are Fully Satisfied such Obligor shall: 5 (a) Other Liens. Defend the Collateral against the claims and demands of all other parties claiming an interest therein, keep the Collateral free from all Liens, except for Permitted Liens, and not sell, exchange, transfer, assign, lease or otherwise dispose of the Collateral or any interest therein, except as permitted under the Credit Agreement. (b) Instruments/Chattel Paper. If any amount in excess of $25,000 payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument or Tangible Chattel Paper, or if any property constituting Collateral in excess of $25,000 shall be stored or shipped subject to a Document, ensure that such Instrument, Tangible Chattel Paper or Document is either in the possession of such Obligor at all times or, if requested by the Administrative Agent to perfect its security interest in such Collateral, is delivered to the Administrative Agent duly indorsed in a manner reasonably satisfactory to the Administrative Agent. Such Obligor shall ensure that any Collateral consisting of Tangible Chattel Paper is marked with a legend reasonably acceptable to the Administrative Agent indicating the Administrative Agent's security interest in such Tangible Chattel Paper. (c) Change in Corporate Structure or Location. Not, without providing 10 days prior written notice to the Administrative Agent and without filing such amendments to any previously filed financing statements as the Administrative Agent may reasonably require, (i) change its registered legal name, be party to a merger, consolidation or other change in structure or use any tradename other than as set forth on Schedule 4(a) hereto, (ii) in the case of any Obligor that is not a "registered organization" as described in Section 9-307 of the UCC, change the location of its chief executive office and chief place of business (as well as its books and records) from the locations set forth on Schedule 6.20(c) to the Credit Agreement, or (iii) prior to January 1, 2002, change the location of its chief executive office and chief place of business (as well as its books and records) from the locations set forth on Schedule 6.20(c) to the Credit Agreement or change the location of its Collateral (other than mobile imaging units) from the locations set forth for such Obligor on Schedule 6.20(b) to the Credit Agreement, in either case, to a location in Alabama, Florida or Mississippi where the Administrative Agent has not filed appropriate UCC-1 financing statements. (d) Filing of Financing Statements, Notices, etc. Each Obligor hereby authorizes the Administrative Agent to prepare and file such financing statements (including renewal statements) or amendments thereof or supplements thereto or other instruments as the Administrative Agent may reasonably from time to time, deem necessary or appropriate in order to perfect and maintain the security interests granted hereunder in accordance with the UCC. Each Obligor shall also execute and deliver to the Administrative Agent such agreements, assignments or instruments (including affidavits, notices, reaffirmations and amendments and restatements of existing documents, as the Administrative Agent may reasonably request) and do all such other things as the Administrative Agent may reasonably deem necessary or appropriate (i) to assure to the Administrative Agent its security interests hereunder, including (A) such financing statements (including renewal statements) or amendments thereof or supplements thereto or other instruments as the Administrative Agent may from time to time reasonably request in order to perfect and maintain the security interests granted hereunder in accordance with the UCC, (B) with regard to 6 Copyrights, a Notice of Grant of Security Interest in Copyrights in the form of Schedule 5(d)(i), (C) with regard to Patents, a Notice of Grant of Security Interest in Patents for filing with the United States Patent and Trademark Office in the form of Schedule 5(d)(ii) attached hereto and (D) with regard to Trademarks, a Notice of Grant of Security Interest in Trademarks for filing with the United States Patent and Trademark Office in the form of Schedule 5(d)(iii) attached hereto, (ii) to consummate the transactions contemplated hereby and (iii) to otherwise protect and assure the Administrative Agent of its rights and interests hereunder. To that end, each Obligor agrees that the Administrative Agent may file one or more financing statements disclosing the Administrative Agent's security interest in any or all of the Collateral of such Obligor without, to the extent permitted by law, such Obligor's signature thereon, and further each Obligor also hereby irrevocably makes, constitutes and appoints the Administrative Agent, its nominee or any other person whom the Administrative Agent may designate, as such Obligor's attorney in fact with full power and for the limited purpose to sign in the name of such Obligor any such financing statements, or amendments and supplements to financing statements, renewal financing statements, notices or any similar documents which in the Administrative Agent's reasonable discretion would be necessary, appropriate or convenient in order to perfect and maintain perfection of the security interests granted hereunder, such power, being coupled with an interest, being and remaining irrevocable until the Credit Party Obligations are Fully Satisfied. Each Obligor hereby agrees that a carbon, photographic or other reproduction of this Security Agreement or any such financing statement is sufficient for filing as a financing statement by the Administrative Agent without notice thereof to such Obligor wherever the Administrative Agent may in its sole discretion desire to file the same. In the event for any reason the law of any jurisdiction other than New York becomes or is applicable to the Collateral of any Obligor or any part thereof, or to any of the Secured Obligations, such Obligor agrees to execute and deliver all such instruments and to do all such other things as the Administrative Agent reasonably deems necessary or appropriate to preserve, protect and enforce the security interests of the Administrative Agent under the law of such other jurisdiction (and, if an Obligor shall fail to do so promptly upon the request of the Administrative Agent, then the Administrative Agent may execute any and all such requested documents on behalf of such Obligor pursuant to the power of attorney granted hereinabove). Each Obligor agrees to mark its books and records to reflect the security interest of the Administrative Agent in the Collateral. (e) Control. Each Obligor shall execute and deliver all agreements, assignments, instruments or other documents as reasonably requested by the Administrative Agent for the purpose of obtaining and maintaining control within the meaning of the UCC with respect to any Collateral consisting of (i) Deposit Accounts, except to the extent constituting Retained Rights, (ii) Investment Property, (iii) Letter-of-Credit Rights, and (iv) Electronic Chattel Paper. (f) Collateral Held by Warehouseman, Bailee, etc. If any Collateral is at any time in the possession or control of a warehouseman, bailee or any agent or processor of such Obligor and the Administrative Agent so requests (i) notify such Person in writing of the Administrative Agent's security interest therein, (ii) instruct such Person to hold all such Collateral for the Administrative Agent's account and subject to the Administrative Agent's 7 instructions and (iii) request a written acknowledgment from such Person that it is holding such Collateral for the benefit of the Administrative Agent. (g) Covenants Relating to Copyrights. (i) Employ the Copyright for each Work with such notice of copyright as may be required by law to secure copyright protection. (ii) Except to the extent the failure to do so would not reasonably be expected to have a Material Adverse Effect and such Obligor has a valid business purpose therefor, not do any act or knowingly omit to do any act whereby any material Copyright may become invalidated and (A) not do any act, or knowingly omit to do any act, whereby any material Copyright may become injected into the public domain; (B) notify the Administrative Agent immediately if it knows, or has reason to know, that any material Copyright may become injected into the public domain or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any court or tribunal in the United States or any other country) regarding an Obligor's ownership of any such Copyright or its validity; (C) take all necessary steps as it shall deem appropriate under the circumstances, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of each material Copyright owned by an Obligor including, without limitation, filing of applications for renewal where necessary; and (D) promptly notify the Administrative Agent of any material infringement of any material Copyright of an Obligor of which it becomes aware and take such actions as it shall reasonably deem appropriate under the circumstances to protect such Copyright, including, where appropriate, the bringing of suit for infringement, seeking injunctive relief and seeking to recover any and all damages for such infringement. (h) Covenants Relating to Patents and Trademarks. (i) Except to the extent the failure to do so would not reasonably be expected to have a Material Adverse Effect and such Obligor has a valid business purpose therefor, (A) continue to use each Trademark on each and every trademark class of goods applicable to its current line as reflected in its current catalogs, brochures and price lists in order to maintain such Trademark in full force free from any claim of abandonment for non-use, (B) maintain as in the past the quality of products and services offered under such Trademark, (C) employ such Trademark with the appropriate notice of registration, (D) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless the Administrative Agent, for the ratable benefit of the Lenders, shall obtain a perfected security interest in such mark pursuant to this Security Agreement, and (E) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any Trademark may become invalidated. 8 (ii) Except to the extent the failure to do so would not reasonably be expected to have a Material Adverse Effect and such Obligor has a valid business purpose therefor, not do any act, or omit to do any act, whereby any Patent may become abandoned or dedicated. (iii) Notify the Administrative Agent and the Lenders immediately if it knows, or has reason to know, that any application or registration relating to any material Patent or Trademark may become abandoned or dedicated, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office or any court or tribunal in any country) regarding an Obligor's ownership of any material Patent or Trademark or its right to register the same or to keep and maintain the same. (iv) Take all reasonable and necessary steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office, or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of the material Patents and Trademarks, including, without limitation, filing of applications for renewal, affidavits of use and affidavits of incontestability. (v) Promptly notify the Administrative Agent and the Lenders after it learns that any material Patent or Trademark included in the Collateral is infringed, misappropriated or diluted by a third party and promptly sue for infringement, misappropriation or dilution, to seek injunctive relief where appropriate and to recover any and all damages for such infringement, misappropriation or dilution, or take such other actions as it shall reasonably deem appropriate under the circumstances to protect such Patent or Trademark. (i) New Patents, Copyrights and Trademarks. Whenever an Obligor, either by itself or through an agent, employee, licensee or designee, shall file an application for the registration of any Patent, Trademark or Copyright with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, promptly provide the Administrative Agent with (i) a listing of all such applications (together with a listing of the issuance of registrations or letters on present applications), which new applications and issued registrations or letters shall be subject to the terms and conditions hereunder, and (ii)(A) with respect to Copyrights, a duly executed Notice of Security Interest in Copyrights, (B) with respect to Patents, a duly executed Notice of Security Interest in Patents, (C) with respect to Trademarks, a duly executed Notice of Security Interest in Trademarks or (D) such other duly executed documents as the Administrative Agent may request in a form acceptable to counsel for the Administrative Agent and suitable for recording to evidence the security interest in the Copyright, Patent or Trademark which is the subject of such new application. 9 (j) Commercial Tort Claims; Notice of Litigation. (i) Promptly forward to the Administrative Agent written notification of any and all Commercial Tort Claims involving amounts in excess of $25,000, including, but not limited to, any and all actions, suits, and proceedings before any court or Governmental Authority by or affecting such Obligor or any of its Subsidiaries and (ii) execute and deliver such statements, documents and notices and do and cause to be done all such things as may be reasonably required by the Administrative Agent, or required by law, including all things which may from time to time be necessary under the UCC to fully create, preserve, perfect and protect the priority of the Administrative Agent's security interest in any Commercial Tort Claims. (k) At all times maintain the Collateral as personal property and not affix any of the Collateral to any real property in a manner which would change its nature from personal property to real property or a Fixture to real property unless the Administrative Agent has a perfected Lien thereon. 6. Advances by Lenders. On failure of any Obligor to perform any of the covenants and agreements contained herein and upon written notice to such Obligor, the Administrative Agent may, at its sole option and in its sole discretion, perform the same and in so doing may expend such sums as the Administrative Agent may reasonably deem advisable in the performance thereof, including, without limitation, the payment of any insurance premiums, the payment of any taxes, a payment to obtain a release of a Lien or potential Lien, expenditures made in defending against any adverse claim and all other expenditures which the Administrative Agent or the Lenders may make for the protection of the security hereof or which may be compelled to make by operation of law. All such sums and amounts so expended shall be repayable by the Obligors on a joint and several basis promptly upon timely notice thereof and demand therefor, shall constitute additional Secured Obligations and shall bear interest from the date said amounts are expended until the date five Business Days thereafter at the rate for Revolving Loans that are Base Rate Loans, and thereafter at the default rate specified in Section 3.1 of the Credit Agreement for Revolving Loans that are Base Rate Loans. No such performance of any covenant or agreement by the Administrative Agent or the Lenders on behalf of any Obligor, and no such advance or expenditure therefor, shall relieve the Obligors of any Default or Event of Default. The Lenders may make any payment hereby authorized in accordance with any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien, title or claim except to the extent such payment is being contested in good faith by an Obligor in appropriate proceedings in a manner which stays payment thereof and against which adequate reserves are being maintained in accordance with GAAP. 7. Events of Default. The occurrence of an event which under the Credit Agreement would constitute an Event of Default shall be an Event of Default hereunder (an "Event of Default"). 8. Remedies. 10 (a) General Remedies. Upon the occurrence of an Event of Default and during continuation thereof, the Lenders shall have, in addition to the rights and remedies provided herein, in the Credit Documents, in the Hedging Agreements between any Obligor and any Lender, or by law (including, but not limited to, levy of attachment, garnishment and the rights and remedies set forth in the Uniform Commercial Code of the jurisdiction applicable to the affected Collateral), the rights and remedies of a secured party under the UCC (regardless of whether the UCC is the law of the jurisdiction where the rights and remedies are asserted and regardless of whether the UCC applies to the affected Collateral), and further, the Administrative Agent may, with or without judicial process or the aid and assistance of others, (i) enter on any premises on which any of the Collateral may be located and, without resistance or interference by the Obligors, take possession of the Collateral, (ii) dispose of any Collateral on any such premises, (iii) require the Obligors to assemble and make available to the Administrative Agent at the expense of the Obligors any Collateral at any place and time designated by the Administrative Agent which is reasonably convenient to both parties, (iv) remove any Collateral from any such premises for the purpose of effecting sale or other disposition thereof, and/or (v) without demand and without advertisement, notice, hearing or process of law, all of which each of the Obligors hereby waives to the fullest extent permitted by law, at any place and time or times, sell and deliver any or all Collateral held by or for it at public or private sale, by one or more contracts, in one or more parcels, for cash, upon credit or otherwise, at such prices and upon such terms as the Administrative Agent deems advisable, in its sole discretion (subject to any and all mandatory legal requirements). In addition to all other sums due the Administrative Agent and the Lenders with respect to the Secured Obligations, the Obligors shall pay the Administrative Agent and each of the Lenders all reasonable documented costs and expenses incurred by the Administrative Agent or any such Lender, including, but not limited to, reasonable attorneys' fees and court costs, in obtaining or liquidating the Collateral, in enforcing payment of the Secured Obligations, or in the prosecution or defense of any action or proceeding by or against the Administrative Agent or any of the Lenders or the Obligors concerning any matter arising out of or connected with this Security Agreement, any Collateral or the Secured Obligations, including, without limitation, any of the foregoing arising in, arising under or related to a case under the Bankruptcy Code. To the extent the rights of notice cannot be legally waived hereunder, each Obligor agrees that any requirement of reasonable notice shall be met if such notice is personally served on or mailed, postage prepaid, to the Borrower in accordance with the notice provisions of Section 11.1 of the Credit Agreement at least 10 days before the time of sale or other event giving rise to the requirement of such notice. The Administrative Agent and the Lenders shall not be obligated to make any sale or other disposition of the Collateral regardless of notice having been given. To the extent permitted by law, any Lender may be a purchaser at any such sale. To the extent permitted by applicable law, each of the Obligors hereby waives all of its rights of redemption with respect to any such sale. Subject to the provisions of applicable law, the Administrative Agent and the Lenders may postpone or cause the postponement of the sale of all or any portion of the Collateral by announcement at the time and place of such sale, and such sale may, without further notice, to the extent permitted by law, be made at the time and place to which the sale was postponed, or the Administrative Agent and the Lenders may further postpone such sale by announcement made at such time and place. 11 (b) Remedies relating to Accounts. Upon the occurrence of an Event of Default and during the continuation thereof, whether or not the Administrative Agent has exercised any or all of its rights and remedies hereunder, the Administrative Agent shall have the right to enforce any Obligor's rights against any account debtors and obligors on such Obligor's Accounts, subject to such Obligor's Retained Rights. The Administrative Agent and the Lenders shall have no liability or responsibility to any Obligor for acceptance of a check, draft or other order for payment of money bearing the legend "payment in full" or words of similar import or any other restrictive legend or endorsement or be responsible for determining the correctness of any remittance. (c) Access. In addition to the rights and remedies hereunder, upon the occurrence of an Event of Default and during the continuance thereof to the extent permitted by applicable law, the Administrative Agent shall have the right to enter and remain upon the various premises of the Obligors without cost or charge to the Administrative Agent, and use the same, together with materials, supplies, books and records of the Obligors for the purpose of collecting and liquidating the Collateral, or for preparing for sale and conducting the sale of the Collateral, whether by foreclosure, auction or otherwise. In addition, the Administrative Agent may remove Collateral, or any part thereof, from such premises and/or any records with respect thereto, in order to effectively collect or liquidate such Collateral. (d) Nonexclusive Nature of Remedies. Failure by the Administrative Agent or the Lenders to exercise any right, remedy or option under this Security Agreement, any other Credit Document, any Hedging Agreement between any Obligor and any Lender, or as provided by law, or any delay by the Administrative Agent or the Lenders in exercising the same, shall not operate as a waiver of any such right, remedy or option. No waiver hereunder shall be effective unless it is in writing, signed by the party against whom such waiver is sought to be enforced and then only to the extent specifically stated, which in the case of the Administrative Agent or the Lenders shall only be granted as provided herein. The rights and remedies of the Administrative Agents and the Lenders under this Security Agreement shall be cumulative and not exclusive of any other right or remedy which the Administrative Agent or the Lenders may have. (e) Retention of Collateral. In addition to the rights and remedies hereunder, upon the occurrence and during the continuance of an Event of Default the Administrative Agent shall have the rights afforded to a secured party under Sections 9-620 and 9-621 (or similar provision) of the UCC. The Administrative Agent shall not be deemed to have retained any Collateral pledged by any Obligor in satisfaction of any Secured Obligations unless and until the Administrative Agent shall have entered into a written agreement with such Obligor to that effect. (f) Deficiency. In the event that the proceeds of any sale, collection or realization are insufficient to pay all amounts to which the Administrative Agent or the Lenders are legally entitled, the Obligors shall be jointly and severally liable for the deficiency, together with interest thereon at the default rate specified in Section 3.1 of the 12 Credit Agreement for Revolving Loans that are Base Rate Loans, together with the costs of collection and the reasonable fees of any attorneys employed by the Administrative Agent to collect such deficiency. Any surplus remaining after the full payment and satisfaction of the Secured Obligations shall be returned to the Obligors or to whomsoever a court of competent jurisdiction shall determine to be entitled thereto. 9. Rights of the Administrative Agent. (a) Power of Attorney. In addition to other powers of attorney contained herein, each Obligor hereby designates and appoints the Administrative Agent, on behalf of the Lenders, and each of its designees or agents, as attorney-in-fact of such Obligor, irrevocably and with power of substitution, with authority to take any or all of the following actions upon the occurrence and during the continuance of an Event of Default: (i) to demand, collect, settle, compromise, adjust, give discharges and releases, all as the Administrative Agent may reasonably determine; (ii) to commence and prosecute any actions at any court for the purposes of collecting any Collateral and enforcing any other right in respect thereof; (iii) to defend, settle or compromise any action brought and, in connection therewith, give such discharge or release as the Administrative Agent may deem reasonably appropriate; (iv) receive, open and dispose of mail addressed to an Obligor and endorse checks, notes, drafts, acceptances, money orders, bills of lading, warehouse receipts or other instruments or documents evidencing payment, shipment or storage of the goods giving rise to the Collateral of such Obligor on behalf of and in the name of such Obligor, or securing, or relating to such Collateral; (v) sell, assign, transfer, make any agreement in respect of, or otherwise deal with or exercise rights in respect of, any Collateral or the goods or services which have given rise thereto, as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes to the extent permitted by applicable law and consistent with the purposes of this Security Agreement; (vi) adjust and settle claims under any insurance policy relating thereto; (vii) execute and deliver all assignments, conveyances, statements, financing statements, renewal financing statements, security agreements, affidavits, notices and other agreements, instruments and documents that the 13 Administrative Agent may reasonably determine necessary in order to perfect and maintain the security interests and liens granted in this Security Agreement and in order to fully consummate all of the transactions contemplated therein; (viii) institute any foreclosure proceedings that the Administrative Agent may deem appropriate; and (ix) do and perform all such other acts and things as the Administrative Agent may reasonably deem to be necessary, proper or convenient in connection with the Collateral to the extent permitted by applicable law and consistent with the purposes of this Security Agreement. This power of attorney is a power coupled with an interest and shall be irrevocable until such time as the Credit Party Obligations are Fully Satisfied. The Administrative Agent shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Administrative Agent in this Security Agreement, and shall not be liable for any failure to do so or any delay in doing so. This power of attorney is conferred on the Administrative Agent solely to protect, preserve and realize upon its security interest in the Collateral. (b) Performance by the Administrative Agent of Obligations. If any Obligor fails to perform any agreement or obligation contained herein, the Administrative Agent itself may perform, or cause performance of, such agreement or obligation, and the expenses of the Administrative Agent incurred in connection therewith shall be payable by the Obligors on a joint and several basis pursuant to Section 11 hereof. (c) Assignment by the Administrative Agent. The Administrative Agent may from time to time assign the Secured Obligations and any portion thereof and/or the Collateral to any successor administrative agent appointed in accordance with Section 10.9 of the Credit Agreement, and the assignee shall be entitled to all of the rights and remedies of the Administrative Agent under this Security Agreement in relation thereto. (d) The Administrative Agent's Duty of Care. Other than the exercise of reasonable care to assure the safe custody of the Collateral while being held by the Administrative Agent hereunder, the Administrative Agent shall have no duty or liability to preserve rights pertaining thereto, it being understood and agreed that the Obligors shall be responsible for preservation of all rights in the Collateral, and the Administrative Agent shall be relieved of all responsibility for the Collateral upon surrendering it or tendering the surrender of it to the Obligors. The Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Administrative Agent accords its own property, which shall be no less than the treatment employed by a reasonable and prudent agent in the industry, it being understood that the Administrative Agent shall not have responsibility for taking any necessary steps to preserve rights against any parties with respect to any of the Collateral. In the event of a public or private sale of 14 Collateral pursuant to Section 8 hereof, the Administrative Agent shall have no obligation to clean-up, repair or otherwise prepare the Collateral for sale. 10. Application of Proceeds. After acceleration of the Credit Party Obligations pursuant to Section 9.2 of the Credit Agreement, any payments in respect of the Secured Obligations and any proceeds of the Collateral, when received by the Administrative Agent or any of the Lenders in cash or its equivalent, will be applied in reduction of the Secured Obligations in the order set forth in Section 3.15(b) of the Credit Agreement, and each Obligor irrevocably waives the right to direct the application of such payments and proceeds. 11. Costs of Counsel. At all times hereafter, the Obligors agree to promptly pay upon demand any and all reasonable costs and expenses of the Administrative Agent or the Lenders, (a) as required under Section 11.5 of the Credit Agreement and (b) as necessary to protect the Collateral or to exercise any rights or remedies under this Security Agreement or with respect to any Collateral. All of the foregoing costs and expenses shall constitute Secured Obligations hereunder secured by the Collateral. 12. Continuing Agreement. (a) This Security Agreement shall be a continuing agreement in every respect and shall remain in full force and effect until such time as the Credit Party Obligations are Fully Satisfied. At such time as the Credit Party Obligations are Fully Satisfied, this Security Agreement shall be automatically terminated and the Administrative Agent and the Lenders shall, upon the request and at the expense of the Obligors, forthwith release all of its liens and security interests hereunder and shall execute and deliver all UCC termination statements and/or other documents reasonably requested by the Obligors evidencing such termination. Notwithstanding the foregoing all releases and indemnities provided hereunder shall survive termination of this Security Agreement. (b) This Security Agreement shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender as a preference, fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar law, all as though such payment had not been made; provided that in the event payment of all or any part of the Secured Obligations is rescinded or must be restored or returned, all reasonable costs and expenses (including without limitation any reasonable legal fees and disbursements) incurred by the Administrative Agent or any Lender in defending and enforcing such reinstatement shall be deemed to be included as a part of the Secured Obligations secured by the Collateral. 13. Amendments; Waivers; Modifications. This Security Agreement and the provisions hereof may not be amended, waived, modified, changed, discharged or terminated except as set forth in Section 11.6 of the Credit Agreement. 14. Successors in Interest. This Security Agreement shall create a continuing security interest in the Collateral and shall be binding upon each Obligor, its successors and assigns and shall 15 inure, together with the rights and remedies of the Administrative Agent and the Lenders hereunder, to the benefit of the Administrative Agent and the Lenders and their successors and permitted assigns; provided, however, that none of the Obligors may assign its rights or delegate its duties hereunder without the prior written consent of each Lender or the Required Lenders, as required by the Credit Agreement. 15. Notices. All notices required or permitted to be given under this Security Agreement shall be in conformance with Section 11.1 of the Credit Agreement. 16. Counterparts. This Security Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Security Agreement to produce or account for more than one such counterpart. 17. Headings. The headings of the sections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Security Agreement. 18. Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial. THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The terms of Section 11.10 of the Credit Agreements are incorporated herein by reference, mutatis mutandis, and the parties hereto agree to such terms. 19. Severability. If any provision of this Security Agreement is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 20. Entirety. This Security Agreement, the other Credit Documents and the Hedging Agreements between any Obligor and any Lender represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents, the Hedging Agreements between any Obligor and any Lender or the transactions contemplated herein and therein. 21. Survival. All representations and warranties of the Obligors hereunder shall survive the execution and delivery of this Security Agreement, the other Credit Documents and the Hedging Agreements between any Obligor and any Lender, the delivery of the Notes and the making of the Loans and the issuance of the Letters of Credit under the Credit Agreement. 22. Other Security. To the extent that any of the Secured Obligations are now or hereafter secured by property other than the Collateral (including, without limitation, real property and securities owned by an Obligor), or by a guarantee, endorsement or property of any other Person, then the Administrative Agent and the Lenders shall have the right to proceed against such 16 other property, guarantee or endorsement upon the occurrence and during the continuance of any Event of Default, and the Administrative Agent and the Lenders have the right, in their sole discretion, to determine which rights, security, liens, security interests or remedies the Administrative Agent and the Lenders shall at any time pursue, relinquish, subordinate, modify or take with respect thereto, without in any way modifying or affecting any of them or any of the Administrative Agent's and the Lenders' rights or the Secured Obligations under this Security Agreement, under any other of the Credit Documents or under any Hedging Agreement between any Obligor and any Lender. 23. Joint and Several Obligations of Obligors. (a) Each of the Obligors is accepting joint and several liability hereunder in consideration of the financial accommodation to be provided by the Lenders under the Credit Agreement, for the mutual benefit, directly and indirectly, of each of the Obligors and in consideration of the undertakings of each of the Obligors to accept joint and several liability for the obligations of each of them. (b) Each of the Obligors jointly and severally hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Obligors with respect to the payment and performance of all of the Secured Obligations arising under this Security Agreement, the other Credit Documents and the Hedging Agreements between any Obligor and any Lender, it being the intention of the parties hereto that all the Secured Obligations shall be the joint and several obligations of each of the Obligors without preferences or distinction among them. (c) Notwithstanding any provision to the contrary contained herein, in any other of the Credit Documents or in any Hedging Agreement between any Obligor and any Lender, the obligations of each Guarantor under the Credit Agreement and the other Credit Documents shall be limited to an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under Section 548 of the Bankruptcy Code or any comparable provisions of any applicable state law. 24. Rights of Required Lenders. All rights of the Administrative Agent hereunder, if not exercised by the Administrative Agent, may be exercised by the Required Lenders, who shall give notice to the Obligors of any such exercise. [remainder of page intentionally left blank] 17 Each of the parties hereto has caused a counterpart of this Security Agreement to be duly executed and delivered as of the date first above written. BORROWER: INSIGHT HEALTH SERVICES CORP. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- GUARANTORS: INSIGHT HEALTH SERVICES HOLDINGS CORP. INSIGHT HEALTH CORP. OPEN MRI, INC. MAXUM HEALTH CORP. RADIOSURGERY CENTERS, INC. MAXUM HEALTH SERVICES CORP. DIAGNOSTIC SOLUTIONS CORP. MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. MAXUM HEALTH SERVICES OF DALLAS, INC. NDDC, INC. SIGNAL MEDICAL SERVICES, INC. MRI ASSOCIATES, L.P. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- Accepted and agreed to as of the date first above written. BANK OF AMERICA, N.A., as Administrative Agent By: -------------------------------------------------- Name: ------------------------------------------------ Title: ----------------------------------------------- 18 SCHEDULE 2(d) COMMERCIAL TORT CLAIMS SCHEDULE 4(a) MERGERS, CONSOLIDATIONS, CHANGE IN STRUCTURE OR USE OF TRADENAMES SCHEDULE 4(b) MOBILE MRI/IMAGING UNITS SCHEDULE 5(d)(i) NOTICE OF GRANT OF SECURITY INTEREST IN COPYRIGHTS United States Copyright Office Gentlemen: Please be advised that pursuant to the Security Agreement dated as of October 17, 2001 (as the same may be amended, modified, extended or restated from time to time, the "Security Agreement") by and among the Obligors party thereto (each an "Obligor" and collectively, the "Obligors") and Bank of America, N.A., as administrative agent (the "Administrative Agent") for the Lenders referenced therein (the "Lenders"), the undersigned Obligor has granted a continuing security interest in and continuing lien upon, the copyrights and copyright applications shown below to the Administrative Agent for the ratable benefit of the Lenders: COPYRIGHTS
Date of Copyright No. Description of Copyright Copyright ------------- ------------------------ ---------
Copyright Applications
Copyright Description of Copyright Date of Copyright Applications No. Applied For Applications ---------------- ------------------------ -----------------
The Obligors and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and agree that the security interest in the foregoing copyrights and copyright applications (i) may only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed as an assignment of any copyright or copyright application. Very truly yours, ---------------------------------- [Obligor], a [jurisdiction of organization] By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Address of Obligor] Acknowledged and Accepted: BANK OF AMERICA, N.A., as Administrative Agent By: -------------------------------------------------- Name: ------------------------------------------------ Title: ----------------------------------------------- SCHEDULE 5(d)(ii) NOTICE OF GRANT OF SECURITY INTEREST IN PATENTS United States Patent and Trademark Office Gentlemen: Please be advised that pursuant to the Security Agreement dated as of October 17, 2001 (as the same may be amended, modified, extended or restated from time to time, the "Security Agreement") by and among the Obligors party thereto (each an "Obligor" and collectively, the "Obligors") and Bank of America, N.A., administrative agent (the "Administrative Agent") for the Lenders referenced therein (the "Lenders"), the undersigned Obligor has granted a continuing security interest in and continuing lien upon, the patents and patent applications shown below to the Administrative Agent for the ratable benefit of the Lenders: PATENTS
Description of Patent Date of Patent No. Item Patent ---------- --------------------- -------
Patent Applications
Patent Description of Patent Date of Patent Applications No. Applied For Applications ---------------- --------------------- --------------
The Obligors and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and agree that the security interest in the foregoing patents and patent applications (i) may only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed as an assignment of any patent or patent application. Very truly yours, [Obligor], a [jurisdiction of organization] By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Address of Obligor] Acknowledged and Accepted: BANK OF AMERICA, N.A., as Administrative Agent By: -------------------------------------------------- Name: ------------------------------------------------ Title: ----------------------------------------------- SCHEDULE 5(d)(iii) NOTICE OF GRANT OF SECURITY INTEREST IN TRADEMARKS United States Patent and Trademark Office Gentlemen: Please be advised that pursuant to the Security Agreement dated as of October 17, 2001 (as the same may be amended, modified, extended or restated from time to time, the "Security Agreement") by and among the Obligors party thereto (each an "Obligor" and collectively, the "Obligors") and Bank of America, N.A., as administrative agent (the "Administrative Agent") for the Lenders referenced therein (the "Lenders"), the undersigned Obligor has granted a continuing security interest in and continuing lien upon, the trademarks and trademark applications shown below to the Administrative Agent for the ratable benefit of the Lenders: TRADEMARKS
Description of Trademark Date of Trademark No. Item Trademark ------------- ------------------------ ---------
Trademark Applications
Trademark Description of Trademark Date of Trademark Applications No. Applied For Applications ---------------- ------------------------ -----------------
The Obligors and the Administrative Agent, on behalf of the Lenders, hereby acknowledge and agree that the security interest in the foregoing trademarks and trademark applications (i) may only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed as an assignment of any trademark or trademark application. Very truly yours, ---------------------------------- [Obligor], a [jurisdiction of organization] By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- [Address of Obligor] Acknowledged and Accepted: BANK OF AMERICA, N.A., as Administrative Agent By: -------------------------------------------------- Name: ------------------------------------------------ Title: ----------------------------------------------- EXHIBIT 2.1(b)(i) FORM OF NOTICE OF BORROWING Bank of America, N. A., as Administrative Agent for the Lenders 101 North Tryon Street Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Ladies and Gentlemen: The undersigned, InSight Health Services Corp. (the "Borrower"), refers to the Credit Agreement dated as of October 17, 2001 (as amended, modified, restated or supplemented from time to time, the "Credit Agreement"), among the Borrower, the Guarantors, the Lenders, The CIT Group/Business Credit, Inc., as Documentation Agent, First Union National Bank, as Syndication Agent, and Bank of America, N. A., as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. [The Borrower hereby gives notice pursuant to Section 2.1 of the Credit Agreement that it requests a Revolving Loan advance under the Credit Agreement, and in connection therewith sets forth below the terms on which such Loan advance is requested to be made:]1 [The Borrower hereby gives notice pursuant to Section 2.3 of the Credit Agreement that it requests a Delayed-Draw Term Loan advance under the Credit Agreement, and in connection therewith sets forth below the terms on which such Loan advance is requested to be made:]2 [The Borrower hereby gives notice pursuant to Section 2.4 of the Credit Agreement that it requests the Tranche B Term Loan under the Credit Agreement on the Closing Date, and in connection therewith sets forth below the terms on which such Loan advance is requested to be made:](3) [(A) Date of Borrowing (which is a Business Day) ____________________](1), (2) [(B) Principal Amount of Borrowing ____________________](1), (2) (C) Interest rate basis ____________________ (D) Interest Period and the last day thereof ____________________ In accordance with the requirements of Section 5.2, the Borrower hereby reaffirms the representations and warranties set forth in the Credit Agreement as provided in clause (b) of such Section, and confirms that the matters referenced in clauses (c), (d) and (e) of such Section, are true and correct. InSight Health Services Corp. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- (1) For all Revolving Loans (2) For all Delayed-Draw Term Loans (3) For the initial advance of the Tranche B Term Loan on the Closing Date EXHIBIT 2.1(e) FORM OF REVOLVING NOTE October 17, 2001 FOR VALUE RECEIVED, INSIGHT HEALTH SERVICES CORP., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of __________________________, its successors and assigns (the "Lender"), at the office of Bank of America, N. A., as administrative agent (the "Administrative Agent"), at 101 North Tryon Street, Independence Center, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the holder hereof may designate), at the times set forth in the Credit Agreement dated as of October 17, 2001 among the Borrower, the Guarantors, the Lenders, The CIT Group/Business Credit, Inc., as Documentation Agent, First Union National Bank, as Syndication Agent, and the Administrative Agent (as it may be as amended, modified, restated or supplemented from time to time, the "Credit Agreement"; all capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement), but in no event later than the Maturity Date, in Dollars and in immediately available funds, the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrower pursuant to the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates selected in accordance with Section 2.1(d) of the Credit Agreement. Upon the occurrence and during the continuance of an Event of Default under Section 9.1(a) of the Credit Agreement, the balance outstanding hereunder shall bear interest as provided in Section 3.1 of the Credit Agreement. Further, in the event the payment of all sums due hereunder is accelerated under the terms of the Credit Agreement, this Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees. This Note and the Loans evidenced hereby may be transferred in whole or in part only by registration of such transfer on the Register maintained by or on behalf of the Borrower as provided in Section 11.3(c) of the Credit Agreement. This Note shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written. INSIGHT HEALTH SERVICES CORP. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- EXHIBIT 2.3(f) FORM OF DELAYED-DRAW TERM NOTE October 17, 2001 FOR VALUE RECEIVED, INSIGHT HEALTH SERVICES CORP., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of __________________________, its successors and assigns (the "Lender"), at the office of Bank of America, N. A., as administrative agent (the "Administrative Agent"), at 101 North Tryon Street, Independence Center, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the holder hereof may designate), at the times set forth in the Credit Agreement dated as of October 17, 2001 among the Borrower, the Guarantors, the Lenders, The CIT Group/Business Credit, Inc., as Documentation Agent, First Union National Bank, as Syndication Agent, and the Administrative Agent (as it may be as amended, modified, restated or supplemented from time to time, the "Credit Agreement"; all capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement), but in no event later than the Maturity Date, in Dollars and in immediately available funds, the aggregate unpaid principal amount of all Delayed-Draw Term Loans made by the Lender to the Borrower pursuant to the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates selected in accordance with Section 2.3(e) of the Credit Agreement. Upon the occurrence and during the continuance of an Event of Default under Section 9.1(a) of the Credit Agreement, the balance outstanding hereunder shall bear interest as provided in Section 3.1 of the Credit Agreement. Further, in the event the payment of all sums due hereunder is accelerated under the terms of the Credit Agreement, this Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees. This Note and the Loans evidenced hereby may be transferred in whole or in part only by registration of such transfer on the Register maintained by or on behalf of the Borrower as provided in Section 11.3(c) of the Credit Agreement. This Note shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written. INSIGHT HEALTH SERVICES CORP. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- EXHIBIT 2.4(f) FORM OF TRANCHE B TERM NOTE $_________________ October 17, 2001 FOR VALUE RECEIVED, INSIGHT HEALTH SERVICES CORP., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of __________________________, its successors and assigns (the "Lender"), at the office of Bank of America, N. A., as administrative agent (the "Administrative Agent"), at 101 North Tryon Street, Independence Center, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the holder hereof may designate), at the times set forth in the Credit Agreement dated as of October 17, 2001 among the Borrower, the Guarantors, the Lenders, The CIT Group/Business Credit, Inc., as Documentation Agent, First Union National Bank, as Syndication Agent, and the Administrative Agent (as it may be as amended, modified, restated or supplemented from time to time, the "Credit Agreement"; all capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement), but in no event later than the Maturity Date, in Dollars and in immediately available funds, the aggregate unpaid principal amount of all Tranche B Term Loans made by the Lender to the Borrower pursuant to the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates selected in accordance with Section 2.3(e) of the Credit Agreement. Upon the occurrence and during the continuance of an Event of Default under Section 9.1(a) of the Credit Agreement, the balance outstanding hereunder shall bear interest as provided in Section 3.1 of the Credit Agreement. Further, in the event the payment of all sums due hereunder is accelerated under the terms of the Credit Agreement, this Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees. This Note and the Loans evidenced hereby may be transferred in whole or in part only by registration of such transfer on the Register maintained by or on behalf of the Borrower as provided in Section 11.3(c) of the Credit Agreement. This Note shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its duly authorized officer as of the day and year first above written. INSIGHT HEALTH SERVICES CORP. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- EXHIBIT 3.2 FORM OF NOTICE OF CONTINUATION/CONVERSION Bank of America, N. A., as Administrative Agent for the Lenders 101 North Tryon Street Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Ladies and Gentlemen: The undersigned, InSight Health Services Corp. (the "Borrower"), refers to the Credit Agreement dated as of October 17, 2001 (as amended, modified, restated or supplemented from time to time, the "Credit Agreement"), among the Borrower, the Guarantors, the Lenders, The CIT Group/Business Credit, Inc., as Documentation Agent, First Union National Bank, as Syndication Agent, and Bank of America, N. A., as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives notice pursuant to Section 3.2 of the Credit Agreement that it requests a continuation or conversion of a [Revolving Loan] [Delayed-Draw Term Loan] [Tranche B Term Loan] outstanding under the Credit Agreement, and in connection therewith sets forth below the terms on which such continuation or conversion is requested to be made: (A) Loan Type/Tranche ----------------------- (B) Date of Continuation or Conversion (which is the last day of the the applicable Interest Period) ----------------------- (C) Principal Amount of Continuation or Conversion ----------------------- (D) Interest rate basis ----------------------- (E) Interest Period and the last day thereof ---------------------- InSight Health Services Corp. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- EXHIBIT 7.1(c) FORM OF OFFICER'S COMPLIANCE CERTIFICATE For the fiscal quarter ended _________________, 20___. I, ______________________, [Title] of InSight Health Services Corp. (the "Borrower") hereby certify that, to the best of my knowledge and belief, with respect to that certain Credit Agreement dated as of October 17, 2001 (as amended, modified, restated or supplemented from time to time, the "Credit Agreement"; all of the defined terms in the Credit Agreement are incorporated herein by reference) among the Borrower, the Guarantors, the Lenders, The CIT Group/Business Credit, Inc., as Documentation Agent, First Union National Bank, as Syndication Agent, and Bank of America, N. A., as Administrative Agent: a. The company-prepared financial statements which accompany this certificate are true and correct in all material respects and have been prepared in accordance with GAAP applied on a consistent basis, subject to changes resulting from normal year-end audit adjustments. b. Since ___________ (the date of the last similar certification, or, if none, the Closing Date), [no Default or Event of Default exists] [a Default or Event of Default exists caused by ______________ and the Credit Parties propose to take the following actions with respect thereto: __________________________]. Delivered herewith are detailed calculations demonstrating compliance by the Credit Parties with the financial covenants contained in Section 7.9 of the Credit Agreement as of the end of the fiscal period referred to above. This ______ day of ___________, 200_ InSight Health Services Corp. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- Attachment to Officer's Certificate COMPUTATION OF FINANCIAL COVENANTS EXHIBIT 7.11 FORM OF JOINDER AGREEMENT THIS JOINDER AGREEMENT (the "Agreement"), dated as of _____________, 200_, is by and between _____________________, a ___________________ (the "Subsidiary"), and BANK OF AMERICA, N. A., in its capacity as Administrative Agent under that certain Credit Agreement (as it may be amended, modified, restated or supplemented from time to time, the "Credit Agreement"), dated as of October 17, 2001, by and among InSight Health Services Corp., a Delaware corporation (the "Borrower"), the Guarantors, the Lenders, The CIT Group/Business Credit, Inc., as Documentation Agent, First Union National Bank, as Syndication Agent, and Bank of America, N. A., as Administrative Agent. All of the defined terms in the Credit Agreement are incorporated herein by reference. The Credit Parties are required by Section 7.10 of the Credit Agreement to cause the Subsidiary to become a "Guarantor". Accordingly, the Subsidiary hereby agrees as follows with the Administrative Agent, for the benefit of the Lenders: 1. The Subsidiary hereby acknowledges, agrees and confirms that, by its execution of this Agreement, the Subsidiary will be deemed to be a party to the Credit Agreement and a "Guarantor" for all purposes of the Credit Agreement, and shall have all of the obligations of a Guarantor thereunder as if it had executed the Credit Agreement. The Subsidiary hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions applicable to the Guarantors contained in the Credit Agreement. Without limiting the generality of the foregoing terms of this paragraph 1, the Subsidiary hereby jointly and severally together with the other Guarantors, guarantees to each Lender and the Administrative Agent, as provided in Section 4 of the Credit Agreement, the prompt payment and performance of the Credit Party Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in accordance with the terms thereof. 2. The Subsidiary hereby acknowledges, agrees and confirms that, by its execution of this Agreement, the Subsidiary will be deemed to be a party to the Security Agreement, and shall have all the obligations of an "Obligor" (as such term is defined in the Security Agreement) thereunder as if it had executed the Security Agreement. The Subsidiary hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in the Security Agreement. Without limiting generality of the foregoing terms of this paragraph 2, the Subsidiary hereby grants to the Administrative Agent, for the benefit of the Lenders, a continuing security interest in, and a right of set off against any and all right, title and interest of the Subsidiary in and to the Collateral (as such term is defined in Section 2 of the Security Agreement) owned by the Subsidiary. The Subsidiary hereby represents and warrants to the Administrative Agent that: (i) The Subsidiary's jurisdiction of organization, chief executive office and chief place of business are (and for the prior four months have been) located at the locations set forth on Schedule 1 attached hereto and the Subsidiary keeps its books and records at such locations. (ii) The location of all Collateral owned by the Subsidiary is as shown on Schedule 2 attached hereto. (iii) The Subsidiary's legal name is as shown in this Agreement and the Subsidiary has not in the past four months changed its name, been party to a merger, consolidation or other change in structure or used any tradename except as set forth in Schedule 3 attached hereto. (iv) The patents and trademarks listed on Schedule 4 attached hereto constitute all of the registrations and applications for the patents and trademarks owned by the Subsidiary. 3. The Subsidiary hereby acknowledges, agrees and confirms that, by its execution of this Agreement, the Subsidiary will be deemed to be a party to the Pledge Agreement, and shall have all the obligations of a "Obligor" thereunder as if it had executed the Pledge Agreement. The Subsidiary hereby ratifies, as of the date hereof, and agrees to be bound by, all the terms, provisions and conditions contained in the Pledge Agreement. Without limiting the generality of the foregoing terms of this paragraph 3, the Subsidiary hereby pledges and assigns to the Administrative Agent, for the benefit of the Lenders, and grants to the Administrative Agent, for the benefit of the Lenders, a continuing security interest in any and all right, title and interest of the Subsidiary in and to Pledged Shares (as such term is defined in Section 2 of the Pledge Agreement) listed on Schedule 5 attached hereto and the other Pledged Collateral (as such term is defined in Section 2 of the Pledge Agreement). 4. The address of the Subsidiary for purposes of all notices and other communications is ____________________, ____________________________, Attention of ______________ (Facsimile No. ____________). 5. The Subsidiary hereby waives acceptance by the Administrative Agent and the Lenders of the guaranty by the Subsidiary under Section 4 of the Credit Agreement upon the execution of this Agreement by the Subsidiary. 6. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute one contract. 7. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the Subsidiary has caused this Joinder Agreement to be duly executed by its authorized officers, and the Administrative Agent, for the benefit of the Lenders, has caused the same to be accepted by its authorized officer, as of the day and year first above written. [SUBSIDIARY] By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- Acknowledged and accepted: BANK OF AMERICA, N. A., as Administrative Agent By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- SCHEDULE 1 TO FORM OF JOINDER AGREEMENT [Chief Executive Office and Chief Place of Business of Subsidiary] SCHEDULE 2 TO FORM OF JOINDER AGREEMENT [Types and Locations of Collateral] SCHEDULE 3 TO FORM OF JOINDER AGREEMENT [Tradenames] SCHEDULE 4 TO FORM OF JOINDER AGREEMENT [Patents and Trademarks] SCHEDULE 5 TO FORM OF JOINDER AGREEMENT [Pledged Shares] EXHIBIT 11.3(b) FORM OF ASSIGNMENT AND ACCEPTANCE This Assignment and Acceptance Agreement (the "ASSIGNMENT") is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the "ASSIGNOR") and [Insert name of Assignee] (the "ASSIGNEE"). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the "CREDIT AGREEMENT"), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment as if set forth herein in full. For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, the interest in and to all of the Assignor's rights and obligations under the Credit Agreement and any other documents or instruments delivered pursuant thereto that represents the amount and percentage interest identified below of all of the Assignor's outstanding rights and obligations under the respective facilities identified below (including, to the extent included in any such facilities, letters of credit) (the "ASSIGNED INTEREST"). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment, without representation or warranty by the Assignor. 1. Assignor: 2. Assignee: [and is an -------------------------------- [Affiliate] [Approved Fund]](1) 3. Borrower: InSight Health Services Corp. 4. Administrative Agent: Bank of America, N.A., as the administrative agent under the Credit Agreement 5. Credit Agreement: The $275,000,000 Credit Agreement dated as of October 17, 2001 among InSight Health Services Corp., as Borrower, the Guarantors party thereto, the Lenders party thereto, Bank of America, N.A., as Administrative Agent, The CIT Group/Business Credit, Inc., as Documentation Agent, and First Union National Bank, as Syndication Agent
- -------- (1) Select as applicable. 6. Assigned Interest(2):
Total Commitment/ Amount of Percentage Loans for all Commitment/Loans Assigned of Total Facility Assigned Lenders Assigned Commitment/Loans ----------------- ------- -------- ---------------- Revolving Commitment $ $ ------------ ------------- Revolving Loans $ $ % ------------ ------------- --------- Delayed-Draw Term Loan Commitment(3) Tranche ____ $ $ % ------------ ------------- --------- Delayed-Draw Term Loan(4) Tranche ____ $ $ % ------------ ------------- --------- Tranche B Term Loan $ $ % ------------ ------------- ---------
Effective Date: ____________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.] The terms set forth in this Assignment are hereby agreed to: ASSIGNOR [NAME OF ASSIGNOR] By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ ASSIGNEE [NAME OF ASSIGNEE] By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ - -------- 2 Complete as applicable 3 Add additional lines if more than one Delayed-Draw Term Loan Commitment Tranche is being assigned. 4 Add additional lines if more than one Delayed-Draw Term Loan Tranche is being assigned. Consented to and Accepted: BANK OF AMERICA, N.A., as Administrative Agent By: --------------------------------- Name: ------------------------------- Title: ------------------------------ INSIGHT HEALTH SERVICES CORP. By: --------------------------------- Name: ------------------------------- Title: ------------------------------ If this is an assignment of all or a portion of the Revolving Loans or Revolving Commitments: Consented to: BANK OF AMERICA, N.A., as Issuing Lender By: --------------------------------- Name: ------------------------------- Title: ------------------------------ ANNEX 1 STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ACCEPTANCE AGREEMENT 1. Representations and Warranties. 1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with any Credit Document (as defined below), (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document delivered pursuant thereto, other than this Assignment (herein collectively the "Credit Documents"), or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Credit Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Credit Document. 1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder and the Assignor shall be released from such obligations, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 7.1 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and to purchase the Assigned Interest on the basis of which it has made such analysis and decision, and (v) if it is a foreign Lender, attached to the Assignment is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make is own credit decisions in taking or not taking action under the Credit Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Credit Documents are required to be performed by it as a Lender. 2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts, which have accrued from and after the Effective Date. 3. General Provisions. This Assignment shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment. This Assignment shall be governed by, and construed in accordance with, the law of the State of New York. SCHEDULE 1.1A - SCHEDULED FINANCIAL INFORMATION
Q3-01 Q4-01 all figures in thousands Mar-01 June-01 ======================== ====== ======= CONSOLIDATED CAPITAL EXPENDITURES $ 735 $ 7,910 CONSOLIDATED EBITDA $21,097 $22,265 CONSOLIDATED MAINTENANCE CAPITAL EXPENDITUREs $ 435 $ 4,210 CONSOLIDATED RENTAL EXPENSE $ 3,299 $ 2,712
SCHEDULE 1.1B - JOINT VENTURES 1. Berwyn Magnetic Resonance Center, LLC 2. Connecticut Lithotripsy, LLC 3. Daniel Freeman MRI, LLC 4. Dublin Diagnostic Imaging, LLC 5. Garfield Imaging Center, Ltd. 6. Granada Hills Open MRI, LLC 7. InSight-Premier Health, LLC 8. Lockport MRI, LLC 9. Southern Connecticut Imaging Centers, LLC* 10. St. John's Regional Imaging Center, LLC 11. Sun Coast Imaging Center, LLC 12. Toms River Imaging Associates, L.P. 13. Wilkes-Barre Imaging, LLC 14. Central Maine Magnetic Imaging Associates* 15. Greater Waterbury Imaging Center, L.P.* 16. Maine Molecular Imaging, LLC* 17. Metabolic Imaging of Kentucky, LLC* 18. Northern Indiana Oncology Center of Porter Memorial Hospital, LLC* 19. Parkway Imaging Center, LLC*
- --------- * Unrestricted Joint Venture SCHEDULE 6.9 - LITIGATION None. SCHEDULE 6.12 - ERISA None. SCHEDULE 6.13A - CONSOLIDATED PARTIES CORPORATE AND CAPITAL OWNERSHIP STRUCTURE COMPANY NAME: INSIGHT HEALTH SERVICES ACQUISITION CORP.
NUMBER OF SHARES ISSUABLE UPON EXERCISE OR NAME OF CONVERSION OF SHAREHOLDER NUMBER OF SHARES CLASS OF STOCK OPTIONS OR WARRANTS ----------- ---------------- -------------- ------------------- InSight Health Services Holdings Corp. 1 Common 0
COMPANY NAME: INSIGHT HEALTH SERVICES CORP. NUMBER OF SHARES ISSUABLE UPON EXERCISE OR NAME OF CONVERSION OF SHAREHOLDER NUMBER OF SHARES CLASS OF STOCK OPTIONS OR WARRANTS ----------- ---------------- -------------- ------------------- InSight Health Services Holdings Corp. 1 Common 0
COMPANY NAME: DIAGNOSTIC SOLUTIONS CORP. NUMBER OF SHARES ISSUABLE UPON EXERCISE OR NAME OF CONVERSION OF SHAREHOLDER NUMBER OF SHARES CLASS OF STOCK OPTIONS OR WARRANTS ----------- ---------------- -------------- ------------------- Maxum Health Services Corp. 1,000 Common 0
COMPANY NAME: INSIGHT HEALTH CORP. NUMBER OF SHARES ISSUABLE UPON EXERCISE OR NAME OF CONVERSION OF SHAREHOLDER NUMBER OF SHARES CLASS OF STOCK OPTIONS OR WARRANTS ----------- ---------------- -------------- ------------------- InSight Health Services Corp. 1,000 Common 0
COMPANY NAME: MAXUM HEALTH CORP. NUMBER OF SHARES ISSUABLE UPON EXERCISE OR NAME OF CONVERSION OF SHAREHOLDER NUMBER OF SHARES CLASS OF STOCK OPTIONS OR WARRANTS ----------- ---------------- -------------- ------------------- InSight Health Services Corp. 1,000 Common 0
COMPANY NAME: MAXUM HEALTH SERVICES CORP. NUMBER OF SHARES ISSUABLE UPON EXERCISE OR NAME OF CONVERSION OF SHAREHOLDER NUMBER OF SHARES CLASS OF STOCK OPTIONS OR WARRANTS ----------- ---------------- -------------- ------------------- Maxum Health Corp. 1,000 Common 0
COMPANY NAME: MAXUM HEALTH SERVICES OF DALLAS, INC. NUMBER OF SHARES ISSUABLE UPON EXERCISE OR NAME OF CONVERSION OF SHAREHOLDER NUMBER OF SHARES CLASS OF STOCK OPTIONS OR WARRANTS Maxum Health Services Corp. 1,000 Common 0
COMPANY NAME: MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. NUMBER OF SHARES ISSUABLE UPON EXERCISE OR NAME OF CONVERSION OF SHAREHOLDER NUMBER OF SHARES CLASS OF STOCK OPTIONS OR WARRANTS ----------- ---------------- -------------- ------------------- Maxum Health Services Corp. 1,000 Common 0
COMPANY NAME: NDDC, INC. NUMBER OF SHARES ISSUABLE UPON EXERCISE OR NAME OF CONVERSION OF SHAREHOLDER NUMBER OF SHARES CLASS OF STOCK OPTIONS OR WARRANTS ----------- ---------------- -------------- ------------------- Maxum Health Services Corp. 1,000 Common 0
COMPANY NAME: OPEN MRI, INC. NUMBER OF SHARES ISSUABLE UPON EXERCISE OR NAME OF CONVERSION OF SHAREHOLDER NUMBER OF SHARES CLASS OF STOCK OPTIONS OR WARRANTS ----------- ---------------- -------------- ------------------- InSight Health Services Corp. 1,000 Common 0
COMPANY NAME: RADIOSURGERY CENTERS, INC. NUMBER OF SHARES ISSUABLE UPON EXERCISE OR NAME OF CONVERSION OF SHAREHOLDER NUMBER OF SHARES CLASS OF STOCK OPTIONS OR WARRANTS ----------- ---------------- -------------- ------------------- InSight Health Corp. 100 Common 0
COMPANY NAME: SIGNAL MEDICAL SERVICES, INC. NUMBER OF SHARES ISSUABLE UPON EXERCISE OR NAME OF CONVERSION OF SHAREHOLDER NUMBER OF SHARES CLASS OF STOCK OPTIONS OR WARRANTS ----------- ---------------- -------------- ------------------- InSight Health 1,000 Common 0 Services Corp.
COMPANY NAME: BERWYN MAGNETIC RESONANCE CENTER, LLC NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF MEMBER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS -------------- ------------------- ----------------------- InSight Health Corp. 75% 0 VHS of Illinois, Inc. 25% 0
COMPANY NAME: CONNECTICUT LITHOTRIPSY, LLC NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF MEMBER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS -------------- ------------------- ----------------------- Signal Medical Services, Inc. 60% 0 Robert H. Lovegrove, M.D. 1.350601% 0 Jonathan Abel Waxberg, M.D. 1.350601% 0 Vincent J. Tumminello, M.D. 1.350601% 0 Peter F. D'Addario, M.D. 1.350601% 0 Michael A. Fischman, M.D. 1.350601% 0 Kenneth R. Kurz, M.D. 1.350601% 0 Robert F. Morrison, M.D. 1.350601% 0 Thomas E. Staley, M.D. 1.350601% 0 Anthony Distefano, M.D. 1.350601% 0
NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF MEMBER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS -------------- ------------------- ----------------------- Arthur E. La Montague, Jr., M.D. 1.350601% 0 Robert D. Rodner, M.D. 1.350601% 0 Richard S. Allen, M.D. 1.350601% 0 Stephen C. Yu, M.D. 1.350601% 0 Herbert Schettler, M.D. 1.350601% 0 James DeVanney, M.D. 1.350601% 0 Anthony D. Quinn, M.D. 1.350601% 0 Steven H. Schoenberger, M.D. 1.350601% 0 Franklin P. Friedman, M.D. 1.350601% 0 Laurence D. Muldoon, M.D. 1.350601% 0 Martin H. Reichgut, M.D. 1.350601% 0 James P. Roach, M.D. 1.350601% 0 William C. Weed, M.D. 1.350601% 0 Michael J. Flanagan, M.D. 0.906568% 0 Robert A. Feldman, M.D. 0.888067% 0 Jeffrey M. Wolk, M.D. 0.888067% 0 Harvey E. Armel, M.D. 0.765957% 0 Jeffrey D. Small, M.D. 0.706763% 0 Roger S. Schual, M.D. 0.699352% 0 Milton F. Armm, M.D. 0.640148% 0 Arthur C. Pinto, M.D. 0.555042% 0 Howard L. Zuckerman, M.D. 0.540241% 0 Paul Kraus, M.D. 0.514339% 0
NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF MEMBER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS -------------- ------------------- ----------------------- Nicholas A. Viner, M.D. 0.492137% 0 Jerome K. Roth, M.D. 0.370028% 0
COMPANY NAME: DANIEL FREEMAN MRI, LLC NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF MEMBER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS -------------- ------------------- ----------------------- InSight Health Corp. 55.6% 0 Daniel Freeman Hospital, Inc. 44.4% 0
COMPANY NAME: DUBLIN DIAGNOSTIC IMAGING, LLC NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF MEMBER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS -------------- ------------------- ----------------------- InSight Health Corp. 51% 0 Stephen J. Pomeranz 49% 0
COMPANY NAME: GARFIELD IMAGING CENTER, LTD. NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF PARTNER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS --------------- ------------------- ----------------------- InSight Health Corp 90% 0 Gordon P. Boroditsky 5% 0 F. Clark Gordon 5% 0
COMPANY NAME: GRANADA HILLS OPEN MRI, LLC NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF MEMBER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS -------------- ------------------- ----------------------- InSight Health Corp. 66.6% 0
NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF MEMBER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS -------------- ------------------- ----------------------- International Philanthropic Hospital Foundation 33.4% 0
COMPANY NAME: INSIGHT-PREMIER HEALTH, LLC NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF MEMBER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS -------------- ------------------- ----------------------- InSight Health Corp. 70% 0 Premier Health, LLC 30% 0
COMPANY NAME: LOCKPORT MRI, LLC NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF MEMBER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS -------------- ------------------- ----------------------- InSight Health Corp. 70% 0 James E. Kelly 10% 0 Jayant G. Kale 10% 0 Charles E. Lannon 10% 0
COMPANY NAME: MRI ASSOCIATES, L.P. NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF PARTNER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS --------------- ------------------- ----------------------- InSight Health Corp. 99% 0 Maxum Health Services 1% 0 Corp.
COMPANY NAME: ST. JOHN'S REGIONAL IMAGING CENTER, LLC NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF MEMBER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS -------------- ------------------- ----------------------- InSight Health Corp. 51% 0 CHW Central Coast 49% 0
COMPANY NAME: SUN COAST IMAGING CENTER, LLC NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF MEMBER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS -------------- ------------------- ----------------------- InSight Health Corp. 51% 0 Sun Coast Hospital 49% 0
COMPANY NAME: WILKES-BARRE IMAGING, LLC NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF MEMBER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS -------------- ------------------- ----------------------- InSight Health Corp. 90% 0 Roy Assael 10% 0
COMPANY NAME: TOMS RIVER IMAGING ASSOCIATES, L.P. NUMBER OF UNITS ISSUABLE UPON EXERCISE OR CONVERSION NAME OF PARTNER PERCENTAGE OF UNITS OF OPTIONS OR WARRANTS --------------- ------------------- ----------------------- InSight Health Corp. 50% 0 Center State Health Services 50% 0 Corporation
SCHEDULE 6.13B - BORROWER AND ITS SUBSIDIARIES I. WHOLLY OWNED SUBSIDIARIES
NUMBER OF SHARES COVERING ALL OUTSTANDING OPTIONS, WARRANTS, RIGHTS OF NUMBER AND PERCENTAGE OF CONVERSION OR JURISDICTION OF NUMBER OF SHARES SHARES OWNED BY PURCHASE AND ALL COMPANY NAME INCORPORATION OUTSTANDING CONSOLIDATED PARTIES OTHER SIMILAR RIGHTS ------------ ------------- ----------- -------------------- -------------------- InSight Health Services Delaware 1 share of common 1 share of common stock, par 0 Acquisition Corp. stock, par value value $0.001 owned by $0.001 InSight Health Services Holdings Corp. (100% owned by InSight Health Services Holdings Corp.) InSight Health Services Delaware 1 share of common 1 share of common stock, par 0 Corp. stock, par value value $0.001 owned by $0.001 InSight Health Services Holdings Corp. (100% owned by InSight Health Services Holdings Corp.)
NUMBER OF SHARES COVERING ALL OUTSTANDING OPTIONS, WARRANTS, RIGHTS OF NUMBER AND PERCENTAGE OF CONVERSION OR JURISDICTION OF NUMBER OF SHARES SHARES OWNED BY PURCHASE AND ALL COMPANY NAME INCORPORATION OUTSTANDING CONSOLIDATED PARTIES OTHER SIMILAR RIGHTS ------------ ------------- ----------- -------------------- -------------------- Diagnostic Solutions Corp. Delaware 1,000 shares of 1,000 shares of common stock, 0 common stock, $0.1 par value owned by $0.1 par value Maxum Health Services Corp. (100% owned by Maxum Health Services Corp.) InSight Health Corp. Delaware 1,000 shares 1,000 shares common stock, 0 common stock, $0.03 par value owned by $0.03 par value InSight Health Services Corp. (100% owned by InSight Health Services Corp.) Maxum Health Corp. Delaware 1,000 shares 1,000 shares common stock, 0 common stock, $0.01 par value owned by $0.01 par value InSight Health Services Corp. (100% owned by InSight Health Services Corp.) Maxum Health Services Delaware 1,000 shares of 1,000 shares of common stock, 0 Corp. common stock, $0.10 par value owned by $0.10 par value Maxum Health Corp. (100% owned by Maxum Health Corp.)
NUMBER OF SHARES COVERING ALL OUTSTANDING OPTIONS, WARRANTS, RIGHTS OF NUMBER AND PERCENTAGE OF CONVERSION OR JURISDICTION OF NUMBER OF SHARES SHARES OWNED BY PURCHASE AND ALL COMPANY NAME INCORPORATION OUTSTANDING CONSOLIDATED PARTIES OTHER SIMILAR RIGHTS ------------ ------------- ----------- -------------------- -------------------- Maxum Health Services of Texas 1,000 shares of 1,000 shares of common stock, 0 Dallas, Inc. common stock, $0.1 par value owned by $0.1 par value Maxum Health Services Corp. (100% owned by Maxum Health Services Corp.) Maxum Health Services of Texas 1,000 shares of 1,000 shares of common stock, 0 North Texas, Inc. common stock, $0.1 par value owned by $0.1 par value Maxum Health Services Corp. (100% owned by Maxum Health Services Corp.) NDDC, Inc. Texas 1,000 shares of 1,000 shares of common stock, 0 common stock, $0.1 par value owned by $0.1 par value Maxum Health Services Corp. (100% owned by Maxum Health Services Corp.) Open MRI, Inc. Delaware 1,000 shares of 1,000 shares of common stock, 0 common stock, $0.01 par value owned by $0.01 par value InSight Health Services Corp. (100% owned by InSight Health Services Corp.)
NUMBER OF SHARES COVERING ALL OUTSTANDING OPTIONS, WARRANTS, RIGHTS OF NUMBER AND PERCENTAGE OF CONVERSION OR JURISDICTION OF NUMBER OF SHARES SHARES OWNED BY PURCHASE AND ALL COMPANY NAME INCORPORATION OUTSTANDING CONSOLIDATED PARTIES OTHER SIMILAR RIGHTS ------------ ------------- ----------- -------------------- -------------------- Radiosurgery Centers, Inc. Delaware 100 shares of 100 shares of common stock, 0 common stock, $.01 par value owned by $.01 par value InSight Health Corp. (100% owned by InSight Health Corp.) Signal Medical Services, Delaware 1,000 shares of 1,000 shares of common stock, 0 Inc. common stock, $.001 par value owned by $.001 par value InSight Health Services Corp. (100% owned by InSight Health Services Corp.)
NUMBER OF UNITS COVERING ALL OUTSTANDING OPTIONS, WARRANTS, RIGHTS OF CONVERSION OR % OF UNITS PURCHASE AND ALL OUTSTANDING OWNED BY OTHER SIMILAR COMPANY NAME JURISDICTION OF ORGANIZATION CONSOLIDATED PARTIES RIGHTS ------------ ---------------------------- -------------------- ------ MRI Associates, L.P. Indiana 99% InSight Health Corp. 0 1% Maxum Health Services Corp.
II. Joint Ventures
NUMBER OF UNITS COVERING ALL OUTSTANDING OPTIONS, WARRANTS, RIGHTS OF CONVERSION OR % OF UNITS PURCHASE AND ALL OUTSTANDING OWNED BY OTHER SIMILAR COMPANY NAME JURISDICTION OF ORGANIZATION CONSOLIDATED PARTIES RIGHTS ------------ ---------------------------- -------------------- ------ Berwyn Magnetic Resonance Center, Illinois 75% InSight Health Corp. 0 LLC Connecticut Lithotripsy, LLC Connecticut 60% Signal Medical 0
NUMBER OF UNITS COVERING ALL OUTSTANDING OPTIONS, WARRANTS, RIGHTS OF CONVERSION OR % OF UNITS PURCHASE AND ALL OUTSTANDING OWNED BY OTHER SIMILAR COMPANY NAME JURISDICTION OF ORGANIZATION CONSOLIDATED PARTIES RIGHTS ------------ ---------------------------- -------------------- ------ Services, Inc. Daniel Freeman MRI, LLC California 55.6% InSight Health 0 Corp. Dublin Diagnostic Imaging, LLC Ohio 51% InSight Health Corp. 0 Garfield Imaging Center, Ltd. California 90% InSight Health Corp. 0 Granada Hills Open MRI, LLC California 66.6% InSight Health 0 Corp. InSight-Premier Health, LLC Maine 70% InSight Health Corp. 0 Lockport MRI, LLC New York 70% InSight Health Corp. 0 St. John's Regional Imaging Center, California 51% InSight Health Corp. 0 LLC Sun Coast Imaging Center, LLC Florida 51% InSight Health Corp. 0 Toms River Imaging Associates, L.P. New Jersey 50% InSight Health Corp. 0
NUMBER OF UNITS COVERING ALL OUTSTANDING OPTIONS, WARRANTS, RIGHTS OF CONVERSION OR % OF UNITS PURCHASE AND ALL OUTSTANDING OWNED BY OTHER SIMILAR COMPANY NAME JURISDICTION OF ORGANIZATION CONSOLIDATED PARTIES RIGHTS ------------ ---------------------------- -------------------- ------ Wilkes-Barre Imaging, LLC Pennsylvania 90% InSight Health Corp. 0
SCHEDULE 6.16 - ENVIRONMENTAL DISCLOSURES None. SCHEDULE 6.17 - INTELLECTUAL PROPERTY a. InSight Health Services and Design - Service Mark Reg. No. 2,229,303 registered March 2, 1999 b. InSight - Service Mark Reg. No. 2,485,208 registered September 4, 2001 c. Maxum X and Design - Service Mark Reg. No. 1,634,498, registered February 5, 1991 (renewal application filed) d. Open MRI and Design - Service Mark Reg. No. 2,432,997 registered March 6, 2001 e. Ocean Medical Imaging Center- Service Mark Reg. No. 12344, registered December 1, 1993 (New Jersey) f. OMIC- Service Mark Reg. No. 12370, registered December 30, 1993 (New Jersey) SCHEDULE 6.20(A) - REAL PROPERTIES
I. OWNED LAND AND OWNED IMPROVEMENTS OWNER ADDRESS COUNTY 1. InSight Health Corp. 1199 8th Avenue, Fort Worth, Tarrant Texas 2. InSight Health Corp. 1301 McCallie Avenue, Hamilton Chattanooga, Tennessee II. OWNED LAND - UNIMPROVED OWNER ADDRESS COUNTY InSight Health Corp. 12th Avenue, Fort Worth, Tarrant Tarrant County, Texas
III. GROUND LEASES WITH OWNED IMPROVEMENTS
CENTER ADDRESS COUNTY 1. Berwyn Magnetic Resonance Center* 3345 South Oak Park Avenue, Cook Landlord: Berwyn, Illinois MacNeal Management Services, Inc. Tenant: Berwyn Magnetic Resonance Center, LLC 2. Diagnostic Outpatient Center 300 West 61st Avenue, Lake Landlord: Hobart, Indiana Lakeshore Health System, Inc. d/b/a St. Mary Medical Center - Hobart Tenant: InSight Health Corp. 3. Garfield Imaging Center* 555 North Garfield Avenue, Los Angeles Landlord: Monterey Park, California NME Hospitals, Inc. Tenant: Garfield Imaging Center, Ltd. 4. LAC+USC Imaging Science Center 1744 Zonal Avenue, Los Los Angeles Landlord: Angeles, California County of Los Angeles Tenant: InSight Health Corp. (formerly American Health Services Corp.)
CENTER ADDRESS COUNTY 5. Harbor/UCLA Diagnostic Imaging Center 21828 South Normandie Los Angeles Landlord: Avenue, Torrance, California County of Los Angeles Tenant: InSight Health Corp. (successor-in- interest to International Imaging Equities 84-6, Inc.) 6. Sun Coast Imaging Center* 2025 Indian Rocks Road, Pinellas Landlord: Largo, Florida Sun Coast Hospital, Inc. Tenant: Sun Coast Imaging Center, LLC 7. Open MRI Center of Granada Hills* 10461 Balboa Boulevard, Los Angeles Landlord: Granada Hills, California International Philanthropic Hospital Foundation d/b/a Granada Hills Community Hospital Tenant: Granada Hills Open MRI, LLC 8. Wilkes-Barre Imaging Center* 146 Mundy Street, Wilkes- Luzerne Landlord: Barre, Pennsylvania Allied Healthcare Services, Inc. Tenant: Wilkes-Barre Imaging, LLC
IV. LEASED PROPERTIES
CENTER/OFFICE ADDRESS COUNTY 1. Broad Street Imaging Center* 750 East Broad Street, Franklin Landlord: Columbus, Ohio Broad Street Proscan Imaging Ltd. Tenant: InSight Health Corp. 2. Daniel Freeman Marina MRI Center 4658 Lincoln Blvd., Marina Los Angeles Landlord: Del Rey, California Daniel Freeman Hospitals Incorporated d/b/a Daniel Freeman Marina Hospital Tenant: Daniel Freeman MRI, LLC 3. Dublin Diagnostic Imaging Center* 4351 Dale Drive, Suite 1000, Franklin Landlord: Dublin, Ohio Dublin Imaging and Sports Medicine Building, Ltd. Tenant: Dublin Diagnostic Imaging, LLC 4. InSight Diagnostic Imaging Centers - 5040 North 15th Avenue. Maricopa Camelback* #401, Phoenix, Arizona Landlord: Camelback Medical Plaza Associates, LLP Tenant: InSight Health Corp. (successor-in- interest to Princeps Southwest LLC)
CENTER/OFFICE ADDRESS COUNTY 5. InSight Diagnostic Imaging Centers - Peoria* 13660 North 94th Drive, #D1, Maricopa D2, and D4 Peoria, Arizona Landlord: Plaza del Rio Properties, LLC Tenant: InSight Health Corp. Suite # D1 Landlord: Plaza del Rio Properties, LLC Tenant: InSight Health Corp. Suites # D2 and D4 6. InSight Diagnostic Imaging Centers - Tempe* 1950 East Southern Avenue, Maricopa Landlord: #105, Tempe, Arizona Tierra Firme One, LLC Tenant: InSight Health Corp. 7. InSight Diagnostic Imaging Centers - Thomas 1848 East Thomas Road, Maricopa Imaging* Phoenix, Arizona Landlord: Fortuna Water Company Tenant: InSight Health Corp. 8. InSight Diagnostic Imaging Centers - 2921 North 18th Place, Maricopa Thomas Phoenix, Arizona Road MRI*
CENTER/OFFICE ADDRESS COUNTY Landlord: Imrad, Inc. Tenant: InSight Health Corp. 9. InSight Mountain Diagnostics* 800 Shadow Lane, Las Vegas, Clark Landlord: Nevada Borstein Partners, Ltd. Tenant: InSight Health Corp. 10. InSight Open MRI of Indianapolis* 8850 Shelby Street, #B1, Marion Landlord: Indianapolis, Indiana Greg Allen & Associates Tenant: InSight Health Corp. 11. InSight Open MRI - Southern Regional* 590 Missouri Avenue, #200, Clark Landlord: Clarksville, Indiana Commercial Logistics Corporation Tenant: InSight Health Corp. 12. Marshwood Imaging Center* Oak Hill Plaza, 33 Gorham Cumberland Landlord: Road, Scarborough, Maine JDR Trust II Tenant: InSight - Premier Health, LLC 13. Storage Space* 2603-D 8th Avenue, Fort Tarrant
CENTER/OFFICE ADDRESS COUNTY Landlord: Worth, Texas Fort Worth C & R, Inc Tenant: InSight Health Corp. 14. Maxum Diagnostic Center - Forest Lane* 11617 North Central Dallas Landlord: Expressway, Suite 132, Dallas, ASG Central Forest, Ltd. (successor- Texas in-interest to Century Properties Fund XIII) Tenant: NDDC, Inc. 15. Maxum Diagnostic Center - Preston Road* 17950 Preston Road, Suite Dallas Landlord: 120, Dallas, Texas 17950 Partners, Ltd. Tenant: InSight Health Corp. 16. Northtowns Imaging - Amherst* 8750 Transit Road, Suite 115, Erie Landlord: Amherst, New York NPC, LLC Tenant: Lockport MRI, LLC 17. Northtowns Imaging - Lockport* 170 Professional Parkway Niagara Landlord: South, Lockport, New York Ulrich Development Company, LLC Tenant: Lockport MRI, LLC
CENTER/OFFICE ADDRESS COUNTY 18. Northtowns Imaging - Maple Road* 61 Maple Road, Williamsville, Erie Landlord: New York 61 Maple Road Associates, LLC Tenant: Family Care Physicians Sublessee: Northtowns Medical Associates, PC (Lockport MRI, LLC) 19. Northtowns Imaging - North Tonawanda* 624 River Road, Erie Landlord: Suite A5 RER, LLC North Tonawanda, New York Tenant: Lockport MRI, LLC 20. Northtowns Imaging - Tonawanda* 2828 Sheridan Drive, Erie Landlord: Tonawanda, New York J.R. Nuchereno & Sons Tenant: Lockport MRI, LLC 21. Northtowns Imaging - Williamsville* 1000 Youngs Road, Erie Landlord: Suite 106, Williamsville, New Meadowlands Professional Park Company York Tenant: Lockport MRI, LLC
CENTER/OFFICE ADDRESS COUNTY 22. Open MRI of Hayward* 3521 Investment Boulevard, Alameda Landlord: Suites 5 and 6, Hayward, PGP Northern Industrial, LP California (successor-in- interest to Eden Plaza Associates) Tenant: InSight Health Corp. 23. Open MRI of Orange County* 2620 South Bristol Street, Orange Landlord: Santa Ana, California CP Bristol, LLC Tenant: InSight Health Corp. 24. Open MRI of Pleasanton* Rose Pavillion Shopping Alameda Landlord: Center, 4225 Rosewood Drive, New Plan Excel Realty Trust, Inc. Suites 4, 5, and 6, Pleasanton, Tenant: California InSight Health Corp. d/b/a Open MRI of Pleasanton 25. Redwood City MRI* 345 Convention Way, Suite San Mateo Landlord: D1, Redwood City, California Brugger Corporation Tenant: InSight Health Corp.
CENTER/OFFICE ADDRESS COUNTY 26. St. John's Regional Imaging Center* 1700 North Rose, Suite 110, Ventura Landlord: Oxnard, California CHW Central Coast Tenant: St. John's Regional Imaging Center, LLC 27. The Imaging Center at Murfreesboro* 1001 and 1005 North Highland Rutherford Landlord: Avenue, Murfreesboro, Marlin Properties, LLC Tennessee Tenant: InSight Health Corp. 28. Thorn Run MRI* 935 Thorn Run Road, Suite Allegheny Landlord: 116, Coraopolis, Pennsylvania Sewickley Valley Hospital Tenant: Maxum Health Services Corp. 29. Washington Magnetic Resonance Center* 12455 East Washington Los Angeles Landlord: Boulevard, Whittier, Washington Magnetic Resonance Center California Tenant: InSight Health Corp. 30. Eastern Regional Office* 74 and 76 Batterson Park Hartford Landlord: Road, Farmington, Fusco Farmington Associates Limited Connecticut Partnership Tenant: InSight Health Corp.
CENTER/OFFICE ADDRESS COUNTY 31. Western Region Billing Office* 3501 S. Harbor Blvd, Suite Orange Landlord: 210, Santa Ana, California The John R. Saunders Trust Tenant: InSight Health Corp. 32. Corporate Office* 4400 MacArthur Blvd., Suites Orange Landlord: 800, 830, 880 and 740, Koll Center Newport Number 9 Newport Beach, California Tenant: InSight Health Corp. 33. Midwest Billing Office* 8585 Broadway, Merrillville, Lake Landlord: Indiana NBD Bank, N.A. Tenant: InSight Health Corp. 34. Former DSC General Offices* 1170 Griffith Road, Space 9, Lake Landlord: Lake Forest, Illinois Westwood Square Partnership Tenant: Diagnostic Solutions Corp. 35. Storage Space* 16745 South Lathrop Ave, Cook Landlord: Harvey, Illinois AK Associates, LLC Tenant: InSight Health Corp.
CENTER/OFFICE ADDRESS COUNTY 36. Billing Office* 1836 East Thomas Road, Maricopa Landlord: Phoenix, Arizona Prim & Property, LLC Tenant: InSight Health Corp. d/b/a/ InSight Diagnostic Centers 37. General Office* 1797 W. University, Suites Maricopa Landlord: 168, 169, and 170, Tempe, PS Business Parks, L.P. Arizona Tenant: InSight Health Corp. 38. Eastern Region Office* 120 Gibraltar Road, Suite 210, Montgomery Landlord: Horsham, Pennsylvania Liberty Property Limited Partnerships Tenant: Complete Care Services, Inc. Sublessee: InSight Health Corp. 39. Wilkes-Barre Billing Office* 150 Mundy Street, Wilkes- Luzerne Landlord: Barre, Pennsylvania Family Physicians Associates of Wyoming Valley, P.C. Tenant: Wilkes-Barre Imaging, LLC
CENTER/OFFICE ADDRESS COUNTY 40. Western Region Office* 22342 Avenida Empersa, Suite Orange Landlord: 165, Rancho Santa Margarita, Olen Commercial Realty Corp., a California Nevada corporation Tenant: InSight Health Corp. 41. Maine Billing Office* 51 Nonesuch Plaza Cumberland Landlord: Gringolet Associates 2nd Floor Tenant: Scarborough, Maine InSight Health Corp. 42. Proposed New Center* 1012 Union Street Penobscot Landlord: Hilltop, Inc. Bangor, Maine Tenant: InSight-Premier Health, LLC 43. Ocean Medical Imaging Center* 21 Stockton Drive Ocean Landlord: Center State Health Group, Toms River, New Jersey Inc. Tenant: OMIC Development Corp. Sublessee: Toms River Imaging Associates, L.P.
* Excluded Property SCHEDULE 6.20(b) - COLLATERAL LOCATIONS
CREDIT PARTY COLLATERAL LOCATION 1. InSight Health Corp. Maxum Diagnostic Center 8th Avenue, 1199 8th Avenue Maxum Health Services of North Fort Worth, Texas Texas, Inc. 2. InSight Health Corp. Chattanooga Outpatient Center 1301 McCallie Avenue Chattanooga, Tennessee 3. InSight Health Corp. Northern Indiana Oncology Center 54 Roosevelt Road Valapariso, Indiana 4. InSight Health Corp. Berwyn Magnetic Resonance Center 3345 South Oak Park Avenue Berwyn, Illinois 5. InSight Health Corp. Diagnostic Outpatient Center 300 West 61st Avenue MRI Associates, L.P. Hobart, Indiana 6. InSight Health Corp. Garfield Imaging Center 555 North Garfield Avenue Monterey Park, California 7. InSight Health Corp. LAC+USC Imaging Science Center 1744 Zonal Avenue Los Angeles, California 8. InSight Health Corp. Harbor/UCLA Diagnostic Imaging Center 21828 South Normandie Avenue Torrance, California 9. InSight Health Corp. Sun Coast Imaging Center 2025 Indian Rocks Road Largo, Florida 10. InSight Health Corp. Open MRI Center of Granada Hills 10461 Balboa Boulevard, Granada Hills, California
CREDIT PARTY COLLATERAL LOCATION 11. InSight Health Corp. Wilkes-Barre Imaging Center 146 Mundy Street Wilkes-Barre Pennsylvania 12. InSight Health Corp. Broad Street Imaging Center 750 East Broad Street Columbus, Ohio 13. InSight Health Corp. Central Maine Imaging Center 287 Main Street Plaza, Suite 100 Maxum Health Services Corp. Lewiston, Maine 14. InSight Health Corp. Daniel Freeman Marina MRI Center 4658 Lincoln Blvd. Marina Del Rey, California 15. InSight Health Corp. Dublin Diagnostic Imaging Center 4351 Dale Drive, Suite 1000 Dublin, Ohio 16. InSight Health Corp. Greater Waterbury Imaging Center 64 Robbins Street Signal Medical Services, Inc. Waterbury, Connecticut 17. InSight Health Corp. InSight Diagnostic Imaging Centers - Camelback 5040 North 15th Avenue, #401 Phoenix, Arizona 18. InSight Health Corp. InSight Diagnostic Imaging Centers - Peoria 13660 North 94th Drive, #D1, D2, and D4 Peoria, Arizona 19. InSight Health Corp. InSight Diagnostic Imaging Centers - Tempe 1950 East Southern Avenue, #105 Tempe, Arizona 20. InSight Health Corp. InSight Diagnostic Imaging Centers - Thomas Imaging 1848 East Thomas Road Phoenix, Arizona
CREDIT PARTY COLLATERAL LOCATION 21. InSight Health Corp. InSight Diagnostic Imaging Centers - Thomas Road MRI 2921 North 18th Place Phoenix, Arizona 22. InSight Health Corp. InSight Mountain Diagnostics 800 Shadow Lane Las Vegas, Nevada 23. InSight Health Corp. InSight Open MRI of Indianapolis 8850 Shelby Street, #B1 Indianapolis, Indiana 24. InSight Health Corp. InSight Open MRI - Southern Regional 590 Missouri Avenue, #200 Clarksville, Indiana 25. InSight Health Corp. Marshwood Imaging Center Oak Hill Plaza, 33 Gorham Road, Scarborough, Maine 26. InSight Health Corp. Storage Space 2603-D 8th Avenue Fort Worth, Texas 27. InSight Health Corp. Maxum Diagnostic Center - Forest Lane 11617 North Central Expressway, Suite 132, NDDC, Inc. Dallas, Texas 28. InSight Health Corp. Maxum Diagnostic Center - Preston Road 17950 Preston Road, Suite 120 Maxum Health Services of Dallas, Dallas, Texas Inc. 29. InSight Health Corp. Metabolic Imaging of Kentucky 6420 Dutchmans Parkway, Suite 385, Louisville, Kentucky 30. InSight Health Corp. Portage Community Hospital, Suite 8, Valparaiso, Indiana 31. InSight Health Corp. Northtowns Imaging - Amherst 8750 Transit Road, Suite 115 Amherst, New York
CREDIT PARTY COLLATERAL LOCATION 32. InSight Health Corp. Northtowns Imaging - Lockport 170 Professional Parkway South Lockport, New York 33. InSight Health Corp. Northtowns Imaging - Maple Road 61 Maple Road Williamsville, New York 34. InSight Health Corp. Northtowns Imaging - North Tonawanda 624 River Road Suite A5 North Tonawanda, New York 35. InSight Health Corp. Northtowns Imaging - Tonawanda 2828 Sheridan Drive Tonawanda, New York 36. InSight Health Corp. Northtowns Imaging - Williamsville 1000 Youngs Road Suite 106 Williamsville, New York 37. InSight Health Corp. Ocean Medical Imaging Center 21 Stockton Drive Toms River, New Jersey 38. InSight Health Corp. Open MRI of Hayward 3521 Investment Boulevard, Suites 5 and 6 Open MRI, Inc. Hayward, California 39. InSight Health Corp. Open MRI of Orange County 2620 South Bristol Street Santa Ana, California Open MRI, Inc. 40. InSight Health Corp. Open MRI of Pleasanton Rose Pavillion Shopping Center, 4225 Rosewood Drive, Suites 4, 5, and 6, Pleasanton, California 41. InSight Health Corp. Parkway Imaging Center 100 North Green Valley Parkway, Suite 130, Henderson, Nevada
CREDIT PARTY COLLATERAL LOCATION 42. InSight Health Corp. Redwood City MRI 345 Convention Way, Suite D1 Redwood City, California 43. InSight Health Corp. St. John's Regional Imaging Center 1700 North Rose, Suite 110, Oxnard, California 44. InSight Health Corp. The Imaging Center at Murfreesboro 1001 and 1005 North Highland Avenue, Murfreesboro, Tennessee 45. InSight Health Corp. Thorn Run MRI 935 Thorn Run Road, Suite 116, Maxum Health Services Corp. Coraopolis, Pennsylvania 46. InSight Health Corp. Washington Magnetic Resonance Center 12455 East Washington Boulevard, Whittier, California 47. InSight Health Corp. Whitney Imaging Center Spring Glen Medical Center 2200 Whitney Avenue Suites 120, 130 and 150 Hamden, Connecticut 48. InSight Health Corp Eastern Regional Office 74 and 76 Batterson Park Road Farmington, Connecticut 49. InSight Health Corp. Western Region Billing Office 3501 S. Harbor Blvd, Suite 210 Santa Ana, California 50. InSight Health Corp. Corporate Office 4400 MacArthur Blvd., Suites 800, 830, 880 and 740 Newport Beach, California 51. InSight Health Corp. Midwest Billing Office 8585 Broadway Merrillville, Indiana
CREDIT PARTY COLLATERAL LOCATION 52. InSight Health Corp. Storage Space 16745 South Lathrop Ave Harvey, Illinois 53. InSight Health Corp. Billing Office 1836 East Thomas Road Phoenix, Arizona 54. InSight Health Corp. General Office 1797 W. University, Suites 168, 169, and 170, Tempe, Arizona 55. InSight Health Corp. Eastern Region Office 120 Gibraltar Road, Suite 210 Horsham, Pennsylvania 56. InSight Health Corp. Wilkes-Barre Billing Office 150 Mundy Street Wilkes-Barre, Pennsylvania 57. InSight Health Corp. Western Region Office 22342 Avenida Empersa, Suite 165 Rancho Santa Margarita, California 58. InSight Health Corp. Maine Billing Office 51 Nonesuch Plaza, 2nd Floor Scarborough, Maine 59. InSight Health Corp. Gamma Knife Center at the University of Miami/Jackson Memorial Radiosurgery Centers, Inc. 1611 N.W. 12th Avenue North Wing 1 Suite 121G Miami, Florida 60. InSight Health Corp. Holy Cross Hospital MRI Center 2701 West 68th Street Chicago, Illinois 61. InSight Health Corp. MRI Center at Martin Luther King Jr./Drew Medical Center 12021 South Wilmington Avenue Los Angeles, California
CREDIT PARTY COLLATERAL LOCATION 62. InSight Health Corp. Olive View - UCLA Imaging Center 14445 Olive View Drive Sylmar, California 63. InSight Health Corp. Rancho Los Amigos MRI Center 12514 Laurel Avenue Downey, California 64. InSight Health Corp. Matagorda General Hospital d/b/a Matagorda County Hospital District ,1115 Avenue G Bay City, TX 65. InSight Health Corp. Community Medical Center 99 Highway 37 West Toms River, NJ 66. InSight Health Corp. Decatur General Hospital 1201 Seventh Street, S.E. P.O. Box 2239 Decatur, Al 67. InSight Health Corp. Johnson Memorial Hospital 201 Chestnut Hill Road Stafford Springs, CT 06076 68. InSight Health Corp. Greenwood Leflore Hospital 1401 River Road Greenwood, MS 69. InSight Health Corp. Hollywood Diagnostic Center 4224 Hollywood Boulevard Hollywood, FL 70. InSight Health Corp. South Broward Hospital District d/b/a Memorial Regional Hospital 3501 Johnson Street Hollywood, FL 71. InSight Health Corp. Citrus Memorial Health Foundation, Inc. d/b/a Citrus Memorial Hospital 502 Highland Boulevard Inverness, FL
CREDIT PARTY COLLATERAL LOCATION 72. Signal Medical Services, Inc. Queens Hospital Center 81-68 164th Street Jamaica, New York InSight Health Corp. 73. InSight Health Corp. Lakes Region General Hospital 80 Highland Street Laconia, NH 74. InSight Health Corp. Lima Memorial Joint Operating Company d/b/a/ Lima Memorial Hospital 1001 Bellefontaine Avenue Lima, OH 75. InSight Health Corp. Manchester Memorial Hospital 71 Haynes Street Manchester, CT 76. InSight Health Corp. Radiological Associates, Inc. 116 Cook Avenue Meriden, CT 77. InSight Health Corp. Titus Regional Medical Center 2001 N. Jefferson Mt. Pleasant, TX 75455 78. InSight Health Corp. Pottsville Hospital and Wame Clinic 420 South Jackson Street Pottsville, PA 17901 79. InSight Health Corp. Christus Health Northern Louisiana d/b/a Christus Schumpert Highland 1453 E. Bert Kouns Industrial Loop Shreveport, LA 71105-6050 80. InSight Health Corp. West Georgia Medical Center 1514 Vernon Road LaGrange, GA 30240
SCHEDULE 6.20(c) - CHIEF EXECUTIVE OFFICES/PRINCIPAL PLACES OF BUSINESS
JURISDICTION OF INCORPORATION/ PRINCIPAL PLACE OF COMPANY NAME FORMATION CHIEF EXECUTIVE OFFICE BUSINESS InSight Health Services Delaware One Federal Street One Federal Street Holdings Corp. 21st Floor 21st Floor Boston, MA 02110 Boston, MA 02110 InSight Health Services Delaware One Federal Street One Federal Street Acquisition Corp. 21st Floor 21st Floor Boston, MA 02110 Boston, MA 02110 InSight Health Services Delaware 4400 MacArthur Blvd, 4400 MacArthur Blvd, Corp. Suite 800 Suite 800 Newport Beach, CA Newport Beach, CA 92660 92660 Diagnostic Solutions Delaware 4400 MacArthur Blvd, 4400 MacArthur Blvd, Corp. Suite 800 Suite 800 Newport Beach, CA Newport Beach, CA 92660 92660 InSight Health Corp. Delaware 4400 MacArthur Blvd, 4400 MacArthur Blvd, Suite 800 Suite 800 Newport Beach, CA Newport Beach, CA 92660 92660 Maxum Health Corp. Delaware 4400 MacArthur Blvd, 4400 MacArthur Blvd, Suite 800 Suite 800 Newport Beach, CA Newport Beach, CA 92660 92660 Maxum Health Services Delaware 4400 MacArthur Blvd, 4400 MacArthur Blvd, Corp. Suite 800 Suite 800 Newport Beach, CA Newport Beach, CA 92660 92660 Maxum Health Services Texas 4400 MacArthur Blvd, 17950 Preston Road, of Dallas, Inc. Suite 800 Suite 120 Newport Beach, CA Dallas, Texas 75252 92660
JURISDICTION OF INCORPORATION/ PRINCIPAL PLACE OF COMPANY NAME FORMATION CHIEF EXECUTIVE OFFICE BUSINESS Maxum Health Services Texas 4400 MacArthur Blvd, 1199 Eighth Avenue of North Texas, Inc. Suite 800 Fort Worth, Texas Newport Beach, CA 76104 92660 MRI Associates, L.P. Indiana 4400 MacArthur Blvd, 300 West 61st Avenue Suite 800 Hobart, Indiana 46342 Newport Beach, CA 92660 NDDC, Inc. Texas 4400 MacArthur Blvd, 11617 North Central Suite 800 Expressway, Suite 132 Newport Beach, CA Dallas, Texas 75243 92660 Open MRI, Inc. Delaware 4400 MacArthur Blvd, 3521 Investment Suite 800 Boulevard Newport Beach, CA Suites 5 and 6 92660 Hayward, California 94545 and 2620 South Bristol Street Santa Ana, California 92704 Radiosurgery Centers, Delaware 4400 MacArthur Blvd, 1611 N.W. 12th Avenue Inc. Suite 800 Miami, Florida 33140 Newport Beach, CA 92660 Signal Medical Delaware 4400 MacArthur Blvd, 4400 MacArthur Blvd, Services, Inc. Suite 800 Suite 800 Newport Beach, CA Newport Beach, CA 92660 92660
SCHEDULE 6.23 - BROKERS' FEES Pursuant to a letter agreement dated January 14, 2001, Shattuck Hammond Partners, in its capacity as financial advisor to the Acquired Company, is entitled to receive $100,000 upon consummation of the Transaction. Pursuant to a letter agreement dated January 30, 2001, UBS Warburg LLC, in its capacity as financial advisor to the Acquired Company, is entitled to receive approximately $2,800,000 upon consummation of the Transaction. SCHEDULE 7.6 - INSURANCE [See attached] SCHEDULE 8.1(b) - INDEBTEDNESS For Indebtedness of Consolidated Parties to InSight Health Corp., see Schedule 8.6 (debt balances of Consolidated Partnerships). INDEBTEDNESS CONSISTING OF CAPITAL LEASES ALL AMOUNTS ARE AS OF AUGUST 31, 2001
DATE OF MATURITY INTEREST BALANCE COMPANY PAYEE DESCRIPTION NOTE DATE RATE 08/31/01 =================== ============ ============================= ============== ================= =============== =============== IHC GE GE - G1187E 12/01/99 05/01/04 9.00% $698,056 IHC GE GE - G1190A 12/01/99 05/01/04 9.00% $670,229 IHC GE GE - G1205A 12/01/99 05/01/04 9.00% $645,052 IHC GE GE - G1207A 12/01/99 05/01/04 9.00% $632,150 IHC GE GE - G3052 (Murf.) 12/01/99 05/01/04 9.00% $464,768 IHC GE GE - G3063 (Pleasanton) 12/01/99 05/01/04 9.00% $526,750 IHC GE GE - G3063 (Pleasanton) 02/01/00 05/01/04 10.28% $20,713 DF GE GE - G3074 08/01/00 07/01/06 9.30% $1,462,784 DF GE GE - G3074 - COIL 08/01/00 07/01/06 9.30% $13,791 OPEN MRI GE GE - G3051 (OC) 12/01/99 05/01/04 9.00% $515,216 --------------- TOTAL CAPITAL LEASES $5,649,509 ===============
IHC = InSight Health Corp. OPEN MRI = Open MRI, Inc. DF = Daniel Freeman MRI, LLC GUARANTY OBLIGATIONS (AS OF AUGUST 31, 2001): 1. InSight Health Corp. has a guaranty outstanding in favor of Siemens Credit Corporation in the amount of $199,325 for obligations of Northern Indiana Oncology Center of Porter Memorial Hospital, LLC 2. InSight Health Corp. has a guaranty outstanding in favor of DVI Financial Services, Inc. in the amount of $641,890 for obligations of Metabolic Imaging of Kentucky, LLC JOINT VENTURE RECOURSE INDEBTEDNESS (AS OF AUGUST 31, 2001): 1. Central Maine Magnetic Imaging Associates has Indebtedness outstanding to Peoples Heritage Bank, of which $260,854 is recourse to Maxum Health Services Corp. 2. Central Maine Magnetic Imaging Associates has Indebtedness outstanding to Picker Financial, of which $483,066 is recourse to Maxum Health Services Corp. 3. Parkway Imaging Center, LLC has Indebtedness outstanding to General Electric Company, of which $361,910 is recourse to InSight Health Corp. 4. Southern Connecticut Imaging Centers, LLC has Indebtedness outstanding to Citizens Bank, of which $1,182,392 is recourse to InSight Health Corp. Schedule 8.1(g) TERMS OF SUBORDINATION Any Indebtedness to any Person issued pursuant to Section 8.1(g) or contemplated by Section 8.12(b) (herein collectively referred to as "Section 8.1(g) Indebtedness") shall be subordinated to the Credit Party Obligations in the manner set forth below: - - Until all of the Credit Party Obligations shall have been paid in full in cash and the Commitments under the Credit Agreement shall have been terminated, interest, fees and premiums on Section 8.1(g) Indebtedness shall be payable in kind or capitalized. - - Until all of the Credit Party Obligations shall have been paid in full in cash and the Commitments under the Credit Agreement shall have been terminated, payments, prepayments, redemptions or repurchases of principal on Section 8.1(g) Indebtedness shall be prohibited (it being acknowledged and agreed that the conversion of any Section 8.1(g) Indebtedness to equity would not constitute a payment, prepayment, redemption or repurchase of principal on such Section 8.1(g) Indebtedness). - - Until all of the Credit Party Obligations shall have been paid in full in cash and the Commitments under the Credit Agreement shall have been terminated, the holders of Section 8.1(g) Indebtedness shall have no right to exercise remedies (other than acceleration) in respect of Section 8.1(g) Indebtedness. - - Until the date 91 days after all of the Credit Party Obligations shall have been paid in full in cash and the Commitments under the Credit Agreement shall have been terminated, the holders of Section 8.1(g) Indebtedness, in their capacities as such, shall not take any action to initiate an involuntary bankruptcy proceeding in respect of any Credit Party. - - The Lenders shall have the right, if not exercised by the holders of Section 8.1(g) Indebtedness, to file proofs of claim (and any notice of assignment of the right to receive payments) in respect of Section 8.1(g) Indebtedness in any bankruptcy proceeding in respect of any Credit Party. - - In any bankruptcy proceeding in respect of any Credit Party, the holders of Credit Party Obligations shall be entitled to payment in full in cash before the holders of Section 8.1(g) Indebtedness, in their capacities as such, shall be entitled to receive any payments or Property (other than (i) debt securities that are subordinated at least to the extent provided in this Schedule 8.1(g) and (ii) equity securities that are not redeemable for cash, and in respect of which no cash dividends are payable), until all of the Credit Party Obligations shall have been paid in full in cash. - - Any payments received by the holders of Section 8.1(g) Indebtedness, in their capacities as such, in contravention of the foregoing subordination provisions shall be held in trust for the benefit of, and immediately turned over to, the Administrative Agent for the benefit of the holders of Credit Party Obligations. - - In any reorganization proceeding in respect of any Credit Party, the holders of Credit Party Obligations shall be entitled to approve (on behalf of the holders of Section 8.1(g) Indebtedness, in their capacities as such) the use of cash collateral by such Credit Party. - - In any bankruptcy proceeding in respect of any Credit Party, the holders of Section 8.1(g) Indebtedness, in their capacities as such, shall not (i) vote against any plan of reorganization or liquidation supported by the holders of Credit Party Obligations or (ii) vote for any plan of reorganization or liquidation opposed by the holders of Credit Party Obligations. - - In any bankruptcy proceeding in respect of any Credit Party, (i) the holders of Section 8.1(g) Indebtedness, in their capacities as such, shall not file any motion, application or other pleading seeking affirmative relief, including without limitation for the appointment of a trustee or examiner, for the conversion of the case to a liquidation proceeding, for the substantive consolidation of such Credit Party's bankruptcy case with the case of any other entity, for the creation of a separate official committee representing only the holders of Section 8.1(g) Indebtedness, in their capacities as such, or any other form of affirmative relief of any other kind or nature and (ii) the holders of Section 8.1(g) Indebtedness, in their capacities as such, shall not file any objection or other responsive pleading opposing any relief requested by the holders of Credit Party Obligations. - - The holders of Section 8.1(g) Indebtedness, in their capacities as such, shall not exercise any right of subrogation in respect of any of the Credit Party Obligations until all of the Credit Party Obligations shall have been paid in full in cash and the Commitments under the Credit Agreement shall have been terminated. SCHEDULE 8.2 - LIENS [See attached*] *With respect to Liens evidencing Capital Leases with General Electric Company being paid off on the Closing Date, the security interest of General Electric Company in the leased equipment will be released upon its receipt of the payout amount (see attached payout letter) and UCC-3 termination statements covering such leased equipment will be filed promptly thereafter. SCHEDULE 8.6 - INVESTMENTS Summary of Joint Venture Balances Owing to InSight Health Corp.
LOANS OUTSTANDING AS OF 08/31/01: ---------------------------------------------------------- Partnership Working Cap. Equipment Total - ---------------------------------------------------------- ---------------------------------------------------------- Consolidated - ---------------------------------------------------------- GARFIELD IMAGING CENTER, LTD. $1,129,712 $1,129,712 BERWYN MAGNETIC RESONANCE CENTER, LLC $287,115 $1,558,732 $1,845,847 TOMS RIVER IMAGING ASSOCIATES, L.P. $330,596 - $330,596 DUBLIN DIAGNOSTIC IMAGING, LLC $71,958 $467,717 $539,675 ST. JOHN'S REGIONAL IMAGING CENTER, LLC $1,662,603 $3,337,843 $5,000,446 LOCKPORT MRI, LLC $708,701 $5,181,461 $5,890,162 CONNECTICUT LITHOTRIPSY, LLC $(85,577) $305,739 $220,162 GRANADA HILLS OPEN MRI, LLC $88,139 $1,129,151 $1,217,290 DANIEL FREEMAN MRI, LLC $285,097 $560,395 $845,492 WILKES-BARRE IMAGING, LLC $321,848 $4,614,979 $4,936,827 INSIGHT-PREMIER HEALTH, LLC $344,864 $4,098,195 $4,443,059 ------------------ ------------------- ------------------- $4,015,344 $22,383,924 $26,399,268 ================== =================== ===================
Unrestricted - ----------------------------------------------------------- CENTRAL MAINE MAGNETIC IMAGING ASSOCIATES $43,422 $43,422 NORTHERN INDIANA ONCOLOGY CENTER $71,352 OF PORTER MEMORIAL HOSPITAL, LLC $71,352 PARKWAY IMAGING CENTER, LLC $1,108,626 $441,236 $1,549,862 METABOLIC IMAGING OF KENTUCKY, LLC $107,772 $107,772 ------------------ ------------------- ------------------- $1,331,172 $441,236 $1,772,408 ================== =================== =================== Total $5,346,516 $22,825,160 $28,171,676
SEE ALSO SCHEDULE 8.1(b) -- "GUARANTY OBLIGATIONS" AND "JOINT VENTURE RECOURSE INDEBTEDNESS" FOR ADDITIONAL INVESTMENTS SCHEDULE 8.9 - TRANSACTIONS WITH AFFILIATES 1. Transactions contemplated under the Stockholders Agreement, dated as of June 29, 2001, as in effect on the Closing Date, among InSight Health Services Holdings Corp., the JWC Holders (as defined therein), the Halifax Holders (as defined therein), the Management Holders (as defined therein) and the Additional Holders (as defined therein) 2. Transactions contemplated under the Administrative Services Agreement dated as of October 1, 1996 between Greater Waterbury Imaging Center, L.P. and Signal Medical Services, Inc. 3. Transactions contemplated under the Management Services Agreement dated March 24, 2000 between InSight Health Corp. and Metabolic Imaging of Kentucky, LLC 4. Transactions contemplated under the Management Services Agreement dated January 17, 1995 between InSight Health Corp. and Northern Indiana Oncology Center of Porter Memorial Hospital, LLC 5. Transactions contemplated under the Management Services Agreement dated September 17, 1999 between InSight Health Corp. and Parkway Imaging Center, LLC 6. Transactions contemplated under the Credit and Security Agreement dated September 17, 1999 between InSight Health Corp. and Parkway Imaging Center, LLC 7. Transactions contemplated under the Management Agreement dated January 20, 1988 between VHA Diagnostic Services, Inc. (now Maxum Health Services Corp.) and Central Maine Magnetic Imaging Associates 8. Transactions contemplated under the Management Services Agreement dated February 1, 2001 between InSight Health Corp. and Maine Molecular Imaging, LLC EX-10.5 35 y55701ex10-5.txt NOTE PURCHASE AGREEMENT Exhibit 10.5 InSight Health Services Acquisition Corp. InSight Health Services Corp., InSight Health Services Holdings Corp. and the Subsidiary Guarantors Listed on Schedule A hereto $ 200,000,000 12-1/8% Senior Subordinated Notes due 2011 Note Purchase Agreement dated October 17, 2001 Banc of America Bridge LLC Banc of America Securities LLC Table of Contents
Page Section 1. Definitions .................................................................................. 2 Section 2. Representations and Warranties ............................................................... 19 (a) No Registration Required ..................................................................... 19 (b) No Integration of Offerings or General Solicitation .......................................... 19 (c) Eligibility for Resale under Rule 144A ....................................................... 19 (d) The Note Purchase Agreement .................................................................. 19 (e) The Merger Agreement ......................................................................... 20 (f) Authorization of the Securities .............................................................. 20 (g) No Material Adverse Change ................................................................... 20 (h) Independent Accountants ...................................................................... 21 (i) Preparation of the Financial Statements ...................................................... 21 (j) Incorporation and Good Standing of Acquisition Corp., the Parent, InSight and its Subsidiaries 21 (k) Capitalization and Other Capital Stock Matters ............................................... 21 (l) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required ... 22 (m) No Material Actions or Proceedings ........................................................... 23 (n) Intellectual Property Rights ................................................................. 23 (o) All Necessary Permits, etc ................................................................... 24 (p) Regulatory Matters ........................................................................... 24 (q) Medicare/Medicaid Participation .............................................................. 25 (r) Title to Properties .......................................................................... 26 (s) Material Agreements .......................................................................... 26 (t) Tax Law Compliance ........................................................................... 26 (u) InSight, Acquisition Corp. and the Parent not an "Investment Company" ........................ 26 (v) Insurance .................................................................................... 26 (w) No Price Stabilization or Manipulation ....................................................... 27 (x) Solvency ..................................................................................... 27 (y) No Unlawful Contributions or Other Payments .................................................. 27 (z) Company's Accounting System .................................................................. 27 (aa) Compliance with Environmental Laws ........................................................... 27 (bb) ERISA Compliance ............................................................................. 28 (cc) Taxes; Fees .................................................................................. 29 (dd) No Labor Disputes ............................................................................ 29 (ee) No Operations ................................................................................ 29 Section 3. Purchase, Sale and Delivery of the Securities ................................................ 29 (a) The Securities ............................................................................... 29 (b) The Closing Date ............................................................................. 29 (c) Delivery of the Securities ................................................................... 30
(d) Purchaser as a Qualified Institutional Buyer ................................................. 30 Section 4. Redemption Procedures ........................................................................ 30 (a) Notices to Holders ........................................................................... 30 (b) Selection of Notes to Be Redeemed ............................................................ 30 (c) Notice of Redemption ......................................................................... 30 (d) Effect of Notice of Redemption ............................................................... 31 (e) Deposit of Redemption Price .................................................................. 31 (f) Notes Redeemed in Part ....................................................................... 31 (g) Optional Redemption .......................................................................... 31 (h) Mandatory Redemption ......................................................................... 32 (i) Repurchase Offers ............................................................................ 32 Section 5. Covenants .................................................................................... 34 (a) Payment of Notes ............................................................................. 34 (b) [Intentionally Omitted] ...................................................................... 34 (c) Reports ...................................................................................... 34 (d) Compliance Certificate ....................................................................... 35 (e) Taxes ........................................................................................ 35 (f) Stay, Extension and Usury Laws ............................................................... 35 (g) Restricted Payments .......................................................................... 36 (h) Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries .................... 40 (i) Incurrence of Indebtedness and Issuance of Preferred Stock ................................... 41 (j) Asset Sales .................................................................................. 44 (k) Transactions with Affiliates ................................................................. 46 (l) Liens ........................................................................................ 47 (m) [Intentionally Omitted] ...................................................................... 47 (n) Limitation on Senior Subordinated Debt ....................................................... 47 (o) Offer to Repurchase upon a Change of Control ................................................. 47 (p) Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries ................ 49 (q) Unrestricted Subsidiaries .................................................................... 49 (r) Payments for Consent ......................................................................... 50 (s) Limitations on Guarantees of Indebtedness by Restricted Subsidiaries ......................... 50 (t) Additional Guarantees ........................................................................ 50 (u) Merger, Consolidation or Sale of Assets ...................................................... 50 Section 6. Use of Proceeds .............................................................................. 52 Section 7. Payment of Expenses .......................................................................... 52 Section 8. Conditions of the Obligations of the Purchaser ............................................... 53 (a) No Material Adverse Change or Ratings Adverse Change ......................................... 53 (b) Opinion of Counsel for the Parent and Acquisition Corp. ...................................... 53 (c) Opinion of Counsel for InSight and the Subsidiary Guarantors ................................. 53 (d) Opinion of General Counsel for InSight ....................................................... 54
ii (e) [Intentionally Omitted] ...................................................................... 54 (f) Opinion of Counsel for the Purchaser ......................................................... 54 (g) Officers' Certificate ........................................................................ 54 (h) Equity Contribution; Option Rollover ......................................................... 54 (i) Consummation of Merger ....................................................................... 54 (j) Consummation of Refinancing Transactions ..................................................... 54 (k) Borrowing under the Credit Facilities ........................................................ 55 (l) Chief Financial Officer's Certificate ........................................................ 55 (m) Liquidity; Funded Debt ....................................................................... 55 (n) Solvency Certificate ......................................................................... 55 (o) Availability under Revolving Credit Facility; Other Debt ..................................... 55 (p) Receipts of Approvals, Consents, etc ......................................................... 56 (q) Additional Documents ......................................................................... 56 Section 9. Reimbursement of Purchaser's Expenses ........................................................ 56 Section 10. Remarketing Procedures; Restricted Securities Legends; Clear Market .......................... 56 (a) Exchange ..................................................................................... 56 (b) Offers and Sales Only to Qualified Institutional Buyers and Non-U.S. Persons ................. 59 (c) No General Solicitation ...................................................................... 59 (d) Restrictions on Transfer ..................................................................... 59 (e) Remarketing Assistance ....................................................................... 60 (f) Blue Sky Compliance .......................................................................... 62 (g) Ratings ...................................................................................... 62 (h) [Intentionally Omitted] ...................................................................... 62 (i) DTC Agreement ................................................................................ 62 (j) Clear Market ................................................................................. 63 Section 11. Events of Default ............................................................................ 63 (a) Definition of Event of Default ............................................................... 63 (b) Acceleration ................................................................................. 64 (c) Other Remedies ............................................................................... 65 Section 12. Indemnification .............................................................................. 65 (a) Indemnification of the Purchaser and BAS ..................................................... 65 (b) [Intentionally Omitted] ...................................................................... 66 (c) Notifications and Other Indemnification Procedures ........................................... 66 (d) Settlements .................................................................................. 66 Section 13. Contribution ................................................................................. 67 Section 14. The Notes .................................................................................... 67 (a) Form and Execution ........................................................................... 68 (b) Terms of the Notes ........................................................................... 68
iii (c) Denominations ................................................................................ 68 (d) Registration; Registration of Transfer and Exchange, Security Register ....................... 68 (e) Registration of Transfer ..................................................................... 68 (f) Exchange ..................................................................................... 68 (g) Effect of Registration of Transfer or Exchange ............................................... 68 (h) Requirements; Charges ........................................................................ 69 (i) Certain Limitations .......................................................................... 69 (j) Mutilated, Destroyed, Lost and Stolen Notes .................................................. 69 (k) Persons Deemed Owners ........................................................................ 69 (l) Cancellation ................................................................................. 70 (m) Home Office Payment .......................................................................... 70 Section 15. Subordination ................................................................................ 70 (a) Agreement to Subordinate ..................................................................... 70 (b) Liquidation; Dissolution; Bankruptcy ......................................................... 70 (c) Default on Designated Senior Indebtedness .................................................... 71 (d) Acceleration of Securities ................................................................... 71 (e) When Distribution Must Be Paid Over .......................................................... 71 (f) Notice by the Company ........................................................................ 72 (g) Subrogation .................................................................................. 72 (h) Relative Rights .............................................................................. 72 (i) Subordination May Not Be Impaired by the Company ............................................. 72 (j) Distribution or Notice to Representative ..................................................... 72 (k) Authorization to Effect Subordination ........................................................ 73 Section 16. Guarantees ................................................................................... 73 (a) Guarantee .................................................................................... 73 (b) Subordination of Guarantee ................................................................... 74 (c) Limitation on Guarantor Liability ............................................................ 74 (d) Execution and Delivery of Guarantee .......................................................... 74 (e) Releases of Guarantors ....................................................................... 75 Section 17. Representations and Indemnities to Survive Delivery .......................................... 76 Section 18. Notices ...................................................................................... 76 Section 19. Successors ................................................................................... 78 Section 20. Partial Unenforceability ..................................................................... 78 Section 21. Governing Law Provisions ..................................................................... 78 (a) Governing Law ................................................................................ 78 (b) Consent to Jurisdiction ...................................................................... 78
iv Section 22. General Provisions ........................................................................... 78 (a) Entire Agreement ............................................................................. 78 (b) No Waiver; Remedies Cumulative ............................................................... 79 (c) Amendments, Waivers and Consents ............................................................. 79 Section 23. Liability of InSight prior to the Merger ..................................................... 80
v Note Purchase Agreement October 17, 2001 BANC OF AMERICA BRIDGE LLC 9 West 57th Street, 47th Floor New York, NY 10019 Ladies and Gentlemen: Introductory. InSight Health Services Acquisition Corp. (f/k/a JWCH Merger Corp.), a Delaware corporation ("Acquisition Corp."), proposes to issue and sell to Banc of America Bridge LLC (the "Purchaser") $200,000,000 aggregate principal amount of Acquisition Corp.'s 12-1/8% Senior Subordinated Notes due 2011 (the "Notes"). InSight Health Services Holdings Corp., a Delaware corporation and the direct parent corporation of Acquisition Corp. (the "Parent"), and the Subsidiary Guarantors (as defined below) (collectively with the Parent, the "Guarantors") as guarantors pursuant to their guarantees (the "Guarantees") of the payment on the Notes, and InSight Health Services Corp., a Delaware corporation ("InSight") have agreed to be a party to this agreement. The payment of principal of, premium and interest on the Notes will be fully and unconditionally guaranteed on a senior subordinated and unsecured basis, jointly and severally by (i) the Parent, (ii) each of the Company's directly and indirectly wholly-owned subsidiaries listed in Schedule A hereto and (iii) any wholly owned subsidiary of InSight formed or acquired after the date hereof that executes an additional guarantee in accordance with the terms of this Agreement, and respective successors and assigns of the Parent and the subsidiaries of the Company referred to in clauses (ii) and (iii) above (the subsidiaries referred to in (ii) and (iii) above, the "Subsidiary Guarantors"). The Notes and the Guarantees attached thereto are herein collectively referred to as the "Securities." As described in the draft preliminary offering memorandum prepared by Acquisition Corp., with the assistance of InSight, dated as of September 21, 2001 describing the terms of the Notes, a copy of which is attached hereto as Exhibit I and made a part hereof (the "Draft Offering Memorandum"), the Notes are being sold as part of the financing that will be used to consummate the substantially concurrent acquisition of InSight, pursuant to an Agreement and Plan of Merger dated as of June 29, 2001 (as amended, the "Merger Agreement") among InSight, the Parent and Acquisition Corp., pursuant to which Acquisition Corp. will merge with and into InSight (the "Merger"), and InSight will be the surviving corporation and a wholly owned subsidiary of the Parent. The Parent is a corporation, which, at the consummation of the Merger, will be beneficially owned by the Equity Sponsors (as defined herein) and certain of their affiliates (the "Related Parties") and certain members of InSight's management. The Merger is subject to the approval of the holders of a majority of the capital stock of the Company. The proceeds from the offering of the Notes, together with (i) borrowings by Acquisition Corp. under the Credit Agreement (as defined herein) that will provide up to $275 million of senior secured credit facilities consisting of (1) a $50 million six-year revolving credit facility (the "Revolving Credit Facility") and (2) a seven-year delayed-draw term loan facility and a seven-year term loan B facility in the aggregate amount of $225 million (collectively, together with the Revolving Credit Facility, the "Credit Facilities"), (ii) an equity contribution by the Equity Sponsors and the Related Parties of up to $101.5 million less the net value of the Option Rollover (as defined below) (the "Equity Contribution") and (iii) the rollover of options by certain members of InSight's senior management into the Parent (the "Option Rollover"), will be used, among other things, to (x) pay the purchase price for the outstanding shares of common stock, options and warrants of InSight as contemplated under the Merger Agreement (the "Merger Consideration") and (y) repurchase, by tender offer (the "Tender Offer"), the entire outstanding aggregate principal amount of the 9-5/8% Senior Subordinated Notes due 2008 of InSight (the "Existing Notes") and consummate the solicitation of consents from holders of the Existing Notes to the elimination of certain covenants and certain events of default from the indenture governing the Existing Notes (the "Consent Solicitation") and (z) repay certain other existing indebtedness of InSight and its subsidiaries as described under the caption "Use of Proceeds" in the Draft Offering Memorandum and pay related fees and expenses (the transactions described in this sentence collectively, the "Transaction"). As a result of the Merger, all of Acquisition Corp.'s obligations under this Agreement, the Securities and the Credit Facilities will, by operation of law, become obligations of InSight. InSight, Acquisition Corp. and each Guarantor hereby confirms its agreements with the Purchaser as follows: Section 1. Definitions. "Acquired Indebtedness" means Indebtedness of a Person (a) existing at the time such Person is merged with or into the Company or a Subsidiary or becomes a Subsidiary or (b) assumed in connection with the acquisition of assets from such Person. "Agent Bank" means Bank of America, N.A. and its successors under the Credit Agreement, in its capacity as administrative agent. "Affiliate" means, with respect to any specified person, (a) any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person or (b) any other person that owns, directly or indirectly, 10% or more of such specified person's Capital Stock or any executive officer or director of any such specified person or other person. For the purposes of this definition, "control," when used with respect to any specified person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets (including, without limitation, by way of merger, consolidation or similar arrangement) (collectively, a "transfer") by the Company or any Restricted Subsidiary other than in the ordinary course of business and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Shares of Capital Stock of any of the Company's Restricted Subsidiaries (which will be deemed to include the sale, grant or conveyance of any interest in the income, profits or 2 proceeds therefrom), in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (x) that have a fair market value in excess of $2,000,000 or (y) for Net Cash Proceeds in excess of $2,000,000. For the purposes of this definition, the term "Asset Sale" does not include (a) any transfer of properties or assets (i) that is governed by Sections 5(g), 5(p) (to the extent of clause (i) thereof) or 5(u), (ii) between or among the Company and its Restricted Subsidiaries pursuant to transactions that do not violate any other provision of this Agreement or (iii) representing obsolete or permanently retired equipment and facilities or (b) the sale or exchange of equipment in connection with the purchase or other acquisition of other equipment, in each case used in the business of the Company or its Restricted Subsidiaries as in existence on the Closing Date or any business determined by the Board of the Company in its good faith judgment to be reasonably related thereto. Notwithstanding anything to the contrary set forth above, a disposition of Receivables and Related Assets other than pursuant to a Receivables Program contemplated by Section 5(i)(iii)(13) shall be deemed to be an Asset Sale. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Banks" means the banks and other financial institutions that from time to time are lenders under the Credit Agreement. "BAS" means Banc of America Securities LLC. "Board" means the Company's Board of Directors or the Parent's Board of Directors, as applicable. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are authorized or obligated by law or executive order to close. "Capitalized Lease Obligation" means, with respect to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee which, in accordance with GAAP, is required to be accounted for as a capital lease on the balance sheet of that Person. "Capital Stock" of any Person means any and all shares, interests, partnership interests, participations, rights in or other equivalents (however designated) of such Person's equity interest (however designated), whether now outstanding or issued after the Closing Date. "Cash Equivalents" means, at any date, (a) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (b) U.S. dollar denominated time deposits and certificates of deposit of (i) any lender under the Credit Agreement (ii) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (iii) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank being an "Approved Lender"), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate 3 notes issued by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody's and maturing within twelve months of the date of acquisition, (d) repurchase agreements entered into by any Person with a bank or trust company (including any of the lenders under the Credit Agreement) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations and (e) Investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by reputable financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing subdivisions (a) through (d). "Change of Control" means the occurrence of any of the following: (a) the consummation of any transaction (including, without limitation, any merger or consolidation) (i) prior to a Public Equity Offering by the Company or the Parent, the result of which is that the Principals and their Related Parties become the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) of less than 50% of the Voting Stock of the Company or the Parent, as the case may be, (measured by voting power rather than the number of shares) or (ii) after a Public Equity Offering of the Company or the Parent, any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act), other than the Principals and their Related Parties, become the beneficial owner (as defined above), directly or indirectly, of 35% or more of the Voting Stock of the Company or the Parent, as the case may be, and such person is or becomes, directly or indirectly, the beneficial owner of a greater percentage of the voting power of the Voting Stock of the Company or the Parent, as the case may be, calculated on a fully diluted basis, than the percentage beneficially owned by the Principals and their Related Parties; (b) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Subsidiaries or the Parent and its Subsidiaries, in each case, taken as a whole, to any "person" (as the term is defined in Section 13(d)(3) of the Exchange Act) other than the Principals or Related Parties of the Principals; (c) the first day on which a majority of the members of the Board of the Company or the Parent are not Continuing Directors; or (d) the Company or the Parent is liquidated or dissolved or adopts a plan of liquidation or dissolution, other than in a transaction that complies with the provisions described under Section 5(u). "Closing Date" means the date of the issuance of the Notes hereunder, which shall be October 17, 2001. 4 "Commitment Letter" means the Amended and Restated Commitment and Engagement Letter, dated October 8, 2001, among BAS, the Purchaser and the Sponsor Parties. "Common Stock" means, with respect to any Person, any and all shares, interests, participations and other equivalents (however designated, whether voting or non-voting) of such Person's Common Stock, whether now outstanding or issued after the date of this Agreement, and includes, without limitation, all series and classes of such Common Stock. "Company" means, until the consummation of the Merger, Acquisition Corp., and upon the consummation of the Merger, InSight. "Consolidated EBITDA" means, for any period, the sum of, without duplication, Consolidated Net Income for such period, plus (or, in the case of clause (d) below, plus or minus) the following items to the extent included in computing Consolidated Net Income for such period: (a) Fixed Charges for such period, plus (b) the provision for federal, state, local and foreign income taxes of the Company and its Restricted Subsidiaries for such period, plus (c) the aggregate depreciation and amortization expense of the Company and its Restricted Subsidiaries for such period, plus (d) any other non-cash charges for such period, and minus non-cash items increasing Consolidated Net Income for such period, other than non-cash charges or items increasing Consolidated Net Income resulting from changes in prepaid assets or accrued liabilities in the ordinary course of business, plus (e) Minority Interest; provided that fixed charges, income tax expense, depreciation and amortization expense and non-cash charges of a Restricted Subsidiary will be included in Consolidated EBITDA only to the extent (and in the same proportion) that the net income of such Subsidiary was included in calculating Consolidated Net Income for such period. "Consolidated Net Income" means, for any period, the net income (or net loss) of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, adjusted to the extent included in calculating such net income or loss by excluding (a) any net after-tax extraordinary or nonrecurring gains or losses (less all fees and expenses relating thereto), (b) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to Asset Sales or discontinued operations, (c) the portion of net income (or loss) of any Person (other than the Company or a Restricted Subsidiary), including Unrestricted Subsidiaries, in which the Company or any Restricted Subsidiary has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any Restricted Subsidiary in cash during such period, (d) the net income (or loss) of any Person combined with the Company or any Restricted Subsidiary on a "pooling of interests" basis attributable to any period prior to the date of combination, (e) the net income (but not the net loss) of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is at the date of determination restricted, directly or indirectly, except to the extent that such net income is actually paid to the Company or a Restricted Subsidiary thereof by loans, advances, intercompany transfers, principal repayments or otherwise and (f) the cumulative effect of a change in accounting principles. "Consolidated Tangible Assets" means, as of the date of determination, the total assets, less goodwill and other intangibles, shown on the balance sheet of the Company and its 5 Restricted Subsidiaries as of the most recent date for which such a balance sheet is available, determined on a consolidated basis in accordance with GAAP. "Continuing Directors" means, as of the date of determination, any member of the Board of the Company or the Parent, as the case may be, who: (a) was a member of such Board on the Closing Date or the date of the Acquisition; (b) was nominated for election or elected to such Board with the approval of the majority of the Continuing Directors who were members of such Board at the time of such nomination or election; or (c) was nominated by one or more of the Principals and the Related Parties. "Credit Agreement" means the credit agreement, to be dated as of the date of the Acquisition, among the Company, the Parent, the Subsidiary Guarantors, the lenders named therein and Bank of America, N.A., as administrative agent, First Union National Bank, as syndication agent and The CIT Group/Business Credit, Inc., as documentation agent, providing for up to $225,000,000 in term loan borrowings and $50,000,000 of revolving credit borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, as such credit agreement (and related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith) may be amended, restated, supplemented, refinanced, extended or otherwise modified from time to time. "Debt Repayment Triggering Event" means any event or condition which gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture or other evidence of material indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Parent, Acquisition Corp., InSight or any of its Subsidiaries. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Depositary" means any Person appointed hereunder as the Depositary with respect to the Remarketed Notes and having become such pursuant to the applicable provision of this Agreement. "Designated Noncash Consideration" means the fair market value of noncash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as Designated Noncash Consideration pursuant to an officer's certificate, setting forth the basis of such valuation, executed by the principal executive officer and the principal financial officer of the Company, less the amount of cash or cash equivalents received in connection with a sale of such Designated Noncash Consideration. "Designated Senior Indebtedness" means (i) so long as the Senior Bank Debt is outstanding, the Senior Bank Debt and (ii) thereafter, any other Senior Indebtedness permitted under this Agreement the principal amount of which is $25,000,000 or more and that has been 6 specifically designated by the Company, in the instrument creating or evidencing such Senior Indebtedness or in an officers' certificate delivered to the Holders, as "Designated Senior Indebtedness." "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board is required to deliver a resolution of the Board, to make a finding or otherwise take action under this Agreement, a member of the Board who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "Disqualified Stock" means any class or series of Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or by contract or otherwise (i) is or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the Notes, (ii) is redeemable at the option of the holder thereof, at any time prior to such final Stated Maturity or (iii) at the option of the holder thereof is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity; provided that any Capital Stock that would constitute Disqualified Stock solely as a result of the provisions therein giving holders thereof the right to cause the issuer thereof to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Notes will not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Sections 5(j) and 5(o) hereof, and such Capital Stock specifically provides that the issuer will not repurchase or redeem any such stock pursuant to such provisions prior to the Company's repurchase of such Notes as are required to be repurchased pursuant to the provisions contained in Sections 5(j) and 5(o) hereof. "Equity Interests" means Capital Stock and all warrants, options and other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means a public or private offering of Capital Stock (other than Disqualified Stock) of the Parent or the Company. "Equity Sponsors" means J.W. Childs Associates, L.P., J.W. Childs Equity Partners II, L.P., The Halifax Group, L.L.C. and Halifax Capital Partners, L.P. "Exchange Act" means the Securities Exchange Act of 1934, as amended, including the rules and regulations of the SEC promulgated thereunder. "Exchange Date" has the meaning specified in Section 10(a)(i) of this Agreement. "Existing Indebtedness" means the Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreement) outstanding on the date of this Agreement and listed on Schedule F to this Agreement, until such amounts are repaid. 7 "Existing Notes" means the 9-5/8% Senior Subordinated Notes Due 2008 of the Company. "Facility" means any premises, together with the diagnostic imaging and treatment equipment installed therein, used by the Company in the conduct of the business of providing diagnostic imaging and information, treatment and related management services. "Fee Letter" means the amended and restated fee letter dated as of October 8, 2001, among BAS, the Purchaser and the Sponsor Parties. "Final Remarketing Date" means the earliest of (i) the third anniversary of the Closing Date, (ii) the sale to investors by BAS, the Purchaser or their Rule 501(b) Affiliates of a principal amount of Notes that, after giving effect to such sale and any prior redemption of Notes by the Company pursuant to Section 4(g)(ii) of this Agreement, results in BAS, the Purchaser and their Rule 501(b) Affiliates holding not more than $25,000,000 aggregate principal amount of Notes, (iii) the issuance of Remarketed Notes pursuant to Section 10(a) hereof and (iv) the commencement for the third time of a customary road show by the Purchaser, BAS or any of their Rule 501(b) Affiliates to market the Remarketed Notes pursuant to Section 10(e) hereof. "Fixed Charges" means, for any period, without duplication, the sum of (a) the amount that, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of operations of the Company and its Restricted Subsidiaries for such period, including, without limitation, (i) amortization of original issue discount, (ii) the net cost of interest rate contracts (including, amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) amortization of debt issuance costs, and (v) the interest component of Capitalized Lease Obligations, plus (b) all dividends and distributions paid (whether or not in cash) on Preferred Stock and Disqualified Stock by the Company or any Restricted Subsidiary (to any Person other than the Company or any of its Restricted Subsidiaries), other than dividends on Equity Interests payable solely in Qualified Equity Interests of the Company, computed on a tax effected basis, plus (c) all interest on any Indebtedness of any Person guaranteed by the Company or any of its Restricted Subsidiaries or secured by a lien on the assets of the Company or any of its Restricted Subsidiaries; provided that Fixed Charges will not include (i) any gain or loss from extinguishment of debt, including the write-off of debt issuance costs, and (ii) the fixed charges of a Restricted Subsidiary to the extent (and in the same proportion) that the net income of such Subsidiary was excluded in calculating Consolidated Net Income pursuant to clause (e) of the definition thereof for such period. "Fixed Charge Coverage Ratio" means, for any period, the ratio of Consolidated EBITDA for such period to Fixed Charges for such period. "Foreign Subsidiary" means a Restricted Subsidiary that is incorporated in a jurisdiction other than the United States or a state thereof or the District of Columbia and that has no material operations or assets in the United States. 8 "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect on the Closing Date. "guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Guarantors" has the meaning specified in the first paragraph of this Agreement. "Healthcare Law" means the following laws or regulations relating to the regulation of the health care industry or to payment for services rendered by healthcare providers: (i) Sections 1877, 1128, 1128A or 1128B of the Social Security Act ("SSA"); (ii) any prohibition on the making of any false statement or misrepresentation of material facts to any governmental agency that administers a federal or state health care program (including, but not limited to, Medicare, Medicaid, and the federal Civilian Health and Medical Plan of the Uniformed Services); (iii) the licensure, certification or registration requirements of health care facilities, services or equipment, including, but not limited to, the Mammography Quality Standards Act; (iv) any state certificate of need or similar law governing the establishment of health care facilities or services or the making of health care capital expenditures; (v) any state law relating to fee-splitting or the corporate practice of medicine; (vi) any state physician self-referral prohibition or state anti-kickback law; (vii) any criminal offense relating to the delivery of, or claim for payment for, a healthcare item or service under any federal or state health care program; (viii) any federal or state law relating to the interference with or obstruction of any investigation into any criminal offense; and (ix) any criminal offense under federal or state law relating to the unlawful manufacture, distribution, prescription or dispensing of a controlled substance. "Hedging Obligations" means, with respect to any Person, the obligations of such Person entered into in the ordinary course of business under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and other similar financial agreements or arrangements designed to protect such Person against, or manage the exposure of such Person to, fluctuations in interest rates, and (ii) forward exchange agreements, currency swap, currency option and other similar financial agreements or arrangements designed to protect such Person against, or manage the exposure of such Person to, fluctuations in foreign currency exchange rates. "Holder" means a Person in whose name a Note is registered. "Indebtedness" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (a) every obligation of such Person for money borrowed, (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services, (e) the attributable value of every 9 Capitalized Lease Obligation of such Person, (f) all Disqualified Stock of such Person valued at its maximum fixed repurchase price, plus accrued and unpaid dividends thereon, (g) all obligations of such Person under or in respect of Hedging Obligations, and (h) every obligation of the type referred to in clauses (a) through (g) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed. For purposes of this definition, the "maximum fixed repurchase price" of any Disqualified Stock that does not have a fixed repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which Indebtedness is required to be determined pursuant to this Agreement, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value will be determined in good faith by the board of directors of the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade accounts payable and accrued liabilities arising in the ordinary course of business and any liability for federal, state or local taxes or other taxes owed by such Person will not be considered Indebtedness for purposes of this definition. "Investment" in any Person means, (i) directly or indirectly, any advance, loan or other extension of credit (including, without limitation, by way of guarantee or similar arrangement) or capital contribution to such Person, the purchase or other acquisition of any stock, bonds, notes, debentures or other securities issued by such Person, the acquisition (by purchase or otherwise) of all or substantially all of the business or assets of such Person, or the making of any investment in such Person, (ii) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary and (iii) the fair market value of the Capital Stock (or any other Investment), held by the Company or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to be a Restricted Subsidiary. Investments exclude endorsements for deposit or collection in the ordinary course of business and extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon, or with respect to, any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. A Person will be deemed to own subject to a Lien any property that such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "Minority Interest" means, with respect to any Person, interests in income of such Person's Subsidiaries held by Persons other than such Person or another subsidiary of such Person, as reflected on such Person's consolidated financial statements. "Moody's" means Moody's Investors Service and any successor thereof. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents, including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary), net of (a) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such 10 Asset Sale, (b) provisions for all taxes payable as a result of such Asset Sale, (c) payments made to retire Indebtedness where such Indebtedness is secured by the assets that are the subject of such Asset Sale, (d) amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in the assets that are subject to the Asset Sale and (e) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the seller after such Asset Sale, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "Non-Recourse Indebtedness" means Indebtedness of a Person (i) as to which neither the Company nor any of its Restricted Subsidiaries (other than such Person), (a) provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, agreement or instrument that would constitute Indebtedness) or (b) is directly or indirectly liable (as a guarantor or otherwise), and (ii) the obligees of which will have recourse for repayment of the principal of and interest on such Indebtedness and any fees, indemnities, expense reimbursements or other amount of whatsoever nature accrued or payable in connection with such Indebtedness solely against the assets of such Person and not against any of the assets of the Company or its Restricted Subsidiaries (other than such Person). "Non-U.S. Person" means a Person who is not a U.S. Person. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by at least two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Holders, which may include internal counsel to the Company or any of its Subsidiaries admitted to practice in New York. "Option Amount" means an amount equal to $150,000,000 minus the aggregate principal amount of Notes outstanding immediately prior to the Exchange Date. "Parent" has the meaning specified in the first paragraph of this Agreement. "Pari Passu Indebtedness" means (a) with respect to the Notes, Indebtedness that ranks pari passu in right of payment to the Notes and (b) with respect to any Guarantee, Indebtedness that ranks pari passu in right of payment to such Guarantee. 11 "Paying Agent" means any Person (including the Company acting as Paying Agent) authorized by the Company to pay the principal or (or premium, if any, on) or interest on any Notes on behalf of the Company. "Permitted Business" means the business conducted by the Company, its Restricted Subsidiaries and Permitted Joint Ventures as of the Closing Date and any and all diagnostic imaging and information businesses that in the good faith judgment of the Board of the Company are reasonably related thereto. "Permitted Debt Obligations" means any of the following: (i) borrowings under any senior bank credit facility (including any senior bank credit facility syndicated to institutional lenders), (ii) Capitalized Lease Obligations, (iii) purchase money obligations, (iv) deferred purchase price obligations in the form of seller paper, (v) any debt issued to the Equity Sponsors or their Affiliates, (vi) any obligations permitted to be incurred pursuant to clauses (d) and (e) of Section 8.1 of the Credit Agreement, and (vii) any obligations incurred to refinance any indebtedness of the Parent, Acquisition Corp., InSight or any of their subsidiaries outstanding on the Closing Date (other than the Existing Notes and the Notes), which obligations are (x) in the form of Permitted Debt Obligations or (y) in a substantially similar form of indebtedness as the indebtedness so being refinanced. "Permitted Indebtedness" has the meaning set forth in Section 5(i) hereof. "Permitted Investments" means any of the following: (a) Investments in (i) United States dollars (including such dollars as are held as overnight bank deposits and demand deposits with banks), (ii) securities with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof); (iii) certificates of deposit, Euro-dollar time deposits or acceptances with a maturity of one year or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus of not less than $500,000,000; (iv) any shares of money market mutual or similar funds having assets in excess of $500,000,000; (v) repurchase obligations with a term not exceeding seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above; and (vi) commercial paper with a maturity of one year or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and having a rating (A) from Moody's of at least P-1 or (B) from S&P of at least A-1; (b) Investments by the Company or any Restricted Subsidiary in another Person, if as a result of such Investment (i) such other Person becomes a Restricted Subsidiary or (ii) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a Restricted Subsidiary; 12 (c) Investments by the Company or a Restricted Subsidiary in the Company or a Restricted Subsidiary; (d) Investments in existence on the Closing Date; (e) promissory notes or other evidence of Indebtedness received as a result of Asset Sales permitted under Section 5(j) hereof; (f) loans or advances to officers, directors and employees of the Company or any of its Restricted Subsidiaries made (i) in the ordinary course of business in an amount not to exceed $5,000,000 in the aggregate at any one time outstanding or (ii) in connection with the purchase by such Persons of Equity Interests of the Parent so long as the cash proceeds of such purchase received by the Parent are contemporaneously remitted by the Parent to the Company as a capital contribution; (g) any Investment by the Company or any Restricted Subsidiary of the Company in Permitted Joint Ventures made after the Closing Date having an aggregate fair market value, when taken together with all other Investments made pursuant to this clause (g) that are at the time outstanding, not exceeding the greater of (i) $30,000,000 and (ii) 10% of the Consolidated Tangible Assets of the Company as of the last day of the most recent full fiscal quarter ending immediately prior to the date of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (h) any Investment by the Company or any Restricted Subsidiary in a trust, limited liability company, special purpose entity or other similar entity in connection with a Receivables Program; provided, that (A) such Investment is made by a Receivables Subsidiary and (B) the only assets transferred to such trust, limited liability company, special purpose entity or other similar entity consist of Receivables and Related Assets of such Receivables Subsidiary; and (i) other Investments that do not exceed $20,000,000 in the aggregate at any one time outstanding. "Permitted Joint Venture" means any joint venture, partnership or other Person designated by the Board of the Company, (i) at least 20% of whose Capital Stock with voting power under ordinary circumstances to elect directors (or Persons having similar or corresponding powers and responsibilities) is at the time owned (beneficially or directly) by the Company and/or by one or more Restricted Subsidiaries of the Company and if the Company owns more than 50% of the Capital Stock of the Permitted Joint Venture, such Permitted Joint Venture is either a Restricted Subsidiary of the Company or has been designated as an Unrestricted Subsidiary of the Company in accordance with the provisions of Section 5(q) hereof, (ii) (x) if it is an Unrestricted Subsidiary, all Indebtedness of such Person is Non-Recourse Indebtedness or (y) if it is a Person other than an Unrestricted Subsidiary, either all Indebtedness of such Person is Non-Recourse Indebtedness or the only Indebtedness of such Person that is not Non-Recourse Indebtedness is Indebtedness as to which any guarantee provided by the Company or a Restricted Subsidiary complies with the provisions of Sections 13 5(g) and 5(i) hereof, and (iii) which is engaged in a Permitted Business; provided that each of Berwyn Magnetic Resonance Center, LLC, Garfield Imaging Center, Ltd., Tom's River Imaging Associates, L.P., St. John's Regional Imaging Center, LLC, Dublin Diagnostic Imaging, LLC, Connecticut Lithotripsy, LLC, Northern Indiana Oncology Center of Porter Memorial Hospital, LLC, Lockport MRI, LLC, Wilkes-Barre Imaging, LLC, Sun Coast Imaging Center, LLC, Granada Hills Open MRI, LLC, Daniel Freeman MRI, LLC, InSight-Premier Health, LLC, Southern Connecticut Imaging Centers, LLC, Parkway Imaging Center, LLC, Metabolic Imaging of Kentucky, LLC, Maine Molecular Imaging, LLC, Greater Waterbury Imaging Center, L.P. and Central Maine Magnetic Imaging Associates shall be deemed to be a Permitted Joint Venture. Any such designation (other than with respect to the Persons identified in the preceding sentence) shall be evidenced to the Holders by promptly mailing to the Holders a copy of the resolution giving effect to such designation and an officer's certificate certifying that such designation complied with the foregoing provisions. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries; provided that: (i) the principal amount of such Permitted Refinancing Indebtedness does not exceed the principal amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded plus accrued interest plus the lesser of the amount of any premium required to be paid in connection with such refinancings pursuant to the terms of such indebtedness or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing (in each case plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date not earlier than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Permitted Refinancing Indebtedness shall not include Indebtedness of a Restricted Subsidiary that refinances Indebtedness of the Company or Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor that refinances Indebtedness of a Subsidiary Guarantor. "Person" means any individual, corporation, limited or general partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Preferred Stock" means, with respect to any Person, any and all shares, interests, partnership interests, participation, rights in or other equivalents (however designated) of such Person's preferred or preference stock, whether now outstanding or issued after the Closing Date, and including, without limitation, all classes and series of preferred or preference stock of such Person. "Principals" means the Equity Sponsors and their respective Affiliates. 14 "Private Offering" is any offering by the Purchaser of some or all of the Securities without registration under the Securities Act. "Private Placement Legend" means the legend set forth in Section 10(d) to be placed on all Notes issued under this Agreement except where otherwise permitted by the provisions of this Agreement. "Public Equity Offering" means an offer and sale of Capital Stock (other than Disqualified Stock) of the Company or the Parent pursuant to a registration statement that has been declared effective by the SEC pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company). "Purchase Agreement" has the meaning specified in Section 10(a) hereof. "purchase money obligations" of any Person means any obligations of such Person to any seller or any other Person incurred or assumed to finance the construction and/or acquisition of real or personal property to be used in the business of such Person or any of its Subsidiaries in an amount that is not more than 100% of the cost of such property, and incurred within 90 days after the date of such construction or acquisition (excluding accounts payable to trade creditors incurred in the ordinary course of business); provided, however, that any Lien on such Indebtedness shall not extend to any property other than the property so acquired or constructed. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Qualified Equity Interest" means any Qualified Stock and all warrants, options or other rights to acquire Qualified Stock (but excluding any debt security that is convertible into or exchangeable for Capital Stock). "Qualified Stock" of any Person means any and all Capital Stock of such Person, other than Disqualified Stock. "Receivables and Related Assets" means accounts receivable, instruments, chattel paper, health care insurance receivables, obligations, general intangibles and other similar assets, including interest in merchandise or goods, the sale or lease of which give rise to the foregoing, related contractual rights, guarantees, insurance proceeds, collections, other related assets and proceeds of all the foregoing. "Receivables Program" means, with respect to any Person, any securitization program pursuant to which such Person pledges, sells or otherwise transfers or encumbers its Receivables and Related Assets, including a trust, limited liability company, special purpose entity or other similar entity. "Receivables Subsidiary" means a Wholly Owned Subsidiary (i) created for the purpose of financing Receivables and Related Assets created in the ordinary course of business of the Company and its Subsidiaries and (ii) the sole assets of which consist of Receivables and Related Assets of the Company and its Subsidiaries and Permitted Investments. 15 "Regulation S" means Regulation S promulgated under the Securities Act. "Related Party" means: (a) any controlling stockholder, partner, member, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Principal; or (b) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Principals and/or such other Persons referred to in the immediately preceding clause. "Remarketed Notes" has the meaning set forth in Section 10(a) hereof. "Remarketed Notes Registration Rights Agreement" has the meaning set forth in Section 10(a) hereof. "Representative" means the trustee, agent or representative for any Senior Indebtedness. "Restricted Investment" means any Investment other than a Permitted Investment. "Restricted Subsidiary" means any Subsidiary other than an Unrestricted Subsidiary. Notwithstanding anything to the contrary herein or in the Notes, Toms River Imaging Associates L.P. shall be deemed to be a Restricted Subsidiary of InSight for purposes of this Agreement and the Notes so long as InSight or the Guarantors, directly or indirectly, own at least 50% of the Voting Stock thereof. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 501(b) Affiliate" means, with respect to any Person, an affiliate (as such term is defined in Rule 501(b) under the Securities Act) of such Person. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated the Securities Act. "Sale and Leaseback Transaction" means any transaction or series of related transactions pursuant to which the Company or a Restricted Subsidiary sells or transfers any property or asset in connection with the leasing, or the resale against installment payments, of such property or asset to the seller or transferor. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended from time to time, and the rules and regulations thereunder. 16 "Senior Bank Debt" means the Obligations outstanding under the Credit Agreement. "Senior Indebtedness" means (i) the Senior Bank Debt and any Hedging Obligations owing by the Company or any Guarantor to any lender which is a party to the Credit Agreement (or to any Affiliate of any such lender), (ii) any other Indebtedness permitted to be incurred by the Company or any Restricted Subsidiary under the terms of this Agreement and (iii) any Indebtedness of the Parent, unless, in the case of clauses (ii) and (iii), the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to any Indebtedness for money borrowed. Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness will not include (i) Indebtedness evidenced by the Notes or the Guarantees, (ii) Indebtedness of the Company or any Guarantor that is expressly subordinated in right of payment to any Senior Indebtedness of the Company or such Guarantor or the Notes or such Guarantor's Guarantee, (iii) Indebtedness of the Company that by operation of law is subordinate to any general unsecured obligations of the Company, (iv) Indebtedness of the Company or any Guarantor to the extent incurred in violation of this Agreement, (v) any liability for federal, state or local taxes or other taxes, owed or owing by the Company or the Parent, (vi) trade account payables owed or owing by the Company or any Guarantor, (vii) amounts owed by the Company or any Guarantor for compensation to employees or for services rendered to the Company or such Guarantor, (viii) Indebtedness of the Company to any Restricted Subsidiary or any other Affiliate of the Company, (ix) Disqualified Stock of the Company or any Guarantor (x) Indebtedness which when incurred and without respect to any election under Section 1111(b) of Title 11 of the United States Code is without recourse to the Company or any Restricted Subsidiary and (xi) any Existing Notes outstanding following consummation of the Acquisition. "Significant Subsidiary" means any Restricted Subsidiary of the Company that, together with its Subsidiaries, (a) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated net revenues of the Company and its Subsidiaries, (b) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the most recently available consolidated financial statements of the Company for such fiscal year or (c) was organized or acquired after the beginning of such fiscal year and would have been a Significant Subsidiary if it had been owned during such entire fiscal year. "Solvent" means, with respect to any Person as of a particular date, that on such date (i) such Person is able to pay its debts and other liabilities, contingent obligations and other commitments as they mature in the ordinary course of business, (ii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature in their ordinary course, (iii) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person's assets would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged or is to engage, (iv) the fair value of the assets of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person and (v) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured. In computing the amount of 17 contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "S&P" means Standard & Poor's Ratings Group and any successor thereof. "Sponsor Parties" means J.W. Childs Associates, L.P. and The Halifax Group, L.L.C. "Standard Securitization Undertaking" means representations, warranties, covenants and indemnities entered into by the Company or any of its Restricted Subsidiaries that are reasonably customary in an accounts receivable transaction. "Stated Maturity" means, when used with respect to any Note or any installment of interest thereon, the date specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable and, when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness or any installment of interest thereon is due and payable. "Subordinated Indebtedness" means Indebtedness of the Company or a Guarantor that is subordinated in right of payment to the Notes or the Guarantee issued by such Guarantor, as the case may be. "Subsidiary" means any Person a majority of the equity ownership or Voting Stock of which is at the time owned, directly or indirectly, by the Company and/or one or more other Subsidiaries of the Company. Notwithstanding anything to the contrary herein or in the Notes, Toms River Imaging Associates, L.P. shall be deemed to be a Subsidiary of InSight for purposes of this Agreement and the Notes so long as InSight and the Guarantors, directly or indirectly, own at least 50% of the Voting Stock thereof. "Subsidiary Guarantors" has the meaning specified in the second paragraph of this Agreement. "Trustee" has the meaning specified in Section 10(a). "Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the Board of the Company as an Unrestricted Subsidiary in accordance with Section 5(q) hereof and (b) any Subsidiary of an Unrestricted Subsidiary. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency). 18 "Weighted Average Life" means, as of the date of determination with respect to any Indebtedness or Disqualified Stock, the quotient obtained by dividing (a) the sum of the products of (i) the number of years from the date of determination to the date or dates of each successive scheduled principal or liquidation value payment of such Indebtedness or Disqualified Stock, respectively, multiplied by (ii) the amount of each such principal or liquidation value payment by (b) the sum of all such principal or liquidation value payments. "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all of the outstanding Voting Stock (other than directors' qualifying shares or shares of foreign Restricted Subsidiaries required to be owned by foreign nationals pursuant to applicable law) of which is owned, directly or indirectly, by the Company. "Wholly Owned Subsidiary" means any Subsidiary, all of the outstanding Voting Stock (other than directors' qualifying shares or shares of foreign Subsidiaries required to be owned by foreign nationals pursuant to applicable law) of which is owned, directly or indirectly, by the Company. Section 2. Representations and Warranties. Acquisition Corp., InSight and each of the Guarantors hereby represents, warrants and covenants to the Purchaser as follows: (a) No Registration Required. Subject to compliance by the Purchaser with the procedures set forth in Section 10 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Purchaser to register the Securities under the Securities Act. (b) No Integration of Offerings or General Solicitation. None of Acquisition Corp., InSight or the Guarantors has, directly or indirectly, solicited any offer to buy or offered to sell, and none of them will, directly or indirectly, solicit any offer to buy or offer to sell, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Securities in a manner that would require the Securities to be registered under the Securities Act. None of the Company, its Rule 501(b) Affiliates or any person acting on its or any of their behalf (other than the Purchaser, as to whom the Company makes no representation or warranty) has engaged or will engage, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. (c) Eligibility for Resale under Rule 144A. The Securities are eligible for resale pursuant to Rule 144A and will not be, at the Closing Date, of the same class as securities listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated interdealer quotation system. (d) The Note Purchase Agreement. This Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, Acquisition Corp., InSight and each Guarantor, enforceable in accordance with its terms, except as rights to indemnification or contribution hereunder may be limited by applicable law and except as the enforcement hereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity). 19 (e) The Merger Agreement. The Merger Agreement has been duly authorized, executed and delivered by, and (subject to its adoption by the shareholders of the Company) is a valid and binding agreement of the Parent, Acquisition Corp. and InSight, enforceable against the Parent, Acquisition Corp. and InSight in accordance with its terms, except as rights to indemnification thereunder may be limited by applicable law and except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity). (f) Authorization of the Securities. (i) The Notes to be purchased by the Purchaser from Acquisition Corp. are in the form contemplated by this Agreement, have been duly authorized for issuance and sale pursuant to this Agreement and, at the Closing Date, will have been duly executed by Acquisition Corp. and, when delivered against payment of the purchase price therefor, will constitute valid and binding obligations of the Company, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity) and will be entitled to the benefits of this Agreement. (ii) The Guarantees are in the respective forms contemplated by this Agreement, have been duly authorized for issuance and sale pursuant to this Agreement and have been duly executed by each of the Guarantors and, when the Notes have been delivered against payment of the purchase price therefor, will constitute valid and binding obligations of the Guarantors, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity) and will be entitled to the benefits of this Agreement. (g) No Material Adverse Change. Except as otherwise disclosed in the Draft Offering Memorandum, since June 30, 2001, (i) there has been no material adverse change or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the business, assets, properties, liabilities (contingent or otherwise) or operations, of Acquisition Corp. or the Parent, or InSight and its Subsidiaries considered as one entity; (ii) any development that could result in a material delay of the consummation of the Merger or result in the termination of the Merger Agreement (any such change or development referred to in clauses (i) and (ii) above is called a "Material Adverse Change"); (iii) Acquisition Corp. and the Parent, and InSight and its Subsidiaries considered as one entity have not incurred any material liability or obligation, indirect, direct or contingent, not in the ordinary course of business nor entered into any material transaction or agreement not in the ordinary course of business, except in connection with the Merger and related transactions; and (iv) there has been no dividend or distribution of any kind declared, paid or made by Acquisition Corp., the Parent, InSight or any of its Subsidiaries on any class of Capital Stock (except for dividends paid by a Subsidiary of InSight to InSight or to another Subsidiary of 20 InSight) or repurchase or redemption by Acquisition Corp., the Parent, InSight or any of its Subsidiaries of any class of Capital Stock. (h) Independent Accountants. Arthur Andersen LLP (the "Independent Accountants"), who have audited the financial statements of InSight, are independent public or certified public accountants within the meaning of Regulation S-X under the Securities Act and the Exchange Act. (i) Preparation of the Financial Statements. The consolidated financial statements, together with the related notes, of InSight included in the Annual Report of the Company on Form 10-K for the fiscal year ended June 30, 2001 filed with the SEC on September 14, 2001, present fairly, in all material respects, the consolidated financial position of InSight and its Subsidiaries as of and at the dates indicated and the results of their operations and cash flows for the periods specified and comply as to form with the applicable requirements of the Securities Act and Regulation S-X. Such financial statements have been prepared in conformity with GAAP as applied in the United States of America applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. The unaudited pro forma financial data of InSight and its Subsidiaries, and the related notes thereto included in the Draft Offering Memorandum present fairly in all material respects the information contained therein, have been prepared in accordance with the SEC's rules and guidelines with respect to pro forma financial statements and have been properly presented on the bases described therein, and the assumptions used in the preparation thereof are believed to be reasonable in light of then existing conditions and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (j) Incorporation and Good Standing of Acquisition Corp., the Parent, InSight and its Subsidiaries. Each of the Parent, Acquisition Corp., InSight and the Subsidiaries of InSight has been duly organized and is validly existing as a corporation, limited partnership or limited liability company, as the case may be, in good standing under the laws of the jurisdiction of its organization; each of the Parent, Acquisition Corp., InSight and the Subsidiaries of InSight has the power and authority to own, lease and operate its properties and to conduct its business as described in the Draft Offering Memorandum; and each of the Parent, Acquisition Corp., InSight and the Subsidiary Guarantors has the power and authority to enter into and/or perform its obligations, as the case may be, under each of this Agreement, the Notes and the Guarantees to which it is a party. Each of the Parent, Acquisition Corp., InSight and each of its Subsidiaries is duly qualified as a foreign corporation, limited partnership or limited liability company, as the case may be, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. (k) Capitalization and Other Capital Stock Matters. At June 30, 2001, InSight had the authorized, issued and outstanding capitalization as set forth in the Draft Offering Memorandum under the caption "Capitalization" under the heading "Actual." At June 30, 2001, on a consolidated basis, after giving pro forma effect to (i) the issuance and sale of the Securities pursuant hereto, (ii) the consummation of the Merger, (iii) the funding under the Credit Agreement, (iv) the Equity Contribution, (v) the Option Rollover and (vi) the application of the 21 proceeds from the issuance and sale of the Securities, the funding under the Credit Agreement, the Equity Contribution and the Option Rollover to the refinancing transactions described under the caption "Use of Proceeds" in the Draft Offering Memorandum, the Company would have an authorized and outstanding capitalization as set forth in the Draft Offering Memorandum under the caption "Capitalization" under the heading "Pro Forma." All of the outstanding shares of capital stock of the Parent, Acquisition Corp. and InSight have been, and in the case of InSight after consummation of the Merger will be, duly authorized and validly issued, are fully paid and nonassessable. None of the outstanding shares of capital stock of the Parent or Acquisition Corp. were, or in the case of InSight after the consummation of the Merger will be, issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Parent, Acquisition Corp. or InSight, as the case may be. Except as set forth in Schedule B hereto, and except for rights of first refusal or "tag-along" or "drag along" rights customarily contained in stockholders' agreements, partnership agreements or joint venture operating agreements, there are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Parent, Acquisition Corp. or InSight or any of its Subsidiaries, other than those described in the Draft Offering Memorandum. The description of InSight's stock option, stock bonus, stock purchase and other stock plans or arrangements to be in effect immediately following the consummation of the Merger as contemplated by the Merger Agreement, and the options or other rights granted thereunder, set forth in the Draft Offering Memorandum accurately and fairly describes, in all material respects, such plans, arrangements, options and rights. As of the date hereof, all of the issued and outstanding capital stock of Acquisition Corp. has been duly authorized and validly issued, is fully paid and nonassessable and is owned directly by the Parent, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim and, following the Merger, all of the issued and outstanding capital stock of InSight will have been duly authorized and validly issued, fully paid and nonassessable and will be owned directly by the Parent, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim. In addition, all of the issued and outstanding capital stock of each Subsidiary of InSight has been duly authorized and validly issued, is fully paid and nonassessable and is owned by InSight, directly or through Subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim, except for any security interests, mortgages, pledges, liens, encumbrances or claims of the lenders existing (x) under the Fourth Amendment and Restatement of Credit Agreement, dated as of June 12, 1998, as amended by the Fifth and Sixth Amendments, among InSight, the Subsidiary Guarantors, Bank of America, N.A., as agent and the lenders thereunder (the "Existing Credit Agreement") and (y) under Credit Agreement. The only Subsidiaries of InSight are hose Subsidiaries listed in Schedule C hereto. (l) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required. None of the Parent, Acquisition Corp., InSight or any of its Subsidiaries is in violation of its charter or by-laws or is in default or has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time, or both, would reasonably be expected to constitute a default (solely for purposes of this paragraph (l), a "Default") under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease, license or other instrument to which the Parent, Acquisition Corp., InSight or any of its Subsidiaries is a party or by which it or any of them may be bound or to which any of the property or assets of the Parent, Acquisition Corp., InSight or any of its Subsidiaries is subject 22 (each, an "Instrument"), except for such Defaults as would not, individually or in the aggregate, result in a Material Adverse Change or except for such defaults that have been waived in writing. InSight's, Acquisition Corp.'s and each Guarantor's execution, delivery and performance of this Agreement and the issuance and delivery by Acquisition Corp. and the Guarantors of the Securities, and consummation of the transactions contemplated hereby and thereby and the Parent's, Acquisition Corp.'s and (subject to the approval by InSight's shareholders of the Merger Agreement and the consummation of the transactions contemplated thereby) InSight's execution, delivery and performance of the Merger Agreement and related agreements and the consummation of the transactions contemplated hereby and thereby and by the Draft Offering Memorandum (including the entering into and funding of the Credit Facilities, the Equity Contribution and the Option Rollover) (i) will not result in any violation of the provisions of the limited partnership agreement, charter or by-laws, as applicable, of the Parent, Acquisition Corp., InSight or any of its Subsidiaries, (ii) will not conflict with or constitute a breach of, or Default or a Debt Repayment Triggering Event under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Parent, Acquisition Corp., InSight or any of its Subsidiaries pursuant to, or require the consent of any other party to, any Instrument, except for such conflicts, breaches, Defaults, Debt Repayment Triggering Events, liens, charges or encumbrances as would not, individually or in the aggregate, result in a Material Adverse Change and except for any conflicts, breaches, Defaults, Debt Repayment Triggering Events, liens, charges or encumbrances under the Existing Credit Agreement, and (iii) will not result in any violation of any law, administrative regulation or administrative or court decree applicable to the Parent, Acquisition Corp., InSight or any of its Subsidiaries except for such violations that would not, individually or in the aggregate, result in a Material Adverse Change. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency, is required for Acquisition Corp.'s, InSight's or each Guarantor's execution, delivery and performance of this Agreement or the issuance and delivery of the Securities, or consummation of the transactions contemplated hereby and thereby and the other Transactions, except such as will be obtained by Acquisition Corp., InSight or the Guarantors and are in full force and effect under the Securities Act and such as may be required under state securities laws or the blue sky laws of any jurisdiction. (m) No Material Actions or Proceedings. There are no legal or governmental actions, suits or proceedings pending or, to the best of the knowledge of the Parent, Acquisition Corp. and InSight, threatened (i) against or affecting the Parent, Acquisition Corp., InSight or any of its Subsidiaries, (ii) which has as the subject thereof any property owned or leased by, the Parent, Acquisition Corp., InSight or any of its Subsidiaries, where in any such case (A) there is a reasonable possibility that such action, suit or proceeding might be determined adversely to the Parent, Acquisition Corp., InSight or such Subsidiary and (B) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to result in a Material Adverse Change or materially and adversely affect the consummation of the Merger and related transactions or the transactions contemplated by this Agreement. (n) Intellectual Property Rights. InSight and its Subsidiaries own, possess or license sufficient trademarks, trade names, patent rights, copyrights, licenses, approvals, trade secrets and other similar rights (collectively, "Intellectual Property Rights") reasonably necessary to conduct their businesses as now conducted; and the expected expiration of any of such Intellectual Property Rights would not result in a Material Adverse Change. Neither 23 InSight nor any of its Subsidiaries has received any notice of infringement or conflict with asserted Intellectual Property Rights of others, which infringement or conflict, if the subject of an unfavorable decision, ruling or filing would reasonably be expected to result in a Material Adverse Change and, except as otherwise disclosed in the Draft Offering Memorandum, neither InSight nor any of its Subsidiaries is in default under the terms of any license or similar agreement related to any Intellectual Property Rights necessary to conduct their business as now conducted or contemplated except as would not reasonably be expected to result in a Material Adverse Change. (o) All Necessary Permits, etc. InSight and each of its Subsidiaries possess such valid and current certificates, authorizations or permits issued by the appropriate municipal, state, federal or foreign regulatory agencies or bodies necessary to conduct their respective businesses as now conducted except as would not reasonably be expected to result in a Material Adverse Change, and neither InSight nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such license, certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, could reasonably be expected to result in a Material Adverse Change. (p) Regulatory Matters. To the knowledge of Acquisition Corp., the Parent, InSight and each Subsidiary Guarantor, none of (i) InSight, any of its Subsidiaries, or the officers, directors, employees, or agents (as defined in 42 C.F.R. Part 420 Subpart C and 42 C.F.R. Section 1001.1001(a)(2)) of InSight or any of its Subsidiaries, or (ii) any entity which InSight or any of its Subsidiaries manages or for which InSight or any of its Subsidiaries provides billing services ("Managed Entity") or the employees of any Managed Entity who are leased from InSight or any of its Subsidiaries, has been charged with, or has been or is being investigated with respect to, any activity (and with respect to the officers, directors, agents and employees of InSight or any of its Subsidiaries or any employee of any Managed Entity as described above, only as to any activity during their employment or association with InSight, any Subsidiary of InSight or any Managed Entity) that materially contravenes or could materially contravene or constitutes or could constitute a material violation of any Healthcare Law. To the knowledge of Acquisition Corp., the Parent, InSight and each Subsidiary Guarantor, no person who, immediately after the Merger will have a direct or indirect ownership interest of 5% or more (as those terms are defined in 42 C.F.R. Part 420 Subpart C and 42 C.F.R. Section 1001.1001(a)(2)) in InSight or any Subsidiary of InSight, has been charged with, or has been or is being investigated with respect to, any activity involving InSight or any of its Subsidiaries that materially contravenes or could materially contravene or constitutes or could constitute a material violation of any Healthcare Law. To the actual knowledge of the officers of InSight, none of the officers, directors and agents of any Managed Entity has been charged with, or has been or is being investigated with respect to, any activity during their employment or association with any Managed Entity that materially contravenes or could materially contravene or constitutes or could constitute a material violation of any Healthcare Law. To the actual knowledge of the officers of InSight, no person who immediately after the Merger will have a direct or indirect ownership interest of 5% or more (as those terms are defined in 42 C.F.R. Part 420 Subpart C and 42 C.F.R. Section 1001.1001(a)(2)) in a Managed Entity has been charged with, or has been or is being investigated with respect to, any activity in connection with the Managed Entity that materially contravenes or could materially contravene or constitutes or 24 could constitute a material violation of any Healthcare Law. To the knowledge of Acquisition Corp., the Parent, InSight and each Subsidiary Guarantor, none of InSight, any of its Subsidiaries, any Managed Entity or any of the officers, directors, employees or agents (as described above) of InSight or any of its Subsidiaries or any employee of any Managed Entity who is leased from InSight or any Subsidiary of InSight, has engaged in any activity (and with respect to the officers, directors, agents and employees of InSight or any Subsidiary of InSight or any employee of any Managed Entity as described above, only as to any activity during their employment or association with InSight, any Subsidiary of InSight or any Managed Entity) that materially contravenes or constitutes a material violation of any Healthcare Law during their employment or association with InSight, any Subsidiary of InSight, or any Managed Entity. To the actual knowledge of the officers of InSight, none of the officers, directors or agents of any Managed Entity has engaged in any activity during their employment or association with InSight, any Subsidiary of InSight or any Managed Entity that materially contravenes or constitutes a material violation of any Healthcare Law. (q) Medicare/Medicaid Participation. To the knowledge of Acquisition Corp., the Parent, InSight and each Subsidiary, none of InSight, any of its Subsidiaries, or any existing officers or directors of InSight or the respective Subsidiary who is expected to be an officer, director, agent (as defined in 42 C.F.R. Section 1001.1001(a)(2)), or managing employee (as defined in SSA Section 1126(b) or any regulations promulgated thereunder) of InSight or the respective Subsidiary: (1) has had a material civil monetary penalty assessed against it under Section 1128A of the SSA or any regulations promulgated thereunder; (2) has been excluded from participation under the Medicare program or a federal or state health care program; or (3) has been convicted (as that term in defined in 42 C.F.R. Section 1001.2) of any of the following categories of offenses as described in SSA Section 1128(a) and (b)(1), (2), (3) or any regulations promulgated thereunder: (i) criminal offenses relating to the delivery of an item or service under Medicare or any federal or state health care program; (ii) criminal offenses under federal or state law relating to patient neglect or abuse in connection with the delivery of a healthcare item or service; criminal offenses under federal or state law relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a healthcare item or service or with respect to any act or omission in a program operated by or financed in whole or in part by any federal, state or local governmental agency; (iii) federal or state laws relating to the interference with or obstruction of any investigation into any criminal offense described above in this paragraph; or (iv) criminal offenses under federal or state law relating to the unlawful manufacture, distribution, prescription or dispensing of a controlled substance. InSight, a Subsidiary of InSight, or an entity owned in whole or in part by InSight or a Subsidiary of InSight has a Medicare provider number, and a participating provider agreement in force with a Medicare Part B carrier, and materially meets all applicable Medicare conditions of coverage, in each locale, as applicable, in which InSight, such Subsidiary or such entity bills directly to Medicare for services furnished by InSight, such Subsidiary or such entity. InSight, a Subsidiary of InSight, or an entity owned in whole or in part by InSight or a Subsidiary of InSight has a Medicare provider number, and a participating provider agreement, and materially satisfies all applicable Medicaid conditions of coverage, in each state, as applicable, in which InSight, such Subsidiary, or such other entity bills directly to such state's Medicaid agency for services provided by InSight, such Subsidiary, or such other entity for Medicaid patients. 25 (r) Title to Properties. Except as otherwise disclosed in the Draft Offering Memorandum, InSight and each of its Subsidiaries have good and marketable title to all their properties and assets reflected as owned in the financial statements referred to in Section 2(i) above, in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects, except such as would not reasonably be expected to result in a Material Adverse Change and except for such security interests, mortgages, liens or encumbrances in favor of the lenders under the Existing Credit Agreement. Any real property, improvements, equipment and personal property held under lease by InSight or any of its Subsidiaries are held under valid and enforceable leases, except for such invalidations and unenforceabilities as would not reasonably be expected to result in a Material Adverse Change. Neither the Parent nor Acquisition Corp., immediately prior to the consummation of the Merger, owns any property or assets (other than, in the case of the Parent, all of the issued and outstanding Capital Stock of Acquisition Corp.). (s) Material Agreements. The agreements, contracts or instruments listed as exhibits to the Annual Report of the Company on Form 10-K for the fiscal year ended June 30, 2001 filed with the SEC on September 14, 2001 and those listed in Schedule D attached hereto are the only agreements, contracts or instruments binding upon the Parent, Acquisition Corp., InSight and/or its Subsidiaries, or will be binding upon the Parent, InSight or its Subsidiaries after the consummation of the Merger, that provide for the payments by the Parent, Acquisition Corp., InSight or any of its Subsidiaries after the date hereof of $2,000,000 or more. (t) Tax Law Compliance. InSight and its Subsidiaries have filed all material federal, state and foreign income and franchise tax returns required to be filed and have paid all taxes shown on such returns required to be paid by any of them which are due and payable and, if due and payable, any related or similar assessment, fine or penalty levied against any of them. InSight and each Subsidiary Guarantor has made adequate charges, accruals and reserves in the applicable financial statements referred to in Section 2(i) above in respect of all federal, state and foreign income and franchise taxes for all periods as to which the tax liability of InSight or any of its Subsidiaries has not been finally determined, except where such failure would not reasonably be expected to result in a Material Adverse Change. (u) InSight, Acquisition Corp. and the Parent not an "Investment Company". The Parent, Acquisition Corp. and InSight have been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the "Investment Company Act"). None of the Parent, Acquisition Corp. or InSight is, nor after receipt of payment for the Securities, the consummation of the Merger and the application of the proceeds as described in the Draft Offering Memorandum under "Use of Proceeds" will the Parent or InSight be, an "investment company" within the meaning of Investment Company Act and each of the Parent and the Company will conduct its business in a manner so that it will not become subject to the Investment Company Act. (v) Insurance. Each of InSight and its Subsidiaries are insured by recognized, financially sound institutions with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate and customary for their businesses including, but not limited to, policies covering real and personal property owned or leased by InSight and its Subsidiaries against theft, damage, destruction, acts of vandalism and 26 earthquakes. InSight has no reason to believe that it or any Subsidiary will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change. To the best of InSight's knowledge, after due inquiry, neither InSight nor any Subsidiary has been denied any insurance coverage which it has sought or for which it has applied and there are no claims by InSight or any of its Subsidiaries under any current insurance policy as to which any insurance company or institution is denying, or will deny, liability or coverage or defending under a reservation of rights clause. (w) No Price Stabilization or Manipulation. None of Acquisition Corp., InSight, the Guarantors or any of their respective affiliates has taken or will take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of any security of InSight to facilitate the sale or resale of the Securities. (x) Solvency. The Parent, Acquisition Corp. and InSight and InSight's Subsidiaries is, and, after giving effect to the sale of the Notes, the Merger, the funding of the Credit Facilities, the Equity Contribution, the Option Rollover and the application of the proceeds from the sale of the Notes, the funding of the Credit Facilities, the Equity Contribution and the Option Rollover to the refinancing transactions described in the Draft Offering Memorandum, will, taken as whole, be, Solvent. (y) No Unlawful Contributions or Other Payments. Neither InSight nor any of its Subsidiaries nor, to the best of Acquisition Corp.'s, InSight's or any Guarantor's knowledge, any employee or agent of InSight or any Subsidiary of InSight, has made any contribution or other payment to any official of, or candidate for, any federal, state or foreign office in violation of any law. (z) Company's Accounting System. InSight and each of its Subsidiaries maintains a system of accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP as applied in the United States and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (aa) Compliance with Environmental Laws. Except as would not, individually or in the aggregate, result in a Material Adverse Change (i) InSight and each of its Subsidiaries have all permits, authorizations and approvals required under any Environmental Laws and are in compliance with their requirements, (ii) neither InSight nor any of its Subsidiaries, to the knowledge of InSight, after due inquiry, is in violation of any federal, state, local or foreign law or regulation relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, 27 hazardous substances, petroleum and petroleum products (collectively, "Materials of Environmental Concern"), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (collectively, "Environmental Laws"), which violation includes, but is not limited to, noncompliance with any permits or other governmental authorizations required for the operation of the business of InSight or its Subsidiaries under applicable Environmental Laws, or noncompliance with the terms and conditions thereof, nor has InSight or any of its Subsidiaries received any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that InSight or any of its Subsidiaries is in violation of any Environmental Law; (iii) there is, to the knowledge of InSight, after due inquiry, no claim, action or cause of action filed with a court or governmental authority, no investigation with respect to which InSight or any Subsidiary has received written notice, and no written notice by any person or entity alleging potential liability for investigatory costs, cleanup costs, governmental responses costs, natural resources damages, property damages, personal injuries, attorneys' fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by InSight or any of its Subsidiaries, now or in the past (collectively, "Environmental Claims"), pending or, to the best of Acquisition Corp.'s, InSight's or any Guarantor's knowledge, threatened against InSight or any of its Subsidiaries or any person or entity whose liability for any Environmental Claim the Company or any of its Subsidiaries has retained or assumed either contractually or by operation of law; and (iv) to the knowledge of the Company, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that reasonably could result in a violation of any Environmental Law or form the basis of a potential Environmental Claim against InSight or any of its Subsidiaries or against any person or entity whose liability for any Environmental Claim InSight or any of its Subsidiaries has retained or assumed either contractually or by operation of law. (bb) ERISA Compliance. InSight and its Subsidiaries and any "employee benefit plan" (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, "ERISA")) established or maintained by InSight, its Subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in all respects with ERISA or, if not in compliance, would not reasonably be expected to result in a Material Adverse Change. "ERISA Affiliate" means, with respect to InSight or any of its Subsidiaries, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the "Code") of which InSight or such Subsidiary is a member. No "reportable event" (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any "employee benefit plan" established or maintained by InSight, its Subsidiaries or any of their ERISA Affiliates. No "employee benefit plan" established or maintained by InSight, its Subsidiaries or any of their ERISA Affiliates, if such "employee benefit plan" were terminated, would have any "amount of unfunded benefit liabilities" (as defined under ERISA). Neither InSight, its Subsidiaries nor any of their ERISA Affiliates has incurred or reasonably expects to incur any liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan" established or maintained 28 by InSight, its Subsidiaries or any of their ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification. (cc) Taxes; Fees. There are no stamp or other issuance or transfer taxes or duties or other similar fees or charges required to be paid in connection with the execution and delivery of this Agreement or the issuance or sale by Acquisition Corp. of the Securities. (dd) No Labor Disputes. As of the date hereof, (i) there is no unfair labor practice complaint pending against InSight or any of its Subsidiaries or, to the best knowledge of InSight, threatened against any of them, before the National Labor Relations Board or any state or local labor relations board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is so pending against InSight or any of its Subsidiaries or, to the best knowledge of InSight, threatened against any of them, (ii) there is no material strike, labor dispute, slowdown or stoppage pending against InSight or any of its Subsidiaries or, to the knowledge of InSight, threatened against InSight and (iii) InSight is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its principal customers, suppliers, manufacturers or contractors, in each case which is likely to result in a Material Adverse Change. (ee) No Operations. Neither the Parent nor Acquisition Corp. has any subsidiaries (other than, in the case of the Parent, Acquisition Corp.) or has conducted any business prior to the date hereof other than in connection with the transactions contemplated by this Agreement, the Draft Offering Memorandum and the Merger Agreement. Any certificate signed by an officer of Acquisition Corp., InSight or any Guarantor and delivered to the Purchaser pursuant to this Agreement or to counsel for the Purchaser shall be deemed to be a representation and warranty by Acquisition Corp., InSight or such Guarantor to the Purchaser as to the matters set forth therein. Section 3. Purchase, Sale and Delivery of the Securities. (a) The Securities. Acquisition Corp. has authorized the issue and sale of $200,000,000 aggregate principal amount of 12-1/8% Senior Subordinated Notes due 2011 in the form of Exhibit F hereto. Acquisition Corp. agrees to issue and sell to the Purchaser all of the Securities upon the terms herein set forth. On the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Purchaser agrees to purchase from Acquisition Corp. all of the Notes, at a purchase price of 96.75% of the principal amount thereof payable on the Closing Date (it being acknowledged that the discount of 3.25% shall be in satisfaction of the fees payable by the Company to BAS pursuant to Section 1 and the first paragraph of Section 2 of the Fee Letter). (b) The Closing Date. Delivery of certificates for the Securities in definitive form to be purchased by the Purchaser and payment therefor shall be made at the offices of Kaye Scholer LLP, 425 Park Avenue, New York, New York (or such other place as may be agreed to by the Sponsor Parties, the Company and the Purchaser) on the Closing Date contemporaneously with the consummation of the Merger. 29 (c) Delivery of the Securities. Acquisition Corp. shall deliver, or cause to be delivered, to the Purchaser certificates for the Securities at the Closing Date against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor. The certificates for the Securities shall be in such denominations as the Purchaser shall have specified to the Company in writing one Business Day prior to the Closing Date and registered in the name of the Purchaser. Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Purchaser. (d) Purchaser as a Qualified Institutional Buyer. The Purchaser represents and warrants to, and agrees with, Acquisition Corp. that it is a QIB and an "accredited investor" within the meaning of Rule 501 under the Securities Act. Section 4. Redemption Procedures. (a) Notices to Holders. If the Company elects to redeem Notes pursuant to the optional redemption provisions of this Agreement, it shall mail to each Holder, at least 30 days (or, if the Notes are then held only by the Purchaser and/or any of its Rule 501(b) Affiliates, 15 days) but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Agreement pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. (b) Selection of Notes to Be Redeemed. In case the Company is entitled to, and elects to, redeem less than all of the Notes, the Company shall redeem the Notes pro rata from each Holder (or as nearly pro rata as practicable). For all purposes of this Agreement, unless the context otherwise requires, all provisions relating to the redemption of Notes shall relate, in the case of any Notes redeemed or to be redeemed only in part, to the portion of the principal amount of such Notes which has been or is to be redeemed. No Notes in amounts of $1,000 or less shall be redeemed in part. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Agreement that apply to Notes called for redemption also apply to portions of Notes called for redemption. (c) Notice of Redemption. Subject to the provisions of this Agreement, at least 30 days (or, if the Notes are then held only by the Purchaser and/or any of its Rule 501(b) Affiliates, 15 days) but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: 1. the redemption date; 2. the redemption price; 30 3. if any Note is being redeemed in part, the portion of the principal amount at maturity of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion of the original Note shall be issued in the name of the Holder thereof upon cancellation of the original Note; 4. the name and address of the Paying Agent (if other than the Company); 5. that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price and become due on the date fixed for redemption; 6. that, unless the Company defaults in making such redemption payment, interest, if any, on Notes called for redemption ceases to accrue on and after the redemption date; and 7. the paragraph of the Notes and/or Section of this Agreement pursuant to which the Notes called for redemption are being redeemed. (d) Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with this Agreement, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. (e) Deposit of Redemption Price. One Business Day prior to the redemption date, the Company shall deposit with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Paying Agent shall promptly return to the Company any money deposited with the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Holder in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in this Agreement. (f) Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue a new Note equal in principal amount to the unredeemed portion of the Note surrendered. No Notes in denominations of $1,000 or less shall be redeemed in part. (g) Optional Redemption. (i) Except as set forth in clause (ii) of this Section 4(g), the Notes shall not be redeemable at the Company's option prior to October 15, 2006. Thereafter, the Company may redeem all or a part of the Notes from time to time, upon not less 31 than 30 days' (or, if the Notes are then held only by the Purchaser and/or any of its Rule 501(b) Affiliates, 15 days) nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest to the applicable redemption date, if redeemed during the twelve-month period beginning on October 15 of the years indicated below:
YEAR PERCENTAGE 2006................................... 106.063% 2007................................... 104.042% 2008................................... 102.021% 2009 and thereafter.................... 100.000%
(ii) At any time prior to October 17, 2004, the Company may redeem (i) up to 35% of the initial aggregate principal amount of the Notes at a redemption price of 112.125% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, or (ii) all, but not less than all, of the Notes at a redemption price equal to $18,000,000, in each case in connection with the initial Public Equity Offering of the Company (or of the Parent, to the extent such proceeds are contributed to the common equity of the Company); provided that the redemption must occur within 60 days of the date of the closing of such initial Public Equity Offering. (h) Mandatory Redemption. Except as set forth in Section 5(j) and 5(o) hereof, the Company is not required to make a mandatory redemption or sinking fund payments with respect to the Notes. (i) Repurchase Offers. In the event that, pursuant to Sections 5(j) and 5(o) hereof, the Company shall be required to commence an offer to all Holders to purchase their respective Notes (a "Repurchase Offer"), it shall follow the procedures specified below: (1) The Repurchase Offer shall remain open for a period of not less than 30 days and not more than 60 days following its commencement, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Sections 5(j) and 5(o) hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Repurchase Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. (2) If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Repurchase Offer. (3) Upon the commencement of a Repurchase Offer, the Company shall send, by first class mail, postage prepaid, a notice to each of the Holders. 32 The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Repurchase Offer. The Repurchase Offer shall be made to all Holders. The notice, which shall govern the terms of the Repurchase Offer, shall state: (A) that the Repurchase Offer is being made pursuant to this Section and Section 5(j) or Section 5(o) hereof, and the length of time the Repurchase Offer shall remain open; (B) the Offer Amount, the purchase price and the Purchase Date; (C) that any Note not tendered or accepted for payment shall continue to accrete or accrue interest; (D) that, unless the Company defaults in making such payment, any Note (or portion thereof) accepted for payment pursuant to the Repurchase Offer shall cease to accrete or accrue interest and Liquidated Damages, if any, after the Purchase Date; (E) that Holders electing to have a Note purchased pursuant to a Repurchase Offer may elect to have Notes purchased in integral multiples of $1,000 only; (F) that Holders electing to have a Note purchased pursuant to any Repurchase Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (G) that Holders shall be entitled to withdraw their election if the Company or the Paying Agent, as the case may be, receives, not later than the expiration of the offer period of the Repurchase Offer, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing its election to have such Note purchased; and (H) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). (4) On the Purchase Date, the Company shall, to the extent lawful, accept for payment on a pro rata basis to the extent necessary, the Offer Amount of Notes (or portions thereof) tendered pursuant to the Repurchase Offer, or if less than the Offer Amount has been tendered, all Notes tendered. The Company or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an 33 amount equal to the purchase price of Notes tendered by such Holder, as the case may be, and accepted by the Company for purchase, and the Company, shall promptly issue a new Note and mail or deliver such new Note to such Holder, in a principal amount at maturity equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the respective Holder thereof. The Company shall publicly announce the results of the Repurchase Offer on the Purchase Date. (5) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Excess Proceeds Offer. (6) Other than as specifically provided in this Section, any purchase pursuant to this Section shall be made pursuant to the provisions of Sections 4(a) through 4(f) hereof. Section 5. Covenants. The Company covenants and agrees with the Purchaser as follows: (a) Payment of Notes. (i) The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or one of its Subsidiaries, holds as of 1:00 p.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. (ii) The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. (b) [Intentionally Omitted]. (c) Reports. Whether or not required by the SEC, so long as any Notes are outstanding, the Company will file with the SEC all such annual reports, quarterly reports and other documents that the Company would be required to file if it were subject to Section 13(a) or 15(d) under the Exchange Act. The Company shall also be required (i) to supply to each Holder, without cost to such Holder, copies of such reports and documents within 15 days after the date on which the Company files such reports and documents with the SEC or the date on which the Company would be required to file such reports and documents if the Company were so required and (ii) if filing such reports and documents is not accepted by the SEC or is prohibited under the Exchange Act, to supply at the Company's cost copies of such reports and documents to any prospective Holder promptly upon written request. 34 Notwithstanding the foregoing, so long as the Parent guarantees the Notes, the reports, information and other documents required to be filed and provided as described above may be those of the Parent, rather than of the Company, so long as such filings (i) would satisfy the requirements of the Exchange Act and (ii) disclose the results of operations and financial condition in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in at least such detail as would be required if the Company were filing such report. (d) Compliance Certificate. The Company and each Guarantor shall deliver to the Holders, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Agreement, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge, the Company has kept, observed, performed and fulfilled its obligations under this Agreement and is not in default in the performance or observance of any of the terms, provisions and conditions of this Agreement (or, if a Default or Event of Default shall have occurred and be continuing, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to clause 1 of Section 5(c) above shall be accompanied by a written statement of the Company's independent public accountants (which shall be the Independent Accountants or another firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Section 5 of this Agreement or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. The Company shall, so long as any of the Notes are outstanding, deliver to the Holders, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. (e) Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, any material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. (f) Stay, Extension and Usury Laws. The Company and each of the Guarantors covenant (to the extent that it may lawfully do so) that it shall not at any time insist 35 upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Agreement. (g) Restricted Payments. (i) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, take any of the following actions: (1) declare or pay any dividend on, or make any distribution to holders of, any shares of the Capital Stock of the Company or any Restricted Subsidiary, other than (i) dividends or distributions payable solely in Qualified Equity Interests or (ii) dividends or distributions by a Restricted Subsidiary payable to the Company or a Wholly Owned Restricted Subsidiary or to all holders of Capital Stock of such Restricted Subsidiary on a pro rata basis; (2) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any shares of Capital Stock, or any options, warrants or other rights to acquire such shares of Capital Stock, of the Company, any direct or indirect parent of the Company or any Subsidiary of the Company (other than a Wholly Owned Restricted Subsidiary); (3) make any principal payment on, or repurchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, sinking fund payment or maturity, any Subordinated Indebtedness; or (4) make any Investment (other than a Permitted Investment) in any Person (such payments or other actions described in (but not excluded from) clauses (1) through (4) being referred to as "Restricted Payments"), unless at the time of, and immediately after giving effect to, the proposed Restricted Payment: (A) no Default or Event of Default has occurred and is continuing; (B) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in clause (i) of Section 5(i) hereof; and (C) the aggregate amount of all Restricted Payments made after the Closing Date does not exceed the sum of: (I) 50% of the aggregate Consolidated Net Income of the Company during the period (taken as one accounting period) from the first day of the Company's first fiscal quarter commencing after the Closing Date to the last day of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such proposed Restricted Payment (or, if such aggregate 36 cumulative Consolidated Net Income is a loss, minus 100% of such amount); plus (II) 100% of the aggregate net cash proceeds received by the Company after the Closing Date as a capital contribution or from the issuance or sale (other than to a Subsidiary) of either (1) Qualified Equity Interests of the Company or (2) debt securities or Disqualified Stock that have been converted into or exchanged for Qualified Stock of the Company, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange. (ii) The preceding provisions will not prohibit, so long as no Default or Event of Default has occurred and is continuing or would occur: (1) the payment of any dividend within 60 days after the date of declaration thereof, if at the declaration date such payment would not have been prohibited by the foregoing provisions; (2) the repurchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company, in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, Qualified Equity Interests of the Company or of the Parent, the proceeds of which are contributed to the Company as a capital contribution on a substantially concurrent basis; (3) the purchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, shares of Qualified Equity Interests of the Company or of the Parent, the proceeds of which are contributed to the Company as a capital contribution on a substantially concurrent basis; (4) the purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Indebtedness in exchange for, or out of the net cash proceeds of a substantially concurrent issuance or sale (other than to a Subsidiary) of, Subordinated Indebtedness, so long as the Company or a Restricted Subsidiary would be permitted to refinance such original Subordinated Indebtedness with such new Subordinated Indebtedness pursuant to clause (4) of the definition of Permitted Indebtedness; (5) the repurchase of any Subordinated Indebtedness at a purchase price not greater than 101% of the principal amount of such Subordinated Indebtedness in the event of a Change of Control in accordance with provisions similar to Section 5(o) hereof; provided that prior to or simultaneously with such repurchase, the Company has made the Change of Control Offer as provided in 37 Section 5(o) hereof with respect to the Notes and has repurchased all Notes validly tendered for payment in connection with such Change of Control Offer; (6) the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Company, options on any such shares or related stock appreciation rights or similar securities, or any dividend, distribution or advance to the Parent for the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Parent, options on any such shares or related stock appreciation rights or similar securities, in each case held by officers, directors or employees or former officers, directors or employees (or their estates or beneficiaries under their estates) of the Company, the Parent or any Subsidiary of the Company, as applicable, or by any employee benefit plan of the Company, the Parent or any Subsidiary of the Company, as applicable, upon death, disability, retirement or termination of employment or pursuant to the terms of any employee benefit plan or any other agreement under which such shares of stock or related rights were issued; provided that the aggregate amount of cash applied by the Company for such purchase, redemption, acquisition, cancellation or other retirement of such shares of Capital Stock of the Company or the Parent after the Closing Date does not exceed $7,500,000 in the aggregate (excluding for purposes of calculating such amount the aggregate amount received by any Person in connection with such purchase, redemption, acquisition, cancellation or other retirement of such shares that is concurrently used to repay loans made to such Person by the Company pursuant to clause (f) of the definition of "Permitted Investment"); (7) the payment of dividends or other distributions or the making of loans or advances to the Parent in amounts required for the Parent to pay franchise taxes and other fees required to maintain its existence and provide for all other customary operating costs of the Parent to the extent attributable to the ownership and operation of the Company and its Restricted Subsidiaries, including, without limitation, in respect of director fees and expenses, administrative, legal and accounting services provided by third parties and other customary costs and expenses including all costs and expenses with respect to filings with the SEC; (8) the payment of dividends or other distributions by the Company to the Parent in amounts required to pay the tax obligations of the Parent attributable to the Company and its Subsidiaries, determined as if the Company and its Subsidiaries had filed a separate consolidated, combined or unitary return for the relevant taxing jurisdiction; provided that (x) the amount of dividends paid pursuant to this clause (8) to enable the Parent to pay Federal and state income taxes (and franchise taxes based on income) at any time shall not exceed the amount of such Federal and state income taxes (and franchise taxes based on income) actually owing by the Parent at such time to the respective tax authorities for the respective period and (y) any refunds received by the Parent attributable to the Company or any of its Restricted Subsidiaries shall promptly be released by the Parent to the Company through a contribution or purchase of common stock (other than Disqualified Stock) of the Company; 38 (9) the payment of dividends or other distributions or the making of loans or advances to the Parent in amounts required for the Parent to pay to the Equity Sponsors an annual amount not to exceed $500,000 for payment of management consulting or financial advisory services provided to the Company or any of the Subsidiaries; and (10) other Restricted Payments not to exceed $10,000,000 at any one time outstanding. (iii) The actions described in clauses (5), (6), (7), (8), (9) and (10) of Section 4(g)(ii) will be Restricted Payments that will be permitted to be taken in accordance with this Section 4(g) but will reduce the amount that would otherwise be available for Restricted Payments under clause (i)(4)(C) of this Section 4(g) and the actions described in clauses (1), (2), (3) and (4) of the second paragraph of Section 4(g)(ii) will be Restricted Payments that will be permitted to be taken in accordance with this Section 4(g) and will not reduce the amount that would otherwise be available for Restricted Payments under clause (i)(4)(C) of this Section 4(g). (iv) For the purpose of making any calculations under this Agreement (i) if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will be deemed to have made an Investment in an amount equal to the greater of the fair market value or net book value of the net assets of such Restricted Subsidiary at the time of such designation as determined by the Board of the Company, and (ii) any property transferred to or from an Unrestricted Subsidiary will be valued at fair market value at the time of such transfer, as determined by the Board of the Company. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of the Company whose resolution with respect thereto shall be delivered to the Holders, such determination to be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $10,000,000. Not later than the date of making any Restricted Payment, the Company shall deliver to the Holders an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required under this Section 4(g) were computed, together with a copy of any fairness opinion or appraisal required by this Agreement. (v) If the aggregate amount of all Restricted Payments calculated under the foregoing provision includes an Investment in an Unrestricted Subsidiary or other Person that thereafter becomes a Restricted Subsidiary, the aggregate amount of all Restricted Payments calculated under the foregoing provision will be reduced by the lesser of (x) the net asset value of such Subsidiary at the time it becomes a Restricted Subsidiary and (y) the initial amount of such Investment. (vi) If an Investment resulted in the making of a Restricted Payment, the aggregate amount of all Restricted Payments calculated under the foregoing provision will be reduced by the amount of any net reduction in such Investment (resulting from the payment of interest or dividends, loan repayment, transfer of assets or otherwise, other than the redesignation 39 of an Unrestricted Subsidiary or other Person as a Restricted Subsidiary), to the extent such net reduction is not included in the Company's Consolidated Net Income; provided that the total amount by which the aggregate amount of all Restricted Payments may be reduced may not exceed the lesser of (x) the cash proceeds received by the Company and its Restricted Subsidiaries in connection with such net reduction and (y) the initial amount of such Investment. (vii) In computing the Consolidated Net Income of the Company for purposes of the foregoing clause (i)(4)(C)(I) of this Section 4(g), (i) the Company may use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (ii) the Company will be permitted to rely in good faith on the financial statements and other financial data derived from its books and records that are available on the date of determination. If the Company makes a Restricted Payment that, at the time of the making of such Restricted Payment, would in the good faith determination of the Company be permitted under the requirements of this Agreement, such Restricted Payment will be deemed to have been made in compliance with this Agreement notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Net Income of the Company for any period. (h) Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. (i) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to (1) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock, (2) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (3) make loans or advances to the Company or any other Restricted Subsidiary or (4) transfer any of its properties or assets to the Company or any other Restricted Subsidiary. (ii) However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (1) any agreement (including the Credit Agreement) in effect on the Closing Date; (2) customary non-assignment provisions of any lease, license or other contract entered into in the ordinary course of business by the Company or any Restricted Subsidiary; (3) the refinancing or successive refinancing of Indebtedness incurred under the agreements (including the Credit Agreement) in effect on the Closing Date, so long as such encumbrances or restrictions are no more restrictive, taken as a whole, than those contained in such original agreement; (4) any agreement or other instrument of a Person acquired by the Company or any Restricted Subsidiary in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is 40 not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; (5) purchase money obligations for acquired property permitted under Section 5(i) that impose restrictions of the nature described in clause (4) of Section 5(h)(i) on the property so acquired; (6) any agreement for the sale of a Restricted Subsidiary or an asset that restricts distributions by that Restricted Subsidiary or transfers of such asset pending its sale; (7) secured Indebtedness otherwise permitted to be incurred pursuant to Section 5(l) hereof that limits the right of the debtor to dispose of the assets securing such Indebtedness; (8) restrictions on cash or other deposits or net worth imposed by leases entered into in the ordinary course of business; (9) Non-Recourse Indebtedness of any Permitted Joint Venture permitted to be incurred under this Agreement; (10) applicable law or regulation; (11) a Receivables Program with respect to a Receivables Subsidiary; and (12) customary provisions in joint venture, limited liability company operating, partnership, shareholder and other similar agreements entered into in the ordinary course of business reasonably consistent with past practice by the Company or any Restricted Subsidiary. (i) Incurrence of Indebtedness and Issuance of Preferred Stock. (i) The Company shall not, and shall not permit any Restricted Subsidiary to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Indebtedness (including Acquired Indebtedness and the issuance of Disqualified Stock), except that the Company and any Subsidiary Guarantors may incur Indebtedness if, at the time of such event, the Fixed Charge Coverage Ratio for the immediately preceding four full fiscal quarters for which internal financial statements are available, taken as one accounting period, would have been equal to at least 2.0 to 1.0. (ii) In making the foregoing calculation for any four-quarter period that includes the Closing Date, pro forma effect will be given to the Transaction, as if such transactions had occurred at the beginning of such four-quarter period. In addition (but without duplication), in making the foregoing calculation, pro forma effect will be given to: (1) the incurrence of such Indebtedness and (if applicable) the application of the net proceeds therefrom, including to refinance other 41 Indebtedness, as if such Indebtedness was incurred and the application of such proceeds occurred at the beginning of such four-quarter period; (2) the incurrence, repayment or retirement of any other Indebtedness by the Company or its Restricted Subsidiaries since the first day of such four-quarter period as if such Indebtedness was incurred, repaid or retired at the beginning of such four-quarter period; and (3) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred at the beginning of such four-quarter period. In making a computation under the foregoing clause (1) or (2), (A) the amount of Indebtedness under a revolving credit facility will be computed based on the average daily balance of such Indebtedness during such four-quarter period, (B) if such Indebtedness bears, at the option of the Company, a fixed or floating rate of interest, interest thereon will be computed by applying, at the option of the Company, either the fixed or floating rate, and (C) the amount of any Indebtedness that bears interest at a floating rate will be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness if such Hedging Obligations have a remaining term at the date of determination in excess of 12 months). (iii) Notwithstanding the foregoing, the Company may, and may permit its Restricted Subsidiaries to, incur the following Indebtedness ("Permitted Indebtedness"): (1) Indebtedness of the Company or any Subsidiary Guarantor under the Credit Agreement (and the incurrence by any Guarantor of guarantees thereof) in an aggregate principal amount at any one time outstanding not to exceed $375,000,000, less any amounts applied to the permanent reduction of such credit facilities pursuant to the provisions of Section 5(j); (2) Indebtedness represented by the Notes (other than the Additional Notes) and the Guarantees; (3) Existing Indebtedness; (4) the incurrence by the Company of Permitted Refinancing Indebtedness in exchange for, or the net cash proceeds of which are used to refund, refinance or replace, any Indebtedness that is permitted to be incurred under clause (2) or (3) above; (5) Indebtedness owed by the Company to any Restricted Subsidiary or owed by any Restricted Subsidiary to the Company or a Restricted Subsidiary (provided that such Indebtedness is held by the Company or such Restricted Subsidiary); provided that: 42 (A) any Indebtedness of the Company or any Subsidiary Guarantor owing to any such Restricted Subsidiary is unsecured and subordinated in right of payment from and after such time as the Notes shall become due and payable (whether at Stated Maturity, acceleration, or otherwise) to the payment and performance of the Company's obligations under the Notes or the Subsidiary Guarantor's obligations under its Guarantee, as the case may be; and (B) (x) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (y) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof, shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (5); (6) Indebtedness of the Company or any Restricted Subsidiary under Hedging Obligations incurred in the ordinary course of business; (7) Indebtedness of the Company or any Restricted Subsidiary consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock; (8) either (A) Capitalized Lease Obligations of the Company or any Restricted Subsidiary or (B) Indebtedness under purchase money mortgages or secured by purchase money security interests so long as (x) such Indebtedness is not secured by any property or assets of the Company or any Restricted Subsidiary other than the property and assets so acquired and (y) such Indebtedness is created within 90 days of the acquisition of the related property; provided that the aggregate amount of Indebtedness under clauses (A) and (B) does not exceed 15% of Consolidated Tangible Assets at any one time outstanding; (9) Guarantees by any Restricted Subsidiary made in accordance with the provisions of Section 5(s); (10) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within two business days of incurrence; (11) Indebtedness of the Company or any of its Restricted Subsidiaries represented by letters of credit for the account of the Company or such Restricted Subsidiary, as the case may be, in order to provide security for workers' 43 compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; (12) the incurrence of Non-Recourse Indebtedness by Permitted Joint Ventures that are Restricted Subsidiaries; (13) Indebtedness incurred by a Receivables Subsidiary pursuant to a Receivables Program; provided that, after giving effect to any such incurrence of Indebtedness, the aggregate principal amount of all Indebtedness incurred under this clause (13) and then outstanding does not exceed $30,000,000; and (14) Indebtedness of the Company, any Restricted Subsidiary or any Permitted Joint Venture not permitted by any other clause of this definition, in an aggregate principal amount not to exceed $30,000,000 at any one time outstanding. (iv) For purposes of determining compliance with this Section 5(i), in the event that any proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (14) of Section 5(i)(iii), or is entitled to be incurred pursuant to Section 5(i)(i), the Company will be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this covenant. Indebtedness under the Credit Agreement immediately following the Acquisition shall be deemed to have been incurred on the date of the Acquisition in reliance on the exception provided by clause (1) of Section 5(i)(iii). (j) Asset Sales. (i) The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any Asset Sale unless (x) the consideration received by the Company or such Restricted Subsidiary for such Asset Sale is not less than the fair market value of the assets sold evidenced by a resolution of the board of directors of such entity set forth in an Officers' Certificate delivered to the Holders and (y) the consideration received by the Company or the relevant Restricted Subsidiary in respect of such Asset Sale consists of at least 75% cash or Cash Equivalents (for purposes of this clause (y), cash and Cash Equivalents includes (A) any liabilities (as reflected in the Company's consolidated balance sheet) of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Guarantee) that are assumed by any transferee of any such assets or other property in such Asset Sale, and where the Company or the relevant Restricted Subsidiary is released from any further liability in connection therewith with respect to such liabilities, (B) any securities, notes or other similar obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted within 180 days of the consummation of the related Asset Sale by the Company or such Restricted Subsidiary into cash and Cash Equivalents (to the extent of the net cash proceeds or the Cash Equivalents (net of related costs) received upon such conversion) and (C) any Designated Noncash Consideration received by the Company or any such Restricted Subsidiary in the Asset Sale having an aggregate fair market value, as determined by the Board of the Company, taken together with all other Designated Noncash Consideration received pursuant to this clause that is at that time outstanding, not to exceed the greater of: 44 (1) $10,000,000; and (2) 15% of Consolidated Tangible Assets at the time of the receipt of such Designated Noncash Consideration (with the fair market value of each item of such Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value). (ii) If the Company or any Restricted Subsidiary engages in an Asset Sale, the Company may, at its option, within 12 months after such Asset Sale, (1) apply all or a portion of the Net Cash Proceeds to the permanent reduction of amounts outstanding under the Credit Agreement (and to correspondingly reduce the commitments, if any, with respect thereto) or to the permanent repayment of other Senior Indebtedness of the Company or a Restricted Subsidiary, provided that the repayment of any Indebtedness incurred under the Credit Agreement in connection with the acquisition of any Facility with the proceeds of any subsequent Sale and Leaseback Transaction relating to such Facility shall not be required to result in the permanent reduction of the amounts outstanding under the Credit Agreement or correspondingly permanently reduce the commitments thereunder, or (2) invest (or enter into a legally binding agreement to invest) all or a portion of such Net Cash Proceeds in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in the businesses of the Company or its Restricted Subsidiaries, as the case may be, existing on the Closing Date or in businesses the same, similar or reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in clause (1) or (2) (without regard to the parenthetical contained in such clause (2)) above. Pending the final application of any such Net Cash Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Cash Proceeds in a manner that is not prohibited by this Agreement. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph shall constitute "Excess Proceeds." (c) When the aggregate amount of Excess Proceeds exceeds $10,000,000, the Company will, within 30 days thereafter, make an offer to purchase (an "Excess Proceeds Offer") from all Holders of Notes on a pro rata basis, in accordance with the procedures set forth in this Agreement, the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased with the Excess Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued interest, if any, to the date such offer to purchase is consummated. To the extent that the aggregate principal amount of Notes tendered pursuant to such offer to purchase is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the Notes to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset to zero. (iii) The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Excess Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict 45 with the Asset Sales provisions of this Agreement, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under Section 5(j) of this Agreement by virtue of such conflict. (k) Transactions with Affiliates. (i) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into or suffer to exist any transaction with, or for the benefit of, any Affiliate of the Company ("Interested Persons"), unless (1) such transaction is on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could have been obtained in an arm's-length transaction with third parties who are not Interested Persons and (2) the Company delivers to the Holders (x) with respect to any transaction or series of related transactions entered into after the Closing Date involving aggregate payments in excess of $5,000,000, a resolution of the Company's Board set forth in an officers' certificate certifying that such transaction or transactions complies with clause (1) above and that such transaction or transactions have been approved by the Board (including a majority of the Disinterested Directors) of the Company and (y) with respect to a transaction or series of related transactions involving aggregate payments equal to or greater than $10,000,000, a written opinion as to the fairness to the Company or such Restricted Subsidiary of such transaction or series of transactions from a financial point of view issued by an accounting, appraisal or investment banking firm, in each case of national standing. (ii) The foregoing Section 5(k)(i) will not restrict: (1) transactions among the Company and/or its Restricted Subsidiaries; (2) the Company from paying reasonable and customary regular compensation, indemnification, reimbursement and fees to officers of the Company or any Restricted Subsidiary and to directors of the Company or any Restricted Subsidiary who are not employees of the Company or any Restricted Subsidiary; (3) transactions permitted by Section 5(g); (4) advances to employees for moving, entertainment and travel expenses and similar expenditures in the ordinary course of business and consistent with past practice; (5) any Receivables Program of the Company or a Restricted Subsidiary; (6) the agreements listed on Schedule E hereto, in each case as in effect as of the Closing Date or any amendment thereto (so long as the amended agreement is not more disadvantageous to the Holders of the Notes in any material respect than such agreement immediately prior to such amendment) or any transaction contemplated thereby; and (7) sales of Equity Interests to Affiliates. 46 (l) Liens. (i) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Pari Passu Indebtedness or Subordinated Indebtedness of the Company on or with respect to any of its property or assets, including any shares of stock or Indebtedness of any Restricted Subsidiary, whether owned at the Closing Date or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless: (1) in the case of any Lien securing Subordinated Indebtedness, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien; and (2) in the case of any Lien securing Pari Passu Indebtedness, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to or ranks equally with such Lien. (ii) The Company shall not permit any Subsidiary Guarantor to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Pari Passu Indebtedness or Subordinated Indebtedness of such Subsidiary Guarantor on or with respect to such Subsidiary Guarantor's properties or assets, including any shares of stock or Indebtedness of any other Restricted Subsidiary, whether owned at the date of this Agreement or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless: (1) in the case of any Lien securing Pari Passu Indebtedness of such Subsidiary Guarantor, each Guarantee of such Subsidiary Guarantor is secured by a Lien on such property, assets or proceeds that is senior in priority to or ranks equally with such Lien; and (2) in the case of any Lien securing Subordinated Indebtedness of such Subsidiary Guarantor, each Guarantee of such Subsidiary Guarantor is secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien. (m) [Intentionally Omitted.] (n) Limitation on Senior Subordinated Debt. Neither the Company nor any Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness or guarantee, as applicable, that is subordinate or junior in right of payment to any Senior Indebtedness and senior in any respect in right of payment to the Notes or such Guarantor's Guarantee, respectively. (o) Offer to Repurchase upon a Change of Control. (i) Upon the occurrence of a Change of Control, each Holder shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price (the "Change of Control Payment") in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of purchase (the "Change of Control Payment Date"). Within 30 days following any Change of Control, the Company shall mail a notice, by first-class mail, postage prepaid, to each Holder, describing the transaction or transactions that 47 constitute the Change of Control and stating (1) that the Change of Control Offer is being made pursuant to this Section 5(o) and that all Notes tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed or such later date as is necessary to comply with the requirements under the Exchange Act (the "Change of Control Payment Date"); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing its election to have the Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Agreement relating to such Change of Control Offer, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Agreement by virtue thereof. (ii) By 2:00 p.m. (noon) Eastern Time on the Change of Control Payment Date, the Company shall, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Holders the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder so tendered the Change of Control Payment for such Notes, and the Company shall promptly execute and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. (iii) Notwithstanding anything to the contrary in this Section 5(o), the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 5(o) and Section 4(i) hereof and all other provisions of this Agreement applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. 48 (p) Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries. The Company (i) shall not permit any Restricted Subsidiary to issue any Capital Stock unless after giving effect thereto the Company's percentage interest (direct and indirect) in the Capital Stock of such Restricted Subsidiary is at least equal to its percentage interest prior thereto, and (ii) shall not, and shall not permit any Restricted Subsidiary to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Restricted Subsidiary to any Person (other than the Company or a Wholly Owned Restricted Subsidiary); provided that this covenant will not prohibit (x) the sale or other disposition of all, but not less than all, of the issued and outstanding Capital Stock of a Restricted Subsidiary owned by the Company and its Restricted Subsidiaries in compliance with the other provisions of this Agreement, (y) the sale or other disposition of a portion of the issued and outstanding Capital Stock of a Restricted Subsidiary (other than a Subsidiary Guarantor) whether or not as a result of such sale or disposition such Restricted Subsidiary continues or ceases to be a Restricted Subsidiary if (A) at the time of such sale or disposition, the Company could make an Investment in the remaining Capital Stock held by it or one of its Restricted Subsidiaries in an amount equal to the amount of its remaining Investment in such Person pursuant to Section 5(g) of this Agreement and (B) such sale or disposition is permitted under, and the Company or such Restricted Subsidiary applies the Net Cash Proceeds of any such sale in accordance with, the provisions of Section 5(j) of this Agreement, or (z) the ownership by directors of director's qualifying shares or the ownership by foreign nationals of Capital Stock of any Restricted Subsidiary, to the extent mandated by applicable law. The Company shall not permit any Restricted Subsidiary to issue any Preferred Stock other than to the Company or any Subsidiary Guarantor. (q) Unrestricted Subsidiaries. (i) The Board of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as (1) such Subsidiary has no Indebtedness other than Non-Recourse Indebtedness, (2) no default with respect to any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Indebtedness of the Company or any Restricted Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity, (3) any Investment in such Subsidiary made as a result of designating such Subsidiary an Unrestricted Subsidiary will not violate the provisions of Section 5(g), (4) neither the Company nor any Restricted Subsidiary has a contract, agreement, arrangement, understanding or obligation of any kind, whether written or oral, with such Subsidiary other than those that might be obtained at the time from Persons who are not Affiliates of the Company, (5) neither the Company nor any Restricted Subsidiary has any obligation to subscribe for additional shares of Capital Stock or other equity interests in such Subsidiary, or to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results, and (6) such Unrestricted Subsidiary has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Notwithstanding the foregoing, the Company may not designate any Subsidiary Guarantor (whether or not existing as of the Closing Date) as an Unrestricted Subsidary. (ii) The Board of the Company may designate any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (1) no Default or Event of Default has occurred and is continuing following such designation and (2) the Company could, at the time of making such 49 designation and giving such pro forma effect as if such designation had been made at the beginning of the applicable four quarter period, incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in clause (i) of Section 5(i) (treating any Indebtedness of such Unrestricted Subsidiary as the incurrence of Indebtedness by a Restricted Subsidiary). (r) Payments for Consent. Neither the Company nor any of its Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Agreement or the Notes unless such consideration is offered to be paid or is paid to all Holders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. (s) Limitations on Guarantees of Indebtedness by Restricted Subsidiaries. The Company shall not permit any Restricted Subsidiary that is not a Subsidiary Guarantor, directly or indirectly, to guarantee, assume or in any other manner become liable for the payment of any Indebtedness of the Company or any Indebtedness of any other Restricted Subsidiary, unless (i) such Restricted Subsidiary simultaneously executes and delivers a supplemental agreement providing for a guarantee of payment of the Notes by such Restricted Subsidiary on a senior subordinated basis on the same terms as set forth in this Agreement and (ii) with respect to any guarantee of Subordinated Indebtedness by a Restricted Subsidiary, any such guarantee is subordinated to such Restricted Subsidiary's guarantee with respect to the Notes at least to the same extent as such Subordinated Indebtedness is subordinated to the Notes; provided that the foregoing provision will not be applicable to any guarantee by any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary. Any guarantee by a Restricted Subsidiary of the Notes pursuant to the preceding paragraph may provide by its terms that it will be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer to any Person not an Affiliate of the Company of all of the Company's and the Restricted Subsidiaries' Capital Stock in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by this Agreement) or (ii) the release or discharge of the guarantee that resulted in the creation of such guarantee of the Notes, except a discharge or release by or as a result of payment under such guarantee. (t) Additional Guarantees. The Company shall provide to the Holders, on the date that any Person (other than a Foreign Subsidiary) becomes a Wholly Owned Restricted Subsidiary, a supplement to this Agreement, executed by such new Wholly Owned Restricted Subsidiary, providing for a full and unconditional guarantee on a senior subordinated basis by such new Wholly Owned Restricted Subsidiary of the Company's obligations under the Notes and this Agreement to the same extent as that set forth in this Agreement. (u) Merger, Consolidation or Sale of Assets. (i) Neither the Company nor the Parent shall, in a single transaction or series of related transactions, consolidate or merge with or into (whether or not the Company or the Parent, as the case may be, is the surviving 50 corporation), or directly and/or indirectly through its Subsidiaries, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets (determined on a consolidated basis for the Company or the Parent, as the case may be, and its Subsidiaries taken as a whole) in one or more related transactions to, another corporation, Person or entity unless: (1) either (A) the Company or the Parent, as the case may be, is the surviving corporation or (B) the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (the "Surviving Entity") is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia and assumes all the obligations of the Company or the Parent, as the case may be, under the Notes and this Agreement pursuant to a supplemental agreement in a form reasonably satisfactory to the Holders; (2) immediately after giving effect to such transaction and treating any obligation of the Company in connection with or as a result of such transaction as having been incurred as of the time of such transaction, no Default or Event of Default has occurred and is continuing; (3) if such transaction involves the Company, the Company (or the Surviving Entity if the Company is not the continuing obligor under this Agreement) could, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to clause (i) of Section 5(i); (4) each Guarantor, unless it is the other party to the transaction described above, has by a supplemental agreement confirmed that its Guarantee applies to the Surviving Entity's obligations under this Agreement and the Notes; (5) if any of the property or assets of the Company or any of its Restricted Subsidiaries would thereupon become subject to any Lien, the provisions of Section 5(l) are complied with; and (6) the Company or the Parent, as the case may be, delivers or causes to be delivered, to each Holder, in form and substance reasonably satisfactory to the Holders, an Officers' Certificate and an Opinion of Counsel, each stating that such transaction complies with the requirements of this Agreement. (ii) No Subsidiary Guarantor shall consolidate with or merge with or into any other Person or convey, sell, assign, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any other Person (other than the Company or another Subsidiary Guarantor) unless: (1) subject to the provisions of the following paragraph, the Person formed by or surviving such consolidation or merger (if other than such Subsidiary Guarantor) or to which such properties and assets are transferred 51 assumes all of the obligations of such Subsidiary Guarantor under this Agreement and its Guarantee, pursuant to a supplemental agreement to this Agreement in form and substance satisfactory to the Holders; (2) immediately after giving effect to such transaction, no Default or Event of Default has occurred and is continuing; and (3) the Subsidiary Guarantor delivers, or causes to be delivered, to the each Holder, in form and substance reasonably satisfactory to the Holders, an Officers' Certificate and an Opinion of Counsel, each stating that such transaction complies with the requirements of this Agreement. (iii) For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. Section 6. Use of Proceeds. Acquisition Corp., InSight and each Guarantor further covenants and agrees with the Purchaser that the Company shall apply the net proceeds from the sale of the Securities sold by Acquisition Corp. in the manner described under the caption "Use of Proceeds" in the Draft Offering Memorandum. Section 7. Payment of Expenses. The Company agrees, and the Parent shall cause the Company, to pay, on the Closing Date (or, with respect to any costs, fees and expenses incurred after the Closing Date, upon incurrence thereof) all costs, fees and expenses incurred in connection with the performance of its obligations hereunder and in connection with the transactions contemplated hereby, including without limitation (i) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of (x) the Securities to the Purchaser and (y) upon exchange pursuant to Section 10(a) of this Agreement, the Remarketed Notes to the Purchaser, (ii) all fees and expenses of Acquisition Corp.'s, InSight's and the Guarantors' counsel, independent public or certified public accountants and other advisors, (iii) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of the Draft Offering Memorandum and each Preliminary Offering Memorandum and Offering Memorandum (including financial statements), and all amendments and supplements thereto prepared pursuant to Section 10(e) of this Agreement, (iv) all filing fees, reasonable attorneys' fees and expenses incurred by Acquisition Corp., InSight, the Guarantors, the Purchaser and BAS in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Securities or the Remarketed Notes for offer and sale under the Blue Sky laws and, if requested by BAS in connection with the remarketing of the Remarketed Notes, preparing and printing a "Blue Sky Survey" or memorandum, and any supplements thereto, advising BAS of such qualifications, registrations and exemptions, such fees and expenses under this clause (iv) not to exceed $20,000 in the aggregate, (v) the fees and expenses of the Trustee, including the fees and disbursements of counsel for the Trustee in connection with the Exchange Indenture, the Remarketed Notes and the exchange notes to be exchanged for the Remarketed Notes pursuant to the Remarketed Notes Registration Rights Agreement, (vi) all fees and expenses (including reasonable fees and 52 expenses of counsel) of the Company in connection with approval of the Securities and the Remarketed Notes by the Depositary for "book-entry" transfer, and (vii) the performance by Acquisition Corp. and InSight of their respective other obligations under this Agreement. In addition, the Company shall pay, and the Parent shall cause the Company to pay (x) the reasonable costs and expenses incurred by the Purchaser and BAS in enforcing, defending or declaring or determining whether or how to enforce, defend or declare) any rights or remedies under this Agreement or the Securities or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Securities, or by reason of being a holder of any Securities and (y) the costs and expenses, including reasonable consultants' and advisors' fees, incurred in connection with any insolvency or bankruptcy of the Company or any Subsidiary of the Company or in connection with any work-out or restructuring of the transactions contemplated hereby or by the Securities. Except as provided in this Section 7, Section 9, Section 12 and Section 13 hereof, the Purchaser and BAS shall pay their own expenses, including the fees and disbursements of their counsel, and shall be responsible for all roadshow related costs in respect of the Remarketed Notes. The provisions of this Section 7 shall not supersede or otherwise affect any agreement between Acquisition Corp. and InSight regarding the allocation of such expenses between themselves. Section 8. Conditions of the Obligations of the Purchaser. The obligations of the Purchaser to purchase and pay for the Securities as provided herein on the Closing Date shall be subject to the accuracy of the representations and warranties set forth in Section 2 hereof as of the Closing Date and to the timely performance by each of Acquisition Corp., InSight and the Guarantors of their respective covenants and other obligations hereunder, and to each of the following additional conditions: (a) No Material Adverse Change or Ratings Adverse Change. For the period from and after the date of this Agreement and prior to the Closing Date: (i) in the reasonable judgment of the Purchaser, there shall not have occurred any Material Adverse Change; and (ii) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any securities of Acquisition Corp. or InSight or any of its Subsidiaries by any "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the Securities Act. (b) Opinion of Counsel for the Parent and Acquisition Corp. On the Closing Date, the Purchaser shall have received the opinion of Kaye Scholer LLP, counsel for the Parent and Acquisition Corp., dated as of such Closing Date, the form of which is attached as Exhibit B. (c) Opinion of Counsel for InSight and the Subsidiary Guarantors. On the Closing Date, the Purchaser shall have received the opinion of Hunton & Williams, counsel for the Company, dated as of such Closing Date, the form of which is attached as Exhibit C. 53 (d) Opinion of General Counsel for InSight. On the Closing Date, the Purchaser shall have received the opinion of Marilyn U. MacNiven-Young, General Counsel for InSight, dated as of such Closing Date, the form of which is attached as Exhibit D[-1]. (e) [Intentionally Omitted.] (f) Opinion of Counsel for the Purchaser. On the Closing Date, the Purchaser shall have received the favorable opinion of Shearman & Sterling, counsel for the Purchaser, dated as of such Closing Date, with respect to such matters as may be reasonably requested by the Purchaser. (g) Officers' Certificate. On the Closing Date, the Purchaser shall have received written certificates from the Parent, Acquisition Corp. and InSight, executed by the Chief Executive Officer, President, Executive Vice President or Senior Vice President of each of the Parent, Acquisition Corp. and InSight, as the case may be, and the Chief Financial Officer or Chief Accounting Officer of each of the Parent, Acquisition Corp. and InSight, as the case may be, dated as of the Closing Date, to the effect set forth in subsection (a)(ii) of this Section 8, and each further to the effect that: (i) the representations and warranties of InSight, Acquisition Corp. and the Guarantors set forth in Section 2 of this Agreement are true and correct in all material respects (except that any representation or warranty qualified as to "materiality" or "Material Adverse Change" shall be true and correct in all respects); (ii) for the period from and after June 30, 2001 and prior to the Closing Date, to their knowledge, after due inquiry, there has not occurred any Material Adverse Change; and (iii) Acquisition Corp., InSight and the Guarantors have complied in all material respects with all the agreements and covenants and satisfied all the conditions on their part to be performed or satisfied at or prior to the Closing Date. (h) Equity Contribution; Option Rollover. Contemporaneously with the closing of the transaction contemplated by this Agreement, the Equity Sponsors or the Related Parties shall have made the Equity Contribution, and the Option Rollover shall have been completed. (i) Consummation of Merger. Contemporaneously with the closing of the transaction contemplated by this Agreement, the Merger shall have been consummated and Merger Consideration paid, in each case in accordance with the terms of the Merger Agreement. (j) Consummation of Refinancing Transactions. Contemporaneously with the closing of the transaction contemplated by this Agreement, the Tender Offer and Consent Solicitation shall have been consummated, the supplemental indenture contemplated by the Consent Solicitation shall have been entered into and become operative and the Company shall have completed the other refinancing transactions, each on terms substantially as contemplated in the Draft Offering Memorandum. 54 (k) Borrowing under the Credit Facilities. Contemporaneously with the closing of the transaction contemplated by this Agreement the Company shall have completed the borrowings under the Credit Agreement as contemplated in the Draft Offering Memorandum. (l) Chief Financial Officer's Certificate. On the Closing Date, the Purchaser shall have received a written certification from the Chief Financial Officer of each of Acquisition Corp. and InSight that (1) the ratio of debt to four consecutive quarters EBITDA of InSight and its subsidiaries (determined on a pro forma basis in accordance with Regulation S-X after giving effect to the Transaction and with further adjustments to arrive at adjusted EBITDA aggregating $970,000 (consisting of $700,000 for eliminating public company expenses and $270,000 of expense savings resulting from the divestiture of the operations of Diagnostic Solutions Corp.), and determined with outstanding indebtedness calculated net of cash on hand in excess of $10,000,000) (the "Leverage Ratio") was not more than 4.45:1.0 for the twelve month period ended on June 30, 2001 and the twelve month period ending on the Closing Date (calculated using indebtedness outstanding as of the Closing Date and EBITDA for the twelve month period ended on the most recent month end which is at least fifteen days prior to the Closing Date), (2) to the best knowledge of such Chief Financial Officers, the Leverage Ratio for the twelve month period ending on the Closing Date was not more than 4.45:1.0, (3) the Equity Contribution accounts for no less than 22.0% of the total capitalization of InSight and (4) the pro forma financial statements previously delivered to the Purchaser and included in the Draft Offering Memorandum were prepared in good faith on the basis of the assumptions stated therein, which assumptions are fair in light of then existing conditions. (m) Liquidity; Funded Debt. The Purchaser shall have received satisfactory evidence that, after giving effect to the Transaction, (i) the amount of cash on hand (excluding any amounts available under the Revolving Credit Facility) as of the Closing Date shall be sufficient to meet the ongoing financial needs of InSight and its Subsidiaries and (ii) the aggregate amount of outstanding principal amount of funded debt and capital lease obligations of InSight and its Subsidiaries owed to third parties (other than under the Credit Facilities and the Notes) does not exceed $12,000,000. (n) Solvency Certificate. On the Closing Date, the Purchaser shall have received certification as to the financial condition and solvency of (i) the Parent, (ii) Acquisition Corp. and (iii) InSight and the Subsidiary Guarantors, taken as a whole, after giving effect to the Transaction and the incurrence of indebtedness related thereto, from the chief financial officer of each such entity. (o) Availability under Revolving Credit Facility; Other Debt. There shall be no less than $25,000,000 of availability under the Revolving Credit Facility as of the Closing Date, after giving effect to the Transaction and all borrowings under the Revolving Credit Facility on such date. The Purchaser shall be satisfied (i) that the amount, terms, conditions and holders of all intercompany indebtedness and all indebtedness and other material liabilities of the Company owing to third parties which existed as of June 30, 2001 and which will remain outstanding on and after the Closing Date have not been altered or amended in any material respect and (ii) with the amounts, terms, conditions and holders of all intercompany indebtedness and all indebtedness and other material liabilities of any of the Parent, Acquisition Corp. and 55 InSight owing to third parties which are or were incurred subsequent to June 30, 2001 and which will remain outstanding on and after the Closing Date. (p) Receipts of Approvals, Consents, etc. All material governmental, shareholder and third-party consents (including Hart-Scott-Rodino clearance) and approvals necessary in connection with the Transaction shall have been received; all such consents and approvals shall be in full force and effect; and all applicable waiting periods shall have expired, including without limitation the expiration or termination of the requisite waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, without any action being taken by any authority that could restrain, prevent or impose any material adverse conditions on the Transaction or that could seek or threaten any of the foregoing. (q) Additional Documents. On or before the Closing Date, the Purchaser and counsel for the Purchaser shall have received such information, documents and opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Securities as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained. If any condition specified in this Section 8 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Purchaser by notice to the Parent, Acquisition Corp. and InSight at any time on the Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 7, Section 9, Section 12 and Section 13 shall at all times be effective and shall survive such termination. Section 9. Reimbursement of Purchaser's Expenses. If this Agreement is terminated by the Purchaser pursuant to Section 8, or if the sale to the Purchaser of the Securities on the Closing Date is not consummated because of any refusal, inability or failure on the part of Acquisition Corp. or InSight to perform any agreement herein or to comply with any provision hereof, Acquisition Corp. agrees to, and the Parent agrees to cause Acquisition Corp. to, reimburse the Purchaser upon demand for all out-of-pocket expenses that shall have been reasonably incurred by the Purchaser in connection with the proposed purchase of the Securities. Section 10. Remarketing Procedures; Restricted Securities Legends; Clear Market. Each of BAS and the Purchaser, on the one hand, and the Company and each of the Guarantors, on the other hand, hereby establish and agree to observe the following procedures in connection with the offer and sale of the Remarketed Notes (as defined below): (a) Exchange. (i) Requirements. If the Company receives, on or prior to the Final Remarketing Date, a written request from BAS or the Purchaser for the exchange of the Notes for Remarketed Notes pursuant to this Section, the Company shall exchange all (but not less than all) of the outstanding Notes (including any Notes to be retained by the Purchaser, BAS or any of their Rule 501(b) Affiliates) for new notes having identical terms (except as provided in the Pricing Notice and clause (ii) below) in an equal aggregate principal amount (the "Remarketed Notes"). Such written request (the "Exchange Notice") shall state the date on which the 56 Remarketed Notes are requested to be issued (the "Exchange Date"), which date shall not be less than three Business Days following the date on which the Exchange Notice is delivered. On the second Business Day following the date on which the Exchange Notice is given (the "Pricing Date"), the Company shall deliver to the Purchaser a Purchase Agreement in substantially the form of Exhibit H hereto (the "Purchase Agreement"), executed by the Company and each Guarantor in respect of the purchase by the Purchaser of Remarketed Notes in consideration of the exchange of the Notes. On the Pricing Date, BAS shall deliver to the Company a written notice (the "Pricing Notice") which shall state: (x) the interest rate, maturity, no-call period, redemption premium and payment dates of the Remarketed Notes (in each case determined in accordance with the provisions of clause (ii) below) and (y) the principal amount of any Additional Remarketed Notes to be issued pursuant to clause (iv) below. On the Exchange Date the Company shall: (I) enter into an indenture (in substantially the form attached hereto as Exhibit A, with such changes as may be necessary to provide for the terms of the Remarketed Notes determined pursuant to clause (ii) below)) pursuant to which the Remarketed Notes will be issued and authenticated (the "Exchange Indenture"), which shall have been duly executed by the trustee thereunder (the "Trustee") and to whom irrevocable instructions shall have been given to authenticate the Remarketed Notes necessary for such exchange; (II) execute and deliver to the Holders, and cause the Trustee to authenticate, the Remarketed Notes in an amount equal to (x) the aggregate principal amount of Notes then outstanding, plus (y) the principal amount, if any, of Additional Remarketed Notes specified in the notice referred to above; (III) execute and deliver to BAS a Remarketed Notes Registration Rights Agreement among BAS, the Company and the Guarantors in substantially the form of Exhibit E attached hereto; (IV) pay in cash any or all accrued and unpaid interest on the Notes; and (V) pay to BAS in immediately available funds (or by such other means as provided in the Fee Letter) the placement fees provided under the second or third paragraph, as the case may be, of Section 2 of the Fee Letter, in the amount calculated by BAS as provided in the Fee Letter and notified to the Company. (ii) Terms of Remarketed Notes. The interest rate, maturity, no-call period, redemption premium and payment dates of the Remarketed Notes shall be determined as follows: (1) the interest rate of the Remarketed Notes shall be determined by BAS in its sole discretion; provided that such interest rate shall not be greater than 12-1/8% per annum; (2) the maturity of the Remarketed Notes shall be determined by BAS after consultation with the Sponsor Parties based on market conditions existing at the time of the issuance of the Remarketed Notes; provided that in no event shall the maturity of the Remarketed Notes be extended by more than six months beyond the term of the Notes remaining at the time of the exchange of the Notes for Remarketed Notes, and in no event shall the maturity of the Remarketed Notes be more than ten years from the date of their issuance; provided further that BAS will use its commercially reasonable efforts to market and sell Remarketed Notes having a maturity as near as equal to the then remaining term of the Notes as practicable; 57 (3) the no-call period and the date (the "Redemption Premium Expiration Date") on which a redemption premium is no longer payable by the Company upon redemption of the Remarketed Notes shall be determined by BAS after consultation with the Sponsor Parties, based on customary market standards existing at the time of the marketing of the Remarketed Notes; (4) the initial redemption premium with respect to any Remarketed Notes to be redeemed shall be equal to one-half of the interest rate on the Remarketed Notes, which redemption premium shall decline ratably, on each anniversary of the last day of the no-call period, to zero on the Redemption Premium Expiration Date; and (5) the payment dates shall be determined by BAS after consultation with the Sponsor Parties. (6) In addition to the foregoing, Sections 4.07 to 4.20 and Section 5.01 of the Exchange Indenture, and the defined terms used in such Sections, may be changed at the request of BAS with the consent of the Company, which consent shall not be unreasonably withheld or delayed. (iii) Procedure for Exchange. (1) On or before the Exchange Date, each Holder shall surrender the certificate or certificates representing Notes held by such Holder, in the manner and at the place designated in the Exchange Notice. The Company shall cause the Remarketed Notes to be executed and authenticated by the Trustee on the Exchange Date and, upon surrender in accordance with the Exchange Notice of the certificates for any Notes so exchanged (properly endorsed or assigned for transfer, if the notice shall so state), such shares shall be exchanged by the Company into Remarketed Notes. The Company shall pay interest on the Remarketed Notes at the rate and on the dates described in the Exchange Indenture. (2) If the Exchange Notice has been mailed as aforesaid, and if on or before the Exchange Date (A) the Exchange Indenture shall have been duly executed and delivered by the Company and the Trustee and (B) all Remarketed Notes necessary for such exchange shall have been duly executed by the Company and delivered to the Trustee with irrevocable instructions to authenticate the Remarketed Notes necessary for such exchange, then interest will cease to accrue on the Notes on and after the Exchange Date and the rights of the Holders of Notes as to those Notes shall cease on and after the Exchange Date (except the right to receive Remarketed Notes and an amount in cash, to the extent applicable, equal to the accrued and unpaid interest on the Notes to the Exchange Date); and the Person or Persons entitled to receive the Remarketed Notes issuable upon exchange shall be treated for all purposes as the registered Holder or Holders of such Remarketed Notes as of the Exchange Date. (iv) Additional Remarketed Notes. In the event that, prior to the Exchange Date, the Company has redeemed more than $50,000,000 aggregate principal amount of Notes, but less than all of the Notes, pursuant to Section 4(g)(ii) of this Agreement, BAS shall have the option to purchase from the Company, on the Exchange Date, additional Remarketed Notes (the "Additional Remarketed Notes") in a maximum principal amount equal to the Option Amount, at 58 a purchase price equal to 100% of the principal amount of such Additional Remarketed Notes, payable in immediately available funds on the Exchange Date. (b) Offers and Sales Only to Qualified Institutional Buyers and Non-U.S. Persons. Offers and sales of the Notes or Remarketed Notes will be made only by the Purchaser, BAS or Affiliates thereof qualified to do so in the jurisdictions in which such offers or sales are made. Each such offer or sale shall only be made to persons whom the offeror or seller reasonably believes to be QIBs or non-U.S. persons outside the United States to whom the offeror or seller reasonably believes offers and sales of the Remarketed Notes may be made in reliance upon Regulation S under the Securities Act, upon the terms and conditions set forth in Annex I hereto, which Annex I is hereby expressly made a part hereof. The Remarketed Notes shall be sold at par; provided that, with the consent of the Sponsor Parties, BAS may sell the Remarketed Notes at a price below par. (c) No General Solicitation. The Notes and Remarketed Notes will be offered by approaching prospective subsequent purchasers on an individual basis. No general solicitation or general advertising (within the meaning of Rule 502 under the Securities Act) will be used in the United States in connection with the offering of Notes or the Remarketed Notes. (d) Restrictions on Transfer. Upon original issuance by the Company, and until such time as the same is no longer required under the applicable requirements of the Securities Act, the Securities and the Remarketed Notes (and all securities issued in exchange therefor or in substitution thereof) shall bear the following legend: THIS NOTE AND THE GUARANTEES ENDORSED HEREON HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR THE GUARANTEES ENDORSED HEREON NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON (OR ANY PREDECESSOR OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, THE PARENT OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE 59 ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE (E) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. Following the sale of Remarketed Notes by BAS or the Purchaser to subsequent purchasers pursuant to the terms hereof, BAS and the Purchaser shall not be liable or responsible to the Parent or the Company for any losses, damages or liabilities suffered or incurred by the Parent or the Company, including any losses, damages or liabilities under the Securities Act, arising from or relating to any resale or transfer of any Remarketed Note. (e) Remarketing Assistance. (i) At any time until the Final Remarketing Date (the "Assistance Period"), the Company will, if reasonably requested by BAS, assist BAS in completing any Private Offering of the Remarketed Notes. Such assistance may, in each case, include the following: (A) direct contact between the Company's and its Subsidiaries' officers and directors selected by BAS (in consultation with the Sponsor Parties) and prospective purchasers in "one-on-one meetings" and participating in meetings with rating agencies and one or more roadshow presentations to prospective purchasers; (B) responding to reasonable inquiries of, and providing answers to, each prospective purchaser who so requests concerning the Company and its Subsidiaries (to the extent such information is available or can be acquired and made available to prospective purchasers without unreasonable effort or expense and to the extent the provision thereof is not prohibited by applicable law or applicable confidentiality restrictions) and the terms and conditions of the applicable distribution; (C) if requested by BAS, making available to BAS information and materials to be used in connection with the distribution (including assistance in completion of any sales or placement agent's or co-manager's, if any, reasonable due diligence review of the Company and its Subsidiaries); and 60 (D) promptly preparing and providing to BAS all information with respect to the Company and its Subsidiaries, including projections, as BAS may reasonably request to successfully market and sell the Remarketed Notes. Any such projections that will so be made available to BAS by the Company or any of its representatives will be prepared in good faith based upon reasonable assumptions. (ii) During the Assistance Period, the Company will allow BAS, in consultation with the Company, to manage all aspects of the distribution, including decisions as to the selection of institutions to be approached and when and how they will be approached. (iii) During the Assistance Period, the Company will prepare and print, at its own expense, preliminary offering memoranda with respect to the Remarketed Notes (each, a "Preliminary Offering Memorandum") for distribution no later than three Business Days after a request therefor by BAS. (iv) During the Assistance Period, the Company will, in connection with the marketing and sale of the Remarketed Notes, promptly prepare and print, at its own expense, offering memoranda with respect to the Remarketed Notes (each, an "Offering Memorandum"). (v) During the Assistance Period, if in the opinion of BAS or counsel for BAS (x) it is necessary to amend or supplement the Offering Memorandum in order either to effect the completion of the placement of the Remarketed Notes by BAS or to comply with law or (y) any event has occurred or condition exists as a result of which it is necessary to amend or supplement the Offering Memorandum in order to make the statements therein, in the light of the circumstances when the Offering Memorandum will be delivered to a purchaser of Remarketed Notes, not misleading, the Company agrees promptly to prepare and furnish at its own expense to BAS, amendments or supplements to the Offering Memorandum (including the financial statements and schedules attached thereto and any financial or statistical data contained therein) requested by BAS. (vi) During the Assistance Period, the Company shall update the financial information contained in or attached to the Preliminary Offering Memorandum and the Offering Memorandum as necessary for such financial data to comply with Regulation S-X under the Securities Act. (vii) During the Assistance Period, all materials supplied or available under this Section 10 (including any materials referred to or incorporated by reference therein, "Resale Materials") will not, as of their date and as of the closing of any Private Offering of Securities or Remarketed Notes or any resale of Registered Notes, when taken as a whole, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (viii) If, during the Assistance Period, any event shall occur or condition exist as a result of which the Resale Materials would contain a misstatement of a material fact or an omission of a material fact required to make the statements therein, in the light of the 61 circumstances, not misleading, then the Company agrees to promptly prepare and furnish at its own expense to the selling holders, further information so that the statements in the Resale Materials, taken as a whole, will not contain a misstatement of a material fact or an omission of a material fact required to make the statements therein, in the light of the circumstances, not misleading. The Company and the Guarantors hereby expressly acknowledge the indemnification and contribution provisions of Sections 12 and 13 hereof are specifically applicable and relate to Resale Materials. (ix) In addition (and not in limitation of the foregoing), for the benefit of holders and beneficial owners from time to time of Securities and Remarketed Notes, the Parent and the Company shall, upon the request of any such holder, furnish, at its expense, to Holders and beneficial owners of Securities and Remarketed Notes and prospective purchasers thereof information ("Additional Company Information") satisfying the requirements of subsection (d)(4) of Rule 144A. (f) Blue Sky Compliance. In connection with any Private Offering of the Securities or Remarketed Notes, the Company and the Guarantors shall cooperate with the Purchaser, BAS and counsel for the Purchaser and BAS to qualify or register the Securities or Remarketed Notes, as applicable, for sale under (or to obtain exemptions from the application of) the Blue Sky or state securities laws of those jurisdictions designated by the Purchaser or BAS, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Securities or Remarketed Notes, as applicable. None of the Company or the Guarantors shall be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where they are not then qualified or to taxation as a foreign corporation. The Company will advise the Purchaser and BAS promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Securities or Remarketed Notes, as applicable, for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall, with the cooperation of the Purchaser and BAS, use its best efforts to obtain the withdrawal thereof at the earliest possible moment. (g) Ratings. In connection with any Private Offering of Remarketed Notes, the Company shall, at its expense, if so requested by BAS, use its reasonable best efforts to enable S&P and Moody's to provide their respective credit ratings of the Remarketed Notes. (h) [Intentionally Omitted.] (i) DTC Agreement. The Company will, to the extent required under the Remarketed Notes Registration Rights Agreement, use its best efforts to cause the Remarketed Notes to be registered in book-entry form in the name of Cede & Co., as nominee of The Depository Trust Company (the "Depositary"), pursuant to an agreement among the Company and the Depositary in the form then required by the Depositary. The Company will cooperate with the Holders and use its best efforts to permit the Remarketed Notes to be eligible for clearance and settlement through the facilities of the Depositary. In connection therewith, the Company shall obtain a CUSIP number for the Remarketed Notes. 62 (j) Clear Market. Until the date (the "Clear Market Termination Date") which is the earlier of (i) the Final Remarketing Date and (ii) the date which is 270 days after the day on which the Purchaser, BAS or any of their Rule 501(b) Affiliates first sells any Notes (other than to the Purchaser, BAS or their respective Rule 501(b) Affiliates), the Parent, its Subsidiaries and InSight and its Subsidiaries shall not, without the prior written consent of BAS (which consent may be withheld by BAS in its sole discretion), directly or indirectly sell, or offer any debt securities, other than Permitted Debt Obligations, of the Parent, any of its Subsidiaries or InSight or any of its Subsidiaries for sale to, solicit any offer to purchase any of the same from, or otherwise contact, approach or negotiate with respect thereto with, any person or persons. In addition, until the first anniversary of the date of the Commitment Letter (whether or not the Clear Market Termination Date occurs earlier), the Parent, its Subsidiaries and InSight and its Subsidiaries shall not, directly or indirectly, offer any debt securities covered by clause (ii) of the first sentence of Section 1(c) of the Commitment Letter (other than the Remarketed Notes) for sale to, or solicit any offer to purchase any of the same from, or otherwise contact, approach or negotiate with respect thereto with, any person or persons other than through BAS (or through its Affiliates). Section 11. Events of Default. (a) Definition of Event of Default. Each of the following is an Event of Default: (i) default for 30 days in the payment when due of interest on the Notes whether or not prohibited by the subordination provisions of this Agreement; (ii) default in payment when due of the principal of, or premium, if any, on the Notes, whether or not prohibited by Section 15 hereof; (iii) failure by the Parent or the Company, as applicable, or any of their Restricted Subsidiaries, to comply with the provisions described in Sections 5(g), 5(i), 5(j), 5(o), 5(u) or 10(a) hereof or with the provisions of the Purchase Agreement; (iv) default in the performance, or breach, of any covenant or agreement of the Company or any Guarantor contained in this Agreement or in any Guarantee (other than a default in the performance, or breach, of a covenant or agreement that is specifically dealt with elsewhere herein), and continuance of such default or breach for a period of 60 days after written notice from Holders of at least 25% in aggregate principal amount of the Notes then outstanding; (v) (x) an event of default has occurred under any mortgage, bond, indenture, loan agreement or other document evidencing an issue of Indebtedness of the Company, the Parent or any Restricted Subsidiary, which issue individually or in the aggregate has an aggregate outstanding principal amount of not less than $10,000,000, and such default has resulted in such Indebtedness becoming, whether by declaration or otherwise, due and payable prior to the date on which it would otherwise become due and payable or (y) a default (a "Payment Default") in any payment when due at final maturity of any such Indebtedness; (vi) failure by the Company, the Parent or any of its Restricted Subsidiaries to pay one or more final judgments the uninsured portion of which exceeds in the aggregate 63 $10,000,000, which judgment or judgments are not paid, discharged or stayed for a period of 60 days; (vii) any Guarantee ceases to be in full force and effect or is declared null and void or any such Guarantor denies that it has any further liability under any Guarantee, or gives notice to such effect (other than by reason of the termination of this Agreement or the release of any such Guarantee in accordance with this Agreement); (viii) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Company, the Parent or any Significant Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustments or composition of or in respect of the Company, the Parent or any Significant Subsidiary under any Bankruptcy Law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company, the Parent or any Significant Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or (ix) the institution by the Company, the Parent or any Significant Subsidiary of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any Bankruptcy Law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company, the Parent or any Significant Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due. (b) Acceleration. In the case of an Event of Default specified in clause (viii) and (ix) of Section 11(a), all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Holders of at least 25% in principal amount of the then outstanding Notes ("Accelerating Holders") may declare all the Notes to be due and payable immediately by notice in writing to the Company specifying the respective Event of Default. At any time after a declaration of acceleration under this Agreement, but before a judgment or decree for payment of the money due has been obtained by the Holders, the Holders of a majority in aggregate principal amount of the outstanding Notes, by written notice to the Company, may rescind such declaration and its consequences if: (i) the Company has paid to the Holders (1) all overdue interest on all Notes, (2) all unpaid principal of (and premium, if any, on) any outstanding Notes that has become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Notes, and (3) to the extent that payment of such interest is lawful, interest upon overdue interest and overdue principal at the rate borne by the Notes; and (ii) all Events of Default, other than the non-payment of amounts of principal of (or premium, if any, on) or interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived. No such rescission will affect any subsequent default or impair any right consequent thereon. 64 Notwithstanding the preceding paragraph, in the event of a declaration of acceleration in respect of the Notes because an Event of Default specified in Section 11(a)(v) shall have occurred and be continuing and provided no judgment or decree for payment of the money due has been obtained by the Holders, such declaration of acceleration shall be automatically annulled if the Indebtedness that is the subject of such Event of Default has been discharged or the holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness, and written notice of such discharge or rescission, as the case may be, shall have been given to the Holders by the Company and countersigned by the holders of such Indebtedness or a trustee, fiduciary or agent for such holders, within 30 days after such declaration of acceleration in respect of the Notes, and no other Event of Default has occurred during such 30-day period which has not been cured or waived during such period. (c) Other Remedies. If an Event of Default occurs and is continuing, the Accelerating Holders may pursue any available remedy to collect the payment of principal, premium, if any, and interest with respect to the Securities or to enforce the performance of any provision of the Notes or this Agreement. The Accelerating Holders may maintain a proceeding even if they do not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by any Holder of a Note in exercising any right or remedy accruing upon and during the continuance of an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 12. Indemnification. (a) Indemnification of the Purchaser and BAS. The Company and the Guarantors jointly and severally agree to indemnify and hold harmless the Purchaser, BAS, their directors, officers and employees, and each person, if any, who controls the Purchaser or BAS within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which the Purchaser or BAS or such controlling person may become subject, under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Parent or the Company), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based (i) in whole or in part upon any inaccuracy in the representations and warranties of Acquisition Corp., InSight or the Guarantors contained herein; or (ii) in whole or in part upon any failure of Acquisition Corp., InSight or the Guarantors to perform its obligations hereunder or under law; or (iii) any act or failure to act or any alleged act or failure to act by the Purchaser or BAS in connection with, or relating in any manner to, the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon any matter covered by clause (i) above; provided that the Company and the Guarantors shall not be liable under this clause (iii) to the extent that a court of competent jurisdiction shall have determined by a final judgment that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by the Purchaser or BAS through its gross negligence or willful misconduct; and to reimburse the Purchaser, BAS and each such 65 controlling person for any and all expenses (including the fees and disbursements of counsel chosen by the Purchaser) as such expenses are reasonably incurred by the Purchaser, BAS or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. The indemnity agreement set forth in this Section 12 shall be in addition to any liabilities that the Company or the Guarantors may otherwise have. (b) [Intentionally Omitted]. (c) Notifications and Other Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 12 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 12, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise than under the indemnity agreement contained in this Section 12 or to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party's election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 12 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (together with local counsel), approved by the Purchaser, representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party. (d) Settlements. The indemnifying party under this Section 12 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final non-appealable judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, 66 liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 12(c) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the final terms of such proposed settlement as soon as practicable prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. Section 13. Contribution. If the indemnification provided for in Section 12 is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 12, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 12 with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 13; provided that no additional notice shall be required with respect to any action for which notice has been given under Section 12 for purposes of indemnification. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 13, each director, officer and employee of the Purchaser and BAS and each person, if any, who controls the Purchaser or BAS within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Purchaser and BAS. Section 14. The Notes. 67 (a) Form and Execution. (i) The Notes shall be in the form of Exhibit F hereto. The Notes shall be executed on behalf of Acquisition Corp. by its President or any of its Vice Presidents under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Notes may be manual or facsimile. (ii) Notes bearing the manual or facsimile signatures of individuals who were at any time the proper officers of Acquisition Corp. shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the delivery of such Notes or did not hold such offices at the date of such Notes. (b) Terms of the Notes. The terms of the Notes shall be as set forth in Exhibit F. Without limiting the foregoing: (i) Stated Maturity. The Stated Maturity of the principal of Notes shall be as provided in Exhibit F. (ii) Interest. The Notes will bear interest as provided in Exhibit F. Interest will be computed on the basis of a 360-day year of twelve 30-day months. (c) Denominations. The Notes shall be issuable only in registered form without coupons and only in denominations of U.S. $1,000 and any integral multiple thereof. (d) Registration; Registration of Transfer and Exchange, Security Register. The Company shall maintain a register (the "Security Register") for the registration or transfer of the Securities. The name and address of the Holder of each Note, records of any transfers of the Securities and the name and address of any transferee of a Note shall be entered in the Security Register and the Company shall, promptly upon receipt thereof, update the Security Register to reflect all information received from a Holder. There shall be no more than one Holder for each Note, including all beneficial interests therein. (e) Registration of Transfer. Upon surrender for registration of transfer of any Security at the office or agency of the Company, the Company shall execute and deliver, in the name of the designated transferee or transferees, one or more new Securities, of any authorized denominations and like aggregate principal amount. (f) Exchange. At the option of the Holder, Notes may be exchanged for other Notes, of any authorized denominations and of like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Company shall execute and deliver the Notes which the Holder making the exchange is entitled to receive. (g) Effect of Registration of Transfer or Exchange. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Agreement, as the Notes surrendered upon such registration of transfer or exchange. 68 (h) Requirements; Charges. Every Note presented or surrendered for registration of transfer or for exchange shall (if so required by the Company) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company duly executed, by the Holder thereof or its attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges not involving any transfer. (i) Certain Limitations. If the Notes are to be redeemed in part, the Company shall not be required (i) to issue, register the transfer of or exchange any Note during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of any such Notes selected for redemption under Section 4(b) and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (j) Mutilated, Destroyed, Lost and Stolen Notes. If any mutilated Note is surrendered to the Company, the Company shall execute and deliver in exchange therefor a new Note of the same principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company (a) evidence to its satisfaction of the destruction, loss or theft of any Note and (b) such security or indemnity as may be required by it to save each of it and any agent harmless, then, in the absence of notice that such Note has been acquired by a bona fide purchaser, the Company shall execute and deliver, in replacement of any such destroyed, lost or stolen Note, a new Note of a like principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company in their discretion may, instead of issuing a new Note, pay such Note. Upon the issuance of any new Note pursuant to this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. Every new Note issued pursuant to this Section in replacement of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. (k) Persons Deemed Owners. Prior to due presentment of a Note for registration of transfer, the Company and any agent of the Company may treat the Person in 69 whose name such Note is registered as the owner of such Note for the purpose of receiving payment of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue and neither the Company nor any agent of the Company shall be affected by notice to the contrary. (l) Cancellation. All Notes surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Company, be delivered to the Company and shall be promptly canceled by it. The Company shall cancel any Notes previously issued and delivered hereunder which the Company may have reacquired. (m) Home Office Payment. So long as any Purchaser or its nominee shall be the holder of any Note, and notwithstanding anything contained in this Agreement or such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, premium, if any, and interest by such method and at such address as such Purchaser shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, such Purchaser shall surrender such Note for cancellation reasonably promptly after any such request, to the Company at its principal executive office. Prior to any sale or other disposition of any Note held by such Purchaser or its nominee such Purchaser will, at its election, either endorse thereon the amount of principal paid thereon and the last date to which original issue discount has accreted or interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 14(d). The Company will afford the benefits of this Section 14(m) to any direct or indirect transferee of any Note purchased by such Purchaser under this Agreement and that has made the same agreement relating to such Note as such Purchaser made in this Section 14(m). Section 15. Subordination. (a) Agreement to Subordinate. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes is subordinated in right of payment, to the extent and in the manner provided in this Section 15, to the prior payment in full of all Senior Indebtedness (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Indebtedness. (b) Liquidation; Dissolution; Bankruptcy. The holders of Senior Indebtedness of the Company will be entitled to receive payment in full of all Obligations due in respect of Senior Indebtedness of the Company (including interest after the commencement of any bankruptcy proceeding at the rate specified in the applicable Senior Indebtedness of the Company) before the Holders will be entitled to receive any payment with respect to the Notes (except that Holders may receive and retain securities that are subordinated at least to the same extent as the Notes to the Senior Indebtedness and securities issued in exchange for Senior Indebtedness ("Permitted Junior Securities"), in the event of any distribution to creditors of the Company: (i) in a liquidation or dissolution of the Company; (ii) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property; (iii) 70 in an assignment for the benefit of creditors; or (iv) in any marshaling of the Company's assets and liabilities. (c) Default on Designated Senior Indebtedness. (i) The Company may not make any payment in respect of the Notes (except in Permitted Junior Securities): (1) In the event any default in the payment of principal of, interest or premium, if any, on any Designated Senior Indebtedness shall have occurred and be continuing beyond any applicable period of grace (a "Payment Event of Default"); or (2) If any event of default other than as described in clause (1) above with respect to any Designated Senior Indebtedness (a "Non-payment Event of Default") shall have occurred and be continuing permitting the holders of such Designated Senior Indebtedness to declare such Designated Senior Debt due and payable prior to the date on which it would otherwise have become due and payable and the Holders receive a notice of such default (a "Payment Blockage Notice") from (A) with respect to the Designated Senior Indebtedness arising under the Credit Agreement, the Agent Bank or (B) with respect to any other Designated Senior Indebtedness, the holders or Representatives of any such Designated Senior Indebtedness; (ii) Payments on the Notes may and shall be resumed (1) in the case of a Payment Event of Default, upon the date on which such default is cured or waived and (2) in case of a Non-payment Event of Default, the earlier of the date on which such Non-payment Event of Default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received unless the maturity of any Designated Senior Indebtedness has been accelerated. (iii) No new period of payment blockage may be commenced by a Payment Blockage Notice unless and until (i) 360 days have elapsed since the first day of the effectiveness of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal, premium, if any, and interest on the Notes that have come due have been paid in full in cash. No Non-payment Event of Default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice, unless such default has been cured or waived for a period of not less than 90 days. (d) Acceleration of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of the acceleration. (e) When Distribution Must Be Paid Over. In the event that any Holder receives any payment of any Obligations with respect to the Notes (except in Permitted Junior Securities) at a time when such payment is prohibited by Section 15 hereof and such Holder has actual knowledge that such payment is prohibited by Section 15 hereof, such payment shall be held by such Holder in trust for the benefit of the holders of Senior Indebtedness of the 71 Company. Upon proper written request of the holder of Senior Indebtedness of the Company, such Holder shall deliver the amounts in trust to the holders of Senior Indebtedness or their proper Representative. (f) Notice by the Company. The Company shall promptly notify the Paying Agent and the Holders in writing of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Section 15, but failure to give such notice shall not affect the subordination of the Notes to the Senior Indebtedness as provided in this Section 15. (g) Subrogation. After all Senior Indebtedness is paid in full and until the Notes are paid in full, Holders shall be subrogated (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to Senior Indebtedness of the Company to the same extent as the Notes are subordinated and which is entitled to like rights of subrogation) to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Indebtedness. A distribution made under this Section 15 to holders of Senior Indebtedness that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on the Notes. (h) Relative Rights. This Section 15 defines the relative rights of Holders and holders of Senior Indebtedness. Nothing in this Agreement shall: (a) impair, as between the Company and Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (b) affect the relative rights of Holders and creditors of the Company other than their rights in relation to holders of Senior Indebtedness; or (c) prevent any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Indebtedness to receive distributions and payments otherwise payable to Holders. If the Company fails because of this Section 15 to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. (i) Subordination May Not Be Impaired by the Company. No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Agreement. (j) Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Section 15, the Holders shall be entitled to rely upon any order or decree made by any court of 72 competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Holders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 15. (k) Authorization to Effect Subordination. Each Holder of Notes, by the Holder's acceptance thereof, agrees to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Section 15. If the Holders do not file a proper proof of claim or proof of debt in order to have these claims allowed in any judicial proceedings relative to the Company or any Guarantor (or any other obligor upon the Securities), their creditors and their property at least 30 days before the expiration of the time to file such claim, the lenders under the Credit Agreement are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. Section 16. Guarantees. (a) Guarantee. Subject to this Section 16 each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note and its successors and assigns, irrespective of the validity and enforceability of this Agreement, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful (subject in all cases to any applicable grace period provided herein), and all other obligations of the Company to the Holders hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Agreement, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Agreement. If any Holder is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either 73 the Company or the Guarantors, any amount paid by either of the above to such Holder, the Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 11 hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Section 11 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. (b) Subordination of Guarantee. The Obligations of each Guarantor under its Guarantee pursuant to this Section 16 shall be junior and subordinated to the prior payment in full of all Senior Indebtedness of such Guarantor (including Senior Indebtedness of the Guarantor incurred after the date hereof) on the same basis as the Notes are junior and subordinated to the prior payment in full all Senior Indebtedness of the Company, as described in Section 15 hereof. For the purposes of the foregoing sentence, the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Agreement, including Section 15 hereof. (c) Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Securities, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Guarantee. To effectuate the foregoing intention, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Section 16, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent transfer or conveyance. (d) Execution and Delivery of Guarantee. To evidence its Guarantee set forth in Section 16(a), each Guarantor hereby agrees that a notation of such Guarantee substantially in the form included in Exhibit G shall be endorsed by an Officer of such Guarantor on each Note issued by the Company and that this Agreement shall be executed on behalf of such Guarantor by its President or one of its Vice Presidents. 74 Each Guarantor hereby agrees that its Guarantee set forth in Section 16(a) shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. If an Officer whose signature is on this Agreement or on the Guarantee no longer holds that office at the time the Company issues the Note on which a Guarantee is endorsed, the Guarantee shall be valid nevertheless. The delivery of any Note by the Company shall constitute due delivery of the Guarantee set forth in this Agreement on behalf of the Guarantors. In the event that the Company creates or acquires any new Subsidiaries subsequent to the date of this Agreement, if required by Section 5(t) hereof, the Company shall cause such Subsidiaries to execute Guarantees in accordance with Section 5(t) hereof and this Section 16, to the extent applicable. (e) Releases of Guarantors. A Guarantor (other than the Parent) will be deemed automatically and unconditionally released and discharged from all of its obligations under its Guarantee without any further action on the part of any Holder upon a sale or other disposition to a Person not an Affiliate of the Company of all of the Capital Stock of, or all or substantially all of the assets of, such Subsidiary Guarantor, by way of merger, consolidation or otherwise, which transaction is carried out in accordance with Section 5(j) of this Agreement; provided that any such termination shall occur (x) only to the extent that all obligations of such Subsidiary Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure any Indebtedness of the Company shall also terminate upon such sale, disposition or release and (y) only if the Holders are furnished with written notice of such release together with an Officers' Certificate from such Subsidiary Guarantor to the effect that all of the conditions to release in this Section 16(e) have been satisfied. Any Guarantor not released from its obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Agreement as provided in this Section 16. 75 Section 17. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of the Acquisition Corp., InSight, the Guarantors and of their officers and of the Purchaser and BAS set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Purchaser, BAS or Acquisition Corp., InSight or the Guarantors or any of its or their partners, officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Securities sold hereunder and any termination of this Agreement. Section 18. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered or by facsimile and confirmed to the parties hereto as follows: If to the Purchaser or BAS: Banc of America Bridge LLC 9 West 57th Street New York, NY 10019 Facsimile: Attention: and to: Banc of America Securities LLC 9 West 57th Street New York, NY 10019 Facsimile: 212-847-8324 Attention: Raymond A. Cubero, Managing Director with a copy to: Shearman & Sterling 599 Lexington Avenue New York, NY 10022 Facsimile: (212) 848-7179 Attention: Christopher C. Paci, Esq. If to the Company or the Guarantors: InSight Health Services Corp. 4400 MacArthur Blvd. Suite 800 Newport Beach, CA 92660 Facsimile: 949-476-8006 Attention: Chief Financial Officer 76 and to: J.W. Childs Associates, L.P. One Federal Street 21st Floor Boston, MA 02110 Facsimile: 617-753-1101 Attention: Edward D. Yun with copies to: Halifax Capital Partners, L.P. 1133 Connecticut Avenue N.W. Suite 700 Washington, D.C. 20036 Facsimile: 202-296-7133 Attention: David W. Dupree and to: Kaye Scholer LLP 245 Park Avenue New York, NY 10022 Facsimile: 212-836-8689 Attention: Stephen C. Koval, Esq. and to: InSight Health Services Corp. 4400 MacArthur Blvd. Suite 800 Newport Beach, CA 92660 Facsimile: 949-476-0137 Attention: General Counsel Any party hereto may change the address for receipt of communications by giving written notice to the others. 77 Section 19. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and to the benefit of the employees, officers and directors and controlling persons referred to in Section 12 and Section 13, and in each case their respective successors, and any Holder of the Notes, and no other person will have any right or obligation hereunder. Section 20. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. Section 21. Governing Law Provisions. (a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE. (b) Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby ("Related Proceedings") may be instituted in the federal courts of the United States of America located in the City and County of New York or the courts of the State of New York in each case located in the City and County of New York (collectively, the "Specified Courts"), and each party irrevocably submits to the non-exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a "Related Judgment"), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party's address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum. Section 22. General Provisions. (a) Entire Agreement. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof except, as to the Purchaser and BAS, the Commitment Letter and the Fee Letter. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. The Table of Contents and the section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement. 78 (b) No Waiver; Remedies Cumulative. No failure or delay on the part of any party hereto or any Holder in exercising any right, power or privilege hereunder or under the Securities and no course of dealing between Acquisition Corp., InSight or any Guarantor and any other party or Holder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under the Securities preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein and in the Securities are cumulative and not exclusive of any rights or remedies which the parties or Holders would otherwise have. No notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the other parties hereto or the Holders to any other or further action in any circumstances without notice or demand. (c) Amendments, Waivers and Consents. This Agreement may be amended, and the observance of any term hereof may be waived (either retroactively or prospectively) with (and only with) the written consent of the Company and (i) (x) with respect to any amendment or waiver relating to this Section 22(c) or Section 2, Section 3, Section 7, Section 8, Section 10, Section 12 or Section 13 of this Agreement, the Purchaser and (y) with respect to any amendment or waiver relating to this Section 22(c) or Section 7, Section 10, Section 12 or Section 13 of this Agreement, BAS or (ii) with respect to any amendment or waiver relating to any provision of this Agreement not listed in clause (i) above, Holders of a majority in aggregate principal amount at Stated Maturity of the Notes; provided that no such amendment or waiver may, without the prior written consent of the Holder of each Note then outstanding and affected thereby: (i) change the Stated Maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which any Note or any premium or the interest thereon are payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the redemption date), or (ii) amend, change or modify the obligation of the Company to make and consummate an Excess Proceeds Offer with respect to any Asset Sale in accordance with the covenant described under Section 5(j) hereof or the obligation of the Company to make and consummate a Change of Control offer in the event of a Change of Control in accordance with Section 5(o) hereof, including, in each case, amending, changing or modifying any definition relating thereto; (iii) reduce the percentage in principal amount of outstanding Notes, the consent of whose Holders is required for any waiver of compliance with certain provisions of, or certain defaults and their consequences provided for under, this Agreement, or (iv) waive a Default or Event of Default in the payment of principal of, or premium, if any, or interest on the Notes or reduce the percentage or aggregate principal amount of outstanding Notes the consent of whose Holders is necessary for waiver of compliance with certain provisions of this Agreement or for waiver of certain Defaults or Events of Default, or 79 (v) modify the ranking or priority of the Notes or the Guarantee of any Guarantor, or (vi) release any Guarantor from any of its obligations under its Guarantee or this Agreement other than in accordance with the terms of this Agreement, or (vii) make any change in the preceding amendment and waiver provisions. No amendment or waiver of this Agreement will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or thereby impair any right consequent thereon. As used herein, the term this "Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. Notwithstanding any of the foregoing, the Company may not amend any provisions of this Agreement or the Notes concerning the subordination of the Notes and the Guarantees without the prior written consent of the Agent Bank, acting on behalf of the Banks under the Credit Agreement. Section 23. Liability of InSight prior to the Merger. Notwithstanding anything to the contrary contained herein, unless and until the Merger is consummated, none of the Company or any of its Subsidiaries (including the Subsidiary Guarantors) shall have any liability arising under or related to this Agreement or arising in connection with or related to the issuance and sale of the Notes, except for liabilities, if any, of InSight or the Subsidiary Guarantors in connection with a violation of Section 10(j) of this Agreement. 80 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Parent, Acquisition Corp. and InSight the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms. Very truly yours, INSIGHT HEALTH SERVICES HOLDINGS CORP. By:__________________________ Name: Title: INSIGHT HEALTH SERVICES ACQUISITION CORP. By:__________________________ Name: Title: INSIGHT HEALTH SERVICES CORP. By:__________________________ Name: Title: INSIGHT HEALTH CORP. By:__________________________ Name: Title: SIGNAL MEDICAL SERVICES, INC. By:__________________________ Name: Title: 81 OPEN MRI, INC. By:__________________________ Name: Title: MAXUM HEALTH CORP. By:__________________________ Name: Title: RADIOSURGERY CENTERS, INC. By:__________________________ Name: Title: MAXUM HEALTH SERVICES CORP. By:__________________________ Name: Title: MRI ASSOCIATES, L.P. By: InSight Health Corp., its General Partner By:__________________________ Name: Title: 82 MAXUM HEALTH SERVICES OF NORTH TEXAS, INC. By:__________________________ Name: Title: MAXUM HEALTH SERVICES OF DALLAS, INC. By:__________________________ Name: Title: NDDC, INC. By:__________________________ Name: Title: DIAGNOSTIC SOLUTIONS CORP. By:__________________________ Name: Title: 83 The foregoing Note Purchase Agreement is hereby confirmed and accepted by the Purchaser and, with respect to Sections 7, 10, 12 and 13 hereof only, BAS, as of the date first above written. BANC OF AMERICA BRIDGE LLC By: __________________________ Name: Title: BANC OF AMERICA SECURITIES LLC By: __________________________ Name: Title: 84 SCHEDULE A GUARANTORS
Guarantor Jurisdiction of Organization - --------- ---------------------------- InSight Health Corp. Delaware Signal Medical Services, Inc. Delaware Open MRI, Inc. Delaware Maxum Health Corp. Delaware Radiosurgery Centers, Inc. Delaware Maxum Health Services Corp. Delaware MRI Associates, L.P. Indiana Maxum Health Services of North Texas, Inc. Texas Maxum Health Services of Dallas, Inc. Texas NDDC, Inc. Texas Diagnostic Solutions Corp. Delaware
SCHEDULE B OUTSTANDING OPTIONS, WARRANTS, PREEMPTIVE RIGHTS ETC. None. SCHEDULE C SUBSIDIARIES OF INSIGHT HEALTH SERVICES CORP.
Subsidiary Jurisdiction of Organization - ---------- ----------------------------
SCHEDULE D MATERIAL AGREEMENTS 2 SCHEDULE D MATERIAL AGREEMENTS 1. Management Agreement, dated as of October 17, 2001, by and among J.W. Childs Advisors II., L.P, Halifax Genpar, L.P., InSight Health Services Holdings Corp. and InSight Health Services Corp. 2. Stockholders Agreement, dated as of June 29, 2001, among InSight Health Services Holdings Corp., the JWC Holders (as defined therein), the Halifax Holders (as defined therein), the Management Holders (as defined therein) and the Additional Holders (as defined therein), as amended. 3. Swap Master Agreement, dated as of December 24, 1997, between NationsBank, N.A. and InSight Health Services Corp., including exercise of Swap Option dated as of March 29, 2001 4. Real Estate Lease for 11617 North Central Expressway, Suite 132, Dallas, Texas between Century Properties Fund XIII and NDDC, Inc. 5. Real Estate Lease for 4225 Rosewood Drive, Suites 4, 5 and 6, Pleasanton, California between New Plan Excel Realty Trust, Inc. and InSight Health Corp. 6. Real Estate Lease for 1001 and 1005 North Highland Avenue, Murfreesboro, Tennessee between Marlin Properties, LLC and InSight Health Corp. 7. Real Estate Lease for 800 Shadow Lane, Las Vegas, Nevada between Borstein Partners Ltd. and InSight Health Corp. 8. Real Estate Lease for 12455 East Washington Boulevard, Whittier, California between Washington Magnetic Resonance Center and InSight Health Corp. 9. Real Estate Lease for 21 Stockton Drive, Toms River, New Jersey between Center State Health Group, Inc. and Toms River Imaging Associates, LP. 10. Real Estate Lease for 1700 North Rose, Suite 110, Oxnard, California between CHW Central Coast and St. John's Regional Imaging Center, LLC. 11. Real Estate Lease for 17950 Preston Road, Suite 120, Dallas, Texas between 17950 Partners, Ltd. and InSight Health Corp. 12. Purchase Agreement between IHC and Berlex Laboratories dated 5/1/00. 13. Master Service Agreement between IHC and General Electric dated 1/1/97. 4/8 14. Agreement between the Company and Lafayette Pharmaceuticals, Inc. dated 2/14/00. 15. Distribution and Service Agreement between IHC and NHD, Inc. dated 2/14/00. 16. Operating Lease with General Electric for 1.5T Signa dated 10/00 (G1238A). 17. Operating Lease with General Electric for 1.5T Signa dated 03/01 (G1242A). 18. Operating Lease with General Electric for 1.5T Signa dated 03/01 (G1243A). 19. Operating Lease with General Electric for 1.5T Signa dated 03/01 (G1244A). 20. Operating Lease with General Electric for 1.5T Signa dated 03/01 (G1245A). 5/8 SCHEDULE E AGREEMENTS PURSUANT TO SECTION 5(k)(ii)(6) 3 SCHEDULE F EXISTING INDEBTEDNESS 4 SCHEDULE F EXISTING INDEBTEDNESS 2. Summary of Joint Venture Balances Owing to InSight Health Corp.
LOANS OUTSTANDING AS OF 08/31/01: PARTNERSHIP WORKING CAP. EQUIPMENT TOTAL CONSOLIDATED GARFIELD IMAGING CENTER, LTD $ -- $ 1,129,712 $ 1,129,712 BERWYN MAGNETIC RESONANCE CENTER, LLC $ 287,115 $ 1,558,732 $ 1,845,847 TOMS RIVER IMAGING ASSOCIATES, L.P. $ 330,596 $ -- $ 330,596 DUBLIN DIAGNOSTIC IMAGING, LLC $ 71,958 $ 467,717 $ 539,675 ST. JOHN'S REGIONAL IMAGING CENTER, LLC $ 1,662,603 $ 3,337,843 $ 5,000,446 LOCKPORT MRI, LLC $ 708,701 $ 5,181,461 $ 5,890,162 CONNECTICUT LITHOTRIPSY, LLC $ (85,577) $ 305,739 $ 220,162 GRANADA HILLS OPEN MRI, LLC $ 88,139 $ 1,129,151 $ 1,217,290 DANIEL FREEMAN MRI, LLC $ 285,097 $ 560,395 $ 845,492 WILKES-BARRE IMAGING, LLC $ 321,848 $ 4,614,979 $ 4,936,827 INSIGHT-PREMIER HEALTH, LLC $ 344,864 $ 4,098,195 $ 4,443,059 $ 4,015,344 $ 22,383,924 $ 26,399,268
3. Indebtedness consisting of capital leases ALL AMOUNTS ARE AS OF AUGUST 31, 2001
DATE OF MATURITY INTEREST BALANCE COMPANY PAYEE DESCRIPTION NOTE DATE RATE 08/31/01 IHC GE GE - G1187E 12/01/99 05/01/04 9.00% $ 698,056 IHC GE GE - G1190A 12/01/99 05/01/04 9.00% $ 670,229 IHC GE GE - G1205A 12/01/99 05/01/04 9.00% $ 645,052 IHC GE GE - G1207A 12/01/99 05/01/04 9.00% $ 632,150 IHC GE GE - G3052 (Murf.) 12/01/99 05/01/04 9.00% $ 464,768
7/8 IHC GE GE - G3063 12/01/99 05/01/04 9.00% $ 526,750 (Pleasanton) IHC GE GE - G3063 02/01/00 05/01/04 10.28% $ 20,713 (Pleasanton) DF GE GE - G3074 309/01/00 07/01/06 9.30% $ 1,462,784 DF GE GE - G3074 - COIL 09/01/00 07/01/06 9.30% $ 13,791 OPEN MRI GE GE - G3051 (OC) 12/01/99 05/01/04 9.00% $ 515,216 TOTAL CAPITAL LEASES $ 5,649,509 ===========
IHC = InSight Health Corp. OPEN MRI = Open MRI, Inc. DF = Daniel Freeman MRI, LLC 4. Swap Agreement Swap Master Agreement , dated as of December 24, 1997, between NationsBank, N.A. and InSight Health Services Corp., including exercise of Swap Option dated as of March 29, 2001 5. Guaranty Obligations (as of August 31, 2001) 1. InSight Health Corp. has a guaranty outstanding in favor of Siemens Credit Corporation in the amount of $199,325 for obligations of Northern Indiana Oncology Center of Porter Memorial Hospital, LLC 2. InSight Health Corp. has a guaranty outstanding in favor of DVI Financial Services, Inc. in the amount of $641,890 for obligations of Metabolic Imaging of Kentucky, LLC 6. Joint Venture Recourse Indebtedness (as of August 31, 2001) 1. Central Maine Magnetic Imaging Associates has Indebtedness outstanding to Peoples Heritage Bank, of which $260,854 is recourse to Maxum Health Services Corp. 2. Central Maine Magnetic Imaging Associates has Indebtedness outstanding to Picker Financial, of which $483,066 is recourse to Maxum Health Services Corp. 3. Parkway Imaging Center, LLC has Indebtedness outstanding to General Electric Company, of which $361,910 is recourse to InSight Health Corp. 4. Southern Connecticut Imaging Centers, LLC has Indebtedness outstanding to Citizens Bank, of which $1,182,392 is recourse to InSight Health Corp. 8/8 EXHIBIT A [FORM OF EXCHANGE INDENTURE] EXHIBIT A [FORM OF EXCHANGE INDENTURE] - -------------------------------------------------------------------------------- INSIGHT HEALTH SERVICES CORP., [__]% SENIOR SUBORDINATED NOTES DUE 201[_] ------------------------------- INDENTURE Dated as of [_________], 200[_] ------------------------------- STATE STREET BANK AND TRUST COMPANY, N.A. TRUSTEE ------------------------------- - -------------------------------------------------------------------------------- CROSS-REFERENCE TABLE* ---------------------
TRUST INDENTURE ACT SECTION INDENTURE SECTION ----------- ----------------- 310(a)(1)...................................................................... 7.10 (a)(2)...................................................................... 7.10 (a)(3)...................................................................... N.A. (a)(4)...................................................................... N.A. (a)(5)...................................................................... 7.10 (b)......................................................................... 7.10 (c)......................................................................... N.A. 311(a)......................................................................... 7.11 (b)......................................................................... 7.11 (c)......................................................................... N.A. 312(a)......................................................................... 2.06 (b)......................................................................... 13.03 (c)......................................................................... 13.03 313(a)......................................................................... 7.06, 13.03 (b)(1)...................................................................... N.A. (b)(2)...................................................................... 7.06, 7.07 (c)......................................................................... 7.06, 13.02 (d)......................................................................... 7.06 314(a)......................................................................... 7.06, 13.05 (b)......................................................................... N.A. (c)(1)...................................................................... N.A. (c)(2)...................................................................... N.A. (c)(3)...................................................................... N.A. (d)......................................................................... N.A. (e)......................................................................... 13.05 (f)......................................................................... N.A. 315(a)......................................................................... N.A. (b)......................................................................... N.A. (c)......................................................................... N.A. (d)......................................................................... N.A. (e)......................................................................... N.A. 316(a) (last sentence)......................................................... N.A. (a)(1)(A)................................................................... N.A. (a)(1)(B)................................................................... N.A. (a)(2)...................................................................... N.A. (b)......................................................................... N.A. (c)......................................................................... 13.13
- ---------- N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture 317(a)(1)...................................................................... N.A. (a)(2)...................................................................... N.A. (b)......................................................................... N.A. 318(a)......................................................................... N.A. (b)......................................................................... N.A. (c)......................................................................... 13.01
TABLE OF CONTENTS
Page ---- CROSS-REFERENCE TABLE ......................................................................i
ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions...............................................................1 Section 1.02 Other Definitions........................................................20 Section 1.03 Incorporation by Reference of Trust Indenture Act........................21 Section 1.04 Rules of Construction....................................................21
ARTICLE TWO THE NOTES Section 2.01 Form and Dating..........................................................22 Section 2.02 Execution and Authentication.............................................23 Section 2.03 Methods of Receiving Payments on the Notes...............................24 Section 2.04 Registrar and Paying Agent...............................................24 Section 2.05 Paying Agent to Hold Money in Trust......................................24 Section 2.06 Holder Lists.............................................................25 Section 2.07 Transfer and Exchange....................................................25 Section 2.08 Replacement Notes........................................................38 Section 2.09 Outstanding Notes........................................................38 Section 2.10 Treasury Notes...........................................................38 Section 2.11 Temporary Notes..........................................................39 Section 2.12 Cancellation.............................................................39 Section 2.13 Defaulted Interest.......................................................39 Section 2.14 CUSIP Numbers............................................................39
ARTICLE THREE REDEMPTION AND PREPAYMENT; SATISFACTION AND DISCHARGE Section 3.01 Notices to Trustee.......................................................40 Section 3.02 Selection of Notes to Be Redeemed........................................40 Section 3.03 Notice of Redemption.....................................................40 Section 3.04 Effect of Notice of Redemption...........................................41 Section 3.05 Deposit of Redemption Price..............................................41 Section 3.06 Notes Redeemed in Part...................................................42 Section 3.07 Optional Redemption......................................................42 Section 3.08 Mandatory Redemption.....................................................43 Section 3.09 Repurchase Offers........................................................43 Section 3.10 Application of Trust Money...............................................45
i ARTICLE FOUR COVENANTS Section 4.01 Payment of Notes.........................................................45 Section 4.02 Maintenance of Office or Agency..........................................45 Section 4.03 Reports..................................................................46 Section 4.04 Compliance Certificate...................................................46 Section 4.05 Taxes....................................................................47 Section 4.06 Stay, Extension and Usury Laws...........................................47 Section 4.07 Restricted Payments......................................................47 Section 4.08 Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.........................................................52 Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock...............53 Section 4.10 Asset Sales..............................................................56 Section 4.11 Transactions with Affiliates.............................................57 Section 4.12 Liens....................................................................58 Section 4.13 Corporate Existence......................................................59 Section 4.14 Limitation on Layering Debt..............................................59 Section 4.15 Offer to Repurchase upon a Change of Control.............................59 Section 4.16 Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries.........................................................60 Section 4.17 Designation of Restricted and Unrestricted Subsidiaries..................61 Section 4.18 Payments for Consent.....................................................61 Section 4.19 Limitations on Issuances of Guarantees of Indebtedness...................62 Section 4.20 Additional Guarantees....................................................62
ARTICLE FIVE SUCCESSORS Section 5.01 Merger, Consolidation or Sale of Assets..................................62
ARTICLE SIX DEFAULTS AND REMEDIES Section 6.01 Events of Default........................................................64 Section 6.02 Acceleration.............................................................65 Section 6.03 Other Remedies...........................................................66 Section 6.04 Waiver of Past Defaults..................................................66 Section 6.05 Control by Majority......................................................67 Section 6.06 Limitation on Suits......................................................67 Section 6.07 Rights of Holders of Notes to Receive Payment............................68 Section 6.08 Collection Suit by Trustee...............................................68 Section 6.09 Trustee May File Proofs of Claim.........................................68 Section 6.10 Priorities...............................................................69 Section 6.11 Undertaking for Costs....................................................69
ii ARTICLE SEVEN TRUSTEE Section 7.01 Duties of Trustee........................................................69 Section 7.02 Certain Rights of Trustee................................................70 Section 7.03 Individual Rights of Trustee.............................................71 Section 7.04 Trustee's Disclaimer.....................................................71 Section 7.05 Notice of Defaults.......................................................71 Section 7.06 Reports by Trustee to Holders of the Notes...............................72 Section 7.07 Compensation and Indemnity...............................................72 Section 7.08 Replacement of Trustee...................................................73 Section 7.09 Successor Trustee by Merger, Etc. .......................................74 Section 7.10 Eligibility; Disqualification............................................74 Section 7.11 Preferential Collection of Claims Against Company........................74
ARTICLE EIGHT DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance.................74 Section 8.02 Legal Defeasance and Discharge...........................................74 Section 8.03 Covenant Defeasance......................................................75 Section 8.04 Conditions to Legal or Covenant Defeasance...............................75 Section 8.05 Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions.......................................76 Section 8.06 Repayment to the Company.................................................77 Section 8.07 Reinstatement............................................................77
ARTICLE NINE AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes......................................78 Section 9.02 With Consent of Holders of Notes.........................................79 Section 9.03 Compliance with Trust Indenture Act......................................81 Section 9.04 Revocation and Effect of Consents........................................81 Section 9.05 Notation on or Exchange of Notes.........................................81 Section 9.06 Trustee to Sign Amendments, Etc. ........................................81
ARTICLE TEN SUBORDINATION Section 10.01 Agreement to Subordinate.................................................81 Section 10.02 Liquidation; Dissolution; Bankruptcy.....................................82 Section 10.03 Default on Designated Senior Indebtedness................................82 Section 10.04 Acceleration of Securities...............................................83 Section 10.05 When Distribution Must Be Paid Over......................................83 Section 10.06 Notice by the Company....................................................83 Section 10.07 Subrogation..............................................................83
iii Section 10.08 Relative Rights..........................................................84 Section 10.09 Subordination May Not Be Impaired by the Company.........................84 Section 10.10 Distribution or Notice to Representative.................................84 Section 10.11 Rights of Trustee and Paying Agent.......................................84 Section 10.12 Authorization to Effect Subordination....................................85
ARTICLE ELEVEN GUARANTEES Section 11.01 Guarantee................................................................85 Section 11.02 Subordination of Guarantee...............................................86 Section 11.03 Limitation on Guarantor Liability........................................86 Section 11.04 Execution and Delivery of Guarantee......................................87 Section 11.05 Releases of Guarantors...................................................87
ARTICLE TWELVE SATISFACTION AND DISCHARGE Section 12.01 Satisfaction and Discharge...............................................88 Section 12.02 Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions.......................................89 Section 12.03 Repayment to the Company.................................................89
ARTICLE THIRTEEN MISCELLANEOUS Section 13.01 Trust Indenture Act Controls.............................................89 Section 13.02 Notices..................................................................90 Section 13.03 Communication by Holders of Notes with Other Holders of Notes............91 Section 13.04 Certificate and Opinion as to Conditions Precedent.......................91 Section 13.05 Statements Required in Certificate or Opinion............................91 Section 13.06 Rules by Trustee and Agents..............................................92 Section 13.07 No Personal Liability of Directors, Officers, Employees and Stockholders.........................................................92 Section 13.08 Governing Law............................................................92 Section 13.09 Consent to Jurisdiction..................................................92 Section 13.10 No Adverse Interpretation of Other Agreements............................93 Section 13.11 Successors...............................................................93 Section 13.12 Severability.............................................................93 Section 13.13 Counterpart Originals....................................................93 Section 13.14 Acts of Holders..........................................................93 Section 13.15 Benefit of Indenture.....................................................94 Section 13.16 Table of Contents, Headings, Etc. .......................................95
iv EXHIBITS Exhibit A1 FORM OF NOTE Exhibit A2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF NOTATION OF GUARANTEE Exhibit F FORM OF SUPPLEMENTAL INDENTURE
v INDENTURE dated as of [_______], 200[_] among InSight Health Services Corp., a Delaware corporation (the "COMPANY"), InSight Health Services Holdings Corp., a Delaware Corporation, (the "PARENT"), the Subsidiary Guarantors (as defined below) and State Street Bank and Trust Company, N.A., as trustee. The Company, the Parent the Subsidiary Guarantors and the Trustee (as defined below) agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined below) of the [__]% Senior Subordinated Notes due 201[_]: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions. "144A GLOBAL NOTE" means a global note substantially in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that shall be issued in a denomination equal to the outstanding principal amount at maturity of the Notes sold in reliance on Rule 144A. "ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (a) existing at the time such Person is merged with or into the Company or a Subsidiary or becomes a Subsidiary or (b) assumed in connection with the acquisition of assets from such Person. "ADDITIONAL NOTES" means up to $100 million aggregate principal amount of Notes (other than the Notes issued on the date hereof) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof. "AFFILIATE" means, with respect to any specified person, (a) any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person or (b) any other person that owns, directly or indirectly, 10% or more of such specified person's Capital Stock or any executive officer or director of any such specified person or other person. For the purposes of this definition, "control," when used with respect to any specified person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "AGENT" means any Registrar, Paying Agent or co-registrar. "AGENT BANK" means Bank of America, N.A. and its successors under the Credit Agreement, in its capacity as administrative agent. "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "ASSET SALE" means (i) the sale, lease, conveyance or other disposition of any assets (including, without limitation, by way of merger, consolidation or similar arrangement) (collectively, a "transfer") by the Company or any Restricted Subsidiary other than in the ordinary course of business and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Shares of Capital Stock of any of the Company's Restricted Subsidiaries (which will be deemed to include the sale, grant or conveyance of any interest in the income, profits or proceeds therefrom), in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (x) that have a fair market value in excess of $2 million or (y) for Net Cash Proceeds in excess of $2 million. For the purposes of this definition, the term "Asset Sale" does not include (a) any transfer of properties or assets (i) that is governed by Sections 4.07, 4.16 (to the extent of paragraph (a) thereof) or 5.01 hereof, (ii) between or among the Company and its Restricted Subsidiaries pursuant to transactions that do not violate any other provision of the Indenture or (iii) representing obsolete or permanently retired equipment and facilities or (b) the sale or exchange of equipment in connection with the purchase or other acquisition of other equipment, in each case used in the business of the Company or its Restricted Subsidiaries as it was in existence on the Reference Date or any business determined by the Board of the Company in its good faith judgment to be reasonably related thereto. Notwithstanding anything to the contrary set forth above, a disposition of Receivables and Related Assets other than pursuant to a Receivables Program contemplated under the provisions described in Section 4.09(c)(xiii). "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "BANKS" means the banks and other financial institutions that from time to time are lenders under the Credit Agreement. "BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "BENEFICIALLY OWNS" and "BENEFICIALLY OWNED" shall have a corresponding meaning. "BOARD" means the Company's Board of Directors or the Parent's Board of Directors, as applicable. "BOARD RESOLUTION" means, with respect to a Board, a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company or the Parent, as the case may be, to have been duly adopted by such Board and to be in full force and effect on the date of such certification, and delivered to the Trustee. "BROKER-DEALER" has the meaning set forth in the Registration Rights Agreement. "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are authorized or obligated by law 2 or executive order to close. If a payment date is not a Business Day, payment may be made on the next succeeding day that is a Business Day, and no interest shall accrue on such payment for the intervening period. "CAPITALIZED LEASE OBLIGATION" means, with respect to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee which, in accordance with GAAP, is required to be accounted for as a capital lease on the balance sheet of that Person. "CAPITAL STOCK" of any Person means any and all shares, interests, partnership interests, participations, rights in or other equivalents (however designated) of such Person's equity interest (however designated), whether now outstanding or issued after the Closing Date. "CASH EQUIVALENTS" means, at any date, (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (b) U.S. dollar denominated time deposits and certificates of deposit of (i) any lender under the Credit Agreement (ii) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (iii) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank being an "Approved Lender"), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody's and maturing within twelve months of the date of acquisition, (d) repurchase agreements entered into by any Person with a bank or trust company (including any of the lenders under the Credit Agreement) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations and (e) Investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by reputable financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing subdivisions (a) through (d). "CHANGE OF CONTROL means the occurrence of any of the following: (a) the consummation of any transaction (including, without limitation, any merger or consolidation) (i) prior to a Public Equity Offering by the Company or the Parent, the result of which is that the Principals and their Related Parties become the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) of less than 50% of the Voting Stock of the Company or the Parent, as the case may be (measured by voting power rather than the number of shares), or (ii) after a Public Equity Offering of the Company or the Parent, any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act), other than the Principals 3 and their Related Parties, become the beneficial owner (as defined above), directly or indirectly, of 35% or more of the Voting Stock of the Company or the Parent, as the case may be, and such person is or becomes, directly or indirectly, the beneficial owner of a greater percentage of the voting power of the Voting Stock of the Company or the Parent, as the case may be, calculated on a fully diluted basis, than the percentage beneficially owned by the Principals and their Related Parties; (b) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Subsidiaries or the Parent and its Subsidiaries, in each case, taken as a whole, to any "person" (as the term is defined in Section 13(d)(3) of the Exchange Act) other than the Principals or Related Parties of the Principals; (c) the first day on which a majority of the members of the Board of the Company or the Parent are not Continuing Directors; or (d) the Company or the Parent is liquidated or dissolved or adopts a plan of liquidation or dissolution, other than in a transaction that complies with the provisions described under Section 5.01 hereof. "CLEARSTREAM" means Clearstream Banking, societe anonyme, Luxembourg. "CLOSING DATE" means the date on which the $[____](1) million in aggregate principal amount of the Notes were originally issued under this Indenture. "COMMON STOCK" means, with respect to any Person, any and all shares, interests, participations and other equivalents (however designated, whether voting or non-voting) of such Person's Common Stock, whether now outstanding or issued after the date of this Indenture, and includes, without limitation, all series and classes of such Common Stock. "COMPANY" means InSight Health Services Corp., a Delaware corporation. "COMPANY REQUEST" or "COMPANY ORDER" means a written request or order signed in the name of the Company by its Chairman, its President, any Vice President, its Treasurer or an Assistant Treasurer, and delivered to the Trustee. "CONSOLIDATED EBITDA" means, for any period, the sum of, without duplication, Consolidated Net Income for such period, plus (or, in the case of clause (d) below, plus or minus) the following items to the extent included in computing Consolidated Net Income for such period: (a) Fixed Charges for such period, plus (b) the provision for federal, state, local and foreign income taxes of the Company and its Restricted Subsidiaries for such period, plus (c) the aggregate depreciation and amortization expense of the Company and its Restricted Subsidiaries for such period, plus (d) any other non-cash charges for such period, and minus non-cash items - --------------------- (1) To be an amount equal to aggregate principal amount of all Notes issued and outstanding under the Note Purchase Agreement at the time of the exchange, plus any Additional Remarked Notes to be issued. 4 increasing Consolidated Net Income for such period, other than non-cash charges or items increasing Consolidated Net Income resulting from changes in prepaid assets or accrued liabilities in the ordinary course of business, plus (e) Minority Interest; provided that fixed charges, income tax expense, depreciation and amortization expense and non-cash charges of a Restricted Subsidiary will be included in Consolidated EBITDA only to the extent (and in the same proportion) that the net income of such Subsidiary was included in calculating Consolidated Net Income for such period. "CONSOLIDATED NET INCOME" means, for any period, the net income (or net loss) of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, adjusted to the extent included in calculating such net income or loss by excluding (a) any net after-tax extraordinary or nonrecurring gains or losses (less all fees and expenses relating thereto), (b) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to Asset Sales or discontinued operations, (c) the portion of net income (or loss) of any Person (other than the Company or a Restricted Subsidiary), including Unrestricted Subsidiaries, in which the Company or any Restricted Subsidiary has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any Restricted Subsidiary in cash during such period, (d) the net income (or loss) of any Person combined with the Company or any Restricted Subsidiary on a "pooling of interests" basis attributable to any period prior to the date of combination, (e) the net income (but not the net loss) of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is at the date of determination restricted, directly or indirectly, except to the extent that such net income is actually paid to the Company or a Restricted Subsidiary thereof by loans, advances, intercompany transfers, principal repayments or otherwise and (f) the cumulative effect of a change in accounting principles. "CONSOLIDATED TANGIBLE ASSETS" means, as of the date of determination, the total assets, less goodwill and other intangibles, shown on the balance sheet of the Company and its Restricted Subsidiaries as of the most recent date for which such a balance sheet is available, determined on a consolidated basis in accordance with GAAP. "CONTINUING DIRECTORS" means, as of the date of determination, any member of the Board of the Company or the Parent, as the case may be, who: (a) was a member of such Board on the Reference Date; (b) was nominated for election or elected to such Board with the approval of the majority of the Continuing Directors who were members of such Board at the time of such nomination or election; or (c) was nominated by one or more of the Principals and the Related Parties. "CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the Trustee specified in Section 13.02 hereof or such other address as to which the Trustee may give notice to the Company. "CREDIT AGREEMENT" means the credit agreement, dated as of the Reference Date, among the Company, the Parent, the Subsidiary Guarantors, the lenders named therein, Bank of 5 America, N.A., as administrative agent, First Union National Bank, as syndication agent, and The CIT Group/Business Credit, Inc., as documentation agent, providing for up to $225 million in term loan borrowings and $50 million of revolving credit borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, as such credit agreement (and related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith) may be amended, restated, supplemented, refinanced, extended or otherwise modified from time to time. "CUSTODIAN" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "DEFAULT" means any event that is, or after notice or the passage of time or both, would be, an Event of Default. "DEFINITIVE NOTE" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.07 hereof, substantially in the form of Exhibit A1 hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "DEPOSITARY" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.04 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "DESIGNATED NONCASH CONSIDERATION" means the fair market value of noncash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as Designated Noncash Consideration pursuant to an officer's certificate, setting forth the basis of such valuation, executed by the principal executive officer and the principal financial officer of the Company, less the amount of cash or cash equivalents received in connection with a sale of such Designated Noncash Consideration. "DESIGNATED SENIOR INDEBTEDNESS" means (i) so long as the Senior Bank Debt is outstanding, the Senior Bank Debt and (ii) thereafter, any other Senior Indebtedness permitted under the Indenture the principal amount of which is $25 million or more and that has been specifically designated by the Company, in the instrument creating or evidencing such Senior Indebtedness or in an officers' certificate delivered to the Trustee, as "Designated Senior Indebtedness." "DISINTERESTED DIRECTOR" means, with respect to any transaction or series of transactions in respect of which the Board is required to deliver a resolution of the Board, to make a finding or otherwise take action under the Indenture, a member of the Board who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "DISQUALIFIED STOCK" means any class or series of Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or by contract or otherwise (i) is or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the Notes, (ii) is redeemable at the option of the 6 holder thereof, at any time prior to such final Stated Maturity or (iii) at the option of the holder thereof is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity; provided that any Capital Stock that would constitute Disqualified Stock solely as a result of the provisions therein giving holders thereof the right to cause the issuer thereof to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Notes will not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Sections 4.10 and 4.15 hereof, and such Capital Stock specifically provides that the issuer will not repurchase or redeem any such stock pursuant to such provisions prior to the Company's repurchase of such Notes as are required to be repurchased pursuant to the provisions contained in Sections 4.10 and 4.15 hereof. "EQUITY INTERESTS" means Capital Stock and all warrants, options and other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EQUITY OFFERING" means a public or private offering of Capital Stock (other than Disqualified Stock) of the Parent or the Company. "EQUITY SPONSORS" means J.W. Childs Associates, L.P., J.W. Childs Equity Partners II, L.P., The Halifax Group, L.L.C. and Halifax Capital Partners, L.P. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, including the rules and regulations of the SEC promulgated thereunder. "EXCHANGE NOTES" means the Notes issued in the Exchange Offer in accordance with Section 2.07(f) hereof. "EXCHANGE OFFER" has the meaning set forth in the Registration Rights Agreement. "EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the Registration Rights Agreement. "EXISTING INDEBTEDNESS" means the Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreement) that was outstanding on the Reference Date and listed on Schedule I to this Indenture, until such amounts are repaid. "EXISTING NOTES" means the 9 5/8% Senior Subordinated Notes Due 2008 of the Company. "FACILITY" means any premises, together with the diagnostic imaging and treatment equipment installed therein, used by the Company in the conduct of the business of providing diagnostic imaging and information, treatment and related management services. 7 "FIXED CHARGE COVERAGE RATIO" means, for any period, the ratio of Consolidated EBITDA for such period to Fixed Charges for such period. "FIXED CHARGES" means, for any period, without duplication, the sum of (a) the amount that, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of operations of the Company and its Restricted Subsidiaries for such period, including, without limitation, (i) amortization of original issue discount, (ii) the net cost of interest rate contracts (including, amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) amortization of debt issuance costs, and (v) the interest component of Capitalized Lease Obligations, plus (b) all dividends and distributions paid (whether or not in cash) on Preferred Stock and Disqualified Stock by the Company or any Restricted Subsidiary (to any Person other than the Company or any of its Restricted Subsidiaries), other than dividends on Equity Interests payable solely in Qualified Equity Interests of the Company, computed on a tax effected basis, plus (c) all interest on any Indebtedness of any Person guaranteed by the Company or any of its Restricted Subsidiaries or secured by a lien on the assets of the Company or any of its Restricted Subsidiaries; provided that Fixed Charges will not include (i) any gain or loss from extinguishment of debt, including the write-off of debt issuance costs, and (ii) the fixed charges of a Restricted Subsidiary to the extent (and in the same proportion) that the net income of such Subsidiary was excluded in calculating Consolidated Net Income pursuant to clause (e) of the definition thereof for such period. "FOREIGN SUBSIDIARY" means a Restricted Subsidiary that is incorporated in a jurisdiction other than the United States or a state thereof or the District of Columbia and that has no material operations or assets in the United States. "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect on the Closing Date. "GLOBAL NOTE LEGEND" means the legend set forth in Section 2.07(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. "GLOBAL NOTES" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A1 or A2 hereto, as appropriate, issued in accordance with Section 2.01, 2.07(b)(iv), 2.07(d)(ii) or 2.07(f) of this Indenture. "GUARANTEE" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "GUARANTEE" means a Guarantee of the Notes pursuant to the Indenture. "GUARANTORS" means: (1) the Parent; (2) the Subsidiary Guarantors; and (3) any other subsidiary that executes a Guarantee in accordance with the provisions hereof; and their respective successors and assigns. 8 "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person entered into in the ordinary course of business under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and other similar financial agreements or arrangements designed to protect such Person against, or manage the exposure of such Person to, fluctuations in interest rates, and (ii) forward exchange agreements, currency swap, currency option and other similar financial agreements or arrangements designed to protect such Person against, or manage the exposure of such Person to, fluctuations in foreign currency exchange rates. "HOLDER" means a Person in whose name a Note is registered. "IAI GLOBAL NOTE" means the global Note substantially in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors. "INDEBTEDNESS" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (a) every obligation of such Person for money borrowed, (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services, (e) the attributable value of every Capitalized Lease Obligation of such Person, (f) all Disqualified Stock of such Person valued at its maximum fixed repurchase price, plus accrued and unpaid dividends thereon, (g) all obligations of such Person under or in respect of Hedging Obligations, and (h) every obligation of the type referred to in clauses (a) through (g) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed. For purposes of this definition, the "maximum fixed repurchase price" of any Disqualified Stock that does not have a fixed repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which Indebtedness is required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value will be determined in good faith by the board of directors of the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade accounts payable and accrued liabilities arising in the ordinary course of business and any liability for federal, state or local taxes or other taxes owed by such Person will not be considered Indebtedness for purposes of this definition. "INDENTURE" means this Indenture, as amended or supplemented from time to time. "INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a Global Note through a Participant. 9 "INITIAL PURCHASER" means Banc of America Securities LLC as initial purchaser under the Purchase Agreement dated [________], 200[_], among the Company, the Guarantors and Banc of America Securities LLC. "INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "INVESTMENT" in any Person means, (i) directly or indirectly, any advance, loan or other extension of credit (including, without limitation, by way of guarantee or similar arrangement) or capital contribution to such Person, the purchase or other acquisition of any stock, bonds, notes, debentures or other securities issued by such Person, the acquisition (by purchase or otherwise) of all or substantially all of the business or assets of such Person, or the making of any investment in such Person, (ii) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary and (iii) the fair market value of the Capital Stock (or any other Investment), held by the Company or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to be a Restricted Subsidiary. Investments exclude endorsements for deposit or collection in the ordinary course of business and extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. "LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "LIEN" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance upon, or with respect to, any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. A Person will be deemed to own subject to a Lien any property that such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "LIQUIDATED DAMAGES" means all liquidated damages then owing pursuant to Section 5 of the Registration Rights Agreement. "MINORITY INTEREST" means, with respect to any Person, interests in income of such Person's Subsidiaries held by Persons other than such Person or another subsidiary of such Person, as reflected on such Person's consolidated financial statements. "MOODY'S" means Moody's Investors Service and any successor thereof. "NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents, including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary), net of (a) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (b) provisions for all taxes payable as a result of such Asset Sale, (c) payments made 10 to retire Indebtedness where such Indebtedness is secured by the assets that are the subject of such Asset Sale, (d) amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in the assets that are subject to the Asset Sale and (e) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the seller after such Asset Sale, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "NON-PAYMENT EVENT OF DEFAULT" means any event (other than a Payment Event of Default) the occurrence of which entitles one or more Persons to accelerate the maturity of any Designated Senior Indebtedness. "NON-RECOURSE INDEBTEDNESS" means Indebtedness of a Person (i) as to which neither the Company nor any of its Restricted Subsidiaries (other than such Person), (a) provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, agreement or instrument that would constitute Indebtedness) or (b) is directly or indirectly liable (as a guarantor or otherwise), and (ii) the obligees of which will have recourse for repayment of the principal of and interest on such Indebtedness and any fees, indemnities, expense reimbursements or other amount of whatsoever nature accrued or payable in connection with such Indebtedness solely against the assets of such Person and not against any of the assets of the Company or its Restricted Subsidiaries (other than such Person). "NON-U.S. PERSON" means a Person who is not a U.S. Person. "NOTES" means the [___]% Senior Subordinated Notes due 201[_] of the Company issued on the date hereof and the Exchange Notes. The Notes and the Additional Notes, if any, shall be treated as a single class for all purposes under this Indenture. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "OFFERING" means the offering of the Notes by the Company. "OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company by at least two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 13.05 hereof. "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 13.05 hereof. 11 "PARENT" means InSight Health Services Holdings Corp., a Delaware corporation and its successors. "PARI PASSU INDEBTEDNESS" means (a) with respect to the Notes, Indebtedness that ranks pari passu in right of payment to the Notes and (b) with respect to any Guarantee, Indebtedness that ranks pari passu in right of payment to such Guarantee. "PARTICIPANT" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and with respect to DTC, shall include Euroclear and Clearstream). "PERMITTED BUSINESS" means the business conducted by the Company, its Restricted Subsidiaries and Permitted Joint Ventures as of the Reference Date and any and all diagnostic imaging and information businesses that in the good faith judgment of the Board of the Company are reasonably related thereto. "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 4.07(b) hereof. "PERMITTED INVESTMENTS" means any of the following: (a) Investments in (i) United States dollars (including such dollars as are held as overnight bank deposits and demand deposits with banks), (ii) securities with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof); (iii) certificates of deposit, Euro-dollar time deposits or acceptances with a maturity of one year or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus of not less than $500,000,000; (iv) any shares of money market mutual or similar funds having assets in excess of $500,000,000; (v) repurchase obligations with a term not exceeding seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above; and (vi) commercial paper with a maturity of one year or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and having a rating (A) from Moody's of at least P-1 or (B) from S&P of at least A-1; (b) Investments by the Company or any Restricted Subsidiary in another Person, if as a result of such Investment (i) such other Person becomes a Restricted Subsidiary or (ii) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a Restricted Subsidiary; (c) Investments by the Company or a Restricted Subsidiary in the Company or a Restricted Subsidiary; (d) Investments that were in existence on the Reference Date; (e) promissory notes or other evidence of Indebtedness received as a result of Asset Sales permitted under Section 4.10 hereof; 12 (f) loans or advances to officers, directors and employees of the Company or any of its Restricted Subsidiaries made (i) in the ordinary course of business in an amount not to exceed $5 million in the aggregate at any one time outstanding or (ii) in connection with the purchase by such Persons of Equity Interests of the Parent so long as the cash proceeds of such purchase received by the Parent are contemporaneously remitted by the Parent to the Company as a capital contribution; (g) any Investment by the Company or any Restricted Subsidiary of the Company in Permitted Joint Ventures made after the Reference Date, having an aggregate fair market value, when taken together with all other Investments made pursuant to this clause (g) that are at the time outstanding, not exceeding the greater of (i) $30 million and (ii) 10% of the Consolidated Tangible Assets of the Company as of the last day of the most recent full fiscal quarter ending immediately prior to the date of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (h) any Investment by the Company or any Restricted Subsidiary in a trust, limited liability company, special purpose entity or other similar entity in connection with a Receivables Program; provided that (A) such Investment is made by a Receivables Subsidiary and (B) the only assets transferred to such trust, limited liability company, special purpose entity or other similar entity consist of Receivables and Related Assets of such Receivables Subsidiary; and (i) other Investments that do not exceed $20 million in the aggregate at any one time outstanding. "PERMITTED JOINT VENTURE" means any joint venture, partnership or other Person designated by the Board of the Company, (i) at least 20% of whose Capital Stock with voting power under ordinary circumstances to elect directors (or Persons having similar or corresponding powers and responsibilities) is at the time owned (beneficially or directly) by the Company and/or by one or more Restricted Subsidiaries of the Company and if the Company owns more than 50% of the Capital Stock of the Permitted Joint Venture, such Permitted Joint Venture is either a Restricted Subsidiary of the Company or has been designated as an Unrestricted Subsidiary of the Company in accordance with the provisions of Section 4.17 hereof, (ii) (x) if it is an Unrestricted Subsidiary, all Indebtedness of such Person is Non-Recourse Indebtedness or (y) if it is a Person other than an Unrestricted Subsidiary, either all Indebtedness of such Person is Non-Recourse Indebtedness or the only Indebtedness of such Person that is not Non-Recourse Indebtedness is Indebtedness as to which any guarantee provided by the Company or a Restricted Subsidiary complies with the provisions of Sections 4.07 and 4.09 hereof, and (iii) which is engaged in a Permitted Business; provided, that each of Berwyn Magnetic Resonance Center, LLC, Garfield Imaging Center, Ltd., Tom's River Imaging Associates, L.P., St. John's Regional Imaging Center, LLC, Dublin Diagnostic Imaging, LLC, Connecticut Lithotripsy, LLC, Northern Indiana Oncology Center of Porter Memorial Hospital, LLC, Lockport MRI, LLC, Wilkes-Barre Imaging, LLC, Sun Coast Imaging Center, LLC, Granada Hills Open MRI, LLC, Daniel Freeman MRI, LLC, InSight-Premier Health, LLC, Southern Connecticut Imaging Centers, LLC, Parkway Imaging Center, LLC, Metabolic Imaging of Kentucky, LLC, Maine Molecular Imaging, LLC, Greater Waterbury Imaging Center, L.P. 13 and Central Maine Magnetic Imaging Associates shall be deemed to be a Permitted Joint Venture. Any such designation (other than with respect to the Persons identified in the preceding sentence) shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution giving effect to such designation and an officer's certificate certifying that such designation complied with the foregoing provisions. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries; provided that: (i) the principal amount of such Permitted Refinancing Indebtedness does not exceed the principal amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded plus accrued interest plus the lesser of the amount of any premium required to be paid in connection with such refinancings pursuant to the terms of such indebtedness or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing (in each case plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date not earlier than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Permitted Refinancing Indebtedness shall not include Indebtedness of a Restricted Subsidiary that refinances Indebtedness of the Company or Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor that refinances Indebtedness of a Subsidiary Guarantor. "PERSON" means any individual, corporation, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or any agency or political subdivision thereof. "PREFERRED STOCK" means, with respect to any Person, any and all shares, interests, partnership interests, participation, rights in or other equivalents (however designated) of such Person's preferred or preference stock, whether now outstanding or issued after the Closing Date, and including, without limitation, all classes and series of preferred or preference stock of such Person. "PRINCIPALS" means the Equity Sponsors and their respective Affiliates. "PRIVATE PLACEMENT LEGEND" means the legend set forth in Section 2.07(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "PUBLIC EQUITY OFFERING" means an offer and sale of Capital Stock (other than Disqualified Stock) of the Company or the Parent pursuant to a registration statement that has been declared effective by the SEC pursuant to the Securities Act (other than a registration 14 statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company). "PURCHASE MONEY OBLIGATIONS" of any Person means any obligations of such Person to any seller or any other Person incurred or assumed to finance the construction and/or acquisition of real or personal property to be used in the business of such Person or any of its Subsidiaries in an amount that is not more than 100% of the cost of such property, and incurred within 90 days after the date of such construction or acquisition (excluding accounts payable to trade creditors incurred in the ordinary course of business); provided that any Lien on such Indebtedness shall not extend to any property other than the property so acquired or constructed. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "QUALIFIED EQUITY INTEREST" means any Qualified Stock and all warrants, options or other rights to acquire Qualified Stock (but excluding any debt security that is convertible into or exchangeable for Capital Stock). "QUALIFIED STOCK" of any Person means any and all Capital Stock of such Person, other than Disqualified Stock. "RECEIVABLES AND RELATED ASSETS" means accounts receivable, instruments, chattel paper, health care insurance receivables, obligations, general intangibles and other similar assets, including interest in merchandise or goods, the sale or lease of which give rise to the foregoing, related contractual rights, guarantees, insurance proceeds, collections, other related assets and proceeds of all the foregoing. "RECEIVABLES PROGRAM" means, with respect to any Person, any securitization program pursuant to which such Person pledges, sells or otherwise transfers or encumbers its Receivables and Related Assets, including a trust, limited liability company, special purpose entity or other similar entity. "RECEIVABLES SUBSIDIARY" means a Wholly Owned Subsidiary (i) created for the purpose of financing Receivables and Related Assets created in the ordinary course of business of the Company and its Subsidiaries and (ii) the sole assets of which consist of Receivables and Related Assets of the Company and its Subsidiaries and Permitted Investments. "REFERENCE DATE" means October [17], 2001. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of the Closing Date, by and among the Company, the Guarantors and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time. "REGULATION S" means Regulation S promulgated under the Securities Act. "REGULATION S GLOBAL NOTE" means a Regulation S Temporary Global Note or a Regulation S Permanent Global Note, as appropriate. 15 "REGULATION S PERMANENT GLOBAL NOTE" means a permanent global Note in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount at maturity of the Regulation S Temporary Global Note upon expiration of the Restricted Period. "REGULATION S TEMPORARY GLOBAL NOTE" means a temporary global Note in the form of Exhibit A2 hereto bearing the Global Note Legend, the Private Placement Legend and the Temporary Regulation S Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount at maturity of the Notes initially sold in reliance on Rule 903 of Regulation S. "RELATED PARTY" means: (a) any controlling stockholder, partner, member, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Principal; or (b) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Principals and/or such other Persons referred to in the immediately preceding clause. "REPRESENTATIVE" means the trustee, agent or representative for any Senior Indebtedness. "RESPONSIBLE OFFICER," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. "RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the Private Placement Legend. "RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private Placement Legend. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED PERIOD" means the 40-day restricted period as defined in Regulation S. "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary other than an Unrestricted Subsidiary. Notwithstanding anything to the contrary herein or in the Notes, Toms River Imaging Associates, L.P. shall be deemed to be a Restricted Subsidiary of the Company 16 for purposes of this Indenture and the Notes so long as the Company and the Guarantors, directly or indirectly, own at least 50% of the Voting Stock thereof. "RULE 144" means Rule 144 promulgated under the Securities Act. "RULE 144A" means Rule 144A promulgated under the Securities Act. "RULE 903" means Rule 903 promulgated under the Securities Act. "RULE 904" means Rule 904 promulgated the Securities Act. "SALE AND LEASEBACK TRANSACTION" means any transaction or series of related transactions pursuant to which the Company or a Restricted Subsidiary sells or transfers any property or asset in connection with the leasing, or the resale against installment payments, of such property or asset to the seller or transferor. "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and the rules and regulations thereunder. "SENIOR BANK DEBT" means the Obligations outstanding under the Credit Agreement. "SENIOR INDEBTEDNESS" " means (i) the Senior Bank Debt and any Hedging Obligations owing by the Company or any Guarantor to any lender which is a party to the Credit Agreement (or to any Affiliate of any such lender), (ii) any other Indebtedness permitted to be incurred by the Company or any Restricted Subsidiary under the terms of this Indenture and (iii) any Indebtedness of the Parent, unless, in the case of clauses (ii) and (iii), the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to any Indebtedness for money borrowed. Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness will not include (i) Indebtedness evidenced by the Notes or the Guarantees, (ii) Indebtedness of the Company or any Guarantor that is expressly subordinated in right of payment to any Senior Indebtedness of the Company or such Guarantor or the Notes or such Guarantor's Guarantee, (iii) Indebtedness of the Company that by operation of law is subordinate to any general unsecured obligations of the Company, (iv) Indebtedness of the Company or any Guarantor to the extent incurred in violation of this Indenture, (v) any liability for federal, state or local taxes or other taxes, owed or owing by the Company or the Parent, (vi) trade account payables owed or owing by the Company or any Guarantor, (vii) amounts owed by the Company or any Guarantor for compensation to employees or for services rendered to the Company or such Guarantor, (viii) Indebtedness of the Company to any Restricted Subsidiary or any other Affiliate of the Company, (ix) Disqualified Stock of the Company or any Guarantor (x) Indebtedness which when incurred and without respect to any election under Section 1111(b) of Title 11 of the United States Code is without recourse to the Company or any Restricted Subsidiary and (xi) any Existing Notes outstanding following consummation of the Acquisition. 17 "SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary of the Company that, together with its Subsidiaries, (a) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated net revenues of the Company and its Subsidiaries, (b) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the most recently available consolidated financial statements of the Company for such fiscal year or (c) was organized or acquired after the beginning of such fiscal year and would have been a Significant Subsidiary if it had been owned during such entire fiscal year. "S&P" means Standard & Poor's Ratings Group and any successor thereof. "STATED MATURITY" means, when used with respect to any Note or any installment of interest thereon, the date specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable and, when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness or any installment of interest thereon is due and payable. "SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or a Guarantor that is subordinated in right of payment to the Notes or the Guarantee issued by such Guarantor, as the case may be. "SUBSIDIARY" means any Person a majority of the equity ownership or Voting Stock of which is at the time owned, directly or indirectly, by the Company and/or one or more other Subsidiaries of the Company. Notwithstanding anything to the contrary herein or in the Notes, Toms River Imaging Associates, L.P. shall be deemed to be a Subsidiary of the Company for purposes of this Indenture and the Notes so long as the Company and the Guarantors, directly or indirectly, own at least 50% of the Voting Stock thereof. "SUBSIDIARY GUARANTORS" means, collectively, all Wholly Owned Restricted Subsidiaries that are incorporated in the United States or a State thereof or the District of Columbia. "TEMPORARY REGULATION S LEGEND" means the legend set forth in Section 2.07(h) hereof, which is required to be placed on the Regulation S Temporary Global Note. "TRANSACTIONS" means, collectively, (i) the merger of InSight Health Services Acquisition Corp. ("ACQUISITION CORP.") with and into the Company pursuant to an Agreement and Plan of Merger, dated as of June 29, 2001, among Acquisition Corp., the Parent and the Company, as amended, and the payment of the purchase price thereunder, (ii) the initial funding under the Credit Agreement, (iii) the equity contribution by the Equity Sponsors or their Affiliates of $[101,500,000] to the Parent, (iv) the rollover of options having a net value of $[_____] by certain members of the Company's senior management into options of the Parent, the repurchase by Acquisition Corp. of all of the Existing Notes and (v) the repayment of 18 $[_________] of then outstanding debt of the Company, in each case as such transactions occurred on the Reference Date. "TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C. Sections 77aaa - 77bbbb), as in effect on the date on which this Indenture is qualified under the TIA. "TRUSTEE" means State Street Bank and Trust Company, N.A., until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "UNRESTRICTED GLOBAL NOTE" means a permanent Global Note substantially in the form of Exhibit A1 attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary that is designated by the Board of the Company as an Unrestricted Subsidiary in accordance with Section 4.17 hereof and (b) any Subsidiary of an Unrestricted Subsidiary. "U.S. GOVERNMENT OBLIGATIONS" means (i) securities that are (a) direct obligations of the United States of America for the payment of which the full faith and credit of the United States of America is pledged or (b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof; and (ii) depositary receipts issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any U.S. Government Obligation which is specified in clause (i) above and held by such bank for the account of the holder of such depositary receipt, or with respect to any specific payment of principal or interest on any U.S. Government Obligation which is so specified and held, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal or interest of the U.S. Government Obligation evidenced by such depositary receipt. "U.S. PERSON" means a U.S. person as defined in Rule 902(o) under the Securities Act. "VOTING STOCK" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency). 19 "WEIGHTED AVERAGE LIFE TO MATURITY" means, as of the date of determination with respect to any Indebtedness or Disqualified Stock, the quotient obtained by dividing (a) the sum of the products of (i) the number of years from the date of determination to the date or dates of each successive scheduled principal or liquidation value payment of such Indebtedness or Disqualified Stock, respectively, multiplied by (ii) the amount of each such principal or liquidation value payment by (b) the sum of all such principal or liquidation value payments. "WHOLLY OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary, all of the outstanding Voting Stock (other than directors' qualifying shares or shares of foreign Restricted Subsidiaries required to be owned by foreign nationals pursuant to applicable law) of which is owned, directly or indirectly, by the Company. "WHOLLY OWNED SUBSIDIARY" means any Subsidiary, all of the outstanding Voting Stock (other than directors' qualifying shares or shares of foreign Subsidiaries required to be owned by foreign nationals pursuant to applicable law) of which is owned, directly or indirectly, by the Company. Section 1.02 Other Definitions.
DEFINED IN TERM SECTION ---- ------- "AFFILIATE TRANSACTION"...................................... 4.11 "EXCESS PROCEEDS OFFER"...................................... 4.10 "AUTHENTICATION ORDER"....................................... 2.02 "CHANGE OF CONTROL OFFER".................................... 4.15 "CHANGE OF CONTROL PAYMENT".................................. 4.15 "CHANGE OF CONTROL PAYMENT DATE"............................. 4.15 "COVENANT DEFEASANCE"........................................ 8.03 "DTC"........................................................ 2.01 "EVENT OF DEFAULT"........................................... 6.01 "EXCESS PROCEEDS"............................................ 4.10 "INCUR"...................................................... 4.09 "LEGAL DEFEASANCE"........................................... 8.02 "OFFER AMOUNT"............................................... 3.10 "OFFER PERIOD"............................................... 3.10 "OFFSHORE TRANSACTION"....................................... 2.07 "PAYING AGENT"............................................... 2.03 "PAYMENT DEFAULT"............................................ 6.01 "PERMITTED DEBT"............................................. 4.09 "PURCHASE DATE".............................................. 3.10 "REGISTRAR".................................................. 2.04 "RELATED JUDGMENT"........................................... 13.09 "RELATED PROCEEDINGS"........................................ 13.09 "REPURCHASE OFFER"........................................... 3.10 "RESALE RESTRICTION TERMINATION DATE"........................ 2.07
20
DEFINED IN TERM SECTION ---- ------- "RESTRICTED PAYMENTS"........................................ 4.07 "SPECIFIED COURTS"........................................... 13.09 "UNITED STATES".............................................. 2.07
Section 1.03 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Notes; "INDENTURE SECURITY HOLDER" means a Holder of a Note; "INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and "OBLIGOR" on the Notes means the Company and any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04 Rules of Construction. (a) Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (iii) "or" is not exclusive; (iv) words in the singular include the plural, and in the plural include the singular; (v) provisions apply to successive events and transactions; and 21 (vi) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. ARTICLE TWO THE NOTES Section 2.01 Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A1 or A2 hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be issued in registered, global form without interest coupons and only shall be in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A1 or A2 attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A1 attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.07 hereof. (c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, as custodian for The Depository Trust Company ("DTC") in New York, New York, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from Euroclear and Clearstream certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount at maturity of the Regulation S Temporary 22 Global Note (except to the extent of any Beneficial Owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who shall take delivery of a beneficial ownership interest in a 144A Global Note bearing a Private Placement Legend, all as contemplated by Section 2.07(a)(ii) hereof), and (ii) an Officers' Certificate from the Company. Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. (d) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by Participants through Euroclear or Clearstream. Section 2.02 Execution and Authentication. Two Officers of the Company shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. Such signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is unlimited. The Trustee shall, upon a written order of the Company signed by two Officers of the Company (an "AUTHENTICATION ORDER"), authenticate Notes for original issue up to the aggregate principal amount of $[___](2), of which $[___] million will be issued on the date of this Indenture. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.08 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication - ------------------- (2) Amount of initial Notes plus $[100]million of Additional Notes. 23 by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.03 Methods of Receiving Payments on the Notes. If a Holder of Notes has given wire transfer instructions to the Company at least 10 Business Days before payment is due, the Company shall pay all principal, interest and premium and Liquidated Damages, if any, on that Holder's Notes in accordance with those instructions. All other payments on Notes shall be made at the office or agency of the Paying Agent and Registrar within the City and State of New York unless the Company elects to make interest payments by check mailed to the Holders at their addresses set forth in the register of Holders. Section 2.04 Registrar and Paying Agent. (a) The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("REGISTRAR") and an office or agency where Notes may be presented for payment ("PAYING AGENT"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without prior notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. (b) The Company initially appoints DTC to act as Depositary with respect to the Global Notes. (c) The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. Section 2.05 Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and shall notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or one of its Subsidiaries) shall have no further liability for the money. If the Company or any of its Subsidiaries acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. 24 Section 2.06 Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). Section 2.07 Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes shall be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 90 days after the date of such notice from the Depositary; (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act; or (iii) there shall have occurred and be continuing a Default or Event of Default with respect to the Notes. Upon the occurrence of any of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.08 and 2.11 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.07 or Section 2.08 or 2.11 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.07(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.07(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery 25 thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Temporary Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.07(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.07(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.07(f) hereof, the requirements of this Section 2.07(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount at maturity of the relevant Global Notes pursuant to Section 2.07(i) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.07(b)(ii) above and the Registrar receives the following: (A) if the transferee shall take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and 26 (B) if the transferee shall take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or Regulation S Permanent Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any Holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.07(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. 27 If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any Holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or 28 (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.07(i) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.07(c) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.07(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Beneficial Interests in Regulation S Temporary Global Note to Definitive Notes. Notwithstanding Sections 2.07(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (iii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A Holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or 29 (D) the Registrar receives the following: (1) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any Holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.07(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.07(i) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.07(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.07(c)(iv) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: 30 (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, and in the case of clause (C) above, the Regulation S Global Note and in all other cases the IAI Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: 31 (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.07(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an 32 Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.07(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.07(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer shall be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer shall be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer shall be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; 33 (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not Broker-Dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. Any Notes that remain outstanding after the consummation of the Exchange Offer, and Exchange Notes issued in connection with the Exchange Offer, shall be treated as a single class of securities under this Indenture. 34 (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. Except as permitted below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: THIS NOTE AND THE GUARANTEES ENDORSED HEREON HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR THE GUARANTEES ENDORSED HEREON NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL CLOSING DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON (OR ANY PREDECESSOR OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, THE PARENT OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE (E) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, 35 CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraph (b)(iv), (c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of this Section 2.07 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.07(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. (h) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note shall bear a legend in substantially the following form: THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON. (i) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.12 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who shall take delivery thereof in the 36 form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (j) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a Holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.11, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid and legally binding obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. 37 (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.07 to effect a registration of transfer or exchange may be submitted by facsimile with the original to follow by first class mail. Section 2.08 Replacement Notes. (a) If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. (b) Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.09 Outstanding Notes. (a) The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.10 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof. (b) If a Note is replaced pursuant to Section 2.08 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser. (c) If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. (d) If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any of the foregoing) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. Section 2.10 Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the 38 purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. Section 2.11 Temporary Notes. (a) Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of Definitive Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Notes in exchange for temporary Notes. (b) Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. Section 2.12 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of canceled Notes in accordance with its procedures for the disposition of canceled securities in effect as of the date of such disposition (subject to the record retention requirement of the Exchange Act). Certification of the disposition of all canceled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.13 Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. Section 2.14 CUSIP Numbers. The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice 39 of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the "CUSIP" numbers. ARTICLE THREE REDEMPTION AND PREPAYMENT; SATISFACTION AND DISCHARGE Section 3.01 Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. Section 3.02 Selection of Notes to Be Redeemed. (a) If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. (b) The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount at maturity thereof to be redeemed. No Notes in amounts of $1,000 or less shall be redeemed in part. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.03 Notice of Redemption. (a) Subject to the provisions of Section 3.10 hereof, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (i) the redemption date; 40 (ii) the redemption price; (iii) if any Note is being redeemed in part, the portion of the principal amount at maturity of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion of the original Note shall be issued in the name of the Holder thereof upon cancellation of the original Note; (iv) the name and address of the Paying Agent; (v) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price and become due on the date fixed for redemption; (vi) that, unless the Company defaults in making such redemption payment, interest, if any, on Notes called for redemption ceases to accrue on and after the redemption date; (vii) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (viii) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. (b) At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. The notice, if mailed in the manner provided herein shall be presumed to have been given, whether or not the Holder receives such notice. Section 3.04 Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05 Deposit of Redemption Price. (a) One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest and Liquidated Damages, if any, on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. (b) If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or 41 prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Holder in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06 Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. No Notes in denominations of $1,000 or less shall be redeemed in part. Section 3.07 Optional Redemption. (a) Except as set forth in clause (b) and (c) of this Section 3.07, the Company shall not have the option to redeem the Notes pursuant to this Section 3.07 prior to [ ], 200[_]. Thereafter, the Company may redeem all or a part of the Notes from time to time, upon not less than 30 days' (or, if all of the Notes are then held by the Initial Purchaser and/or any of its affiliates, 15 days) nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on [ ] of the years indicated below (subject to the right of Holders on the relevant record date to receive interest due on the related interest payment date):
YEAR PERCENTAGE ---- ---------- 200[_]....................... [ ]% 200[_]....................... [ ]% 200[_] and thereafter........ 100.0000%
(b) At any time prior to [ ], 200[_], the Company may redeem up to 35% of the aggregate principal amount of Notes originally issued hereunder at a redemption price of [ ]% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of the initial Public Offerings; provided that (A) at least 65% of the aggregate principal amount of the Notes originally issued under this Indenture remains outstanding immediately after the occurrence of such redemption, excluding Notes held by the Parent, the Company and its Subsidiaries; and (B) the redemption must occur within 60 days of the date of the closing of such initial Public Equity Offering. (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. 42 Section 3.08 Mandatory Redemption. Except as set forth in Section 4.10 and 4.15 hereof, the Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. Section 3.09 Repurchase Offers. In the event that, pursuant to Sections 4.10 and 4.15 hereof, the Company shall be required to commence an offer to all Holders to purchase their respective Notes (a "REPURCHASE OFFER"), it shall follow the procedures specified below. The Repurchase Offer shall remain open for a period of not less than 30 and not more than 60 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than five Business Days after the termination of the Offer Period (the "PURCHASE DATE"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Sections 4.10 and 4.15 hereof (the "OFFER AMOUNT") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Repurchase Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Repurchase Offer. Upon the commencement of a Repurchase Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Repurchase Offer. The Repurchase Offer shall be made to all Holders. The notice, which shall govern the terms of the Repurchase Offer, shall state: (i) that the Repurchase Offer is being made pursuant to Section 4.10 or Section 4.15 hereof, and the length of time the Repurchase Offer shall remain open; (ii) the Offer Amount, the purchase price and the Purchase Date; (iii) that any Note not tendered or accepted for payment shall continue to accrete or accrue interest and Liquidated Damages, if any; (iv) that, unless the Company defaults in making such payment, any Note (or portion thereof) accepted for payment pursuant to the Repurchase Offer shall cease to accrete or accrue interest and Liquidated Damages, if any, after the Purchase Date; (v) that Holders electing to have a Note purchased pursuant to a Repurchase Offer may elect to have Notes purchased in integral multiples of $1,000 only; (vi) that Holders electing to have a Note purchased pursuant to any Repurchase Offer shall be required to surrender the Note, with the form entitled "Option 43 of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (vii) that Holders shall be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing its election to have such Note purchased; (viii) that, if the aggregate amount of Notes surrendered by Holders exceeds the Offer Amount, the Trustee shall select the Notes to be purchased pursuant to the terms of Section 3.02 hereof (with such adjustments as may be deemed appropriate by the Trustee so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (ix) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On the Purchase Date, the Company shall, to the extent lawful, accept for payment on a pro rata basis to the extent necessary, the Offer Amount of Notes (or portions thereof) tendered pursuant to the Repurchase Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes (or portions thereof) were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of Notes tendered by such Holder, as the case may be, and accepted by the Company for purchase, and the Company, shall promptly issue a new Note. The Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount at maturity equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the respective Holder thereof. The Company shall publicly announce the results of the Repurchase Offer on the Purchase Date. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Excess Proceeds Offer. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. 44 Section 3.10 Application of Trust Money. All money deposited with the Trustee pursuant to Section 12.02 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. ARTICLE FOUR COVENANTS Section 4.01 Payment of Notes. (a) The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or one of its Subsidiaries, holds as of 1:00 p.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. (b) The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest, and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02 Maintenance of Office or Agency. (a) The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee or an agent of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. (b) The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain 45 an office or agency in the Borough of Manhattan, The City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. (c) The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.04 of this Indenture. Section 4.03 Reports. (a) Whether or not the Company is required to file reports with the SEC, so long as any Notes are outstanding, the Company will file with the SEC, within the time periods specified in the SEC's rules and regulations, all such annual reports, quarterly reports and other documents that the Company would be required to file if it were subject to Section 13(a) or 15(d) under the Exchange Act. The Company will also be required (i) to supply to the Trustee and each Holder, or supply to the Trustee for forwarding to each such Holder, without cost to such Holder, copies of such reports and other documents within 15 days after the date on which the Company files such reports and documents with the SEC or the date on which the Company would be required to file such reports and documents if the Company were so required and (ii) if filing such reports and documents with the SEC is not accepted by the SEC or is prohibited under the Exchange Act, to supply at the Company's cost copies of such reports and documents to any prospective Holder promptly upon written request. In addition, the Company has agreed that, for so long as any Notes remain outstanding, it will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information specified in Rule 144A(d)(4) under the Securities Act. (b) Notwithstanding subsection (a) above, so long as the Parent guarantees the Notes, the reports, information and other documents required to be filed and provided as described above may be those of the Parent, rather than the Company, so long as such filings (i) would satisfy the requirements of the Exchange Act and the regulations promulgated thereunder and (ii) disclose the Company's results of operations and financial condition in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in at least such detail as would be required if the Company were filing such report. Section 4.04 Compliance Certificate. (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge, the Company has kept, observed, performed and fulfilled its obligations under this Indenture and is not in default in the performance or observance of any of the material terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred and be continuing, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her 46 knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) If required under Section 314(a) of the Trust Indenture Act, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (which shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article Four or Article Five hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05 Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, any material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. Section 4.06 Stay, Extension and Usury Laws. The Company and each of the Guarantors covenant (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant that they shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. Section 4.07 Restricted Payments. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, take any of the following actions: (i) declare or pay any dividend on, or make any distribution to holders of, any shares of the Capital Stock of the Company or any Restricted Subsidiary, other than (i) dividends or distributions payable solely in Qualified Equity Interests or (ii) dividends or distributions by a Restricted Subsidiary payable to the Company or a Wholly Owned 47 Restricted Subsidiary or to all holders of Capital Stock of such Restricted Subsidiary on a pro rata basis; (ii) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any shares of Capital Stock, or any options, warrants or other rights to acquire such shares of Capital Stock, of the Company, any direct or indirect parent of the Company or any Subsidiary of the Company (other than a Wholly Owned Restricted Subsidiary); (iii) make any principal payment on, or repurchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, sinking fund payment or maturity, any Subordinated Indebtedness; and (iv) make any Investment (other than a Permitted Investment) in any Person (such payments or other actions described in (but not excluded from) clauses (a) through (d) being referred to as "RESTRICTED Payments"), unless at the time of, and immediately after giving effect to, the proposed Restricted Payment: (i) no Default or Event of Default has occurred and is continuing; (ii) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a); and (iii) the aggregate amount of all Restricted Payments made after the Reference Date does not exceed the sum of: (A) 50% of the aggregate Consolidated Net Income of the Company during the period (taken as one accounting period) from the first day of the Company's first fiscal quarter commencing after the Closing Date to the last day of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Net Income is a loss, minus 100% of such amount); plus (B) 100% of the aggregate net cash proceeds received by the Company after the Reference Date as a capital contribution or from the issuance or sale (other than to a Subsidiary) of either (1) Qualified Equity Interests of the Company or (2) debt securities or Disqualified Stock that have been converted into or exchanged for Qualified Stock of the Company, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange. (b) Notwithstanding the foregoing, the Company and its Restricted Subsidiaries may take the following actions, so long as no Default or Event of Default has occurred and is continuing or would occur: 48 (i) the payment of any dividend within 60 days after the date of declaration thereof, if at the declaration date such payment would not have been prohibited by the foregoing provisions; (ii) the repurchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company, in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, Qualified Equity Interests of the Company or of the Parent, the proceeds of which are contributed to the Company as a capital contribution on a substantially concurrent basis; (iii) the purchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, shares of Qualified Equity Interests of the Company or of the Parent, the proceeds of which are contributed to the Company as a capital contribution on a substantially concurrent basis; (iv) the purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Indebtedness in exchange for, or out of the net cash proceeds of a substantially concurrent issuance or sale (other than to a Subsidiary) of, Subordinated Indebtedness, so long as the Company or a Restricted Subsidiary would be permitted to refinance such original Subordinated Indebtedness with such new Subordinated Indebtedness pursuant to clause (iv) of the definition of Permitted Indebtedness; (v) the repurchase of any Subordinated Indebtedness at a purchase price not greater than 101% of the principal amount of such Subordinated Indebtedness in the event of a Change of Control in accordance with provisions similar to Section 4.15 hereof; provided that prior to or simultaneously with such repurchase, the Company has made the Change of Control Offer as provided in Section 4.15 hereof with respect to the Notes and has repurchased all Notes validly tendered for payment in connection with such Change of Control Offer; and (vi) the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Company, options on any such shares or related stock appreciation rights or similar securities, or any dividend, distribution or advance to the Parent for the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Parent, options on any such shares or related stock appreciation rights or similar securities, in each case held by officers, directors or employees or former officers, directors or employees (or their estates or beneficiaries under their estates) of the Company, the Parent or any Subsidiary of the Company, as applicable, or by any employee benefit plan of the Company, the Parent or any Subsidiary of the Company, as applicable, upon death, disability, retirement or termination of employment or pursuant to the terms of any employee benefit plan or any other agreement under which such shares of stock or related rights were issued; provided that the aggregate amount of cash applied by the Company for such purchase, redemption, acquisition, cancellation or other retirement of such shares of Capital Stock of the Company or the Parent after the Reference Date does not exceed $7.5 million in the aggregate (excluding for purposes of calculating such amount the aggregate amount 49 received by any Person in connection with such purchase, redemption, acquisition, cancellation or other retirement of such shares that is concurrently used to repay loans made to such Person by the Company pursuant to clause (f) of the definition of "Permitted Investment"); (vii) the payment of dividends or other distributions or the making of loans or advances to the Parent in amounts required for the Parent to pay franchise taxes and other fees required to maintain its existence and provide for all other customary operating costs of the Parent to the extent attributable to the ownership and operation of the Company and its Restricted Subsidiaries, including, without limitation, in respect of director fees and expenses, administrative, legal and accounting services provided by third parties and other customary costs and expenses including all costs and expenses with respect to filings with the SEC; (viii) the payment of dividends or other distributions by the Company to the Parent in amounts required to pay the tax obligations of the Parent attributable to the Company and its Subsidiaries, determined as if the Company and its Subsidiaries had filed a separate consolidated, combined or unitary return for the relevant taxing jurisdiction; provided that (x) the amount of dividends paid pursuant to this clause (viii) to enable the Parent to pay Federal and state income taxes (and franchise taxes based on income) at any time shall not exceed the amount of such Federal and state income taxes (and franchise taxes based on income) actually owing by the Parent at such time to the respective tax authorities for the respective period and (y) any refunds received by the Parent attributable to the Company or any of its Restricted Subsidiaries shall promptly be remitted by the Parent to the Company through a contribution or purchase of common stock (other than Disqualified Stock) of the Company; (ix) the payment of dividends or other distributions or the making of loans or advances to the Parent in amounts required for the Parent to pay to the Equity Sponsors an annual amount not to exceed $500,000 for payment of management consulting or financial advisory services provided to the Company or any of the Subsidiaries; and (x) other Restricted Payments not to exceed $10 million at any one time outstanding. (b) The actions described in clauses (v), (vi), (vii), (viii), (ix) and (x) of Section 4.07(b) will be Restricted Payments that will be permitted to be taken in accordance with this Section 4.07 but will reduce the amount that would otherwise be available for Restricted Payments under clause (iv)(iii) of Section 4.07(a) hereof and the actions described in clauses (i), (ii), (iii) and (iv) of Section 4.07(b) will be Restricted Payments that will be permitted to be taken in accordance with this Section 4.07 and will not reduce the amount that would otherwise be available for Restricted Payments under clause (iv)(iii) of Section 4.07(a) hereof. For the purpose of making any calculations under this Indenture (i) if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will be deemed to have made an Investment in an amount equal to the greater of the fair market value or net book value of the net assets of such Restricted Subsidiary at the time of such designation as determined by the 50 Board of the Company, and (ii) any property transferred to or from an Unrestricted Subsidiary will be valued at fair market value at the time of such transfer, as determined by the Board of the Company. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of the Company whose resolution with respect thereto shall be delivered to the Trustee, such determination to be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $10 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required under this Section 4.07 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. If the aggregate amount of all Restricted Payments calculated under the foregoing provision includes an Investment in an Unrestricted Subsidiary or other Person that thereafter becomes a Restricted Subsidiary, the aggregate amount of all Restricted Payments calculated under the foregoing provision will be reduced by the lesser of (x) the net asset value of such Subsidiary at the time it becomes a Restricted Subsidiary and (y) the initial amount of such Investment. If an Investment resulted in the making of a Restricted Payment, the aggregate amount of all Restricted Payments calculated under the foregoing provision will be reduced by the amount of any net reduction in such Investment (resulting from the payment of interest or dividends, loan repayment, transfer of assets or otherwise, other than the redesignation of an Unrestricted Subsidiary or other Person as a Restricted Subsidiary), to the extent such net reduction is not included in the Company's Consolidated Net Income; provided that the total amount by which the aggregate amount of all Restricted Payments may be reduced may not exceed the lesser of (x) the cash proceeds received by the Company and its Restricted Subsidiaries in connection with such net reduction and (y) the initial amount of such Investment. In computing the Consolidated Net Income of the Company for purposes of Section 4.07(a)(iii)(A) hereof, (i) the Company may use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (ii) the Company will be permitted to rely in good faith on the financial statements and other financial data derived from its books and records that are available on the date of determination. If the Company makes a Restricted Payment that, at the time of the making of such Restricted Payment, would in the good faith determination of the Company be permitted under the requirements of this Indenture, such Restricted Payment will be deemed to have been made in compliance with this Indenture notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Net Income of the Company for any period. 51 Section 4.08 Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to (i) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock, (ii) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (iii) make loans or advances to the Company or any other Restricted Subsidiary or (iv) transfer any of its properties or assets to the Company or any other Restricted Subsidiary. (b) However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (i) any agreement (including the Credit Agreement) in effect on the Reference Date; (ii) customary non-assignment provisions of any lease, license or other contract entered into in the ordinary course of business by the Company or any Restricted Subsidiary; (iii) the refinancing or successive refinancing of Indebtedness incurred under the agreements (including the Credit Agreement) in effect on the Reference Date, so long as such encumbrances or restrictions are no more restrictive, taken as a whole, than those contained in such original agreement; (iv) any agreement or other instrument of a Person acquired by the Company or any Restricted Subsidiary in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; (v) purchase money obligations for acquired property permitted under Section 4.09 hereof that impose restrictions of the nature described in clause (iv) of Section 4.08(a) hereof on the property so acquired; (vi) any agreement for the sale of a Restricted Subsidiary or an asset that restricts distributions by that Restricted Subsidiary or transfers of such asset pending its sale; (vii) secured Indebtedness otherwise permitted to be incurred pursuant to Section 4.12 hereof that limits the right of the debtor to dispose of the assets securing such Indebtedness; (viii) restrictions on cash or other deposits or net worth imposed by leases entered into in the ordinary course of business; (ix) Non-Recourse Indebtedness of any Permitted Joint Venture permitted to be incurred under the Indenture; 52 (x) applicable law or regulation; (xi) a Receivables Program with respect to a Receivables Subsidiary; and (xii) customary provisions in joint venture, limited liability company operating, partnership, shareholder and other similar agreements entered into in the ordinary course of business reasonably consistent with past practice by the Company or any Restricted Subsidiary. Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock. (a) The Company will not, and will not permit any Restricted Subsidiary to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "INCUR"), any Indebtedness (including Acquired Indebtedness and the issuance of Disqualified Stock), except that the Company and any Subsidiary Guarantors may incur Indebtedness if, at the time of such event, the Fixed Charge Coverage Ratio for the immediately preceding four full fiscal quarters for which internal financial statements are available, taken as one accounting period, would have been equal to at least 2.0 to 1.0. (b) In making the foregoing calculation for any four-quarter period that includes the Reference Date, pro forma effect will be given to the Transactions, as if such transactions had occurred at the beginning of such four-quarter period. In addition (but without duplication), in making the foregoing calculation, pro forma effect will be given to: (i) the incurrence of such Indebtedness and (if applicable) the application of the net proceeds therefrom, including to refinance other Indebtedness, as if such Indebtedness was incurred and the application of such proceeds occurred at the beginning of such four-quarter period; (ii) the incurrence, repayment or retirement of any other Indebtedness by the Company or its Restricted Subsidiaries since the first day of such four-quarter period as if such Indebtedness was incurred, repaid or retired at the beginning of such four-quarter period; and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred at the beginning of such four-quarter period. In making a computation under the foregoing clause (i) or (ii), (A) the amount of Indebtedness under a revolving credit facility will be computed based on the average daily balance of such Indebtedness during such four-quarter period, (B) if such Indebtedness bears, at the option of the Company, a fixed or floating rate of interest, interest thereon will be computed by applying, at the option of the Company, either the fixed or floating rate, and (C) the amount of any Indebtedness that bears interest at a floating rate will be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any 53 Hedging Obligations applicable to such Indebtedness if such Hedging Obligations have a remaining term at the date of determination in excess of 12 months). (c) Notwithstanding the foregoing, the Company may, and may permit its Restricted Subsidiaries to, incur the following Indebtedness ("PERMITTED INDEBTEDNESS"): (i) Indebtedness of the Company or any Subsidiary Guarantor under the Credit Agreement (and the incurrence by any Guarantor of guarantees thereof) in an aggregate principal amount at any one time outstanding not to exceed $375 million, less any amounts applied to the permanent reduction of such credit facilities pursuant to the provisions of Section 4.10 hereof; (ii) Indebtedness represented by the Notes (other than the Additional Notes) and the Guarantees; (iii) Existing Indebtedness; (iv) the incurrence by the Company of Permitted Refinancing Indebtedness in exchange for, or the net cash proceeds of which are used to refund, refinance or replace, any Indebtedness that is permitted to be incurred under clause (ii) or (iii) above; (v) Indebtedness owed by the Company to any Restricted Subsidiary or owed by any Restricted Subsidiary to the Company or a Restricted Subsidiary (provided that such Indebtedness is held by the Company or such Restricted Subsidiary); provided that: (A) any Indebtedness of the Company or any Subsidiary Guarantor owing to any such Restricted Subsidiary is unsecured and subordinated in right of payment from and after such time as the Notes shall become due and payable (whether at Stated Maturity, acceleration, or otherwise) to the payment and performance of the Company's obligations under the Notes or the Subsidiary Guarantor's obligations under its Guarantee, as the case may be; and (B) (x) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (y) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof, shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (v); (vi) Indebtedness of the Company or any Restricted Subsidiary under Hedging Obligations incurred in the ordinary course of business; (vii) Indebtedness of the Company or any Restricted Subsidiary consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock; 54 (viii) either (A) Capitalized Lease Obligations of the Company or any Restricted Subsidiary or (B) Indebtedness under purchase money mortgages or secured by purchase money security interests so long as (x) such Indebtedness is not secured by any property or assets of the Company or any Restricted Subsidiary other than the property and assets so acquired and (y) such Indebtedness is created within 90 days of the acquisition of the related property; provided that the aggregate amount of Indebtedness under clauses (A) and (B) does not exceed 15% of Consolidated Tangible Assets at any one time outstanding; (ix) Guarantees by any Restricted Subsidiary made in accordance with the provisions of Section 4.19 hereof; (x) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within two business days of incurrence; (xi) Indebtedness of the Company or any of its Restricted Subsidiaries represented by letters of credit for the account of the Company or such Restricted Subsidiary, as the case may be, in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; (xii) the incurrence of Non-Recourse Indebtedness by Permitted Joint Ventures that are Restricted Subsidiaries; (xiii) Indebtedness incurred by a Receivables Subsidiary pursuant to a Receivables Program; provided that, after giving effect to any such incurrence of Indebtedness, the aggregate principal amount of all Indebtedness incurred under this clause (xiii) and then outstanding does not exceed $30 million; and (xiv) Indebtedness of the Company, any Restricted Subsidiary or any Permitted Joint Venture not permitted by any other clause of this definition, in an aggregate principal amount not to exceed $30 million at any one time outstanding. (d) For purposes of determining compliance with this Section 4.09, in the event that any proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (i) through (xiv) above, or is entitled to be incurred pursuant to Section 4.09(a) hereof, the Company will be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this Section 4.09. Indebtedness under the Credit Agreement immediately following the Acquisition shall be deemed to have been incurred on the date of the Acquisition in reliance on the exception provided by clause (i) of the definition of Permitted Indebtedness. 55 Section 4.10 Asset Sales. (a) The Company will not, and will not permit any Restricted Subsidiary to, engage in any Asset Sale unless (i) the consideration received by the Company or such Restricted Subsidiary for such Asset Sale is not less than the fair market value of the assets sold evidenced by a resolution of the board of directors of such entity set forth in an Officers' Certificate delivered to the Trustee and (ii) the consideration received by the Company or the relevant Restricted Subsidiary in respect of such Asset Sale consists of at least 75% cash or Cash Equivalents (for purposes of this clause (ii), cash and Cash Equivalents includes (1) any liabilities (as reflected in the Company's consolidated balance sheet) of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Note Guarantee) that are assumed by any transferee of any such assets or other property in such Asset Sale, and where the Company or the relevant Restricted Subsidiary is released from any further liability in connection therewith with respect to such liabilities, (2) any securities, notes or other similar obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted within 180 days of the consummation of the related Asset Sale by the Company or such Restricted Subsidiary into cash and Cash Equivalents (to the extent of the net cash proceeds or the Cash Equivalents (net of related costs) received upon such conversion) and (3) any Designated Noncash Consideration received by the Company or any such Restricted Subsidiary in the Asset Sale having an aggregate fair market value, as determined by the Board of the Company, taken together with all other Designated Noncash Consideration received pursuant to this clause that is at that time outstanding, not to exceed the greater of: (A) $10 million; and (B) 15% of Consolidated Tangible Assets at the time of the receipt of such Designated Noncash Consideration (with the fair market value of each item of such Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value). (b) If the Company or any Restricted Subsidiary engages in an Asset Sale, the Company may, at its option, within 12 months after such Asset Sale, (i) apply all or a portion of the Net Cash Proceeds to the permanent reduction of amounts outstanding under the Credit Agreement (and to correspondingly reduce the commitments, if any, with respect thereto) or to the permanent repayment of other Senior Indebtedness of the Company or a Restricted Subsidiary, provided that the repayment of any Indebtedness incurred under the Credit Agreement in connection with the acquisition of any Facility with the proceeds of any subsequent Sale and Leaseback Transaction relating to such Facility shall not be required to result in the permanent reduction of the amounts outstanding under the Credit Agreement or correspondingly permanently reduce the commitments thereunder, or (ii) invest (or enter into a legally binding agreement to invest) all or a portion of such Net Cash Proceeds in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in the businesses of the Company or its Restricted Subsidiaries, as the case may be, existing on the Reference Date or in businesses the same, similar or reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, the Company may, within 90 days of such termination or within 12 months of such 56 Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical contained in such clause (ii)) above. Pending the final application of any such Net Cash Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Cash Proceeds in a manner that is not prohibited by this Indenture. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph shall constitute "EXCESS PROCEEDS". (c) When the aggregate amount of Excess Proceeds exceeds $10 million, the Company will, within 30 days thereafter, make an offer to purchase (an "EXCESS PROCEEDS OFFER") from all Holders of Notes on a pro rata basis, in accordance with the procedures set forth in this Indenture, the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased with the Excess Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued interest and Liquidated Damages, if any, to the date such offer to purchase is consummated. To the extent that the aggregate principal amount of Notes tendered pursuant to such offer to purchase is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the Notes to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset to zero. Section 4.11 Transactions with Affiliates. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or suffer to exist any transaction with, or for the benefit of, any Affiliate of the Company ("Interested Persons"), unless (i) such transaction is on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could have been obtained in an arm's-length transaction with third parties who are not Interested Persons and (ii) the Company delivers to the Trustee (x) with respect to any transaction or series of related transactions entered into after the Reference Date involving aggregate payments in excess of $5 million, a resolution of the Company's Board set forth in an officers' certificate certifying that such transaction or transactions complies with clause (i) above and that such transaction or transactions have been approved by the Board (including a majority of the Disinterested Directors) of the Company and (y) with respect to a transaction or series of related transactions involving aggregate payments equal to or greater than $10 million, a written opinion as to the fairness to the Company or such Restricted Subsidiary of such transaction or series of transactions from a financial point of view issued by an accounting, appraisal or investment banking firm, in each case of national standing. (b) The foregoing Section 4.11(a) will not restrict: (i) transactions among the Company and/or its Restricted Subsidiaries; (ii) the Company from paying reasonable and customary regular compensation, indemnification, reimbursement and fees to officers of the Company or any Restricted Subsidiary and to directors of the Company or any Restricted Subsidiary who are not employees of the Company or any Restricted Subsidiary; 57 (iii) transactions permitted by Section 4.07; (iv) advances to employees for moving, entertainment and travel expenses and similar expenditures in the ordinary course of business and consistent with past practice; (v) any Receivables Program of the Company or a Restricted Subsidiary; (vi) the agreements listed on Schedule II to this Indenture, in each case as in effect as of the Reference Date or any amendment thereto (so long as the amended agreement is not more disadvantageous to the Holders of the Notes in any material respect than such agreement immediately prior to such amendment) or any transaction contemplated thereby; and (vii) sales of Equity Interests to Affiliates. Section 4.12 Liens. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Pari Passu Indebtedness or Subordinated Indebtedness of the Company on or with respect to any of its property or assets, including any shares of stock or Indebtedness of any Restricted Subsidiary, whether owned at the Closing Date or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless: (i) in the case of any Lien securing Subordinated Indebtedness, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien; and (ii) in the case of any Lien securing Pari Passu Indebtedness, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to or ranks equally with such Lien. (b) The Company will not permit any Subsidiary Guarantor to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Pari Passu Indebtedness or Subordinated Indebtedness of such Subsidiary Guarantor on or with respect to such Subsidiary Guarantor's properties or assets, including any shares of stock or Indebtedness of any other Restricted Subsidiary, whether owned at the date of this Indenture or thereafter acquired, or any income, profits or proceeds therefrom, or assign or otherwise convey any right to receive income thereon, unless: (i) in the case of any Lien securing Pari Passu Indebtedness of such Subsidiary Guarantor, each Guarantee of such Subsidiary Guarantor is secured by a Lien on such property, assets or proceeds that is senior in priority to or ranks equally with such Lien; and (ii) in the case of any Lien securing Subordinated Indebtedness of such Subsidiary Guarantor, each Guarantee of such Subsidiary Guarantor is secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien. 58 Section 4.13 Corporate Existence. Subject to Article Five, the Parent and the Company will do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence, rights (charter and statutory) and franchises of the Parent, the Company and each Subsidiary; provided that the Company shall not be required to preserve any such right or franchise if the Board shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries as a whole and that the loss thereof is not disadvantageous in any material respect to the Holders. Section 4.14 Limitation on Layering Debt. Neither the Company nor any Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness or guarantee, as applicable, that is subordinate or junior in right of payment to any Senior Indebtedness and senior in any respect in right of payment to the Notes or such Guarantor's Guarantee, respectively. Section 4.15 Offer to Repurchase upon a Change of Control. (a) Upon the occurrence of a Change of Control, each Holder shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "CHANGE OF CONTROL OFFER") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "CHANGE OF CONTROL PAYMENT"). Within 30 days following any Change of Control, the Company shall notify the Trustee thereof and mail a notice, by first-class mail, postage prepaid, to each Holder, describing the transaction or transactions that constitute the Change of Control and stating (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed or such later date as is necessary to comply with the requirements under the Exchange Act (the "CHANGE OF CONTROL PAYMENT DATE"); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing its election to have the Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company shall comply with the requirements of Rule 14e-1 under 59 the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture relating to such Change of Control Offer, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof. (b) By 2:00 p.m. (noon) Eastern Time on the Change of Control Payment Date, the Company shall, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. (c) Notwithstanding anything to the contrary in this Section 4.15, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 and Section 3.09 hereof and all other provisions of this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. Section 4.16 Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries. The Company (a) will not permit any Restricted Subsidiary to issue any Capital Stock unless after giving effect thereto the Company's percentage interest (direct and indirect) in the Capital Stock of such Restricted Subsidiary is at least equal to its percentage interest prior thereto, and (b) will not, and will not permit any Restricted Subsidiary to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Restricted Subsidiary to any Person (other than the Company or a Wholly Owned Restricted Subsidiary); provided that this covenant will not prohibit (i) the sale or other disposition of all, but not less than all, of the issued and outstanding Capital Stock of a Restricted Subsidiary owned by the Company and its Restricted Subsidiaries in compliance with the other provisions of this Indenture, (ii) the sale or other disposition of a portion of the issued and outstanding Capital Stock of a Restricted Subsidiary (other than a Subsidiary Guarantor) whether or not as a result of such sale or disposition such Restricted Subsidiary continues or ceases to be a Restricted Subsidiary if (A) at the time of such sale or disposition, the Company could make an Investment in the remaining Capital Stock held by it or one of its Restricted Subsidiaries in an amount equal to the amount of its remaining Investment in such Person pursuant to Section 4.07 hereof and (B) such sale or disposition is permitted under, and the Company or such Restricted Subsidiary applies the Net Cash Proceeds of any such sale in accordance with, Section 4.10 hereof, or (iii) the ownership by directors of director's qualifying shares or the ownership by foreign nationals of Capital Stock of any 60 Restricted Subsidiary, to the extent mandated by applicable law. The Company will not permit any Restricted Subsidiary to issue any Preferred Stock other than to the Company or any Subsidiary Guarantor. Section 4.17 Designation of Restricted and Unrestricted Subsidiaries. (a) The Board of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as (i) such Subsidiary has no Indebtedness other than Non-Recourse Indebtedness, (ii) no default with respect to any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Indebtedness of the Company or any Restricted Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity, (iii) any Investment in such Subsidiary made as a result of designating such Subsidiary an Unrestricted Subsidiary will not violate the provisions of Section 4.07 hereof, (iv) neither the Company nor any Restricted Subsidiary has a contract, agreement, arrangement, understanding or obligation of any kind, whether written or oral, with such Subsidiary other than those that might be obtained at the time from Persons who are not Affiliates of the Company, (v) neither the Company nor any Restricted Subsidiary has any obligation to subscribe for additional shares of Capital Stock or other equity interests in such Subsidiary, or to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results, and (vi) such Unrestricted Subsidiary has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Notwithstanding the foregoing, the Company may not designate any Subsidiary Guarantor (whether or not existing as of the Closing Date) as an Unrestricted Subsidary. (b) The Board of the Company may designate any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) no Default or Event of Default has occurred and is continuing following such designation and (ii) the Company could, at the time of making such designation and giving such pro forma effect as if such designation had been made at the beginning of the applicable four quarter period, incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) (treating any Indebtedness of such Unrestricted Subsidiary as the incurrence of Indebtedness by a Restricted Subsidiary). Section 4.18 Payments for Consent. Neither the Company nor any of its Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. 61 Section 4.19 Limitations on Issuances of Guarantees of Indebtedness. (a) The Company will not permit any Restricted Subsidiary that is not a Subsidiary Guarantor, directly or indirectly, to guarantee, assume or in any other manner become liable for the payment of any Indebtedness of the Company or any Indebtedness of any other Restricted Subsidiary, unless (i) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture providing for a guarantee of payment of the Notes by such Restricted Subsidiary on a senior subordinated basis on the same terms as set forth in this Indenture and (ii) with respect to any guarantee of Subordinated Indebtedness by a Restricted Subsidiary, any such guarantee is subordinated to such Restricted Subsidiary's guarantee with respect to the Notes at least to the same extent as such Subordinated Indebtedness is subordinated to the Notes, provided that the foregoing provision will not be applicable to any guarantee by any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary. (b) Any guarantee by a Restricted Subsidiary of the Notes pursuant to the preceding paragraph may provide by its terms that it will be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer to any Person not an Affiliate of the Company of all of the Company's and the Restricted Subsidiaries' Capital Stock in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by this Indenture) or (ii) the release or discharge of the guarantee that resulted in the creation of such guarantee of the Notes, except a discharge or release by or as a result of payment under such guarantee. Section 4.20 Additional Guarantees. The Company shall provide to the Trustee, on the date that any Person (other than a Foreign Subsidiary) becomes a Wholly Owned Restricted Subsidiary, a supplemental indenture to this Indenture, executed by such new Wholly Owned Restricted Subsidiary, providing for a full and unconditional guarantee on a senior subordinated basis by such new Wholly Owned Restricted Subsidiary of the Company's obligations under the Notes and this Indenture to the same extent as that set forth in this Indenture. ARTICLE FIVE SUCCESSORS Section 5.01 Merger, Consolidation or Sale of Assets. (a) Neither the Parent nor the Company will, in a single transaction or series of related transactions, consolidate or merge with or into (whether or not the Parent or the Company, as the case may be, is the surviving corporation), or directly and/or indirectly through its Subsidiaries, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets (determined on a consolidated basis for the Parent or the Company, as the case may be, and its Subsidiaries taken as a whole) in one or more related transactions to, another corporation, Person or entity unless: 62 (i) either (i) the Company or the Parent, as the case may be, is the surviving corporation or (ii) the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (the "SURVIVING ENTITY") is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia and assumes all the obligations of the Company or the Parent, as the case may be, under the Notes and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (ii) immediately after giving effect to such transaction and treating any obligation of the Company in connection with or as a result of such transaction as having been incurred as of the time of such transaction, no Default or Event of Default has occurred and is continuing; (iii) if such transaction involves the Company, the Company (or the Surviving Entity if the Company is not the continuing obligor under this Indenture) could, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant Section 4.09(a); (iv) each Guarantor, unless it is the other party to the transaction described above, has by supplemental indenture confirmed that its Guarantee applies to the Surviving Entity's obligations under this Indenture and the Notes; (v) if any of the property or assets of the Company or any of its Restricted Subsidiaries would thereupon become subject to any Lien, the provisions of Section 4.12 hereof are complied with; and (vi) the Company or the Parent, as the case may be, delivers or causes to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such transaction complies with the requirements of this Indenture. (b) No Subsidiary Guarantor shall consolidate with or merge with or into any other Person or convey, sell, assign, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any other Person (other than the Company or another Subsidiary Guarantor) unless: (i) subject to the provisions of the following paragraph, the Person formed by or surviving such consolidation or merger (if other than such Subsidiary Guarantor) or to which such properties and assets are transferred assumes all of the obligations of such Subsidiary Guarantor under this Indenture and its Guarantee, pursuant to a supplemental indenture in form and substance satisfactory to the Trustee; (ii) immediately after giving effect to such transaction, no Default or Event of Default has occurred and is continuing; and 63 (iii) the Subsidiary Guarantor delivers, or causes to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such transaction complies with the requirements of this Indenture. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. ARTICLE SIX DEFAULTS AND REMEDIES Section 6.01 Events of Default. "EVENT OF DEFAULT", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes (whether or not prohibited by the subordination provisions of Article Ten of this Indenture); (ii) default in payment when due of the principal of (or premium, if any, on) the Notes when due (whether or not prohibited by Article Ten of this Indenture); (iii) failure by the Parent or the Company, as applicable, or any of their Restricted Subsidiaries to comply with the provisions of Sections 4.07, 4.09, 4.10, 4.15 and 5.01; (iv) default in the performance, or breach, of any covenant or agreement of the Company or any Guarantor contained in this Indenture or in any Guarantee (other than a default in the performance, or breach, of a covenant or agreement that is specifically dealt with elsewhere herein), and continuance of such default or breach for a period of 60 days after written notice has been given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; (v) (x) an event of default has occurred under any mortgage, bond, indenture, loan agreement or other document evidencing an issue of Indebtedness of the Company, the Parent or any Restricted Subsidiary, which issue individually or in the aggregate has an aggregate outstanding principal amount of not less than $10 million, and such default has resulted in such Indebtedness becoming, whether by declaration or otherwise, due and payable prior to the date on which it would otherwise become due and payable or (y) 64 a default (a "PAYMENT DEFAULT") in any payment when due at final maturity of any such Indebtedness; (vi) failure by the Company, the Parent or any of its Restricted Subsidiaries to pay one or more final judgments the uninsured portion of which exceeds in the aggregate $10 million, which judgment or judgments are not paid, discharged or stayed for a period of 60 days; (vii) any Guarantee ceases to be in full force and effect or is declared null and void or any such Guarantor denies that it has any further liability under any Guarantee, or gives notice to such effect (other than by reason of the termination of this Indenture or the release of any such Guarantee in accordance with this Indenture); (viii) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Company, the Parent or any Significant Subsidiary a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustments or composition of or in respect of the Company, the Parent or any Significant Subsidiary under any Bankruptcy Law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company, the Parent or any Significant Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or (ix) the institution by the Company, the Parent or any Significant Subsidiary of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any Bankruptcy Law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company, the Parent or any Significant Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due. Section 6.02 Acceleration. (a) If an Event of Default (other than as specified in Section 6.01(viii) or (ix) hereof) occurs and is continuing, the Trustee or the Holders of not less than 25% in aggregate principal amount of then outstanding Notes may, and the Trustee at the request of such Holders will, declare the principal of, and accrued interest on, all of the outstanding Notes immediately due and payable and, upon any such declaration, such principal and such interest will become due and payable immediately. The Trustee shall promptly notify the Company of any such acceleration of the Notes pursuant to this Section 6.02(a). If an Event of Default specified in Section 6.01(viii) or (ix) hereof occurs and is continuing, then the principal of and accrued interest on all of the outstanding Notes will ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. 65 (b) At any time after a declaration of acceleration under this Indenture, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the holders of a majority in aggregate principal amount of the outstanding Notes, by written notice to the Company and the Trustee, may rescind such declaration and its consequences if: (i) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on, and Liquidate Damages with respect to, all Notes, (B) all unpaid principal of (and premium, if any, on) any outstanding Notes that has become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Notes, (C) to the extent that payment of such interest is lawful, interest upon overdue interest and overdue principal at the rate borne by the Notes and (D) all sums paid or advanced by the Trustee under this Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (ii) all Events of Default, other than the non-payment of amounts of principal of (or premium, if any, on), interest on or Liquidated Damages with respect to, the Notes that have become due solely by such declaration of acceleration, have been cured or waived. No such rescission will affect any subsequent default or impair any right consequent thereon. (c) Notwithstanding the preceding paragraph, in the event of a declaration of acceleration in respect of the Notes because an Event of Default specified in Section 501(e) shall have occurred and be continuing and provided no judgment or decree for payment of the money due has been obtained by the Trustee, such declaration of acceleration shall be automatically annulled if the Indebtedness that is the subject of such Event of Default has been discharged or the holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness, and written notice of such discharge or rescission, as the case may be, shall have been given to the Trustee by the Company and countersigned by the holders of such Indebtedness or a trustee, fiduciary or agent for such holders, within 30 days after such declaration of acceleration in respect of the Notes, and no other Event of Default has occurred during such 30-day period which has not been cured or waived during such period. Section 6.03 Other Remedies. (a) If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, interest, and Liquidated Damages, if any, with respect to, the Notes or to enforce the performance of any provision of the Notes or this Indenture. (b) The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon and during the continuance of an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04 Waiver of Past Defaults. Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee, may on behalf of the Holders of all of the Notes, waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of 66 Default in the payment of interest or Liquidated Damages, if any, on, or the principal of, the Notes (including in connection with an offer to purchase) (provided, however, that the Holders of a majority in principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). The Company shall deliver to the Trustee an Officers' Certificate stating that the requisite percentage of Holders have consented to such waiver and attaching copies of such consents. In case of any such waiver, the Company, the Trustee and the Holders shall be restored to their former positions and rights hereunder and under the Notes, respectively. This Section 6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05 Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or Liquidated Damages, if any) if it determines that withholding notice is in their interest. Section 6.06 Limitation on Suits. (a) A Holder may pursue a remedy with respect to this Indenture, or the Notes or the Guarantees only if: (i) the Holder gives to the Trustee written notice of a continuing Event of Default; (ii) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (iii) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee security and indemnity satisfactory to the Trustee against any loss, liability or expense that might be incurred by it in connection with the request or direction; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (v) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. 67 (b) A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07 Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, interest on, and Liquidated Damages, if any, with respect to, the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08 Collection Suit by Trustee. If an Event of Default specified in Section 6.01(i) or (ii) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium, if any, interest, and Liquidated Damages, if any, remaining unpaid on the Notes and interest on overdue principal and premium, if any, and, to the extent lawful, interest and Liquidated Damages, if any, and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09 Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company or any Guarantor (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other securities or property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. 68 Section 6.10 Priorities. (a) If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, interest and Liquidated Damages, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, interest, and Liquidated Damages, if any, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. (b) The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. Section 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than ten percent in principal amount of the then outstanding Notes. ARTICLE SEVEN TRUSTEE Section 7.01 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and 69 (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, costs, liability or expense that might be incurred by it in connection with the request or direction. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02 Certain Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. 70 (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of such event is sent to the Trustee in accordance with Section 13.02 hereof, and such notice references the Notes. Section 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may become a creditor of, or otherwise deal with, the Company or any of its Affiliates with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest as described in the Trust Indenture Act, it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04 Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. Section 7.05 Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium and Liquidated Damages, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. 71 Section 7.06 Reports by Trustee to Holders of the Notes. (a) Within 60 days after each [ ] beginning with the [ ] following the date hereof, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). (b) A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange or any delisting thereof. Section 7.07 Compensation and Indemnity. (a) The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder in accordance with a written schedule provided by the Trustee to the Company. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable and customary disbursements, advances and reasonable out-of-pocket expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable and customary compensation, disbursements and expenses of the Trustee's agents and counsel. (b) The Company shall indemnify the Trustee against any and all losses, liabilities or reasonable out-of-pocket expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by either of the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable and customary fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. (c) The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. (d) To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. 72 (e) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(viii) or (ix) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. (f) The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. Section 7.08 Replacement of Trustee. (a) A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. (b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (i) the Trustee fails to comply with Section 7.10 hereof; (ii) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (iii) a custodian or public officer takes charge of the Trustee or its property; or (iv) the Trustee becomes incapable of acting. (c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. (d) If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition at the expense of the Company any court of competent jurisdiction for the appointment of a successor Trustee. (e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (f) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as 73 Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. Section 7.09 Successor Trustee by Merger, Etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another Person, the successor Person without any further act shall be the successor Trustee. Section 7.10 Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100.0 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). Section 7.11 Preferential Collection of Claims Against Company. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. The Trustee hereby waives any right to set-off any claim that it may have against the Company in any capacity (other than as Trustee and Paying Agent) against any of the assets of the Company held by the Trustee; provided, however, that if the Trustee is or becomes a lender of any other Indebtedness permitted hereunder to be pari passu with the Notes, then such waiver shall not apply to the extent of such Indebtedness. ARTICLE EIGHT DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of the Board evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight. Section 8.02 Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.02 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all 74 outstanding Notes and all obligations of the Guarantors shall be deemed to have been discharged with respect to their obligations under the Subsidiary Guarantees on the date the conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the Company and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes and Subsidiary Guarantees, respectively, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, interest and Liquidated Damages, if any, on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article Two and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. Section 8.03 Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.19, 4.20 and 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, S ections 6.01(iii) through (vii) shall not constitute Events of Default. Section 8.04 Conditions to Legal or Covenant Defeasance. (a) The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: 75 (i) the Company must irrevocably deposit or cause to be deposited with the Trustee, as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders, money in an amount, or U.S. Government Obligations that through the scheduled payment of principal and interest thereon will provide money in an amount, or a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge the principal of (and premium, if any, on) and interest and Liquidated Damages, if any, on the outstanding Notes at maturity (or upon redemption, if applicable) of such principal or installment of interest or Liquidated Damages; (ii) no Default or Event of Default has occurred and is continuing on the date of such deposit or, insofar as an event of bankruptcy under Section 6.01(viii) is concerned, at any time during the period ending on the 91st day after the date of such deposit; (iii) such Legal Defeasance or Covenant Defeasance may not result in a breach or violation of, or constitute a default under, this Indenture, the Credit Agreement or any material agreement or instrument to which the Company or any Guarantor is a party or by which it is bound; (iv) in the case of Legal Defeasance, the Company must deliver to the Trustee an Opinion of Counsel stating that the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or, since the Closing Date, there has been a change in applicable federal income tax law, to the effect, and based thereon such opinion must confirm, that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (v) in the case of Covenant Defeasance, the Company must have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; and (vi) the Company must have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with. Section 8.05 Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. (a) Subject to Section 8.06 hereof, all money and non-callable U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "TRUSTEE") pursuant to 76 Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Liquidated Damages, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. (b) The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable U.S. Government Obligations deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. (c) Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable U.S. Government Obligations held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06 Repayment to the Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Company. Section 8.07 Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable U.S. Government Obligations in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if 77 any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes. (a) Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors, and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (i) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company in this Indenture and in the Notes; or (ii) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (iii) to add additional Events of Defaults; or (iv) to provide for uncertificated Notes in addition to or in place of certificated Notes; or (v) to evidence and provide for the acceptance of appointment under this Indenture by a successor Trustee; or (vi) to secure the Notes; or (vii) to cure any ambiguity, to correct or supplement any provision in this Indenture that may be defective or inconsistent with any other provision in this Indenture, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such actions pursuant to this clause do not adversely affect the interests of the Holders in any material respect; or (viii) to comply with any requirements of the SEC in order to effect and maintain the qualification of this Indenture under the Trust Indenture Act; or (ix) to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture as of its date; or (x) to allow any Guarantor to execute a supplemental Indenture and a Guarantee with respect to the Notes; or (xi) to provide for the issuance of the Exchange Notes pursuant to the terms of this Indenture. 78 Notwithstanding the foregoing, neither the Company nor the Trustee may amend any provisions of the Indenture or the Notes concerning (i) the subordination of the Notes and the Guarantees or (ii) legal defeasance or covenant defeasance without, in either case, the prior written consent of the Agent Bank, acting on behalf of the Banks under the Credit Agreement. (b) Upon the request of the Company accompanied by a resolution of its Board authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02 With Consent of Holders of Notes. (a) Except as provided below in this Section 9.02, the Company the Guarantors and the Trustee may amend or supplement this Indenture or the Notes with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). (b) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto. If a record date is fixed, the Holders on such record date, or its duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental indenture, whether or not such Holders remain Holders after such record date; provided that unless such consent shall have become effective by virtue of the requisite percentage having been obtained prior to the date which is 90 days after such record date, any such consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect. (c) Upon the request of the Company accompanied by a resolution of its Board authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence reasonably satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. 79 (d) It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. (e) After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) may waive compliance in a particular instance by the Company with any provision of this Indenture, or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (i) change the Stated Maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest or Liquidated Damages, if any, thereon or any premium payable upon the redemption thereof, or change the coin or currency in which any Note or any premium or the interest or any Liquidated Damages thereon are payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the redemption date); (ii) amend, change or modify the obligation of the Company to make and consummate an Excess Proceeds Offer with respect to any Asset Sale in accordance with the covenant described under Section 4.10 or the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control in accordance with Section 4.15, including, in each case, amending, changing or modifying any definition relating thereto; (iii) reduce the percentage in principal amount of outstanding Notes, the consent of whose Holders is required for any waiver of compliance with certain provisions of, or certain defaults and their consequences provided for under, this Indenture; (iv) waive a Default or Event of Default in the payment of principal of, or premium, if any, or interest or Liquidated Damages, if any, on the Notes or reduce the percentage or aggregate principal amount of outstanding Notes the consent of whose Holders is necessary for waiver of compliance with certain provisions of this Indenture or for waiver of certain Defaults or Events of Default; (v) modify the ranking or priority of the Notes or the Guarantee of any Guarantor; or (vi) release any Guarantor from any of its obligations under its Guarantee or this Indenture other than in accordance with the terms of this Indenture. (vii) make any change in the preceding amendment and waiver provisions. 80 Section 9.03 Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. Section 9.04 Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. Section 9.05 Notation on or Exchange of Notes. (a) The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. (b) Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06 Trustee to Sign Amendments, Etc. The Trustee shall sign any amended or supplemental indenture or Note authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture or Note until its Board approves it. In executing any amended or supplemental indenture or Note, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE TEN SUBORDINATION Section 10.01 Agreement to Subordinate. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article Ten, to the prior payment in full of all Senior Indebtedness (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Indebtedness. 81 Section 10.02 Liquidation; Dissolution; Bankruptcy. The holders of Senior Indebtedness of the Company will be entitled to receive payment in full of all Obligations due in respect of Senior Indebtedness of the Company (including interest after the commencement of any bankruptcy proceeding at the rate specified in the applicable Senior Indebtedness of the Company) before the Holders will be entitled to receive any payment with respect to the Notes (except that Holders may receive and retain securities that are subordinated at least to the same extent as the Notes to Senior Indebtedness and any securities issued in exchange for Senior Indebtedness ("PERMITTED JUNIOR SECURITIES") and payments made from the trust pursuant to Article Eight hereunder), in the event of any distribution to creditors of the Company: (i) in a liquidation or dissolution of the Company; (ii) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property; (iii) in an assignment for the benefit of creditors; or (iv) in any marshaling of the Company's assets and liabilities. Section 10.03 Default on Designated Senior Indebtedness. (a) The Company may not make any payment in respect of the Notes (except in Permitted Junior Securities or from the trust pursuant to Article Eight hereof): (i) in the event any default in the payment of principal of, interest or premium, if any, on Designated Senior Indebtedness occurs and is continuing beyond any applicable period of grace (a "PAYMENT EVENT OF DEFAULT"), or (ii) any Non-payment Event of Default occurs and is continuing with respect to Designated Senior Indebtedness which permits holders of the Designated Senior Indebtedness as to which such default relates to accelerate its maturity and the Trustee receives a notice of such default (a "PAYMENT BLOCKAGE NOTICE") from (A) with respect to the Designated Senior Indebtedness arising under the Credit Agreement, the Agent Bank, or (B) with respect to any other Designated Senior Indebtedness, the holders or the representative of the holders of any such Designated Senior Indebtedness. (iii) Payments on the Notes may and shall be resumed (x) in the case of a Payment Event of Default, upon the date on which such default is cured or waived and (y) in case of a Non-payment Event of Default, the earlier of the date on which such Non-payment Event of Default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received unless the maturity of any Designated Senior Indebtedness has been accelerated. No new period of payment blockage may be commenced by a Payment Blockage Notice unless and until (i) 360 days have elapsed since the first day of the effectiveness of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal, premium, if any, and interest on the Notes that have come due have been paid in full in cash. No Non-payment Event of Default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice, unless such default has been cured or waived for a period of not less than 90 days. 82 Section 10.04 Acceleration of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of the acceleration. Section 10.05 When Distribution Must Be Paid Over. (a) In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes (except in Permitted Junior Securities or from the trust pursuant to Article Eight hereof) at a time when such payment is prohibited by Article Ten hereof and the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Article Ten hereof, such payment shall be held by the Trustee or such Holder, as applicable, in trust for the benefit of the holders of Senior Indebtedness of the Company. Upon proper written request of the holders of Senior Indebtedness of the Company, the Trustee or such Holder, as the case may be, shall deliver the amounts in trust to the holders of Senior Indebtedness or their proper Representative under the indenture or other agreement (if any) pursuant to which Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Indebtedness remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. (b) With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article Ten, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article Ten, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. Section 10.06 Notice by the Company. The Company shall promptly notify the Trustee and the Paying Agent in writing of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article Ten, but failure to give such notice shall not affect the subordination of the Notes to the Senior Indebtedness as provided in this Article Ten. Section 10.07 Subrogation. After all Senior Indebtedness is paid in full and until the Notes are paid in full, Holders shall be subrogated (equally and ratably with the holders of all Indebtedness of the Company which by its express terms is subordinated to Senior Indebtedness of the Company to the same extent as the Notes are subordinated and which is entitled to like rights of subrogation) to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Indebtedness. A distribution made under this Article Ten to holders of 83 Senior Indebtedness that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on the Notes. Section 10.08 Relative Rights. (a) This Article Ten defines the relative rights of Holders and holders of Senior Indebtedness. Nothing in this Indenture shall: (i) impair, as between the Company and Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (ii) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Indebtedness; or (iii) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Indebtedness to receive distributions and payments otherwise payable to Holders. (b) If the Company fails because of this Article Ten to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. Section 10.09 Subordination May Not Be Impaired by the Company. No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. Section 10.10 Distribution or Notice to Representative. (a) Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their Representative. (b) Upon any payment or distribution of assets of the Company referred to in this Article Ten, the Trustee and the Holders of Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Ten. Section 10.11 Rights of Trustee and Paying Agent. (a) Notwithstanding the provisions of this Article Ten or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts 84 that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article Ten. Only the Company or a Representative may give the notice. Nothing in this Article Ten shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. (b) The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. Section 10.12 Authorization to Effect Subordination. Each Holder, by the Holder's acceptance thereof, agrees and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article Ten, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the lenders under the Credit Agreement are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. ARTICLE ELEVEN GUARANTEES Section 11.01 Guarantee. (a) Subject to this Article Eleven each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful (subject in all cases to any applicable grace period provided herein), and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. 85 (b) The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Subject to Section 6.06 hereof, each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. (c) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (d) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article Six hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. Section 11.02 Subordination of Guarantee. The Obligations of each Guarantor under its Guarantee pursuant to this Article Eleven shall be junior and subordinated to the prior payment in full of all Senior Indebtedness of such Guarantor (including Senior Indebtedness of the Guarantor incurred after the date hereof) on the same basis as the Notes are junior and subordinated to the prior payment in full all Senior Indebtedness of the Company, as described in Article Ten hereof. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article Ten hereof. Section 11.03 Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent 86 Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article Eleven, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent transfer or conveyance. Section 11.04 Execution and Delivery of Guarantee. (a) To evidence its Guarantee set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Guarantee substantially in the form included in Exhibit E shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by any of its executive officers. (b) Each Guarantor hereby agrees that its Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. (c) If an Officer whose signature is on this Indenture or on the Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Guarantee is endorsed, the Guarantee shall be valid nevertheless. (d) The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantors. (e) In the event that the Company creates or acquires any new Wholly Owned Restricted Subsidiaries subsequent to the date of this Indenture, if required by Section 4.20 hereof, the Company shall cause such Subsidiaries to execute supplemental indentures to this Indenture and Guarantees in accordance with Section 4.20 hereof and this Article Eleven, to the extent applicable. Section 11.05 Releases of Guarantors. (a) A Subsidiary Guarantor will be deemed automatically and unconditionally released and discharged from all of its obligations under its Guarantee without any further action on the part of the Trustee or any Holder of the Notes upon a sale or other disposition to a Person not an Affiliate of the Company of all of the Capital Stock of, or all or substantially all of the assets of, such Subsidiary Guarantor, by way of merger, consolidation or otherwise, which transaction is carried out in accordance with Section 4.10 hereof; provided that any such termination shall occur (x) only to the extent that all obligations of such Subsidiary Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure any Indebtedness of the Company shall also terminate upon such sale, disposition or release and (y) only if the Trustee is furnished with written notice of such release together 87 with an Officers' Certificate from such Subsidiary Guarantor to the effect that all of the conditions to release in this Section 11.05(a) have been satisfied. (b) Any Guarantor not released from its obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article Eleven. ARTICLE TWELVE SATISFACTION AND DISCHARGE Section 12.01 Satisfaction and Discharge. (a) This Indenture shall be discharged and shall cease to be of further effect as to all Notes issued thereunder, when: (i) either: (A) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (B) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Liquidated Damages, if any, and accrued interest to the date of maturity or redemption; (ii) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound; (iii) the Company or any Guarantor has paid or caused to be paid all sums payable by it hereunder; and (iv) the Company has delivered irrevocable instructions to the Trustee hereunder to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be. 88 (b) In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel (which opinion may be subject to customary assumptions and exclusions) to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. (c) Notwithstanding the above, the Trustee shall pay to the Company from time to time upon its request any cash or U.S. Government Obligations held by it as provided in this section which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect a satisfaction and discharge under this Article Twelve. Section 12.02 Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. Subject to Section 12.03 hereof, all money and non-callable U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 12.02, the "TRUSTEE") pursuant to Section 12.01 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Liquidated Damages, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. Section 12.03 Repayment to the Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium and Liquidated Damages, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times or The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Company. ARTICLE THIRTEEN MISCELLANEOUS Section 13.01 Trust Indenture Act Controls. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. 89 Section 13.02 Notices. (a) Any notice or communication by the Company or any Guarantor, on the one hand, or the Trustee on the other hand, to the other is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), facsimile or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company or any Guarantor: InSight Health Services Corp. 4400 MacArthur Blvd. Suite 800 Newport Beach, CA 92660 Facsimile: 949-476-8006 Attention: Chief Financial Officer, with a copy to General Counsel with copies to: J.W. Childs Associates, L.P. One Federal Street 21st Floor Boston, MA 02110 Facsimile: 617-753-1101 Attention: Edward D. Yun and to: Halifax Capital Partners, L.P. 1133 Connecticut Avenue N.W. Suite 700 Washington, D.C. 20036 Facsimile: 202-296-7133 Attention: David W. Dupree and to: Kaye Scholer LLP 245 Park Avenue New York, NY 10022 Facsimile: 212-836-8689 Attention: Stephen C. Koval, Esq. If to the Trustee: State Street Bank and Trust Company, N.A. [____________] 90 (b) The Company, the Guarantors or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. (c) All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. (d) Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. (e) If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. (f) If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. Section 13.03 Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to its rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). Section 13.04 Certificate and Opinion as to Conditions Precedent. (a) Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (i) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (ii) to the extent required under Section 314 of the Trust Indenture Act, an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Section 13.05 Statements Required in Certificate or Opinion. (a) Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: 91 (i) a statement that the Person making such certificate or opinion has read such covenant or condition; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (iv) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. Section 13.06 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 13.07 No Personal Liability of Directors, Officers, Employees and Stockholders. No director, officer, employee, incorporator or shareholder of the Parent, the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Parent, the Company or the Subsidiary Guarantors under the Notes, this Indenture, the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. Section 13.08 Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Section 13.09 Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Indenture or the transactions contemplated hereby ("RELATED PROCEEDINGS") may be instituted in the federal courts of the United States of America located in the City of New York or the courts of the State of New York in each case located in the City of New York (collectively, the "SPECIFIED COURTS"), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a "RELATED JUDGMENT"), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such 92 party's address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that a Related Proceeding has been brought in an inconvenient forum. Section 13.10 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or any of its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 13.11 Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 5.01. Section 13.12 Severability. In case any provision in this Indenture or the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 13.13 Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 13.14 Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by the Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "ACT" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company if made in the manner provided in this Section 13.14. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to such witness, notary or 93 officer the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) Notwithstanding anything to the contrary contained in this Section 13.14, the principal amount and serial numbers of Notes held by any Holder, and the date of holding the same, shall be proved by the register of the Notes maintained by the Registrar as provided in Section 2.04 hereof. (d) If the Company shall solicit from the Holders of the Notes any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a resolution of its Board, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith or the date of the most recent list of Holders forwarded to the Trustee prior to such solicitation pursuant to Section 2.06 hereof and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of the then outstanding Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the then outstanding Notes shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration or transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note. (f) Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Note may do so itself with regard to all or any part of the principal amount of such Note or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. Section 13.15 Benefit of Indenture. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any Registrar and its successors 94 hereunder, and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 13.16 Table of Contents, Headings, Etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 95 SIGNATURES INSIGHT HEALTH SERVICES CORP. By: ----------------------------- Name: Title: INSIGHT HEALTH SERVICES HOLDINGS CORP. By: ----------------------------- Name: Title: [Names of Subsidiary Guarantors] By: ----------------------------- Name: Title: STATE STREET BANK AND TRUST COMPANY, N.A., as Trustee By: ----------------------------- Name: Title: 96 EXHIBIT A1 [Face of Note] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & Co. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.07(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. THIS NOTE AND THE GUARANTEES ENDORSED HEREON HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR THE GUARANTEES ENDORSED HEREON NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL CLOSING DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON (OR ANY PREDECESSOR OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, THE PARENT OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED A1-1 INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE (E) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. A1-2 CUSIP [ ] No. **$________** INSIGHT HEALTH SERVICES CORP. [__]% Senior Subordinated Notes due 201[_] Closing Date: [_____], 200[_] InSight Health Services Corp., a Delaware corporation (the "Company", which term includes any successor under this Indenture hereinafter referred to), for value received, promises to pay to CEDE & CO., or its registered assigns, the principal sum of [Amount of Note] ($[_________]) on [___], 201[_]. Interest Payment Dates: [____], commencing [_____], 200[_]. Record Dates: [__________]. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. A1-3 IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. INSIGHT HEALTH SERVICES CORP. By: ------------------------------- Name: Title: By: ------------------------------- Name: Title: This is one of the [__]% Senior Subordinated Notes due 201[_] described in the within-mentioned Indenture. Dated: STATE STREET BANK AND TRUST COMPANY, N.A., as Trustee By: ----------------------------------- Authorized Signatory A1-4 [Reverse Side of Note] INSIGHT HEALTH SERVICES CORP. [__]% Senior Subordinated Notes due 201[_] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. The Company promises to pay interest on the principal amount of this Note at [__]% per annum from the date hereof until maturity and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages, if any, semi-annually in arrears on [_____] and [_____] of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be [____], 200[_]. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the [___] next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.13 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose in The City of New York, or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest, premium and Liquidated Damages, if any, on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Registrar. Initially, State Street Bank and Trust Company, N.A., the Trustee under the Indenture, shall act as Paying Agent and Registrar. The A1-5 Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated as of [_____], 200[_] ("Indenture") among the Company, the Parent, the Subsidiary Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. This Note is an obligation of the Company limited to $[____] million in aggregate principal amount. The Indenture pursuant to which this Note is issued provides that up to $[100] million aggregate principal amount of Additional Notes may be issued thereunder. 5. Optional Redemption. (a) Except as set forth in paragraphs 5(b) below, the Company shall not have the option to redeem the Notes prior to [_____], 200[_]. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on [_____] of the years indicated below:
Year Percentage - ---- ---------- 200[_]................................................................ [ ]% 200[_]................................................................ [ ]% 200[_] and thereafter................................................. 100.0000%
(b) Notwithstanding the foregoing, at any time prior to [______], 200[_], the Company may redeem up to 35% of the aggregate principal amount of Notes originally issued under the Indenture at a redemption price of [__]% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of the initial Public Equity Offerings of the Company or the Parent; provided that (A) at least 65% of the aggregate principal amount of the Notes originally issued under the Indenture remains outstanding immediately after the occurrence of such redemption, excluding Notes held by the Parent, the Company and its Subsidiaries; and (B) the redemption must occur within 60 days of the date of the closing of such initial Public Equity Offering. 6. Mandatory Redemption. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. Repurchase at Option of Holder. (a) Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 30 days A1-6 following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. (b) Within 365 days after the receipt of any Net Cash Proceeds from an Asset Sale, the Company may, at its option, within 12 months after such Asset Sale, (i) apply all or a portion of the Net Cash Proceeds to the permanent reduction of amounts outstanding under the Credit Agreement (and to correspondingly reduce the commitments, if any, with respect thereto) or to the permanent repayment of other Senior Indebtedness of the Company or a Restricted Subsidiary, provided that the repayment of any Indebtedness incurred under the Credit Agreement in connection with the acquisition of any Facility with the proceeds of any subsequent Sale and Leaseback Transaction relating to such Facility shall not be required to result in the permanent reduction of the amounts outstanding under the Credit Agreement or correspondingly permanently reduce the commitments thereunder, or (ii) invest (or enter into a legally binding agreement to invest) all or a portion of such Net Cash Proceeds in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in the businesses of the Company or its Restricted Subsidiaries, as the case may be, existing on the Reference Date or in businesses the same, similar or reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical contained in such clause (ii)) above. Pending the final application of any such Net Cash Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Cash Proceeds in a manner that is not prohibited by this Indenture. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph shall constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $10 million, the Company will, within 30 days thereafter, make an offer to purchase (an "Excess Proceeds Offer") from all Holders of Notes on a pro rata basis, in accordance with the procedures set forth in this Indenture, the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased with the Excess Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued interest and Liquidated Damages, if any, to the date such offer to purchase is consummated. If the aggregate principal amount of Notes validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the Notes to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset to zero. 8. Selection and Notice of Redemption If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. Notices of redemption may not be conditional. If any Note is to be A1-7 redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion of the original Note will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest and Liquidated Damages, if any, cease to accrue on Notes or portions of them called for redemption. 9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. 10. Persons Deemed Owners. The registered Holder of a Note will be treated as its owner for all purposes. 11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal of the then outstanding Notes and Additional Notes, if any, voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes). Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency; to provide for uncertificated Notes in addition to or in place of certificated Notes; to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company; to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; to add additional Events of Default; to evidence and provide for the acceptance of appointment under the Indenture by a successor Trustee; to secure the Notes; to comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act; to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture as of its date; or to allow any Guarantor to execute a supplemental Indenture and a Guarantee with respect to the Notes. 12. Defaults and Remedies. In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Parent, the Company or any Restricted Subsidiary that is a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company specifying the respective Event of Default. The Trustee may withhold from Holders A1-8 of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or Liquidated Damages, if any) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or Liquidated Damages, if any, on, or the principal of, the Notes. 13. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. No Recourse Against Others. No director, officer, employee, incorporator or stockholder of the Parent, the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Parent, the Company or the Subsidiary Guarantors under the Notes, the Indenture, the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. 15. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes. In addition to the rights provided to Holders under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of [___], 200[_], between the Company, the Parent, the Guarantors and the parties named on the signature pages thereof or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall have the rights set forth in one or more registration rights agreements, if any, between the Company, the Parent, the Guarantors and the other parties thereto, relating to rights given by the Company and the Guarantors to the purchasers of Additional Notes (the "Registration Rights Agreement"). 17. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: InSight Health Services Corp. 4400 MacArthur Blvd., Suite 800 A1-9 Newport Beach, California 92660 Attention: General Counsel Facsimile: (949) 476-0137 A1-10 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: ---------------------------------- (Insert assignee's legal name) - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint -------------------------------------------------------- to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: --------------------- Your Signature: --------------------------------- (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: ----------------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A1-11 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $_____________ Date: --------------------- Your Signature: --------------------------------- (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ------------------------ Signature Guarantee*: ----- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A1-12 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made: Principal Amount at Amount of Decrease in Amount of Increase in Maturity Signature of Principal Amount at Principal Amount at of this Global Note Authorized Officer Maturity Maturity Following such of Trustee or Date of Exchange of this Global Note of this Global Note decrease (or increase) Note Custodian - ---------------- ------------------- ------------------- ---------------------- --------------
A1-13 EXHIBIT A2 [Face of Note] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.07(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON. THIS NOTE AND THE GUARANTEES ENDORSED HEREON HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR THE GUARANTEES ENDORSED HEREON NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL CLOSING DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE A2-1 AND THE GUARANTEES ENDORSED HEREON (OR ANY PREDECESSOR OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, THE PARENT OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE (E) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. A2-2 CUSIP [ ] No. **$___________** INSIGHT HEALTH SERVICES CORP. [__]% Senior Subordinated Notes due 201[_] Closing Date: [_____], 200[_] InSight Health Services Corp., a Delaware corporation (the "Company", which term includes any successor under this Indenture hereinafter referred to), for value received, promises to pay to CEDE & CO., or its registered assigns, the principal sum of [Amount of Note] ($[_________]) on [___], 201[_]. Interest Payment Dates: [____], commencing [_____], 200[_]. Record Dates: [__________]. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. A2-3 IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. INSIGHT HEALTH SERVICES CORP. By: ------------------------------------ Name: Title: By: ------------------------------------ Name: Title: This is one of the [__]% Senior Subordinated Notes due 201[_] described in the within-mentioned Indenture. Dated: STATE STREET BANK AND TRUST COMPANY, N.A., as Trustee By: ---------------------------------- Authorized Signatory A2-4 [Reverse Side of Note] INSIGHT HEALTH SERVICES CORP. [__]% Senior Subordinated Notes due 201[_] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. The Company promises to pay interest on the principal amount of this Note at [__]% per annum from the date hereof until maturity and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages, if any, semi-annually in arrears on [_____] and [_____] of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be [____], 200[_]. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the [___] next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.13 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose in The City of New York, or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest, premium and Liquidated Damages, if any, on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Registrar. Initially, State Street Bank and Trust Company, N.A., the Trustee under the Indenture, shall act as Paying Agent and Registrar. The A2-5 Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated as of [_____], 200[_] ("Indenture") among the Company, the Parent, the Subsidiary Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. This Note is an obligation of the Company limited to $[____] million in aggregate principal amount. The Indenture pursuant to which this Note is issued provides that up to $[100] million aggregate principal amount of Additional Notes may be issued thereunder. 5. Optional Redemption. (a) Except as set forth in paragraphs 5(b) below, the Company shall not have the option to redeem the Notes prior to [_____], 200[_]. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on [_____] of the years indicated below:
Year Percentage - ---- ---------- 200[_]................................................................ [ ]% 200[_]................................................................ [ ]% 200[_] and thereafter................................................. 100.0000%
(b) Notwithstanding the foregoing, at any time prior to [______], 200[_], the Company may redeem up to 35% of the aggregate principal amount of Notes originally issued under the Indenture at a redemption price of [__]% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of the initial Public Equity Offerings of the Company or the Parent; provided that (A) at least 65% of the aggregate principal amount of the Notes originally issued under the Indenture remains outstanding immediately after the occurrence of such redemption, excluding Notes held by the Parent, the Company and its Subsidiaries; and (B) the redemption must occur within 60 days of the date of the closing of such initial Public Equity Offering. 6. Mandatory Redemption. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. Repurchase at Option of Holder. (a) Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 30 days A2-6 following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. (b) Within 365 days after the receipt of any Net Cash Proceeds from an Asset Sale, the Company may, at its option, within 12 months after such Asset Sale, (i) apply all or a portion of the Net Cash Proceeds to the permanent reduction of amounts outstanding under the Credit Agreement (and to correspondingly reduce the commitments, if any, with respect thereto) or to the permanent repayment of other Senior Indebtedness of the Company or a Restricted Subsidiary, provided that the repayment of any Indebtedness incurred under the Credit Agreement in connection with the acquisition of any Facility with the proceeds of any subsequent Sale and Leaseback Transaction relating to such Facility shall not be required to result in the permanent reduction of the amounts outstanding under the Credit Agreement or correspondingly permanently reduce the commitments thereunder, or (ii) invest (or enter into a legally binding agreement to invest) all or a portion of such Net Cash Proceeds in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in the businesses of the Company or its Restricted Subsidiaries, as the case may be, existing on the Reference Date or in businesses the same, similar or reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical contained in such clause (ii)) above. Pending the final application of any such Net Cash Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Cash Proceeds in a manner that is not prohibited by this Indenture. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph shall constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $10 million, the Company will, within 30 days thereafter, make an offer to purchase (an "Excess Proceeds Offer") from all Holders of Notes on a pro rata basis, in accordance with the procedures set forth in this Indenture, the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased with the Excess Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued interest and Liquidated Damages, if any, to the date such offer to purchase is consummated. If the aggregate principal amount of Notes validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the Notes to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset to zero. 8. Selection and Notice of Redemption If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. Notices of redemption may not be conditional. If any Note is to be A2-7 redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion of the original Note will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest and Liquidated Damages, if any, cease to accrue on Notes or portions of them called for redemption. 9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. 10. Persons Deemed Owners. The registered Holder of a Note will be treated as its owner for all purposes. 11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal of the then outstanding Notes and Additional Notes, if any, voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes). Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency; to provide for uncertificated Notes in addition to or in place of certificated Notes; to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company; to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; to add additional Events of Default; to evidence and provide for the acceptance of appointment under the Indenture by a successor Trustee; to secure the Notes; to comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act; to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture as of its date; or to allow any Guarantor to execute a supplemental Indenture and a Guarantee with respect to the Notes. 12. Defaults and Remedies. In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Parent, the Company or any Restricted Subsidiary that is a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company specifying the respective Event of Default. The Trustee may withhold from Holders A2-8 of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or Liquidated Damages, if any) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or Liquidated Damages, if any, on, or the principal of, the Notes. 13. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. No Recourse Against Others. No director, officer, employee, incorporator or stockholder of the Parent, the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Parent, the Company or the Subsidiary Guarantors under the Notes, the Indenture, the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. 15. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes. In addition to the rights provided to Holders under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of [___], 200[_], between the Company, the Parent, the Guarantors and the parties named on the signature pages thereof or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall have the rights set forth in one or more registration rights agreements, if any, between the Company, the Parent, the Guarantors and the other parties thereto, relating to rights given by the Company and the Guarantors to the purchasers of Additional Notes (the "Registration Rights Agreement"). 17. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: InSight Health Services Corp. 4400 MacArthur Blvd., Suite 800 A2-9 Newport Beach, California 92660 Attention: General Counsel Facsimile: (949) 476-0137 A2-10 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: ---------------------------------- (Insert assignee's legal name) - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint -------------------------------------------------------- to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: --------------------- Your Signature: --------------------------------- (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: ----------------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A2-11 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $___________ Date: --------------------- Your Signature: --------------------------------- (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ------------------------- Signature Guarantee*: ----------------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A2-12 SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note or of other Restricted Global Notes for an interest in this Regulation S Temporary Global Note, have been made: Principal Amount at Amount of Decrease in Amount of Increase in Maturity Signature of Principal Amount at Principal Amount at of this Global Note Authorized Officer Maturity Maturity Following such of Trustee or Date of Exchange of this Global Note of this Global Note decrease (or increase) Note Custodian - ---------------- ------------------- ------------------- ---------------------- --------------
A2-13 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER InSight Health Services Corp. 4400 MacArthur Blvd., Suite 800 Newport Beach, California 92660 Attention: General Counsel Facsimile: (949) 476-0137 State Street Bank and Trust Company, N.A. [address] Re: [__]% Senior Subordinated Notes due 201[_] Reference is hereby made to the Indenture, dated as of [____], 200[_] (the "Indenture"), among InSight Health Services Corp., a Delaware corporation (the "Company") InSight Health Services Holdings Corp., a Delaware corporation (the "Parent"), the Subsidiary Guarantors, and State Street Bank and Trust Company, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________ (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount at maturity of $___________ in such Note[s] or interests (the "Transfer"), to ___________________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. Check if Transferee will take delivery of a beneficial interest in the Regulation S Temporary Global Note, the Regulation S Permanent Global Note or a Definitive B-1 Note pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Permanent Global Note, the Regulation S Temporary Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. Check and complete if Transferee will take delivery of a beneficial interest in the IAI Global Note or a Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) such Transfer is being effected to the Company or a subsidiary thereof; or (c) such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the B-2 requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act. 4. Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note. (a) Check if Transfer is Pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. B-3 ------------------------------------ [Insert Name of Transferor] By: --------------------------------- Name: Title: Dated: ----------------------------- B-4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (A) OR (B)] (A) a beneficial interest in the: (i) 144A Global Note (CUSIP __________); or (ii) Regulation S Global Note (CUSIP __________); or (iii) IAI Global Note (CUSIP __________); or (B) a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (A) a beneficial interest in the: (i) 144A Global Note (CUSIP __________); or (ii) Regulation S Global Note (CUSIP __________); or (iii) IAI Global Note (CUSIP ); or (iv) Unrestricted Global Note (CUSIP ); or (B) a Restricted Definitive Note; or (C) an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-5 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE InSight Health Services Corp. 4400 MacArthur Blvd., Suite 800 Newport Beach, California 92660 Attention: General Counsel Facsimile: (949) 476-0137 State Street Bank and Trust Company, N.A. [address] Re: [__]% Senior Subordinated Notes due 201[_] Reference is hereby made to the Indenture, dated as of [____], 200[_] (the "Indenture"), among InSight Health Services Corp., a Delaware corporation (the "Company") InSight Health Services Holdings Corp., a Delaware corporation (the "Parent"), the Subsidiary Guarantors, and State Street Bank and Trust Company, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. __________________________ (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount at maturity of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note (a) Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount at maturity, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the C-1 Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes (a) Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount at maturity, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] [ ] 144A Global Note, [ ] Regulation S Global Note, [ ] IAI Global Note with an equal principal amount at maturity, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the C-2 Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ------------------------------------ [Insert Name of Transferor] By: --------------------------------- Name: Title: Dated: ---------------------- C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR [ ] Re: [__]% Senior Subordinated Notes due 201[_] Reference is hereby made to the Indenture, dated as of [____], 200[_] (the "Indenture"), among InSight Health Services Corp., a Delaware corporation (the "Company") InSight Health Services Holdings Corp., a Delaware corporation (the "Parent"), the Subsidiary Guarantors, and State Street Bank and Trust Company, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount at maturity of: (a) [ ] beneficial interest in a Global Note, or (b) [ ] a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. D-1 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ------------------------------------ [Insert Name of Accredited Investor] By: --------------------------------- Name: Title: Dated: ---------------------- D-2 EXHIBIT E FORM OF NOTATION OF GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of [______], 2001 (the "Indenture") among InSight Health Services Corp. (the "Company"), InSight Health Services Holdings Corp., the Subsidiary Guarantors (as defined in the Indenture), and State Street Bank and Trust Company, N.A., as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth in Article Eleven of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided that the Indebtedness evidenced by this Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of the Indenture. [Name of Guarantor] By: ------------------------ Name: Title: E-1 EXHIBIT F FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS Supplemental Indenture (this "Supplemental Indenture"), dated as of _____________, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of InSight Health Services Corp. (or its permitted successor), a Delaware corporation (the "Company"), InSight Health Services Holdings Corp., the Subsidiary Guarantors (as defined in the Indenture referred to herein) and State Street Bank and Trust Company, N.A., as trustee under the Indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of [ ], 2001 providing for the issuance of an aggregate principal amount of $[ ] million of [ ]% Senior Subordinated Notes due 201[ ] (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all other Guarantors, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance that might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following are hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article Six of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. (h) Pursuant to Section 10.02 of the Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article Ten of the Indenture shall result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent transfer or conveyance. 3. Subordination. The Obligations of the Guaranteeing Subsidiary under its Guarantee pursuant to this Supplemental Indenture shall be junior and subordinated to the Senior Indebtedness of the Guaranteeing Subsidiary on the same basis as the Notes are junior and subordinated to the Senior Indebtedness of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by the Guaranteeing Subsidiary only at such time as they may receive and/or retain payments in respect of the Notes pursuant to the Indenture, including Article Ten thereof. 4. Execution and Delivery. Each Guaranteeing Subsidiary agrees that the Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. 5. Guaranteeing Subsidiary May Consolidate, Etc., on Certain Terms. Except as otherwise provided in Section 11.05 of the Indenture, a Subsidiary Guarantor may not consolidate with or merge with or into any other Person or convey, sell, assign, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any other Person (other than the Company or another Subsidiary Guarantor) unless: (i) subject to the provisions of the following paragraph, the Person formed by or surviving such consolidation or merger (if other than such Subsidiary Guarantor) or to which such properties and assets are transferred assumes all of the obligations of such Subsidiary Guarantor under this Indenture and its Guarantee, pursuant to a supplemental indenture in form and substance satisfactory to the Trustee; (ii) immediately after giving effect to such transaction, no Default or Event of Default has occurred and is continuing; and (iii) the Subsidiary Guarantor delivers, or causes to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such transaction complies with the requirements of this Indenture. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and reasonably satisfactory in form to the Trustee, of the Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by a Guarantor, such successor Person shall succeed to and be substituted for a Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Guarantees had been issued at the date of the execution hereof. 6. Releases. (a) A Subsidiary Guarantor will be deemed automatically and unconditionally released and discharged from all of its obligations under its Guarantee without any further action on the part of the Trustee or any Holder of the Notes upon a sale or other disposition to a Person not an Affiliate of the Company of all of the Capital Stock of, or all or substantially all of the assets of, such Subsidiary Guarantor, by way of merger, consolidation or otherwise, which transaction is carried out in accordance with Section 4.10 hereof; provided that any such termination shall occur (x) only to the extent that all obligations of such Subsidiary Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure any Indebtedness of the Company shall also terminate upon such sale, disposition or release and (y) only if the Trustee is furnished with written notice of such release together with an Officers' Certificate from such Subsidiary Guarantor to the effect that all of the conditions to release in this Section 6 have been satisfied. (b) Any Guarantor not released from its obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article Eleven of the Indenture. 7. No Recourse Against Others. No director, officer, employee, incorporator or stockholder of the Parent, the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Parent, the Company or the Subsidiary Guarantors under the Notes, this Indenture, the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. 8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 9. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 10. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. 11. Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: , --------------- ---- [Guaranteeing Subsidiary] By: ------------------------ Name: Title: INSIGHT HEALTH SERVICES CORP. By: ------------------------ Name: Title: INSIGHT HEALTH SERVICES HOLDINGS CORP. By: ------------------------------ Name: Title: [Subsidiary Guarantors] By: ------------------------------ Name: Title: STATE STREET BANK AND TRUST COMPANY, N.A., AS TRUSTEE By: ------------------------------ Name: Title: EXHIBIT B [FORM OF OPINION FOR THE PARENT AND ACQUISITION CORP.] The form of opinion of Kaye Scholer LLP, to be delivered pursuant to Section 5 of the Note Purchase Agreement shall be as follows. (i) Each of the Parent and Acquisition Corp. has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware. (ii) Each of the Parent and Acquisition Corp. has the corporate power and authority to enter into and perform its obligations under the Note Purchase Agreement and the Securities. (iii) All of the issued and outstanding capital stock of each of the Parent and Acquisition Corp. has been duly authorized and validly issued, is fully paid and non-assessable. All the outstanding shares of capital stock of Acquisition Corp. are owned of record by the Parent and, immediately following the Merger as contemplated by the Merger Agreement, all of the outstanding shares of capital stock of InSight will be owned of record by the Parent. (iv) The issuance and sale of the Notes by Acquisition Corp. will not be subject to any preemptive right arising by operation of the certificate of incorporation or by-laws of Acquisition Corp. or the General Corporation Law of the State of Delaware or under any agreement listed on Schedule I to this opinion. (v) The Note Purchase Agreement has been duly authorized, executed and delivered by the Parent and Acquisition Corp., and is a valid and binding agreement of the Parent and Acquisition Corp., enforceable in accordance with its terms, except with respect to any indemnification or contribution provision thereof and subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights and remedies and general principles of equity (regardless of whether considered at a proceeding at law or in equity). (vi) The Notes are in the form contemplated by the Note Purchase Agreement, have been duly authorized by Acquisition Corp. for issuance and sale pursuant to the Note Purchase Agreement and, when executed by Acquisition Corp. in the manner provided in the Note Purchase Agreement and delivered against payment of the purchase price therefor, will constitute valid and binding obligations of Acquisition Corp., enforceable against Acquisition Corp. in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights and remedies and general principles of equity (regardless of whether considered at a proceeding at law or in equity). (vii) The Guarantee by the Parent of the Notes is in the form contemplated by the Note Purchase Agreement, has been duly authorized for issuance and sale pursuant to the Note Purchase Agreement and, at the Closing Date, will have been duly executed by the Parent and, when the Notes have been authenticated in the manner provided for in the Note Purchase Agreement and delivered against payment of the purchase price therefor, will constitute the valid and binding agreement of the Parent, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights and remedies and general principles of equity (regardless of whether considered at a proceeding at law or in equity), and will be entitled to the benefits of the Note Purchase Agreement. (viii) No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency of the federal government of the United States or the State of New York, is required for the execution, delivery and performance at the Closing by the Parent or Acquisition Corp. of the Note Purchase Agreement or the Securities, as applicable, or the issuance and delivery by Acquisition Corp. of the Securities, or consummation at the Closing of the transactions contemplated hereby and thereby, except as may be required under the Securities Act, the Exchange Act, the Trust Indenture Act or applicable state securities or "blue sky" laws. (ix) The execution and delivery of the Note Purchase Agreement and the Securities by the Parent and Acquisition Corp., the performance by the Parent and Acquisition Corp. of their respective obligations thereunder (i) will not result in any violation of the provisions of the certificate of incorporation or by-laws of the Parent or Acquisition Corp., as applicable, (ii) will not constitute a breach of, or Default, or result in the imposition of any lien, charge or encumbrance upon any property or assets of the Parent or Acquisition Corp., as applicable, pursuant to any material contract, loan agreement, note indenture, mortgage, deed of trust, lease or other agreement or instrument to which the Parent or Acquisition Corp., as applicable, is a party; or (iii) to the best knowledge of such counsel, will not result in any violation of any law or administrative regulation, which a lawyer exercising customary professional diligence would reasonably recognize as being applicable to the Parent and Acquisition Corp. with respect to the transactions contemplated by the Note Purchase Agreement. (x) Acquisition Corp. is not, and after receipt of payment for the Securities will not be, an "investment company" requiring it to register under the Investment Company Act. Immediately following the assumption of the Notes in connection with the Merger and the application of the net proceeds from the sale of the Securities as contemplated by the Note Purchase Agreement, InSight will not be an "investment company" requiring it to register under the Investment Company Act. (xi) Assuming the accuracy of the representations, warranties and covenants of InSight and the Purchaser contained in the Note Purchase Agreement, no registration of the Notes or the Guarantees under the Securities Act is required in connection with the purchase of the Securities by the Purchaser in the manner contemplated by the Note Purchase Agreement. (xii) To best of our knowledge, there are no pending or threatened legal or governmental proceedings to which the Parent or Acquisition Corp. is a party that would be required to be described by Item 103 of Regulation S-K under the Securities Act if the Parent or Acquisition Corp. were registering the Notes under the Securities Act. (xiii) None of the sale, issuance, execution or delivery of the Notes, the assumption by operation of law of the obligations of Acquisition under the Notes in connection with the Merger or the application of the proceeds therefrom in the manner contemplated by the Note Purchase Agreement, will contravene Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve System. (xiv) The Merger Agreement has been duly authorized, executed and delivered by Acquisition Corp. and the Parent and approved and adopted by the Parent as the sole stockholder of Acquisition Corp. and (assuming the due authorization, execution and delivery by InSight) is enforceable against each in accordance with its terms, except with respect to any indemnification or contribution provision thereof and subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights and remedies and general principles of equity (regardless of whether considered at a proceeding at law or in equity, and further assuming that the Merger Agreement is governed by the laws of the State of New York). All of the obligations of Acquisition Corp. under the Note Purchase Agreement will become obligations of InSight by operation of law upon consummation of the Merger pursuant to Section 259(a) of the General Corporation Law of the State of Delaware. EXHIBIT C-1 [FORM OF OPINION OF COUNSEL TO INSIGHT] The form of opinion of Hunton & Williams, counsel for InSight, to be delivered pursuant to Section 5 of the Note Purchase Agreement shall be as follows. (i) InSight is a corporation duly incorporated, validly existing and, based solely on a Certificate of Good Standing issued by the Secretary of State of the State of Delaware on October [__], 2001, in good standing under the laws of the State of Delaware. (ii) InSight has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Draft Offering Memorandum and to enter into and perform its obligations under the Note Purchase Agreement. (iii) Based solely on certificates of public officials and officers of InSight (which certificates shall be attached as exhibits to such opinion), and the documents attached to such certificates (including the organizational documents of InSight), InSight is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. (iv) Based solely on certificates of public officials and officers of InSight (which certificates shall be attached as exhibits to such opinion), and the documents attached to such certificates (including the organizational documents of the Subsidiary Guarantors), each Subsidiary Guarantor is in valid existence and in good standing under the laws of its respective jurisdiction of incorporation or formation as set forth on Schedule I hereto. Based solely on certificates of public officials and officers of InSight (which certificates shall be attached as exhibits to such opinion), and the documents attached to such certificates (including the organizational documents of the Subsidiary Guarantors), and assuming the laws of the State of Texas and the State of Indiana are comparable to the laws of Delaware or North Carolina, each Subsidiary Guarantor (a) has corporate or entity power and authority to own, lease and operate its properties and to conduct its business as described in the Draft Offering Memorandum and (b) to the best of our knowledge, is duly qualified as a foreign corporation or limited partnership, as the case may be, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. (v) All of the issued and outstanding capital stock of each Subsidiary Guarantor, if a corporation, has been duly authorized and, to our knowledge, has been validly issued and is fully paid and non-assessable and is owned by InSight, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or any pending or threatened claim. (vi) The Note Purchase Agreement has been duly authorized, executed and delivered by InSight and each Subsidiary Guarantor, and is a valid and binding agreement of InSight and each Subsidiary Guarantor, enforceable in accordance with its terms. (vii) The Guarantees by the Subsidiary Guarantors of the Notes are in the respective forms contemplated by the Note Purchase Agreement, have been duly authorized for issuance and sale pursuant to the Note Purchase Agreement and the Indenture and, on the Closing Date, will have been duly executed by each of the Subsidiary Guarantors and, immediately following the consummation of the Merger, will constitute valid and binding agreements of the Subsidiary Guarantors, enforceable in accordance with their terms. (viii) To our knowledge, there are no pending or threatened legal or governmental proceedings to which InSight or any of its subsidiaries is a party that would be required to be described by Item 103 of Regulation S-K under the Securities Act if InSight was registering the Notes under the Securities Act. (ix) Immediately prior to the assumption of the Notes in connection with the Merger and the application of the net proceeds from the sale of the Securities as contemplated by the Note Purchase Agreement, InSight is not an "investment company" within the meaning of the Investment Company Act. The enforceability of the Note Purchase Agreement and the Guarantees by the Subsidiary Guarantors of the Notes is limited by (i) bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally, and (ii) general principles of equity, whether considered at law or in equity. Any rights to indemnity or contribution under the Note Purchase Agreement and the Guarantees by the Subsidiary Guarantors of the Notes may be limited by federal and state securities laws and public policy considerations. In addition, we express no opinion regarding (i) the submission to jurisdiction to the extent it relates to the subject matter jurisdiction of any court, (ii) the enforceability of any waiver of a trial by jury or waiver of objection to venue or claim of an inconvenient forum with respect to proceedings, (iii) the waiver of any right to have service of process made in the manner presented by applicable law, (iv) the appointment of any Person as attorney in fact insofar as exercise of such power of attorney may be limited by public policy or limitations referred to elsewhere in this opinion, (v) the enforceability of indemnification or contribution provided for in the Agreements for claims, losses or liabilities in an unreasonable amount or for claims, losses or liabilities attributable to the indemnified party's negligence, (vi) the ability of any Person to receive the remedies of specific performance, injunctive relief, liquidated damages or any similar remedy in any proceeding, (vii) any right to the appointment of a receiver, (viii) any right to obtain possession of any property or the exercise of self-help remedies or other remedies without judicial process, (ix) any waiver or limitation concerning mitigation of damages, (x) the availability of the right of rescission, (xi) any law or regulation relating to federal, state or local taxation, federal or state environmental regulation, local laws, labor laws, intellectual property laws, antitrust laws or those relating to zoning, land use or subdivision laws, ERISA and similar matters, (xii) the effect of the law of any jurisdiction (other than the State of New York) that limits the rate(s) of interest that may be charged or collected, (xiii) the enforceability of any right to receive interest on interest, or (xiv) any fraudulent transfer and fraudulent conveyance laws. EXHIBIT D [FORM OF OPINION OF GENERAL COUNSEL FOR INSIGHT] The form of opinion of Marilyn U. MacNiven-Young, general counsel for InSight to be delivered pursuant to Section 5 of the Note Purchase Agreement shall be as follows. (i) To such counsel's knowledge, InSight and each Subsidiary Guarantor has such permits, licenses, franchises, certifications, accreditations and authorizations (collectively, "Authorizations") from all regulatory or governmental officials, bodies or tribunals as are necessary to own, lease and operate its respective properties and to conduct its business in the manner described in the Draft Offering Memorandum and is eligible to participate in the Medicare and Medicaid programs as and to the extent described in the Draft Offering Memorandum and, to such counsel's knowledge, InSight and each Subsidiary Guarantor has fulfilled and performed all of its material obligations with respect to such Authorizations or eligibility and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof except where such revocation or termination would not result in a Material Adverse Change. (ii) The execution and delivery of the Note Purchase Agreement by InSight and the Subsidiary Guarantors and the performance by InSight and the Subsidiary Guarantors of their respective obligations thereunder (i) will not result in any violation of the provisions of the limited partnership agreement, charter or by-laws of InSight or any Subsidiary Guarantor, as applicable, or (ii) will not constitute a breach of, or Default under or result in the imposition of any lien, charge or encumbrance upon any property or assets of InSight or any Subsidiary Guarantor pursuant to (x) any contract, loan agreement, note indenture, mortgage, deed of trust, lease or other agreement or instrument filed by InSight with the SEC, or (y) to such counsel's knowledge, any statute, rule or regulation or any judgment, order or decree of any governmental authority or court or arbitrator applicable to InSight or any Subsidiary Guarantor. EXHIBIT E [FORM OF REMARKETED NOTES REGISTRATION RIGHTS AGREEMENT] EXHIBIT E [FORM OF REMARKETED NOTES REGISTRATION RIGHTS AGREEMENT] $[________] [___]% SENIOR SUBORDINATED NOTES DUE 201[_] REGISTRATION RIGHTS AGREEMENT DATED AS OF [___________], 200[_] BY AND AMONG INSIGHT HEALTH SERVICES CORP., INSIGHT HEALTH SERVICES HOLDINGS CORP., THE SUBSIDIARIES LISTED IN SCHEDULE A, AS GUARANTORS -AND- BANC OF AMERICA SECURITIES LLC This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of [______], 200[_], by and among InSight Health Services Corp., a Delaware corporation (the "COMPANY"), InSight Health Services Holdings Corp., a Delaware corporation ("HOLDINGS"), the subsidiaries of the Company listed in Schedule A herein (the "SUBSIDIARY GUARANTORS," and, together with Holdings, the "GUARANTORS") and Banc of America Securities LLC (the "PURCHASER"). The Purchaser is offering and selling the Company's [___]% Senior Subordinated Notes due 201[_] (the "NOTES") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated [______], 200[_] (the "PURCHASE AGREEMENT"), by and among the Company, the Guarantors and the Purchaser and pursuant to a Note Purchase Agreement, dated as of October 17, 2001, by and among InSight Health Services Acquisition Corp., the Company, the Guarantors, the Purchaser and Banc of America Bridge LLC (the "NOTE PURCHASE AGREEMENT"). In order to induce Banc of America Bridge LLC to purchase the Notes under the Note Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to them under the Indenture, dated as of [______], 200[_] (the "INDENTURE"), entered into by and among the Company, each Guarantor and State Street Bank and Trust Company, N.A., as Trustee, relating to the Notes and the Exchange Notes (as defined below). The parties hereby agree as follows: Section 1. Definitions. As used in this Agreement, the following capitalized terms shall have the following meanings: ACT: The Securities Act of 1933, as amended. AFFILIATE: As defined in Rule 144 under the Act. BROKER-DEALER: Any broker or dealer registered under the Exchange Act. CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture. CLOSING DATE: The date hereof. COMMISSION: The Securities and Exchange Commission. CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (a) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange Offer Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the period required pursuant to Section 3(b) hereof and (c) the delivery by the Company to the Registrar under the Indenture of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Notes tendered by Holders thereof pursuant to the Exchange Offer. 2 CONSUMMATION DEADLINE: As defined in Section 3(b) hereof. EFFECTIVENESS DEADLINE: As defined in Sections 3(a) and 4(a) hereof. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended. EXCHANGE NOTES: The Company's [___]% Senior Subordinated Notes due 201[_] to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as contemplated by Section 4 hereof. EXCHANGE OFFER: The exchange and issuance by the Company of a principal amount of Exchange Notes (which shall be registered pursuant to the Exchange Offer Registration Statement) equal to the outstanding principal amount of Notes that are tendered by such Holders in connection with such exchange and issuance. EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating to the Exchange Offer, including the related Prospectus. EXEMPT RESALES: The transactions in which the Purchaser proposes to sell the Notes to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Act and pursuant to Regulation S under the Act. FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof. HOLDERS: As defined in Section 2 hereof. PROSPECTUS: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. RECOMMENCEMENT DATE: As defined in Section 6(d) hereof. REGISTRATION DEFAULT: As defined in Section 5 hereof. REGISTRATION STATEMENT: Any registration statement of the Company and the Guarantors relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case, (i) that is filed pursuant to the provisions of this Agreement and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. REGULATION S: Regulation S promulgated under the Act. RULE 144: Rule 144 promulgated under the Act. SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof. SUSPENSION NOTICE: As defined in Section 6(d) hereof. 3 TIA: The Trust Indenture Act of 1939 as in effect on the date of the Indenture. TRANSFER RESTRICTED SECURITIES: Each (A) Note, until the earliest to occur of (i) the date on which such Note is exchanged in the Exchange Offer for an Exchange Note which is entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (ii) the date on which such Note has been disposed of in accordance with a Shelf Registration Statement (and the purchasers thereof have been issued Exchange Notes) or (iii) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act or is saleable pursuant to Rule 144(k) under the Act (or similar provisions then in effect) and (B) Exchange Note held by a Broker-Dealer until the date on which such Exchange Note is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including the delivery of the Prospectus contained therein). Section 2. Holders. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "HOLDER") whenever such Person owns Transfer Restricted Securities. Section 3. Registered Exchange Offer. (a) Unless the Exchange Offer shall not be permitted by applicable federal law (after the procedures set forth in Section 6(a)(i) below have been complied with), the Company and the Guarantors shall (i) cause the Exchange Offer Registration Statement to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 120 days after the Closing Date (such 120th day being the "FILING DEADLINE"), (ii) use its best efforts to cause such Exchange Offer Registration Statement to become effective at the earliest possible time, but in no event later than 180 days after the Closing Date (such 180th day being the "EFFECTIVENESS DEADLINE") and (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause it to become effective, (B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer Registration Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting (i) registration of the Exchange Notes to be offered in exchange for the Notes that are Transfer Restricted Securities and (ii) resales of Exchange Notes by any Broker-Dealer that tendered Notes into the Exchange Offer that such Broker-Dealer acquired for its own account as a result of market making activities or other trading activities (other than Notes acquired directly from the Company or any of their respective Affiliates) as contemplated by Section 3(c) below. (b) The Company and the Guarantors shall use their respective reasonable best efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 30 days. The Company and the Guarantors shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Exchange Notes shall be included in the Exchange Offer Registration Statement. The Company and the Guarantors shall use their respective 4 reasonable best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 45 days thereafter, and in no event shall such Exchange Offer be Consummated later than 210 days after the Closing Date (such 210th day being the "CONSUMMATION DEADLINE"). (c) The Company shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Broker-Dealer who holds Transfer Restricted Securities that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities (other than Notes acquired directly from the Company or any of their respective Affiliates), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of Distribution" section shall also contain all other information with respect to such sales by such Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Transfer Restricted Securities held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in policy, rules or regulations after the date of this Agreement. See the Shearman & Sterling no-action letter (available July 2, 1993). Because any such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with its initial sale of any Exchange Notes received by such Broker-Dealer in the Exchange Offer, the Company and the Guarantors shall permit the use of the Prospectus contained in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such prospectus delivery requirement through the Consummation Deadline and thereafter as provided in the remainder of this paragraph. To the extent necessary to ensure that the prospectus contained in the Exchange Offer Registration Statement is available for sales of Exchange Notes by any Broker-Dealer that acquired Exchange Notes as a result of market-making or similar activities such that the Broker-Dealer would be required to deliver a prospectus under the Act upon a subsequent sale or other disposition of the Exchange Notes, then the Company and the Guarantors agree to use their respective reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented, amended and current as required by and subject to the provisions of Section 6(a) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of 180 days (as extended pursuant to Section 6(d)(i)) from the Consummation Deadline or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold pursuant thereto if any such Broker-Dealer desiring such action shall notify the Company in writing that such Broker-Dealer acquired Exchange Notes as a result of market-making or other similar activities such that the Broker-Dealer would be required to deliver a prospectus under the Act upon a subsequent sale or other disposition of the Exchange Notes. The Company and the Guarantors shall provide copies of the latest version of such Prospectus to such Broker-Dealers, in such number as such Broker-Dealers may reasonably request promptly upon such request, and in no event later than two Business Days after the date of such request, at any time during such period. 5 Section 4. Shelf Registration. (a) If (i) the Exchange Offer is not permitted by applicable law (after the Company and the Guarantors have complied with the procedures set forth in Section 6(a)(i) below) or (ii) any Holder of Transfer Restricted Securities shall notify the Company in writing within 30 days following the Consummation Deadline that (A) such Holder was prohibited by law or Commission policy from participating in the Exchange Offer or (B) such Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Notes acquired directly from the Company or any of their Affiliates, or (iii) the Exchange Offer has not been Consummated on or prior to the Consummation Deadline, then the Company and the Guarantors shall: (x) cause to be filed, on or prior to 45 days after the earliest of (i) the date on which the Company determines that the Exchange Offer Registration Statement cannot be filed as a result of clause (a)(i) above, (ii) the date on which the Company receives the notice specified in clause (a)(ii) above, or (iii) if the Exchange Offer has not been consummated on or prior to the Consummation Deadline, the Consummation Deadline (such earliest date, the "FILING DEADLINE"), a shelf registration statement pursuant to Rule 415 under the Act (which may be an amendment to the Exchange Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")), relating to all Transfer Restricted Securities, and (y) shall use their respective best efforts to cause such Shelf Registration Statement to become effective on or prior to 90 days after the Filing Deadline for the Shelf Registration Statement (such 90th day the "EFFECTIVENESS DEADLINE"). If, after the Company and the Guarantors filed an Exchange Offer Registration Statement that satisfies the requirements of Section 3(a) above, the Company and the Guarantors are required to file and make effective a Shelf Registration Statement solely because the Exchange Offer is not permitted under applicable federal law (i.e., clause (a)(i) above), then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (x) above; provided that, in such event, the Company and the Guarantors shall remain obligated to use best efforts to meet the Effectiveness Deadline set forth in clause (y). To the extent necessary to ensure that the Shelf Registration Statement is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a) and the other securities required to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and the Guarantors shall use their respective best efforts to keep any Shelf Registration Statement required by this Section 4(a) continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(b) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years (as extended pursuant to Section 6(c)(i)) following the Closing Date, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Shelf Registration Statement have been sold pursuant thereto. (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 days after receipt of a request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, 6 of the Act for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to liquidated damages pursuant to Section 5 hereof unless and until such Holder shall have provided all such information. Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. The Company shall not be obligated to supplement such Shelf Registration Statement after it has been declared effective by the Commission more than one time per quarterly period solely to reflect additional Holders. Section 5. Liquidated Damages. If (i) the Exchange Offer Registration Statement required by this Agreement is not filed with the Commission on or prior to the Filing Deadline, (ii) such Exchange Offer Registration Statement has not been declared effective by the Commission on or prior to the Effectiveness Deadline or the Exchange Offer has not been Consummated on or prior to the Consummation Deadline or (iii) a Shelf Registration Statement has not been declared effective on or prior to the Effectiveness Deadline (each such event referred to in clauses (i) through (iii), a "REGISTRATION DEFAULT"), then the Company will pay to each Holder of Transfer Restricted Securities affected thereby liquidated damages in an amount equal to $.05 per week per $1,000 in principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues for the first 30-day period immediately following the occurrence of a Registration Default referred to in clause (i) above or for the first 90-day period following the occurrence of a Registration Default referred to in clauses (ii) and (iii) above. The amount of the liquidated damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 30-day period in the case of clause (i) above or 90-day period in the case of clauses (ii) or (iii) above until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.30 per week per $1,000 in principal amount of Transfer Restricted Securities. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement, in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement and the Consummation of the Exchange Offer, in the case of (ii) above or (3) upon effectiveness of the Shelf Registration Statement, in the case of (iii) above, as applicable, the liquidated damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii) or (iii), as applicable, shall cease. All accrued liquidated damages shall be paid to the Holders entitled thereto, in the manner provided for the payment of interest in the Indenture, on each Interest Payment Date, as more fully set forth in the Indenture and the Notes. Notwithstanding the fact that any securities for which liquidated damages are due cease to be Transfer Restricted Securities, all obligations of the Company and the Guarantors to pay accrued liquidated damages with respect to such securities shall survive until such time as such obligations with respect to such securities shall have been satisfied in full. Section 6. Registration Procedures. (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Guarantors shall (x) comply with all applicable provisions of Section 6(c) below, (y) use their respective reasonable best efforts to effect such exchange and to permit the resale of Exchange Notes by any Broker-Dealer that tendered in the Exchange Offer Notes that such Broker-Dealer acquired for its own account as a 7 result of its market making activities or other trading activities (other than Notes acquired directly from the Company or any of their Affiliates) being sold in accordance with the intended method or methods of distribution thereof, and (z) comply with all of the following provisions: (i) If, following the date hereof there has been announced a change in Commission policy with respect to exchange offers such as the Exchange Offer, that in the reasonable opinion of counsel to the Company raises a substantial question as to whether the Exchange Offer is permitted by applicable federal law, the Company and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Transfer Restricted Securities. The Company and the Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level, but shall not be required to take commercially unreasonable action to effect a change of Commission policy. In connection with the foregoing, the Company and the Guarantors hereby agree to take all such other actions as may be requested by the Commission or otherwise reasonably required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission, (B) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff. (ii) As a condition to its participation in the Exchange Offer, each Holder of Transfer Restricted Securities (including, without limitation, any Holder who is a Broker-Dealer) shall furnish, upon the request of the Company, prior to the Consummation of the Exchange Offer, a written representation to the Company and the Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course of business. As a condition to its participation in the Exchange Offer each Holder using the Exchange Offer to participate in a distribution of the Exchange Notes shall acknowledge and agree that if the resales are of Exchange Notes obtained by such Holder in exchange for Notes acquired directly from the Company or an Affiliate thereof, it (1) could not, under Commission policy as in effect on the date of this Agreement, rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K. 8 (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall provide a supplemental letter to the Commission (A) stating that the Company and the Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that neither the Company nor any Guarantor has entered into any arrangement or understanding with any Person to distribute the Exchange Notes to be received in the Exchange Offer and that, to the best of the Company's and each Guarantor's information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes received in the Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above, if applicable. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Guarantors shall: (i) comply with all the provisions of Section 6(c) below and use their respective reasonable best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company and the Guarantors will prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof, and (ii) issue, upon the request of any Holder or purchaser of Notes covered by any Shelf Registration Statement contemplated by this Agreement, Exchange Notes having an aggregate principal amount equal to the aggregate principal amount of Notes sold pursuant to the Shelf Registration Statement and surrendered to the Company for cancellation; the Company shall register Exchange Notes on the Shelf Registration Statement for this purpose and issue the Exchange Notes to the purchaser(s) of securities subject to the Shelf Registration Statement in the names as such purchaser(s) shall designate. (c) General Provisions. In connection with any Registration Statement and any related Prospectus required by this Agreement, the Company and the Guarantors shall: (i) use their respective reasonable best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus 9 contained therein (A) to contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein (in light of the circumstances under which they were made) not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Guarantors shall file promptly an appropriate amendment to such Registration Statement curing such defect, and, if Commission review is required, use their respective reasonable best efforts to cause such amendment to be declared effective as soon as practicable. (ii) prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as the case may be; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) with respect to a Shelf Registration Statement, advise each selling Holder promptly and, if requested by such selling Holder, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Guarantors shall use their respective reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) subject to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective 10 amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (v) furnish to the Purchaser and, with respect to a Shelf Registration Statement, each selling Holder named in any Registration Statement or Prospectus in connection with such exchange or sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders in connection with such sale, if any, for a period of at least five Business Days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which such Holders shall reasonably object within five Business Days after the receipt thereof. A Holder shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omits to state any material fact necessary to make the statements therein (in light of the circumstances under which they were made) not misleading or fails to comply with the applicable requirements of the Act; (vi) with respect to a Shelf Registration Statement, promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to each selling Holder, upon such selling Holder's reasonable request, in connection with such exchange or sale, if any; (vii) with respect to a Shelf Registration Statement, subject to appropriate confidentiality agreements being entered into, make available, at reasonable times, for inspection by each selling Holder and any attorney or accountant retained by such Holders, all financial and other records, pertinent corporate documents of the Company and the Guarantors and cause at reasonable times the Company's and the Guarantors' officers, directors and employees to supply all information reasonably requested by any such Holder, attorney or accountant at reasonable times in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness; (viii) with respect to a Shelf Registration Statement, if requested by any selling Holders in connection with such sale, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such Holders may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities; and make all required filings of such Prospectus supplement or 11 post-effective amendment as soon as reasonably practicable after the Company is notified of the matters to be included in such Prospectus supplement or post-effective amendment; (ix) with respect to a Shelf Registration Statement, furnish to each selling Holder in connection with such exchange or sale, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) with respect to a Shelf Registration Statement, deliver to each Holder, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Holder reasonably may request; the Company and the Guarantors hereby consent to the use (in accordance with law, rules, regulations and orders) of the Prospectus and any amendment or supplement thereto by each selling Holder in connection with the public offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (xi) upon the request of any Holders who collectively hold an aggregate principal amount of Notes in excess of 20% of the outstanding Transferred Securities (the "REQUESTING HOLDERS") enter into an underwriting agreement and make such representations and warranties and take all such other actions in connection therewith as may be reasonable and customary in underwritten offerings in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any applicable Registration Statement contemplated by this Agreement as may be reasonably requested by any Requesting Holder in connection with any sale or resale pursuant to any applicable Registration Statement. In such connection, the Company and the Guarantors shall: (A) upon request of any Requesting Holder furnish (or in the case of paragraphs (2) and (3) below, use their best efforts to cause to be furnished) to each Requesting Holder, upon Consummation of the Exchange Offer or upon the effectiveness of the Shelf Registration Statement, as the case may be: (1) a certificate, dated such date, signed on behalf of the Company and each Guarantor by (x) the President or any Vice President and (y) a principal financial or accounting officer of the Company, and such Guarantor, confirming, as of the date thereof, the matters set forth in Section 5(e) of the Purchase Agreement and such other similar matters as such Holders may reasonably request; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company, covering matters similar to those set forth in paragraphs (b), (c) and (d) of Section 5 of the Purchase Agreement and Exhibits A, B and C thereto, subject to the same conditions with respect thereto and to the delivery thereof and such other matter as such Requesting Holder may reasonably request which are 12 customarily covered in Company counsel opinions to underwriters in underwritten public offerings, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company and the Guarantors, representatives of the independent public accountants for the Company and the Guarantors and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (relying as to materiality to the extent such counsel deems appropriate upon the statements of officers and other representatives of the Company and the Guarantors) and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation of the Exchange Offer, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial data and statistical data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated the date of Consummation of the Exchange Offer, or as of the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's independent accountants specified in the Purchase Agreement, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with underwritten public offerings, and covering the matters set forth in the comfort letters delivered pursuant to Section 5(a) of the Purchase Agreement subject to the same conditions with respect thereto and to the delivery thereof; and (B) deliver such other documents and certificates as may be reasonably requested by the selling Holders to evidence compliance with the matters covered in clause (A) above and with any customary conditions contained in the any agreement entered into by the Company and the Guarantors pursuant to this clause (xi); 13 (xii) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders and their counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders may reasonably request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement; provided, however, that neither the Company nor any Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xiii) in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer Restricted Securities in such denominations and such names as the selling Holders may request at least two Business Days prior to any sale of such Transfer Restricted Securities; (xiv) use their respective best efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xii) above; (xv) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of a Registration Statement covering such Transfer Restricted Securities and provide the Trustee under the Indenture with certificates for the Transfer Restricted Securities which are in a form eligible for deposit with The Depository Trust Company; (xvi) otherwise use their respective reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) covering a twelve-month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act); (xvii) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection therewith, cooperate with the Trustee to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use its best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and 14 documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; (xviii) provide promptly to each Holder, upon request, each document filed with the Commission pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act if not obtainable from the Commission; and (xix) the Company and the Guarantors will be deemed not to have used their reasonable best efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if the Company or any of the Guarantors voluntarily and knowingly takes any action that would, or omits to take any action which omission would, result in any such Registration Statement not being declared effective or in the Holders of Registrable Securities covered thereby not being able to exchange or offer and sell such Registrable Securities during that period as and to the extent contemplated hereby, unless (i) such action is required by applicable law or (ii) such action is taken by the Company and the Guarantors in good faith and for valid business reasons (but not including avoidance of the Company's or the Guarantors', as applicable, obligations hereunder), including a material corporate transaction, so long as the Company and the Guarantors promptly comply with the requirements of Section 6(c)(iv) thereof, if applicable. (d) Restrictions on Selling Holders. With respect to a Shelf Registration Statement, each selling Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of the notice referred to in Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact or the happening of any event of the kind described in Section 6(c)(iii)(D) hereof, or upon receipt of a notice from the Company pending the announcement of a material corporate transaction that the Shelf Registration Statement is unusable (in each case, a "SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until (i) such selling Holder has received copies of the supplemented or amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such selling Holder is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will either (i) destroy any Prospectuses, other than permanent file copies, then in such Holder's possession which have been replaced by the Company with more recently dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of the Suspension Notice. The time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by a number of days equal to the number of days in the period from and including the date of delivery of the Suspension Notice to the date of delivery of the Recommencement Date. Section 7. Registration Expenses. (a) All expenses incident to the Company's and the Guarantors' performance of or compliance with this Agreement will be borne, jointly and severally, by the Company and the Guarantors, regardless of whether a Registration 15 Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company and the Guarantors and one counsel for the Holders of Transfer Restricted Securities chosen by the Holders of a majority of the outstanding Transfer Restricted Securities; (v) all application and filing fees in connection with listing the Exchange Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its and the Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Guarantors. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company and the Guarantors will reimburse the Purchaser and the Holders of Transfer Restricted Securities who are tendering Notes into the Exchange Offer and/or selling or reselling Notes or Exchange Notes pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Shearman & Sterling unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. Section 8. Indemnification. (a) The Company and the Guarantors agree, jointly and severally, to indemnify and hold harmless each Holder, its directors, officers, any underwriter in any underwritten public offering of Transfer Restricted Securities pursuant to a Shelf Registration Statement and each Person, if any, who controls such Holder or underwriter (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from and against (i) any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment or supplement thereto) pursuant to which Transfer Restricted Securities are registered under the Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim 16 whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, provided that (subject to Section 8(d) below) any such settlement is effected with the written consent of the Company and the Guarantors; and (iii) any and all expenses whatsoever, as incurred (including the fees and disbursements of counsel chosen by any indemnified party, subject to the limitations in Section 8(c) below), reasonably incurred in investigating, preparing or defending against any litigation or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company and the Guarantors by the Purchaser, such Holder or such underwriter expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto); provided, further, that the Company will not be liable to any Purchaser, Holder (in its capacity as Holder) or underwriter (or any person who controls such party within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) with respect to any such untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary Prospectus to the extent that the Company shall sustain the burden of proving that any such loss, liability, claim, damage or expense resulted from the fact that such Purchaser, Holder (in its capacity as Holder) or underwriter, as the case may be, sold Transfer Restricted Securities to a Person to whom such Purchaser, Holder (in its capacity as Holder) or underwriter, as the case may be, failed to send or give, at or prior to the written confirmation of the sale of such Securities a copy of the final Prospectus (as amended or supplemented) if the Company has previously furnished copies thereof (sufficiently in advance of the closing of such sale to allow for distribution of the final Prospectus in a timely manner) to such Purchaser, Holder (in its capacity as Holder) or underwriter, as the case may be, and the loss, liability, claim, damage or expense of such Purchaser, Holder (in its capacity as Holder) or underwriter, as the case may be, resulted solely from an untrue statement or omission or alleged untrue statement or omission of a material fact contained in or omitted from such preliminary Prospectus which was corrected in the final Prospectus. (b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantors, and their respective directors and officers, and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company, or the Guarantors to the same extent as the foregoing indemnity from the Company and the Guarantors set forth in section (a) above, but only with reference to information relating to such Holder furnished in writing to the Company by such Holder expressly for use in any Registration Statement. In no event shall any Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. 17 (c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holder). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party within a reasonable period of time after notification by the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed promptly following receipt of invoice therefor as they are incurred. Such firm shall be designated in writing by a majority of the Holders, in the case of the parties indemnified pursuant to Section 8(a), and by the Company and Guarantors, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final non-appealable judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8(c) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the final terms of such proposed settlement as soon as practicable prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent includes an unconditional release of such 18 indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. (d) To the extent that the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Holders, on the other hand, from their sale of Transfer Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Company and the Guarantors, on the one hand, and of the Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantors, on the one hand, and of the Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or such Guarantor, on the one hand, or by the Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and judgments referred to above shall be deemed to include, subject to the limitations set forth in the third sentence of Section 8(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company, the Guarantors and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, no Holder, its directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(c) are several in proportion to the respective principal amount of Transfer Restricted Securities held by each Holder hereunder and not joint. 19 Section 9. Rule 144a and Rule 144. The Company and each Guarantor agree with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon written request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. Section 10. Miscellaneous. (a) Remedies. The Company and the Guarantors acknowledge and agree that any failure by the Company and/or the Guarantors to comply with their respective obligations under Sections 3 and 4 hereof may result in material irreparable injury to the Purchaser or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Purchaser or any Holder may obtain such relief as may be required to specifically enforce the Company's and the Guarantors' obligations under Sections 3 and 4 hereof. The Company and the Guarantors further agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. None of the Company or the Guarantors will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. None of the Company or the Guarantors has previously entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's or the Guarantors' securities under any agreement in effect on the date hereof. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 10(c)(i), the Company has obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities (excluding Transfer Restricted Securities held by the Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose Transfer Restricted Securities are being tendered pursuant to the Exchange Offer, and that does not affect directly or indirectly the rights of other Holders whose Transfer Restricted Securities are not being tendered pursuant to such Exchange Offer, may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer. (d) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company and the Guarantors, on the one hand, and the Purchaser, on the other hand, and shall have the right to enforce such agreements directly to 20 the extent they may deem such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telecopier, or air courier guaranteeing overnight delivery: (1) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (2) (i) If to the Company or any Guarantor: InSight Health Services Corp. 4400 MacArthur Blvd. Suite 800 Newport Beach, CA 92660 Facsimile: 949-476-8006 Attention: Chief Financial Officer with copies to: InSight Health Services Corp. 4400 MacArthur Blvd. Suite 800 Newport Beach, CA 92660 Facsimile: 949-476-0137 Attention: General Counsel and to: J.W. Childs Associates, L.P. One Federal Street 21st Floor Boston, MA 02110 Facsimile: 617-753-1101 Attention: Edward D. Yun and to: The Halifax Group, L.L.C. 1133 Connecticut Avenue N.W. Suite 700 Washington, D.C. 20036 Facsimile: 202-296-7133 Attention: David W. Dupree 21 and to: Kaye Scholer LLP 245 Park Avenue New York, NY 10022 Facsimile: 212-836-8689 Attention: Stephen C. Koval, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 22 (k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 23 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. INSIGHT HEALTH SERVICES HOLDINGS CORP. By: ------------------------------------ Name: Title: INSIGHT HEALTH SERVICES CORP. By: ------------------------------------ Name: Title: BANC OF AMERICA SECURITIES LLC By: ------------------------------------ Name: Title: [Name of Subsidiary Guarantor] By: ------------------------------------- Name: Title: 24 SCHEDULE A SUBSIDIARY GUARANTORS 25 EXHIBIT F [Face of Note] THIS NOTE AND THE GUARANTEES ENDORSED HEREON HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR THE GUARANTEES ENDORSED HEREON NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON (OR ANY PREDECESSOR OF THIS NOTE AND THE GUARANTEES ENDORSED HEREON) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, THE PARENT OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE (E) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. No. **$___________________** INSIGHT HEALTH SERVICES ACQUISITION CORP. 12-1/8% Senior Subordinated Notes due 2011 Issue Date: October 17, 2001 InSight Health Services Acquisition Corp., a Delaware corporation (the "Company", which term includes any successor under this Agreement hereinafter referred to), for value received, promises to pay to [_________], or its registered assigns, the principal sum of [Amount of Note] ($____) on the earlier of (i) October 17, 2011 and (ii) the Exchange Date. Interest Payment Dates: April 15 and October 15, commencing April 15, 2002. Record Dates: April 1 and October 1. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. By:___________________________________ Name: Title: G-2 [Reverse Side of Note] INSIGHT HEALTH SERVICES ACQUISITION CORP. 12-1/8% Senior Subordinated Notes due 2011 Capitalized terms used herein shall have the meanings assigned to them in the Note Purchase Agreement referred to below unless otherwise indicated. 1. Interest. The Company promises to pay interest on the principal amount of this Note at 12-1/8% per annum from the date hereof until maturity. The Company shall pay interest semi-annually in arrears on April 15 and October 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance; provided that if there is no existing Default in the payment of interest, and if this Note is issued between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be April 15, 2002. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders at the close of business on the 1st day of the month in which the related Interest Payment Date occurs, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 5(a)(ii) of the Agreement with respect to defaulted interest. The Notes shall be payable as to principal, premium and interest at the office or agency of the Company maintained for such purpose in The City of New York maintained for such purposes, or, at the option of the Company, payment of may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest and premium on, all other Notes the Holders of which shall have provided wire transfer instructions to the Company. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Note Purchase Agreement. The Company issued the Notes under a Note Purchase Agreement dated as of October 17, 2001 ("Agreement") among the Company, InSight Health Sevices Corp., InSight Health Services Holdings Corp., the Subsidiary Guarantors, the Purchaser and Banc of America Securities LLC. The terms of the Notes include those stated in the Agreement. The Notes are subject to all such terms, and Holders are referred to the Agreement for a statement of such terms. To the extent any provision of this Note conflicts with G-3 the express provisions of the Agreement, the provisions of the Agreement shall govern and be controlling. 4. Optional Redemption. (a) Except as set forth in clause (b) of this paragraph 4, the Notes shall not be redeemable at the Company's option prior to October 15, 2006. Thereafter, the Company may redeem all or a part of the Notes from time to time, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest to the applicable redemption date, if redeemed during the twelve-month period beginning on October 15 of the years indicated below:
YEAR PERCENTAGE 2006................................... 106.063% 2007................................... 104.042% 2008................................... 102.021% 2009 and thereafter.................... 100.000%
(b) At any time prior to October 15, 2004, the Company may redeem (i) up to 35% of the initial aggregate principal amount of the Notes at a redemption price of 112.125% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, or (ii) all, but not less than all, of the Notes at a redemption price equal to $18,000,000, in each case in connection with the initial Public Equity Offering of the Company (or of the Parent, to the extent such proceeds are contributed to the common equity of the Company); provided that the redemption must occur within 60 days of the date of the closing of such initial Public Equity Offering. 5. Mandatory Redemption. Except as set forth in paragraph 6 below, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 6. Repurchase at Option of Holder. (a) Upon the occurrence of a Change of Control, each Holder will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the Agreement and described in such notice. (b) Within 12 months after the receipt of any Net Cash Proceeds from an Asset Sale, the Company may at its option: (i) apply all or a portion of the Net Cash Proceeds to the permanent reduction of amounts outstanding under the Credit Agreement (and to correspondingly reduce the commitments, if any, with respect thereto) or to the permanent repayment of other Senior Indebtedness of the Company or a Restricted Subsidiary, provided that the repayment of any Indebtedness incurred under the Credit Agreement in connection with G-4 the acquisition of any Facility with the proceeds of any subsequent Sale and Leaseback Transaction relating to such Facility shall not be required to result in the permanent reduction of the amounts outstanding under the Credit Agreement or correspondingly permanently reduce the commitments thereunder, or (ii) invest (or enter into a legally binding agreement to invest) all or a portion of such Net Cash Proceeds in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in the businesses of the Company or its Restricted Subsidiaries, as the case may be, existing on the Closing Date or in businesses the same, similar or reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical contained in such clause (ii)) above. Pending the final application of any such Net Cash Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Cash Proceeds in a manner that is not prohibited by this Agreement. The amount of such Net Cash Proceeds not so used as set forth above in this paragraph shall constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10,000,000, the Company will, within 30 days thereafter, make an offer to purchase (an "Excess Proceeds Offer") from all Holders of Notes on a pro rata basis, in accordance with the procedures set forth in this Agreement, the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased with the Excess Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued interest, if any, to the date such offer to purchase is consummated. If the aggregate principal amount of Notes validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the Notes to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset to zero. 7. Selection and Notice of Redemption. In case the Company is entitled to, and elects to, redeem less than all of the Notes, the Company shall redeem the Notes pro rata from each Holder (or as nearly pro rata as practicable). For all purposes of this Agreement, unless the context otherwise requires, all provisions relating to the redemption of Notes shall relate, in the case of any Notes redeemed or to be redeemed only in part, to the portion of the principal amount of such Notes which has been or is to be redeemed. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion of the original Note will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. 8. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Agreement. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. 9. Persons Deemed Owners. The registered Holder of a Note will be treated as its owner for all purposes. G-5 10. Amendment, Supplement and Waiver. Subject to certain exceptions, the Agreement or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes, if any, voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes), and any existing default or compliance with any provision of the Agreement or the Notes may be waived with the consent of the Holders of a majority in principal of the then outstanding Notes voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the Notes). Without the consent of any Holder of a Note, the Agreement or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency; to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company; to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; to add additional Events of Default; to secure the Notes; or to allow any Guarantor to execute a supplemental agreement to the Agreement and a Guarantee with respect to the Notes. 11. Defaults and Remedies. In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Parent, the Company or any Restricted Subsidiary that is a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately by notice in writing to the Company specifying the respective Event of Default. Holders of the Notes may enforce the Agreement or the Notes as provided in the Agreement. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Company may waive any existing Default or Event of Default and its consequences under the Agreement except a continuing Default or Event of Default in the payment of interest or Liquidated Damages on, or the principal of, the Notes. 12. No Recourse Against Others. No director, officer, employee, incorporator or stockholder of the Parent, the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Parent, the Company or the Subsidiary Guarantors under the Notes, the Agreement, the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. The Company shall furnish to any Holder upon written request and without charge a copy of the Agreement. Requests may be made to: InSight Health Services Corp. 4400 MacArthur Blvd. Suite 800 Newport Beach, California 92660 Attention: General Counsel Facsimile: (949) 476-0137 G-6 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to:___________________________________ (Insert assignee's legal name) ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date:___________________ Your Signature:_____________________________ (Sign exactly as your name appears on the face of this Note) G-7 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 5(j) or 5(o) of the Agreement, check the appropriate box below: [ ] Section 5(j) [ ] Section 5(o) If you want to elect to have only part of the Note purchased by the Company pursuant to Section 5(j) or Section 5(o) of the Agreement, state the amount you elect to have purchased: $________________ Date:____________________ Your Signature:_____________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No.:_____________________ G-8 EXHIBIT G FORM OF NOTATION OF GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Note Purchase Agreement) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Note Purchase Agreement and subject to the provisions in the Note Purchase Agreement dated as of October 17, 2001 (the "Note Purchase Agreement") among InSight Health Services Holdings Corp., InSight Health Services Corp., InSight Health Services Acquisition Corp., the Subsidiary Guarantors (as defined in the Note Purchase Agreement), Banc of America Bridge LLC, as purchaser, and Banc of America Securities LLC, (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes (as defined in the Note Purchase Agreement), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders all in accordance with the terms of the Note Purchase Agreement and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders pursuant to the Guarantee and the Note Purchase Agreement are expressly set forth in Section 16 of the Note Purchase Agreement and reference is hereby made to the Note Purchase Agreement for the precise terms of the Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions and (b) agrees to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Note Purchase Agreement. [Name of Guarantor] By:______________________ Name: Title: G-9 EXHIBIT H [FORM OF PURCHASE AGREEMENT] EXHIBIT H [FORM OF PURCHASE AGREEMENT] INSIGHT HEALTH SERVICES HOLDINGS CORP., INSIGHT HEALTH SERVICES CORP. - AND - THE SUBSIDIARY GUARANTORS LISTED ON SCHEDULE A HERETO $[_________](1) [__]% SENIOR SUBORDINATED NOTES DUE 201[_] PURCHASE AGREEMENT DATED [_________], 200[_] BANC OF AMERICA SECURITIES LLC - ---------------------------------- (1) Include any Additional Remarketed Notes pursuant to Section 10(a)(iv) of the Note Purchase Agreement. Table of Contents
Page Section 1. Representations and Warranties................................................3 (a) No Registration Required......................................................3 (b) No Integration of Offerings or General Solicitation...........................3 (c) Eligibility for Resale Under Rule 144A........................................4 (d) The Offering Memorandum.......................................................4 (e) Incorporated Documents........................................................4 (f) The Remarketing Agreement.....................................................4 (g) The Registration Rights Agreement.............................................4 (h) The DTC Letter of Representations.............................................5 (i) Authorization of the Securities and the Exchange Securities...................5 (j) Authorization of the Indenture................................................6 (k) Descriptions in the Offering Memorandum.......................................6 (l) No Material Adverse Change....................................................6 (m) Independent Accountants.......................................................7 (n) Preparation of the Financial Statements.......................................7 (o) Incorporation and Good Standing of Company and its Subsidiaries...............7 (p) Capitalization and Other Capital Stock Matters................................8 (q) Non-Contravention of Instruments; No Further Authorizations or Approvals Required......................................................................9 (r) No Material Actions or Proceedings...........................................10 (s) Intellectual Property Rights.................................................10 (t) All Necessary Permits, Etc...................................................10 (u) Regulatory Matters...........................................................11 (v) Medicare/Medicaid Participation..............................................12 (w) Title to Properties..........................................................13 (x) Material Agreements..........................................................13 (y) Tax Law Compliance...........................................................13 (z) Company Not an "Investment Company"..........................................13 (aa) Insurance....................................................................14 (bb) No Price Stabilization or Manipulation.......................................14 (cc) Solvency.....................................................................14 (dd) No Unlawful Contributions or Other Payments..................................14 (ee) Company's Accounting System..................................................15 (ff) Compliance with Environmental Laws...........................................15 (gg) ERISA Compliance.............................................................16 (hh) Regulation S Compliance......................................................16 (ii) Taxes; Fees..................................................................16 (jj) No Labor Disputes............................................................16 Section 2. Issuance and Delivery of the Securities......................................17 (a) The Securities...............................................................17 (b) The Closing Date.............................................................17 (c) Delivery of the Notes........................................................17
i (d) Delivery of Offering Memorandum to the Initial Purchaser.....................18 (e) Initial Purchaser as Qualified Institutional Buyer...........................18 Section 3. Covenants....................................................................18 (a) The Initial Purchaser's Review of Proposed Amendments and Supplements........18 (b) Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters.......................................................18 (c) Copies of the Offering Memorandum............................................19 (d) Blue Sky Compliance..........................................................19 (e) Depositary...................................................................19 (f) Additional Issuer Information................................................19 (g) Future Agreement Not to Offer or Sell Additional Securities..................20 (h) Future Reports to the Initial Purchaser......................................20 (i) No Integration...............................................................20 (j) Legended Securities..........................................................21 (k) PORTAL.......................................................................21 (l) Rating of Securities.........................................................21 Section 4. Payment of Expenses..........................................................21 Section 5. Additional Covenants.........................................................21 (a) Accountants' Comfort Letter..................................................21 (b) Opinion of Counsel for the Company...........................................22 (c) Opinion of General Counsel for the Company...................................22 (d) Opinion of Regulatory Counsel for the Company................................22 (e) Officers' Certificate........................................................22 (f) Bring-down Comfort Letters...................................................23 (g) Registration Rights Agreement................................................23 (h) Additional Documents.........................................................23 Section 6. Reimbursement of Initial Purchaser's Expenses................................23 Section 7. Offer, Sale and Resale Procedures............................................23 (a) Offers and Sales Only to Qualified Institutional Buyers and Non-U.S. Persons......................................................................23 (b) No General Solicitation......................................................24 (c) Restrictions on Transfer.....................................................24 Section 8. Indemnification..............................................................24 (a) Indemnification of the Initial Purchaser.....................................24 (b) Indemnification of the Company and the Guarantors and their Directors and Officers.....................................................................25 (c) Notifications and Other Indemnification Procedures...........................26 (d) Settlements..................................................................26
ii Section 9. Contribution.................................................................28 Section 10. [Reserved]...................................................................29 Section 11. Representations and Indemnities to Survive Delivery..........................29 Section 12. Notices......................................................................29 Section 13. Successors...................................................................30 Section 14. Partial Unenforceability.....................................................30 Section 15. Governing Law; Consent to Jurisdiction.......................................31 (a) Governing Law Provisions.....................................................31 (b) Consent to Jurisdiction......................................................31 Section 16. General Provisions...........................................................31
SCHEDULE A - Guarantors SCHEDULE B - Material Agreements SCHEDULE C - Subsidiaries of InSight Health Services Corp. EXHIBIT A - Form of Opinion of Counsel to Holdings and the Company EXHIBIT B - Form of Opinion of General Counsel for the Company EXHIBIT C - Form of Opinion of Regulatory Counsel for the Company ANNEX 1 - Terms and Conditions of Offers and Sales iii Purchase Agreement [_______], 200[_] BANC OF AMERICA SECURITIES LLC 9 West 57th Street, 47th Floor New York, NY 10019 Ladies and Gentlemen: Introductory. Pursuant to the terms of a Note Purchase Agreement, dated October 17, 2001, among InSight Health Services Acquisition Corp., a Delaware corporation, InSight Health Services Corp., a Delaware corporation (the "Company"), InSight Health Services Holdings Corp., a Delaware corporation ("Holdings"), the Subsidiary Guarantors (as defined herein), Banc of America Bridge LLC and Banc of America Securities LLC, (the "Note Purchase Agreement"), the Company is issuing to Banc of America Securities LLC (the "Initial Purchaser") [(i)] $200,000,000 aggregate principal amount of the Company's [__]% Senior Subordinated Notes Due 201[_] (the "[Exchange] Notes") in exchange for $200,000,000 principal amount of the Company's 12-1/8% Senior Subordinated Notes due 2011 (the "Existing Notes") [and (ii) an additional $[_______] aggregate principal amount of the Company's [__]% Senior Subordinated Notes due 201[_] pursuant to Section 10(a)(iv) of the Note Purchase Agreement (the "Additional Notes" and, together with the Exchange Notes, the "Notes)](2). The Notes will be issued pursuant to an indenture, dated as of [________], 200[_] (the "Indenture"), among the Company, the Guarantors (as defined below) and State Street Bank and Trust Company N.A., as trustee (the "Trustee"). Notes issued in book-entry form will be issued in the name of Cede & Co., as nominee of The Depository Trust Company (the "Depositary") pursuant to a letter of representations, to be dated as of the Closing Date (as defined in Section 2), to be entered into in connection with the issuance of the Securities (the "DTC Letter of Representations") among the Company, the Trustee and the Depositary. The payment of principal of, premium and Liquidated Damages (as defined in the Indenture), if any, and interest on the Notes and the Exchange Notes (as defined below) will, upon issuance of the Notes, become fully and unconditionally guaranteed on a senior subordinated and unsecured basis, jointly and severally by (i) Holdings, (ii) each of the Company's directly and indirectly wholly-owned subsidiaries listed in Schedule A attached hereto, and (iii) any wholly-owned or other subsidiary of the Company formed or acquired after - ----------------------------------- (2) Include only if Additional Notes are to be issued. the Closing Date that executes an additional guarantee in accordance with the terms of the Indenture, and respective successors and assigns of Holdings and the subsidiaries of the Company referred to in (ii) and (iii) above (collectively, the "Guarantors," and the subsidiaries referred to in (ii) and (iii) above, the "Subsidiary Guarantors"), pursuant to their guarantees (the "Guarantees"). The Notes and the Guarantees attached thereto are herein collectively referred to as the "Securities," and the Exchange Notes and the Guarantees attached thereto are herein collectively referred to as the "Exchange Securities." The holders of the Notes will be entitled to the benefits of a remarketed notes registration rights agreement, to be dated as of the Closing Date (the "Registration Rights Agreement"), among the Company, the Guarantors and the Initial Purchaser, substantially in the form of Exhibit E attached to the Note Purchase Agreement, pursuant to which the Company and the Guarantors agree to file, within 120 days of the Closing Date, a registration statement with the Securities and Exchange Commission (the "Commission") registering the Exchange Securities under the Securities Act of 1933, as amended (the "Securities Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder). The Company understands that the Initial Purchaser proposes to make an offering of the Securities on the terms and in the manner set forth herein and in the Offering Memorandum (as defined below) and agrees that the Initial Purchaser may sell, subject to the conditions set forth herein, all or a portion of the Securities to purchasers (the "Subsequent Purchasers") at any time after the date of this Agreement. The Securities are to be offered and sold to or through the Initial Purchaser without being registered with the Commission under the Securities Act, in reliance upon exemptions therefrom. The terms of the Securities and the Indenture will require that investors that acquire Securities expressly agree that Securities may only be resold or otherwise transferred, after the date hereof, if such Securities are registered for sale under the Securities Act or if an exemption from the registration requirements of the Securities Act is available (including the exemptions afforded by Rule 144A under the Securities Act ("Rule 144A") or Regulation S under the Securities Act ("Regulation S")). The Company has prepared and delivered to the Initial Purchaser copies of a preliminary offering memorandum, dated [__________], 200[_] (the "Preliminary Offering Memorandum"), and has prepared and will deliver to the Initial Purchaser, copies of the Offering Memorandum (defined below), describing the terms of the Securities, each for use by the Initial Purchaser in connection with its solicitation of offers to purchase the Securities. As used herein, the "Offering Memorandum" shall mean, with respect to any date or time referred to in this Agreement, the offering memorandum, dated [_______], 200[_], including amendments or supplements thereto, any exhibits thereto and the Incorporated Documents (as defined in Section 1 below), in the most recent form that has been prepared and delivered by the Company to the Initial Purchaser in connection with its solicitation of offers to purchase Securities. Further, any reference to the Preliminary Offering Memorandum or the Offering Memorandum shall be deemed to refer to and include any Additional Issuer Information (as defined in Section 3) furnished by the Company prior to the completion of the distribution of the Securities. All references in this Agreement to financial statements and other information which is "contained," "included" or "stated" in the Offering Memorandum (or other references of like import) shall be deemed to mean and include all such financial statements and schedules 2 and other information which are incorporated by reference in the Offering Memorandum; all references in this Agreement to amendments or supplements to the Offering Memorandum shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934 (as amended, the "Exchange Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder) which is incorporated or deemed to be incorporated by reference in the Offering Memorandum; and all references in this Agreement to the Transaction Documents shall be deemed to mean and include this Purchase Agreement, the Registration Rights Agreement, the Indenture, the Securities and the DTC Letter of Representations. References herein to "Subsidiaries" shall mean each corporation, partnership, joint venture or other entity in which (i) the Company owns, directly or indirectly, 50% or more of the outstanding voting securities or equity interests or (ii) the Company or any Subsidiary is the sole general partner or the sole managing member. Each of the Company and the Guarantors hereby confirms its respective agreement with the Initial Purchaser as follows: Section 1. Representations and Warranties. The Company and each of the Guarantors hereby jointly and severally represent, warrant and covenant to the Initial Purchaser as follows: (a) No Registration Required. Subject to compliance by the Initial Purchaser with the representations and warranties set forth in Section 2(e) hereof and with the procedures set forth in Section 7 hereof, it is not necessary in connection with the issuance and sale of the Securities to the Initial Purchaser and the offer, sale and delivery of the Securities to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the Securities under the Securities Act or, until such time as the Exchange Securities are issued pursuant to an effective registration statement, to qualify the Indenture under the Trust Indenture Act of 1939 (the "Trust Indenture Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder). (b) No Integration of Offerings or General Solicitation. None of the Company or any Guarantor has, directly or indirectly, solicited any offer to buy or offered to sell, and none of them will, directly or indirectly, solicit any offer to buy or offer to sell, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Securities in a manner that would require the Securities to be registered under the Securities Act. None of the Company, the Guarantors, their respective affiliates (as such term is defined in Rule 501(b) under the Securities Act (each, an "Affiliate")) or any person acting on their behalf (other than the Initial Purchaser, as to whom none of the Company or any Guarantor makes any representation or warranty) has engaged or will engage, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. With respect to those Securities sold in reliance upon Regulation S, (i) none of the Company, the Guarantors, their Affiliates or any person acting on their behalf (other than the Initial Purchaser, as to whom none of the Company or any Guarantor makes any representation or warranty) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (ii) each of 3 the Company, the Guarantors and their Affiliates and any person acting on their behalf (other than the Initial Purchaser, as to whom none of the Company or any Guarantor makes any representation or warranty) has complied and will comply with the offering restrictions set forth in Regulation S. (c) Eligibility for Resale Under Rule 144A. The Securities are eligible for resale pursuant to Rule 144A and will not be, at the Closing Date, of the same class as securities listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder) or quoted in a U.S. automated interdealer quotation system. (d) The Offering Memorandum. The Offering Memorandum does not, and at the Closing Date will not, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation, warranty and agreement shall not apply to statements in or omissions from the Offering Memorandum made in reliance upon and in conformity with information furnished to the Company in writing by the the Initial Purchaser expressly for use in the Offering Memorandum. Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, contains all the information specified in, and meeting the requirements of Rule 144A(d)(4). None of the Company or any Guarantor has distributed and none of them will distribute, prior to the later of the Closing Date and the completion of the the Initial Purchaser's distribution of the Securities, any offering material in connection with the offering and sale of the Securities other than the Preliminary Offering Memorandum, the Offering Memorandum or as agreed upon by the Initial Purchaser. (e) Incorporated Documents. The Offering Memorandum as delivered from time to time shall incorporate by reference [the Annual Report of the Company on Form 10-K for the fiscal year ended June 30, 2001 filed with the Commission on September 14, 2001 (the "Annual Report"), each Quarterly Report of the Company on Form 10-Q and each Current Report of the Company on Form 8-K (and any amendment(s) thereto) filed with the Commission between the date of the Annual Report and the Closing Date].(3) The documents incorporated or deemed to be incorporated by reference in the Offering Memorandum, at the time they were, or hereafter are, filed with the Commission (collectively, the "Incorporated Documents") complied and will comply in all material respects with the requirements of the Exchange Act. (f) The Purchase Agreement. This Agreement has been duly authorized, executed and delivered by each of the Company and the Guarantors. (g) The Registration Rights Agreement. At the Closing Date, the Registration Rights Agreement will have been duly authorized, executed and delivered by, and - ------------------------------- (3) To be updated depending on the time of the Offering. 4 (assuming the due authorization, execution and delivery thereof by the other parties thereto) will be a valid and binding agreement of, the Company and each Guarantor, enforceable in accordance with its terms, except as rights to indemnification and contribution thereunder may be limited by applicable law and except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity). Pursuant to the Registration Rights Agreement, the Company and each Guarantor will agree to file with the Commission, under the circumstances set forth therein, (i) a registration statement under the Securities Act relating to another series of debt securities of the Company with terms substantially identical to the Notes (the "Exchange Notes") to be offered in exchange for the Notes (the "Exchange Offer") and (ii) to the extent required by the Registration Rights Agreement, a shelf registration statement pursuant to Rule 415 of the Securities Act relating to the resale by certain holders of the Notes, and in each case, to use its best efforts to cause such registration statements to be declared effective. (h) The DTC Letter of Representations. At the Closing Date, the DTC Letter of Representations will have been duly authorized, executed and delivered by, and (assuming the due authorization, execution and delivery thereof by the other parties thereto) will be a valid and binding agreement of, the Company, enforceable in accordance with its terms except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity). (i) Authorization of the Securities and the Exchange Securities. (i) The Notes to be issued to the Initial Purchaser are in the form contemplated by Section 10(a) of the Note Purchase Agreement and by the Indenture, have been duly authorized for issuance and sale pursuant to this Agreement and the Indenture and, at the Closing Date, will have been duly executed by the Company and, when authenticated in the manner provided for in the Indenture and delivered in exchange for the Existing Notes [(and against payment of the purchase price for the Additional Notes)](4), will constitute valid and binding agreements of the Company, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity) and will be entitled to the benefits of the Indenture; (ii) prior to their issuance, the Exchange Notes will have been duly and validly authorized for issuance by the Company, and when issued and authenticated in accordance with the terms of the Indenture, the Registration Rights Agreement and the Exchange Offer, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, - ------------------------ (4) Include only if Additional Notes are to be issued. 5 or similar laws relating to or affecting enforcement of the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity) and will be entitled to the benefits of the Indenture; (iii) the Guarantees of the Notes will be in the form contemplated by the Indenture, will have been, prior to their issuance, duly authorized for issuance and sale pursuant to this Agreement and the Indenture and will have been duly executed by each of the Guarantors and, when the Guarantees have been authenticated in the manner provided for in the Indenture and delivered, will constitute valid and binding agreements of the Guarantors, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity) and will be entitled to the benefits of the Indenture; and (iv) prior to their issuance, the Guarantees of the Exchange Notes will be in the form contemplated by the Indenture and will have been duly and validly authorized for issuance and sale pursuant to the Indenture and when issued and authenticated in accordance with the terms of the Indenture, will constitute valid and binding agreements of the Guarantors, enforceable in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity) and will be entitled to the benefits of the Indenture. (j) Authorization of the Indenture. The Indenture has been duly authorized by the Company and the Guarantors and, at the Closing Date, will have been duly executed and delivered by the Company and the Guarantors and (assuming due authorization, execution and delivery by other parties thereto) will constitute a valid and binding agreement of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles (whether considered in a proceeding at law or in equity). (k) Descriptions in the Offering Memorandum. The Notes, the Guarantees of the Notes and the Indenture conform, or will conform, in all material respects to the respective statements relating thereto contained in the Offering Memorandum. The Exchange Securities and the Guarantees of the Exchange Securities will conform in all material respects to the respective statements relating thereto contained in the Offering Memorandum and the Registration Statement at the time such Registration Statement becomes effective. (l) No Material Adverse Change. Except as otherwise disclosed in the Offering Memorandum, subsequent to the respective dates as of which information is given in the Offering Memorandum, (i) there has been no material adverse change or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the business, assets, properties, liabilities (contingent or otherwise) or operations, of Holdings or the Company and its Subsidiaries 6 considered as one entity (any such change or development is called a "Material Adverse Change"); (ii) Holdings, and the Company and its Subsidiaries considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, not in the ordinary course of business nor entered into any material transaction or agreement not in the ordinary course of business; and (iii) there has been no dividend or distribution of any kind declared, paid or made by Holdings, the Company or any of its Subsidiaries on any class of capital stock (except for dividends paid by a Subsidiary of the Company to the Company or to another Subsidiary of the Company) or repurchase or redemption by Holdings, the Company or any of its Subsidiaries of any class of capital stock. (m) Independent Accountants. Arthur Andersen LLP (the "Independent Accountants"), who have expressed their opinion with respect to the financial statements (which term as used in this Agreement includes the related notes thereto) included in the Offering Memorandum are independent public or certified public accountants with respect to the Company within the meaning of Regulation S-X under the Exchange Act. (n) Preparation of the Financial Statements. The consolidated financial statements of the Company, together with the related notes, included in the Offering Memorandum present fairly in all material respects the consolidated financial position of the Company and its Subsidiaries as of and at the dates indicated and the results of their operations and cash flows for the periods specified. The financial statements included in the Offering Memorandum comply as to form with the applicable requirements of the Securities Act. Such financial statements have been prepared in conformity with generally accepted accounting principles as applied in the United States of America applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. [The financial data with respect to the Company and its Subsidiaries set forth in the Offering Memorandum under the captions "Offering Memorandum Summary--Summary Consolidated Historical and Pro Forma Financial and Operating Data," "Unaudited Pro Forma Condensed Consolidated Financial Statements" and "Selected Historical Financial and Operating Data" fairly present in all material respects the historical financial information set forth therein on a basis consistent with that of the audited and unaudited financial statements contained in the Offering Memorandum. The unaudited pro forma financial data of the Company and its Subsidiaries, and the related notes thereto included in the Offering Memorandum present fairly in all material respects the information contained therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and have been properly presented on the bases described therein, and the assumptions used in the preparation thereof are believed to be reasonable in light of then existing conditions and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein.](5) (o) Incorporation and Good Standing of Company and its Subsidiaries. Each of Holdings, the Company and the Subsidiaries of the Company has been duly organized - ------------------------ (5) Include only if the Offering Memorandum contains pro forma financial statements. Update to reflect financial statements included in the Offering Memorandum. 7 and is validly existing as a corporation, limited partnership or limited liability company, as the case may be, in good standing under the laws of the jurisdiction of its organization; each of Holdings, the Company and the Subsidiaries of the Company has the power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum; and each of Holdings, the Company and the Subsidiary Guarantors has the power and authority to enter into and/or perform its obligations, as the case may be, under each of this Agreement, the Indenture, the Registration Rights Agreement, the DTC Letter of Representations, the Securities and the Exchange Securities to which it is a party. Each of Holdings, the Company and each of its Subsidiaries is duly qualified as a foreign corporation, limited liability company or limited partnership, as the case may be, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. (p) Capitalization and Other Capital Stock Matters. At the date specified in such table, the Company had the authorized, issued and outstanding capitalization as set forth in the Offering Memorandum under the caption "Capitalization" [under the heading "Actual."](6) [At the date specified in such table, on a consolidated basis, after giving pro forma effect to [(i) the issuance and sale of the Securities pursuant hereto, (ii) the consummation of the Merger, (iii) the funding of the New Senior Secured Credit Facilities, (iv) the Equity Contribution, (v) the Option Rollover, each as described in the Offering Memorandum, and (vi) the application of the proceeds from the issuance and sale of the Securities, the funding of the Senior Secured Credit Facilities, the Equity Contribution and the Option Rollover to the refinancing transactions described under the caption "Use of Proceeds" in the Offering Memorandum,] the Company would have an authorized and outstanding capitalization as set forth in the Offering Memorandum under the caption "Capitalization" under the heading "Pro Forma."](7) All of the outstanding shares of capital stock of Holdings and the Company have been duly authorized and validly issued, are fully paid and nonassessable. None of the outstanding shares of capital stock of Holdings or the Company were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of Holdings or the Company, as the case may be. Except for rights of first refusal or "tag-along" or "drag along" rights customarily contained in stockholders' agreements, partnership agreements or joint venture operating agreements, there are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of Holdings or the Company or any of the Subsidiaries, other than those described in the Offering Memorandum. The description of the Company's stock option, stock bonus, stock purchase and other stock plans or arrangements and the options or other rights granted thereunder, set forth in the Offering Memorandum accurately and - ------------------------ (6) Include only if pro forma financial information is included in the Offering Memorandum. (7) To be updated based on pro forma financial information, if any, included in the Offering Memorandum. 8 fairly describes, in all material respects, such plans, arrangements, options and rights. As of the date hereof, all of the issued and outstanding capital stock of the Company has been duly authorized and validly issued, is fully paid and nonassessable and is owned directly by Holdings, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim except as described in the Offering Memorandum. In addition, all of the issued and outstanding capital stock of each Subsidiary, except as described in the Offering Memorandum, has been duly authorized and validly issued, is fully paid and nonassessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim, except for any security interests, mortgages, pledges, liens, encumbrances or claims of the lenders existing under the Credit Agreement, dated as of October 17, 2001, among the Company, the Guarantors, Bank of America, N.A., as administrative agent, First Union National Bank, as syndication agent, The CIT Group/Business, Inc., as documentation agent, and the other lenders party thereto (such agreement, as amended from time to time, the "Existing Credit Agreement"). The only Subsidiaries of the Company are those Subsidiaries listed in Schedule C hereto. (q) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required. None of Holdings, the Company or any of its Subsidiaries is in violation of its charter or by-laws or is in default or has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time, or both, would reasonably be expected to constitute a default ("Default") under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease, license or other instrument to which Holdings, the Company or any of its Subsidiaries is a party or by which it or any of them may be bound or to which any of the property or assets of Holdings, the Company or any of its Subsidiaries is subject (each, an "Instrument"), except for such Defaults as would not, individually or in the aggregate, result in a Material Adverse Change or except for such defaults that have been waived in writing. The Company's and each Guarantor's execution, delivery and performance of this Agreement, the Company's and each Guarantor's execution and delivery of, and the performance by the Company and the Guarantors of, the Registration Rights Agreement and the Indenture, the Company's execution and delivery of, and the performance by the Company of, the DTC Letter of Representations, and the issuance and delivery of the Securities or the Exchange Securities, and consummation of the transactions contemplated hereby and thereby and by the Offering Memorandum (i) will not result in any violation of the provisions of the partnership agreement, operating agreement, charter or by-laws, as applicable, of Holdings, the Company or any of its Subsidiaries, (ii) will not conflict with or constitute a breach of, or Default or a Debt Repayment Triggering Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of Holdings, the Company or any of its Subsidiaries pursuant to, or require the consent of any other party to, any Instrument, except for such conflicts, breaches, Defaults, Debt Repayment Triggering Events, liens, charges or encumbrances as would not, individually or in the aggregate, result in a Material Adverse Change and (iii) will not result in any violation of any law, administrative regulation or administrative or court decree applicable to Holdings or the Company or any of its Subsidiaries except for such violations that would not, individually or in the aggregate, result in a Material Adverse Change. No consent, approval, 9 authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency, is required for the Company's or each Guarantor's execution, delivery and performance of this Agreement, the Registration Rights Agreement, the DTC Letter of Representations or the Indenture, to which it is a party, or the issuance and delivery of the Securities or the Exchange Securities, or consummation of the transactions contemplated hereby and thereby and by the Offering Memorandum, except such as will be obtained by the Company or the Guarantors and are in full force and effect under the Securities Act, the Trust Indenture Act and such as may be required under state securities laws or the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Initial Purchasers in the manner contemplated herein and in the Offering Memorandum and in connection with Holdings', the Company's and the Subsidiary Guarantors' obligations under the Registration Rights Agreement. As used herein, a "Debt Repayment Triggering Event" means any event or condition which gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture or other evidence of material indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by Holdings or the Company or any of its Subsidiaries. (r) No Material Actions or Proceedings. Except as otherwise disclosed in the Offering Memorandum, there are no legal or governmental actions, suits or proceedings pending or, to the best of the knowledge of Holdings and the Company, threatened (i) against or affecting Holdings or the Company or any of the Subsidiaries, (ii) which has as the subject thereof any property owned or leased by, Holdings, the Company or any of its Subsidiaries, where in any such case (A) there is a reasonable possibility that such action, suit or proceeding might be determined adversely to Holdings or the Company or such Subsidiary and (B) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to result in a Material Adverse Change or materially and adversely affect the transactions contemplated by this Agreement. (s) Intellectual Property Rights. The Company and its Subsidiaries own, possess or license sufficient trademarks, trade names, patent rights, copyrights, licenses, approvals, trade secrets and other similar rights (collectively, "Intellectual Property Rights") reasonably necessary to conduct their businesses as now conducted; and the expected expiration of any of such Intellectual Property Rights would not result in a Material Adverse Change. Neither the Company nor any of its Subsidiaries has received any notice of infringement or conflict with asserted Intellectual Property Rights of others, which infringement or conflict, if the subject of an unfavorable decision, ruling or filing would reasonably be expected to result in a Material Adverse Change and, except as otherwise disclosed in the Offering Memorandum, neither the Company nor any of its Subsidiaries is in default under the terms of any license or similar agreement related to any Intellectual Property Rights necessary to conduct their business as now conducted or contemplated except as would not reasonably be expected to result in a Material Adverse Change. (t) All Necessary Permits, Etc. The Company and each of its Subsidiaries possess such valid and current certificates, authorizations or permits issued by the 10 appropriate municipal, state, federal or foreign regulatory agencies or bodies necessary to conduct their respective businesses as now conducted except as would not reasonably be expected to result in a Material Adverse Change, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such license, certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, could reasonably be expected to result in a Material Adverse Change. (u) Regulatory Matters. To the knowledge of Holdings, the Company and each Subsidiary Guarantor, none of (i) the Company, any of its Subsidiaries, or the officers, directors, employees, or agents (as defined in 42 C.F.R. Part 420 Subpart C and 42 C.F.R. Section 1001.1001(a)(2)) of the Company or any of its Subsidiaries, or (ii) any entity which the Company or any of its Subsidiaries manages or for which the Company or any of its Subsidiaries provides billing services ("Managed Entity") or the employees of any Managed Entity who are leased from the Company or any of its Subsidiaries, has been charged with, or has been or is being investigated with respect to, any activity (and with respect to the officers, directors, agents and employees of the Company or any of its Subsidiaries or any employee of any Managed Entity as described above, only as to any activity during their employment or association with the Company, any Subsidiary of the Company or any Managed Entity) that materially contravenes or could materially contravene or constitutes or could constitute a material violation of any Healthcare Law. To the knowledge of Holdings, the Company and each Subsidiary Guarantor, no person who has a direct or indirect ownership interest of 5% or more (as those terms are defined in 42 C.F.R. Part 420 Subpart C and 42 C.F.R. Section 1001.1001(a)(2)) in the Company or any Subsidiary, has been charged with, or has been or is being investigated with respect to, any activity involving the Company or any Subsidiary that materially contravenes or could materially contravene or constitutes or could constitute a material violation of any Healthcare Law. To the actual knowledge of the officers of the Company, none of the officers, directors and agents of any Managed Entity has been charged with, or has been or is being investigated with respect to, any activity during their employment or association with any Managed Entity that materially contravenes or could materially contravene or constitutes or could constitute a material violation of any Healthcare Law. To the actual knowledge of the officers of the Company, no person who has a direct or indirect ownership interest of 5% or more (as those terms are defined in 42 C.F.R. Part 420 Subpart C and 42 C.F.R. Section 1001.1001(a)(2)) in a Managed Entity has been charged with, or has been or is being investigated with respect to, any activity in connection with the Managed Entity that materially contravenes or could materially contravene or constitutes or could constitute a material violation of any Healthcare Law. To the knowledge of Holdings, the Company and each Subsidiary Guarantor, none of the Company, any of its Subsidiaries, any Managed Entity or any of the officers, directors, employees or agents (as described above) of the Company or any Subsidiary or any employee of any Managed Entity who is leased from the Company or any Subsidiary, has engaged in any activity (and with respect to the officers, directors, agents and employees of the Company or any Subsidiary or any employee of any Managed Entity as described above, only as to any activity during their employment or association with the Company, any Subsidiary or any Managed Entity) that materially contravenes or constitutes a material violation of any Healthcare Law during their employment or association with the 11 Company, any Subsidiary, or any Managed Entity. To the actual knowledge of the officers of the Company, none of the officers, directors or agents of any Managed Entity has engaged in any activity during their employment or association with the Company, any Subsidiary or any Managed Entity that materially contravenes or constitutes a material violation of any Healthcare Law. "Healthcare Law" means the following laws or regulations relating to the regulation of the health care industry or to payment for services rendered by healthcare providers: (i) Sections 1877, 1128, 1128A or 1128B of the Social Security Act ("SSA"); (ii) any prohibition on the making of any false statement or misrepresentation of material facts to any governmental agency that administers a federal or state health care program (including, but not limited to, Medicare, Medicaid, and the federal Civilian Health and Medical Plan of the Uniformed Services); (iii) the licensure, certification or registration requirements of health care facilities, services or equipment, including, but not limited to, the Mammography Quality Standards Act; (iv) any state certificate of need or similar law governing the establishment of health care facilities or services or the making of health care capital expenditures; (v) any state law relating to fee-splitting or the corporate practice of medicine; (vi) any state physician self-referral prohibition or state anti-kickback law; (vii) any criminal offense relating to the delivery of, or claim for payment for, a healthcare item or service under any federal or state health care program; (viii) any federal or state law relating to the interference with or obstruction of any investigation into any criminal offense; and (ix) any criminal offense under federal or state law relating to the unlawful manufacture, distribution, prescription or dispensing of a controlled substance. (v) Medicare/Medicaid Participation. To the knowledge of Holdings, the Company and each Subsidiary, none of the Company, any of its Subsidiaries, or any existing officers or directors of the Company or the respective Subsidiary who is expected to be an officer, director, agent (as defined in 42 C.F.R. Section 1001.1001(a)(2)), or managing employee (as defined in SSA Section 1126(b) or any regulations promulgated thereunder) of the Company or the respective Subsidiary: (1) has had a material civil monetary penalty assessed against it under Section 1128A of the SSA or any regulations promulgated thereunder; (2) has been excluded from participation under the Medicare program or a federal or state health care program; or (3) has been convicted (as that term in defined in 42 C.F.R. Section 1001.2) of any of the following categories of offenses as described in SSA Section 1128(a) and (b)(1), (2), (3) or any regulations promulgated thereunder: (i) criminal offenses relating to the delivery of an item or service under Medicare or any federal or state health care program; (ii) criminal offenses under federal or state law relating to patient neglect or abuse in connection with the delivery of a healthcare item or service; criminal offenses under federal or state law relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a healthcare item or service or with respect to any act or omission in a program operated by or financed in whole or in part by any federal, state or local governmental agency; (iii) federal or state laws relating to the interference with or obstruction of any investigation into any criminal offense described above in this paragraph; or (iv) criminal offenses under federal or state law relating to the unlawful manufacture, distribution, prescription or dispensing of a controlled substance. The Company, a Subsidiary, or an entity owned in whole or in part by the Company or a Subsidiary has a Medicare provider number, and a participating 12 provider agreement in force with a Medicare Part B carrier, and materially meets all applicable Medicare conditions of coverage, in each locale, as applicable, in which the Company, such Subsidiary or such entity bills directly to Medicare for services furnished by the Company, such Subsidiary or such entity. The Company, a Subsidiary, or an entity owned in whole or in part by the Company or a Subsidiary has a Medicare provider number, and a participating provider agreement, and materially satisfies all applicable Medicaid conditions of coverage, in each state, as applicable, in which the Company, such Subsidiary, or such other entity bills directly to such state's Medicaid agency for services provided by the Company, such Subsidiary, or such other entity for Medicaid patients. (w) Title to Properties. Except as otherwise disclosed in the Offering Memorandum, the Company and each of its Subsidiaries has good and marketable title to all their properties and assets reflected as owned in the financial statements referred to in Section 1(n) above (or elsewhere in the Offering Memorandum), in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects, except as would not reasonably be expected to result in a Material Adverse Change. Any real property, improvements, equipment and personal property held under lease by the Company or any of its Subsidiaries are held under valid and enforceable leases, except for such invalidations and unenforceabilities as would not reasonably be expected to result in a Material Adverse Change. (x) Material Agreements. The agreements, contracts or instruments listed as exhibits to the Annual Report and those listed in Schedule B attached hereto are the only agreements, contracts or instruments binding upon Holdings and/or the Company and its Subsidiaries, that provide for the payments by Holdings, the Company or any of its Subsidiaries after the date hereof of $2 million or more. (y) Tax Law Compliance. The Company and its Subsidiaries have filed all material federal, state and foreign income and franchise tax returns required to be filed and have paid all taxes shown on such returns required to be paid by any of them which are due and payable and, if due and payable, any related or similar assessment, fine or penalty levied against any of them. The Company and each Subsidiary Guarantor has made adequate charges, accruals and reserves in the applicable financial statements referred to in Section 1(n) above in respect of all federal, state and foreign income and franchise taxes for all periods as to which the tax liability of the Company or any of its Subsidiaries has not been finally determined, except where such failure would not reasonably be expected to result in a Material Adverse Change. (z) Company Not an "Investment Company". Holdings and the Company have been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the "Investment Company Act"). None of Holdings or the Company is an "investment company" within the meaning of Investment Company Act and each of Holdings and the Company will conduct its business in a manner so that it will not become subject to the Investment Company Act. 13 (aa) Insurance. Each of the Company and its Subsidiaries are insured by recognized, financially sound institutions with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate and customary for their businesses including, but not limited to, policies covering real and personal property owned or leased by the Company and its Subsidiaries against theft, damage, destruction, acts of vandalism and earthquakes. The Company has no reason to believe that it or any Subsidiary will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change. To the best of the Company's knowledge, after due inquiry, neither the Company nor any Subsidiary has been denied any insurance coverage which it has sought or for which it has applied and there are no claims by the Company or any of its Subsidiaries under any current insurance policy as to which any insurance company or institution is denying, or will deny, liability or coverage or defending under a reservation of rights clause. (bb) No Price Stabilization or Manipulation. None of the Company, the Guarantors or any of their respective Affiliates has taken or will take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. (cc) Solvency. Holdings, the Company and each of the Company's Subsidiaries, taken as a whole, is Solvent. As used herein, the term "Solvent" means, with respect to Holdings, the Company and its Subsidiaries, taken as a whole, on a particular date, that on such date (i) such entity is able to pay its debts and other liabilities, contingent obligations and other commitments as they mature in the ordinary course of business, (ii) such entity does not intend to, and does not believe that it will, incur debts or liabilities beyond such entity's ability to pay as such debts and liabilities mature in their ordinary course, (iii) such entity is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such entity's assets would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such entity is engaged or is to engage, (iv) the fair value of the assets of such entity is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such entity and (v) the present fair salable value of the assets of such entity is not less than the amount that will be required to pay the probable liability of such entity on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. (dd) No Unlawful Contributions or Other Payments. Neither the Company nor any of its Subsidiaries nor, to the best of the Company's or any Guarantor's knowledge, any employee or agent of the Company or any Subsidiary, has made any contribution or other payment to any official of, or candidate for, any federal, state or foreign office in 14 violation of any law or of the character necessary to be disclosed in the Offering Memorandum in order to make the statements therein not misleading. (ee) Company's Accounting System. The Company and each of its Subsidiaries maintains a system of accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles as applied in the United States of America and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (ff) Compliance with Environmental Laws. Except as otherwise disclosed in the Offering Memorandum or as would not, individually or in the aggregate, result in a Material Adverse Change (i) the Company and each of its Subsidiaries have all permits, authorizations and approvals required under any Environmental Laws and are in compliance with their requirements, (ii) neither the Company nor any of its Subsidiaries, to the knowledge of the Company, after due inquiry, is in violation of any federal, state, local or foreign law or regulation relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products (collectively, "Materials of Environmental Concern"), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (collectively, "Environmental Laws"), which violation includes, but is not limited to, noncompliance with any permits or other governmental authorizations required for the operation of the business of the Company or its Subsidiaries under applicable Environmental Laws, or noncompliance with the terms and conditions thereof, nor has the Company or any of its Subsidiaries received any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company or any of its Subsidiaries is in violation of any Environmental Law; (iii) there is, to the knowledge of the Company, after due inquiry, no claim, action or cause of action filed with a court or governmental authority, no investigation with respect to which the Company or any Subsidiary has received written notice, and no written notice by any person or entity alleging potential liability for investigatory costs, cleanup costs, governmental responses costs, natural resources damages, property damages, personal injuries, attorneys' fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by the Company or any of its Subsidiaries, now or in the past (collectively, "Environmental Claims"), pending or, to the best of the Company's or any Guarantor's knowledge, threatened against the Company or any of its Subsidiaries or any person or entity whose liability for any Environmental Claim the Company or any of its Subsidiaries has retained or assumed either contractually or by operation of law; and (iv) 15 to the knowledge of the Company, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that reasonably could result in a violation of any Environmental Law or form the basis of a potential Environmental Claim against the Company or any of its Subsidiaries or against any person or entity whose liability for any Environmental Claim the Company or any of its Subsidiaries has retained or assumed either contractually or by operation of law. (gg) ERISA Compliance. The Company and its Subsidiaries and any "employee benefit plan" (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, "ERISA")) established or maintained by the Company, its Subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in all respects with ERISA or, if not in compliance, would not reasonably be expected to result in a Material Adverse Change. "ERISA Affiliate" means, with respect to the Company or a Subsidiary, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the "Code") of which the Company or such Subsidiary is a member. No "reportable event" (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any "employee benefit plan" established or maintained by the Company, its Subsidiaries or any of their ERISA Affiliates. No "employee benefit plan" established or maintained by the Company, its Subsidiaries or any of their ERISA Affiliates, if such "employee benefit plan" were terminated, would have any "amount of unfunded benefit liabilities" (as defined under ERISA). Neither the Company, its Subsidiaries nor any of their ERISA Affiliates has incurred or reasonably expects to incur any liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan" established or maintained by the Company, its Subsidiaries or any of their ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification. (hh) Regulation S Compliance. The Company, the Guarantors and their respective Affiliates and all authorized persons acting on their behalf (other than the Initial Purchaser, as to whom the Company and the Guarantors make no representation) have complied with and will comply with the offering restrictions requirements of Regulation S in connection with the offering of the Securities outside the United States and, in connection therewith, the Offering Memorandum will contain the disclosure required by Rule 902(h). (ii) Taxes; Fees. There are no stamp or other issuance or transfer taxes or duties or other similar fees or charges required to be paid in connection with the execution and delivery of this Agreement or the issuance or sale by the Company of the Securities. (jj) No Labor Disputes. As of the date hereof, (i) there is no unfair labor practice complaint pending against the Company or any of its Subsidiaries or, to the best 16 knowledge of the Company, threatened against any of them, before the National Labor Relations Board or any state or local labor relations board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Company or any of its Subsidiaries or, to the best knowledge of the Company, threatened against any of them, (ii) there is no material strike, labor dispute, slowdown or stoppage pending against the Company or any of its Subsidiaries or, to the knowledge of the Company, threatened against the Company and (iii) the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its principal customers, suppliers, manufacturers or contractors, in each case which is likely to result in a Material Adverse Change. Any certificate signed by an officer of the Company or any Guarantor and delivered to the Initial Purchaser pursuant to this Agreement or to counsel for the Initial Purchaser shall be deemed to be a representation and warranty by the Company or such Guarantor to the Initial Purchaser as to the matters set forth therein. Section 2. Purchase, Sale and Delivery of the Securities. (a) The Securities. The Company agrees to [(x)]* issue to the Initial Purchaser, in exchange for all of the Existing Notes, $[_______] aggregate principal amount of Notes [and (y) issue and sell to the Initial Purchaser the principal amount of Additional Notes set forth in the Pricing Notice (as defined in the Note Purchase Agreement) at a purchase price equal to 100% of the principal amount thereof, payable on the Closing Date]*. The Notes shall be resold by the Initial Purchaser at par; provided that, with the consent of J.W. Childs Associates, L.P. and The Halifax Group, L.L.C., the Initial Purchaser may resell the Notes at a price below par. (b) The Closing Date. Delivery of certificates for the Securities in definitive form to be issued and sold to the Initial Purchaser [(and payment of the purchase price for the Additional Notes)]* shall be made at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022-6069 (or such other place as may be agreed to by the Company and the Initial Purchaser) at 9:00 a.m. New York City time, on the Exchange Date (as defined in the Note Purchase Agreement), or such other time and date as the Initial Purchaser shall designate by notice to the Company (the time and date of such closing are called the "Closing Date"). The Company hereby acknowledges that circumstances under which the Initial Purchaser may provide notice to postpone the Closing Date as originally scheduled include, but are in no way limited to, any determination by the Company or the Initial Purchaser to recirculate to investors copies of an amended or supplemented Offering Memorandum or a delay as contemplated by the provisions of Section 16 hereof. (c) Delivery of the Notes. The Notes shall be delivered as provided in Section 10(a) of the Note Purchase Agreement. The certificates for the Notes shall be in such denominations and registered in the name of the Depository or its nominee, pursuant to - ------------------------ * Include only if Additional Notes are to be issued. 17 the DTC Letter of Representations, and shall be made available for inspection on the business day preceding the Closing Date at a location in New York City, as the Initial Purchaser may designate. Time shall be of the essence. (d) Delivery of Offering Memorandum to the Initial Purchaser. Not later than 12:00 p.m. on the second business day following the date of this Agreement, the Company shall deliver or cause to be delivered copies of the Offering Memorandum in such quantities and at such places as the Initial Purchaser shall reasonably request. (e) Initial Purchaser as Qualified Institutional Buyer. The Initial Purchaser represents and warrants to, and agrees with, the Company that (i) it is a "qualified institutional buyer" within the meaning of Rule 144A (a "Qualified Institutional Buyer"), and (ii) with respect to those Securities sold in reliance on Regulation S, (A) has not engaged and will not engage in any direct selling efforts within the meaning of Regulation S and (B) has complied and will comply with the offering restrictions requirements of Regulations S. Section 3. Covenants. The Company and each Guarantor further jointly and severally covenant and agree with the Initial Purchaser as follows: (a) The Initial Purchaser's Review of Proposed Amendments and Supplements. Prior to amending or supplementing the Offering Memorandum (including any amendment or supplement through incorporation by reference of any report filed under the Exchange Act), the Company shall furnish to the Initial Purchaser for review a copy of each such proposed amendment or supplement, and the Company shall not use any such proposed amendment or supplement to which the Initial Purchaser reasonably objects in writing within 3 business days (with advice from its independent counsel). (b) Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters. If, prior to the completion of the placement of the Securities by the Initial Purchaser with the Subsequent Purchasers, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Offering Memorandum in order to make the statements therein, in the light of the circumstances when the Offering Memorandum is delivered to a Subsequent Purchaser, not misleading, or if in the opinion of the Initial Purchaser or counsel for the Initial Purchaser it is otherwise necessary to amend or supplement the Offering Memorandum to comply with law, the Company agrees to promptly prepare (subject to Section 3(a) hereof), and furnish at its own expense to the Initial Purchaser, amendments or supplements to the Offering Memorandum so that the statements in the Offering Memorandum as so amended or supplemented will not, in the light of the circumstances when the Offering Memorandum is delivered to a Subsequent Purchaser, be misleading or so that the Offering Memorandum, as amended or supplemented, will comply with law. The Company and the Guarantors hereby expressly acknowledge that the indemnification and contribution provisions of Sections 8 and 9 hereof are specifically applicable and relate to each offering memorandum, registration statement, prospectus, amendment or supplement referred to in this Section 3(b). 18 (c) Copies of the Offering Memorandum. The Company agrees to furnish the Initial Purchaser, without charge, as many copies of the Offering Memorandum and any amendments and supplements thereto as they shall have reasonably requested prior to or at the time of the original printing of the Offering Memorandum or any amendment or supplement thereto. (d) Blue Sky Compliance. Holdings, the Company and the Subsidiary Guarantors shall cooperate with the Initial Purchaser and counsel for the Initial Purchaser to qualify or register the Securities for sale under (or obtain exemptions from the application of) the Blue Sky or state securities laws of those jurisdictions designated by the Initial Purchaser, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Securities. Holdings, the Company and the Subsidiary Guarantors shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or where it would be subject to taxation as a foreign corporation. Holdings and the Company will advise the Initial Purchaser promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Securities for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, Holdings, the Company and the Subsidiary Guarantors shall use their reasonable best efforts to obtain the withdrawal thereof at the earliest possible moment. (e) Depositary. The Company will cooperate with the Initial Purchaser and use its reasonable best efforts to permit the Securities to be eligible for clearance and settlement through the facilities of the Depositary. (f) Additional Issuer Information. Prior to the completion of the placement of the Securities by the Initial Purchaser with the Subsequent Purchasers, the Company, or, if permitted by the Exchange Act, Holdings, shall file, on a timely basis, with the Commission all reports and documents required to be filed under Section 13 or 15 of the Exchange Act; provided that if such filings are being made by Holdings, rather than by the Company, such filings shall adequately disclose the Company's results of operations and financial condition in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in at least such detail as would be required if the Company were filing such report. In addition, at any time Holdings or the Company is not subject to Section 13 or 15 of the Exchange Act, Holdings and the Company covenant that they will furnish, at their expense, upon request, to registered holders of Securities within the time periods specified in the Exchange Act (i) all quarterly and annual reports that would be required to be filed with the Commission on Forms 10-Q and 10-K if Holdings or the Company were required to file such Forms, (including, in each case, financial information and a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by Holdings' and the Company's certified independent accountants); and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if Holdings or the Company were required to file such reports. In addition, following the date the Company is required to 19 consummate the exchange offer contemplated by the Registration Rights Agreement, whether or not required by the Commission, Holdings and the Company will file a copy of all of the information and reports referred to in clauses (i) and (ii) above with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective purchasers of Securities upon request. In addition, the Company and the Guarantors agree that, for so long as Securities (but not the Exchange Securities) remain outstanding, they will furnish to holders and beneficial owners of Securities and to securities analysts and prospective purchasers of Securities, upon their request, the information (together with the documents referred to in the second sentence of this paragraph, the "Additional Issuer Information") required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. (g) Future Agreement Not to Offer or Sell Additional Securities. Holdings and the Company, during the period of 180 days following the date of the Offering Memorandum, will not, without the prior written consent of the Initial Purchaser (which consent may be withheld at the sole discretion of the Initial Purchaser), directly or indirectly, sell, offer, contract or grant any option to sell, pledge, transfer or establish an open "put equivalent position" within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or transfer, or announce the offering of, or file any registration statement under the Securities Act in respect of, any debt securities of the Company or securities exchangeable for or convertible into debt securities of the Company (other than to register the Exchange Securities). (h) Future Reports to the Initial Purchaser. For so long as any Securities or Exchange Securities remain outstanding, Holdings and the Company will furnish to the Initial Purchaser (i) as soon as reasonably practicable after the end of each fiscal year, copies of the Annual Report of Holdings and the Company containing the balance sheet of Holdings and the Company as of the close of such fiscal year and statements of income, stockholders' equity and cash flows for the year then ended and the opinion thereon of Holdings' and the Company's independent public or certified public accountants; (ii) as soon as reasonably practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by Holdings and the Company with the Commission; and (iii) as soon as available, copies of any report or communication of Holdings and the Company mailed generally to holders of its capital stock or debt securities (including the holders of the Securities). (i) No Integration. Each of Holdings and the Company agrees that it will not and will cause its affiliates not to, make any offer or sale of securities of any class if, as a result of the doctrine of "integration" referred to in Rule 502 under the Securities Act, such offer or sale would render invalid (for the purpose of (i) the issuance and sale of the Securities by the Company to the Initial Purchaser, (ii) the resale of the Securities by the Initial Purchaser to Subsequent Purchasers or (iii) the resale of the Securities by such Subsequent Purchasers to others) the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof or by Rule 144A or by Regulation S thereunder or otherwise. 20 (j) Legended Securities. Each certificate for a Note will bear the legend substantially in the form set forth in Section 10(d) of the Note Purchase Agreement for the time period and upon the other terms stated in the Offering Memorandum. (k) PORTAL. The Company will use its reasonable best efforts to cause such Notes when issued to be eligible for the National Association of Securities Dealers, Inc. PORTAL market (the "PORTAL market"). (l) Rating of Securities. The Company shall take all reasonable action necessary to enable Standard & Poor's Ratings Services, a division of McGraw Hill, Inc. ("S&P"), and Moody's Investor Services, Inc. ("Moody's") to provide their respective credit ratings to the Securities. The Initial Purchaser may, in its sole discretion, waive in writing the performance by Holdings or the Company of any one or more of the foregoing covenants or extend the time for their performance. Section 4. Payment of Expenses. The Company agrees, and Holdings shall cause the Company, to pay all costs, fees and expenses incurred in connection with the performance of its obligations hereunder and in connection with the transactions contemplated hereby, including without limitation (i) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Securities to the Initial Purchaser, (ii) all fees and expenses of the Company's and the Guarantors' counsel, independent public or certified public accountants and other advisors, (iii) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of each Preliminary Offering Memorandum and the Offering Memorandum (including financial statements), and all amendments and supplements thereto, (iv) all filing fees, reasonable attorneys' fees and expenses incurred by the Company, the Guarantors or the Initial Purchaser in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Securities for offer and sale under the Blue Sky laws and, if requested by the Initial Purchaser, preparing and printing a "Blue Sky Survey" or memorandum, and any supplements thereto, advising the Initial Purchaser of such qualifications, registrations and exemptions, such fees and expenses under this clause (iv) not to exceed $20,000 in the aggregate, (v) the fees and expenses of the Trustee, including the fees and disbursements of counsel for the Trustee in connection with the Indenture, the Securities and the Exchange Securities, (vi) all fees and expenses (including reasonable fees and expenses of counsel) of the Company in connection with approval of the Securities by the Depositary for "book-entry" transfer, and (vii) the performance by Company of its other obligations under this Agreement. Except as provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the Initial Purchaser shall pay its own expenses, including the fees and disbursements of its counsel, and shall be responsible for all roadshow related costs. Section 5. Additional Covenants. The Company and each Guarantor further jointly and severally covenant and agree with the Initial Purchaser as follows: (a) Accountants' Comfort Letter. The Company shall use its best efforts to cause the Independent Accountants to deliver to the Initial Purchaser, on the Closing 21 Date, a letter dated the date hereof addressed to the Initial Purchaser, in form and substance satisfactory to the Initial Purchaser, containing statements and information of the type ordinarily included in accountant's "comfort letters" to the Initial Purchaser, delivered according to Statement of Auditing Standards Nos. 71, 72 and 76 (or any successor bulletins), with respect to the audited and unaudited financial statements, pro forma, and other financial information contained in the Offering Memorandum. (b) Opinion of Counsel for the Company. The Company shall use its best efforts to cause Kaye Scholer LLP and Hunton & Williams, counsel for the Company, to deliver to the Initial Purchaser, on the Closing Date, opinions of such counsels, dated as of such Closing Date, the forms of which are attached as Exhibit A-1 and Exhibit A-2, respectively. (c) Opinion of General Counsel for the Company. The Company shall use its best efforts to cause Marilyn U. MacNiven-Young, its General Counsel to deliver to the Initial Purchaser, on the Closing Date, an opinion of such counsel, dated as of such Closing Date, the form of which is attached as Exhibit B. (d) Opinion of Regulatory Counsel for the Company. The Company shall use its best efforts to cause Davis Wright Tremaine LLP, regulatory counsel for the Company, to deliver to the Initial Purchaser, on the Closing Date, an opinion of such counsel, dated as of such Closing Date, the form of which is attached as Exhibit C. (e) Officers' Certificate. On the Closing Date, each of Holdings and the Company shall deliver to the Initial Purchaser written certificates, executed by the Chief Executive Officer, President, Executive Vice President or Senior Vice President of each of Holdings and the Company, as the case may be, and the Chief Financial Officer or Chief Accounting Officer of each of Holdings and the Company, as the case may be, dated as of the Closing Date, to the effect that: (i) for the period from and after the date of this Agreement and prior to the Closing Date, to their knowledge, after due inquiry, there has not occurred any Material Adverse Change; (ii) for the period from the date of this Agreement and prior to the Closing Date, there has not occurred any downgrading, nor has any notice been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any securities of the Company or any of its Subsidiaries by any "nationally recognized statistical rating organization", as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; (iii) the representations, warranties and covenants of the Company and each Guarantor, as the case may be, and set forth in Section 1 of this Agreement are true and correct in all material respects (without giving effect to any limitation as to "materiality" or "Material Adverse Change" set forth therein) with the same force and effect as though expressly made on and as of the Closing Date; and 22 (iv) the Company and the Guarantors have complied in all material respects with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date. (f) Bring-down Comfort Letters. The Company shall use its best efforts to cause the Independent Accountants to deliver to the Initial Purchaser, on the Closing Date, a letter dated such date, in form and substance satisfactory to the Initial Purchaser, to the effect that such Independent Accountants reaffirm the statements made in the letter furnished by them pursuant to subsection (a) of this Section 5, except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the Closing Date. (g) Registration Rights Agreement. The Company and the Guarantors shall enter into the Registration Rights Agreement and deliver to the Initial Purchaser executed counterparts thereof. (h) Additional Documents. On or before the Closing Date, the Company shall deliver to the Initial Purchaser and counsel for the Initial Purchaser such information and documents as the Initial Purchaser and such counsel may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Securities as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained. Section 6. Reimbursement of Initial Purchaser's Expenses. If the issuance and sale to the Initial Purchaser of the Securities on the Closing Date is not consummated because of any refusal, inability or failure on the part of the Company to perform any agreement herein or to comply with any provision hereof, the Company agrees to, and Holdings agrees to cause the Company to, reimburse the Initial Purchaser upon demand for all reasonable out-of-pocket expenses that shall have been incurred by the Initial Purchaser in connection with the proposed offering and sale of the Securities. Section 7. Offer, Sale and Resale Procedures. The Initial Purchaser, on the one hand, and Holdings and the Company, on the other hand, hereby establish and agree to observe the following procedures in connection with the offer and sale of the Securities: (a) Offers and Sales Only to Qualified Institutional Buyers and Non-U.S. Persons. Offers and sales of the Securities will be made only by the Initial Purchaser or Affiliates thereof qualified to do so in the jurisdictions in which such offers or sales are made. Each such offer or sale shall only be made (A) to persons whom the offeror or seller reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the Securities Act) or (B) non-U.S. persons outside the United States to whom the offeror or seller reasonably believes offers and sales of the Securities may be made in reliance upon Regulation S under the Securities Act, upon the terms and conditions set forth in Annex I hereto, which Annex I is hereby expressly made a part hereof. 23 (b) No General Solicitation. The Securities will be offered by approaching prospective Subsequent Purchasers on an individual basis. No general solicitation or general advertising (within the meaning of Rule 502(c) under the Securities Act) will be used in the United States in connection with the offering of the Securities. (c) Restrictions on Transfer. Upon original issuance by the Company, and until such time as the same is no longer required under the applicable requirements of the Securities Act, the Notes (and all securities issued in exchange therefor or in substitution thereof, other than the Exchange Securities) shall bear a legend substantially in the form set forth in Section 10(d) of the Note Purchase Agreement. Following the sale of the Securities by the Initial Purchaser to Subsequent Purchasers pursuant to the terms hereof, the Initial Purchaser shall not be liable or responsible to the Company for any losses, damages or liabilities suffered or incurred by the Company, including any losses, damages or liabilities under the Securities Act, arising from or relating to any resale or transfer of any Security. Section 8. Indemnification. (a) Indemnification of the Initial Purchaser. Each of Holdings, the Company and each of the Subsidiary Guarantors jointly and severally agrees to indemnify and hold harmless the Initial Purchaser, its directors, officers and employees, and each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which the Initial Purchaser or such controlling person may become subject, under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of Holdings and the Company), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based (i) upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (ii) in whole or in part upon any inaccuracy in the representations and warranties of the Company or any Guarantor contained herein; or (iii) in whole or in part upon any failure of the Company or any Guarantor to perform its obligations hereunder or under law; or (iv) any act or failure to act or any alleged act or failure to act by the Initial Purchaser in connection with, or relating in any manner to, the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon any matter covered by clause (i) above to the extent such loss, claim, damage, liability or expense is not covered in items (i) through (iii) (subject to the limitations set forth below), provided that none of the Company or any Guarantor shall be liable under this clause (iv) to the extent that a court of competent jurisdiction shall have determined by a final judgment that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by the Initial Purchaser through its gross negligence or 24 willful misconduct; and to reimburse the Initial Purchaser and each such controlling person for any and all expenses (including the fees and disbursements of counsel chosen by the Initial Purchaser) as such expenses are reasonably incurred by the Initial Purchaser or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Initial Purchaser expressly for use in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto). The indemnity agreement set forth in this Section 8(a) shall be in addition to any liabilities that Holdings or the Company and the Subsidiary Guarantors may otherwise have. (b) Indemnification of the Company and the Guarantors and their Directors and Officers. The Initial Purchaser agrees to indemnify and hold harmless Holdings and the Company and each of their respective directors and each person, if any, who controls the Company or Holdings within the meaning of the Securities Act or the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which Holdings or the Company or any such director, or controlling person may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Initial Purchaser), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), or arises out of or is based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein in the light of the circumstances under which they were made not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), in reliance upon and in conformity with written information furnished to the Company by the Initial Purchaser expressly for use therein; and to reimburse Holdings and the Company or any such director or controlling person for any legal and other expenses reasonably incurred by Holdings or the Company or any such director or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. Holdings and the Company hereby acknowledge that the only information that the Initial Purchaser has furnished to the Company expressly for use in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto) are the statements set forth in [(A) the seventh full paragraph on introductory page ii of the Offering Memorandum, (B) the second sentence under the caption "Risk Factors--You cannot be sure that an active trading market will develop for these notes," and (C) the first sentence of the third paragraph, the first three sentences of the fourth paragraph, the third sentence of the sixth paragraph and the eight paragraph under the caption "Plan 25 of Distribution" in the Offering Memorandum](8); and the Initial Purchaser confirms that such statements are correct. The indemnity agreement set forth in this Section 8(b) shall be in addition to any liabilities that the Initial Purchaser may otherwise have. (c) Notifications and Other Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise than under the indemnity agreement contained in this Section 8 or to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party's election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (together with local counsel), approved by the indemnifying party (the Initial Purchaser in the case of Section 8 and Section 9), representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party. (d) Settlements. The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final non-appealable judgment for the plaintiff, - ------------------------ (8) To be updated based on Offering Memorandum. 26 the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8(c) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the final terms of such proposed settlement as soon as practicable prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. 27 Section 9. Contribution. If the indemnification provided for in Section 8 is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by Holdings, the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchaser, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of Holdings and the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchaser, on the other hand, in connection with the statements or omissions or inaccuracies in the representations and warranties herein which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by Holdings and the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchaser, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds, if any, from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company and the total discount, if any, received by the Initial Purchaser bear to the aggregate initial offering price of the Securities. The relative fault of Holdings, the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchaser, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact or any such inaccurate or alleged inaccurate representation or warranty relates to information supplied by Holdings, the Company or the Subsidiary Guarantors, on the one hand, or the Initial Purchaser, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 8(c) with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 9; provided that no additional notice shall be required with respect to any action for which notice has been given under Section 8(c) for purposes of indemnification. The Company, the Guarantors and the Initial Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 9. Notwithstanding the provisions of this Section 9, the Initial Purchaser shall not be required to contribute any amount in excess of the discount received by the Initial Purchaser in connection with the Securities distributed by them. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to 28 contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 9, each director, officer and employee of the Initial Purchaser and each person, if any, who controls the Initial Purchaser within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Initial Purchaser, and each director of Holdings and the Company and each person, if any, who controls Holdings and the Company within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as Holdings and the Company. Section 10. [Intentionally Omitted.] Section 11. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of Holdings and the Company of their officers and of the Initial Purchaser set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Initial Purchaser, Holdings or the Company or any of its or their partners, officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Securities sold hereunder and any termination of this Agreement. Section 12. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered or telecopied and confirmed to the parties hereto as follows: If to the Initial Purchaser: Banc of America Securities LLC 9 West 57th Street New York, NY 10019 Facsimile: 212-847-8324 Attention: Raymond A. Cubero, Managing Director with a copy to: Shearman & Sterling 599 Lexington Avenue New York, NY 10022 Facsimile: 212-848-7179 Attention: Christopher C. Paci, Esq. If to the Company or Holdings: InSight Health Services Corp. 4400 MacArthur Blvd. Suite 800 Newport Beach, CA 92660 Facsimile: 949-476-8006 Attention: Chief Financial Officer 29 with copies to: J.W. Childs Associates, L.P. One Federal Street 21st Floor Boston, MA 02110 Facsimile: 617-753-1101 Attention: Edward D. Yun and to: The Halifax Group, L.L.C. 1133 Connecticut Avenue N.W. Suite 700 Washington, D.C. 20036 Facsimile: 202-296-7133 Attention: David W. Dupree and to: Kaye Scholer LLP 245 Park Avenue New York, NY 10022 Facsimile: 212-836-8689 Attention: Stephen C. Koval, Esq. and to: InSight Health Services Corp. 4400 MacArthur Blvd. Suite 800 Newport Beach, CA 92660 Facsimile: 949-476-0137 Attention: General Counsel Any party hereto may change the address for receipt of communications by giving written notice to the others. Section 13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and to the benefit of the employees, officers and directors and controlling persons referred to in Section 8 and Section 9, and in each case their respective successors, and no other person will have any right or obligation hereunder. The term "successors" shall not include any purchaser of the Securities as such from the Initial Purchaser by reason of such purchase. Section 14. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of 30 this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. Section 15. Governing Law; Consent to Jurisdiction. (a) Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE. (b) Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby ("Related Proceedings") may be instituted in the federal courts of the United States of America located in the City and County of New York or the courts of the State of New York in each case located in the City and County of New York (collectively, the "Specified Courts"), and each party hereto irrevocably submits to the non-exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a "Related Judgment"), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party's address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum. Section 16. General Provisions. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof except, as to the Initial Purchaser, the Note Purchase Agreement. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit. The Table of Contents and the section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement. 31 Kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms. Very truly yours, INSIGHT HEALTH SERVICES HOLDINGS CORP. By: -------------------------------- Name: Title: INSIGHT HEALTH SERVICES CORP. By: -------------------------------- Name: Title: [Name of Subsidiary Guarantor] By: -------------------------------- Name: Title: The foregoing Purchase Agreement is hereby confirmed and accepted by the Initial Purchaser as of the date first above written. BANC OF AMERICA SECURITIES LLC By: ------------------------- Name: Title: SCHEDULE A GUARANTORS(9)
Guarantor Jurisdiction of Organization - --------- ---------------------------- [InSight Health Corp. Delaware Signal Medical Services, Inc. Delaware Open MRI, Inc. Delaware Maxum Health Corp. Delaware Radiosurgery Centers, Inc. Delaware Maxum Health Services Corp. Delaware MRI Associates, L.P. Indiana Maxum Health Services of North Texas, Inc. Texas Maxum Health Services of Dallas, Inc. Texas NDDC, Inc. Texas Diagnostic Solutions Corp. Delaware]
- ------------------------ (9) To be updated to reflect guarantors at the time of execution of Purchase Agreement. SCHEDULE B MATERIAL AGREEMENTS SCHEDULE C SUBSIDIARIES OF INSIGHT HEALTH SERVICES CORP. Subsidiary Jurisdiction of Organization EXHIBIT A-1/A-2 FORM OF OPINION OF COUNSEL TO HOLDINGS, THE COMPANY AND THE SUBSIDIARY GUARANTORS(10) (i) Each of Holdings and the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware. (ii) Each of Holdings and the Company has the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under the Purchase Agreement and the other Transaction Documents to which it is a party. (iii) Based solely on certificates of public officials and officers of the Company, the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. (iv) All of the issued and outstanding capital stock of each of Holdings, the Company and the Subsidiary Guarantors has been duly authorized and, to our knowledge, has been validly issued, is fully paid and non-assessable. All the outstanding shares of capital stock of the Company and the Subsidiary Guarantors are owned of record by Holdings, directly or through Subsidiary, free and clear of any security interest, mortgage, pledge, lien, encumbrance or any pending or threatened claim. (v) Based solely on certificates of public officials and officers of the Company (which certificates shall be attached as exhibits to such opinion), and the documents attached to such certificates (including the organizational documents of the Subsidiary Guarantors), each Subsidiary Guarantor is in valid existence and in good standing under the laws of its respective jurisdiction of incorporation or formation as set forth on Schedule I hereto. Based solely on certificates of public officials and officers of the Company (which certificates shall be attached as exhibits to such opinion), and the documents attached to such certificates (including the organizational documents of the Subsidiary Guarantors), each Subsidiary Guarantor (a) has corporate or entity power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and (b) to the best of our knowledge, is duly qualified as a foreign corporation or limited partnership, as the case may be, to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. - ------------------------ (10) We will need to discuss who will be giving the opinions, and how to split up the opinions between the opinion givers. A-1 (vi) The description of Holdings' stock option, stock bonus and other stock plans or arrangements and the options or other rights granted thereunder, set forth in the Offering Memorandum fairly summarizes, in all material respects, such plans, arrangements, options and rights. (vii) The issuance and sale of the Notes by the Company will not be subject to any preemptive right arising (i) by operation of the charter or by-laws of the Company, the Company or the General Corporation Law of the State of Delaware or (ii) to the best knowledge of such counsel, under any agreement to which the Company is a party. (viii) The Purchase Agreement has been duly authorized, executed and delivered by Holdings and the Company. (ix) Each of the Registration Rights Agreement and the DTC Letter of Representations has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company, enforceable in accordance with its terms, and the Registration Rights Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, each Guarantor, enforceable in accordance with its terms. (x) The Indenture has been duly authorized, executed and delivered by the Company and each Guarantor and (assuming the due authorization, execution and delivery thereof by the Trustee) constitutes a valid and binding agreement of the Company and each Guarantor, enforceable against the Company and each Guarantor in accordance with its terms. (xi) The Notes are in the form contemplated by the Indenture, have been duly authorized by the Company for issuance and sale pursuant to the Purchase Agreement and the Indenture and, when executed by Acquisition and authenticated by the Trustee in the manner provided in the Indenture (assuming the due authorization, execution and delivery of the Indenture by the Trustee) and delivered against surrender of the Existing Notes in exchange therefor [(and, in the case of the Additional Notes, payment of the purchase price therefor)](11), will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. (xii) The Board of Directors of the Company has duly adopted by requisite vote the resolutions necessary to authorize the execution, delivery and performance of the Exchange Notes. No approval by Holdings, as sole stockholder of the Company, is required therefor. (xiii) The Guarantee by the Guarantors of the Notes is in the form contemplated by the Indenture, has been duly authorized for issuance and sale pursuant to the Purchase Agreement and the Indenture and, at the Closing Date, will have been duly executed by the Guarantors and, when the Notes have been authenticated in the manner provided for in the Indenture and delivered against surrender of the Existing Notes in exchange therefor [(and, in the case of the Additional Notes, payment of the purchase price therefor)], will constitute the valid and binding agreement of Holdings, enforceable in accordance with its terms and will be entitled to the benefits of the Indenture. - ------------------------ (11) Include only if any Additional Notes are to be issued. A-2 (xiv) The Securities, the Indenture and the Registration Rights Agreement conform in all material respects to the descriptions thereof contained in the Offering Memorandum. (xv) The statements in the Offering Memorandum under the captions ["Offering Memorandum Summary--The Acquisition and Related Financing Transactions," "Risk Factors--Risks Relating to the Notes--Your right to receive payments on these notes is junior to the issuer's existing senior indebtedness and possibly all of its future borrowings. Further, the guarantees of these notes are junior to all of the guarantors' existing senior indebtedness and possibly to all their future borrowings," "Risk Factors--Risks Relating to the Notes--Since the notes are unsecured, your right to enforce remedies is limited by the rights of holders of secured debt," "Risk Factors--Risks Relating to the Notes--You should not rely on our parent company's guarantee in evaluating an investment in the notes," "Risk Factors--Risks Relating to the Notes--Not all of our subsidiaries guarantee our obligations under the notes, and the assets of the non-guarantor subsidiaries may not be available to make payments on the notes," "Risk Factors--Risks Relating to the Notes--The indenture related to the notes and the new senior credit facilities will contain various covenants which limit our management's discretion in the operations of our business," "Risk Factors--Risks Relating to the Notes--The issuer may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture," "Risk Factors--Risks Relating to the Notes--Federal and state statutes allow courts, under specific circumstances, to avoid guarantees and require noteholders to return payments received from guarantors," "Risk Factors--Risks Relating to Our Company and Our Industry--The interests of our controlling stockholders could conflict with those of the holders of the notes offered hereby," "The Acquisition and Related Financing Transactions," "Management--Employment Agreements," "Management--2001 Stock Option Plan," "Management--Stock Option Agreements," "Certain Relationships and Related Transactions," "Description of New Senior Credit Facilities and the Tender Offer and Consent Solicitation," "Description of the Notes," "Certain Federal Income Tax Considerations" and "Notice to Investors,"](12) insofar as such statements constitute matters of law, summaries of legal matters, documents or legal conclusions, have been reviewed by such counsel, fairly summarize, in all material respects, the matters referred to therein and do not omit a material fact necessary to make the statements contained therein not misleading. (xvi) No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency of the federal government of the United States or the State of New York, is required for the execution, delivery and performance by the Company or any Guarantor of the Purchase Agreement, the Registration Rights Agreement, the Indenture or the Securities, as applicable, the execution, delivery and performance by the Company of the DTC Letter of Representations or the issuance and delivery by the Company or the Guarantors of the Securities, or consummation of the transactions contemplated hereby and thereby, except as may be required under the Securities Act, the Exchange Act, the Trust Indenture Act and applicable state securities or blue sky laws. (xvii) The execution and delivery of the Purchase Agreement, the Registration Rights Agreement, the DTC Letter of Representations, the Securities and the Indenture by the Company - ------------------------ (12) To be updated based on Offering Memorandum. A-3 and the Guarantors, the performance by the Company and the Guarantors of their respective obligations thereunder (i) will not result in any violation of the provisions of the charter or by-laws of the Company or any Guarantor, as applicable, (ii) will not constitute a breach of, or Default, or result in the imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Guarantor, as applicable, pursuant to any material contract, loan agreement, note indenture, mortgage, deed of trust, lease or other agreement or instrument to which the Company or any Guarantor, as applicable, is a party; or (iii) to the best knowledge of such counsel, will not result in any violation of any law, administrative regulation or administrative or court decree applicable to the Company or any Guarantor. (xviii) The Company is not, and after surrender of the Existing Notes in exchange for the Notes [(and receipt of payment for the Additional Notes)] will not be, an "investment company" within the meaning of Investment Company Act. (xix) To the best knowledge of such counsel, neither the Company nor any of the Guarantors is in violation of its charter or by-laws or equivalent constitutive document or any law, administrative regulation or administrative or court decree applicable to it or is in Default in the performance or observance of any obligation, agreement, covenant or condition contained in any agreement listed as an Exhibit to the Annual Report or in Schedule B to the Purchase Agreement to which the Company or any Guarantor is a party. (xx) Assuming the accuracy of the representations, warranties and covenants of the Company and the Initial Purchaser contained in the Purchase Agreement, no registration of the Notes or the Guarantees under the Securities Act, and no qualification of an indenture under the Trust Indenture Act with respect thereto, is required in connection with the exchange of the Existing Notes for the Securities [(or, with respect to the Additional Notes, the purchase thereof)] by the Initial Purchaser or the initial resale of the Securities by the Initial Purchaser to Qualified Institutional Buyers or non-U.S. persons in the manner contemplated by the Purchase Agreement and the Offering Memorandum other than any registration or qualification that may be required in connection with the Exchange Offer contemplated by the Offering Memorandum or in connection with the Registration Rights Agreement. Such counsel need express no opinion, however, as to when or under what circumstances any Notes initially sold by the Initial Purchaser may be reoffered or resold. (xxi) The documents incorporated by reference in the Offering Memorandum (other than the financial statements and related notes thereto and other financial, statistical and accounting data and supporting schedules therein, as to which no opinion need be rendered), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act. (xxii) To such counsel's knowledge, there are no pending or threatened legal or governmental proceedings to which Holdings, the Company or any of its subsidiaries is a party that would be required to be described by Item 103 of Regulation S-K under the Securities Act if the issuance of the Notes were being registered under the Securities Act but is not so described in the Offering Memorandum. A-4 (xxiii) None of the sale, issuance, execution or delivery of the Notes will contravene Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve System. The enforceability of the Registration Rights Agreement, the Indenture, the DTC Letter of Representations, the Notes, the Guarantees of the Notes by the Guarantors is subject to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws affecting the rights of creditors generally, and (ii) general principles of equity, whether considered at law or in equity. We express no opinion with respect to the indemnification and contribution provisions contained in the Registration Rights Agreement and the Indenture. We have participated in various conferences with the officers and other representatives of the Company and its independent certified public accountants. In some conferences you and your counsel also participated. At those conferences, the contents of the Offering Memorandum and Prospectus were discussed and revised. Since the dates of those conferences, we have inquired of certain officers whether there has been any material change in the affairs of the Company. Because of the inherent limitations in the independent verification of factual matters, and the character of determinations involved in the preparation of offering memoranda under the Securities Act, we are not passing upon, and do not assume any responsibility for, and make no representation that we have independently verified, the accuracy, completeness or fairness of the statements contained in the Offering Memorandum, other than to the extent set forth in paragraphs (xiv) and (xv) above. Also, we do not express any opinion or belief as to the financial statements or other financial and statistical information contained in the Offering Memorandum, or derived therefrom, or incorporated therein by reference. However, subject to the foregoing, on the basis of our participation in the conferences referred to above and our examination of the documents referred to herein, we advise you that nothing has come to the attention of the attorneys of this firm who have been engaged in the representation of the Company in connection with the Company's issuance and sale of the Notes that leads us to believe that the Offering Memorandum, as of its date or at the Closing Date, contained or contains an untrue statement of material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. A-5 EXHIBIT B FORM OF OPINION OF GENERAL COUNSEL FOR THE COMPANY (i) The statements in the Offering Memorandum under the captions ["Risk Factors--Risks Relating to Our Company and Our Industry--Changes in the rates or methods of third-party reimbursements for diagnostic imaging and therapeutic services could result in reduced demand for our services or create downward pricing pressure, which would result in a decline in our revenues and harm our financial position," "Risk Factors--Risks Relating to Our Company and Our Industry--We may be unable to renew or maintain our customer contracts which would harm our business and financial results," "Risk Factors--Risks Relating to Government Regulation of Our Business," "Business--Diagnostic Imaging and Other Equipment," "Business--Properties," "Business--Reimbursement of HealthCare Costs," "Business--Government Regulation," "Business--Compliance Program," "Business--Legal Proceedings" and "Business--Company History,"](1)3 insofar as such statements constitute matters of law, summaries of legal matters, proceedings, documents or legal conclusions, have been reviewed by such counsel and fairly present and summarize, in all material respects, the matters referred to therein. The statements under the captions ["Business--Proposed Acquisition and Related Financing Transactions," "Business--Diagnostic Imaging and Other Equipment," "Business--Government Regulation," "--Reimbursement of HealthCare Costs," "Business--Compliance Program," "Business--Company History," "Business--Properties," "Business--Legal Proceedings," "Directors and Executive Officers of the Registrant--Board of Directors," "Directors and Executive Officers of the Registrant--Section 16(a) Beneficial Ownership Reporting Compliance," "Executive Compensation--Compensation of Directors," "Executive Compensation--Indemnification Agreements," "Executive Compensation--Employment Agreements and Severance Arrangements" and "Certain Relationships and Related Transactions"](14) in the Annual Report of the Company on Form 10-K incorporated by reference in the Offering Memorandum, insofar as such statements constitute matters of law, summaries of legal matters, proceedings, documents or legal conclusions, have been reviewed by such counsel and fairly present and summarize, in all material respects, the matters referred to therein. (ii) To such counsel's knowledge, the Company and each Subsidiary Guarantor has such permits, licenses, franchises, certifications, accreditations and authorizations (collectively, "Authorizations") from all regulatory or governmental officials, bodies or tribunals as are necessary to own, lease and operate its respective properties and to conduct its business in the manner described in the Offering Memorandum and is eligible to participate in the Medicare and Medicaid programs as and to the extent described in the Offering Memorandum and, to such counsel's knowledge, the Company and each Subsidiary Guarantor has fulfilled and performed all of its material obligations with respect to such Authorizations or eligibility and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof except where such revocation or termination would not result in a Material Adverse Change. - ------------------------ (13) To be updated based on Offering Memorandum and Exchange Act filings incorporated therein. (14) To be updated based on Offering Memorandum and Exchange Act filings incorporated therein. B-1 (iii) The execution and delivery of the Purchase Agreement and the Registration Rights Agreement and the Indenture by the Company and the Subsidiary Guarantors and the performance by the Company and the Subsidiary Guarantors of their respective obligations thereunder (i) will not result in any violation of the provisions of the limited partnership agreement, charter or by-laws of the Company or any Subsidiary Guarantor, as applicable, or (ii) will not constitute a breach of, or Default under or result in the imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Subsidiary Guarantor pursuant to (x) any contract, loan agreement, note indenture, mortgage, deed of trust, lease or other agreement or instrument filed by the Company with the Commission, or (y) to such counsel's knowledge, any statute, rule or regulation or any judgment, order or decree of any governmental authority or court or arbitrator applicable to the Company or any Subsidiary Guarantor. In addition, such counsel shall state that such counsel has participated in conferences with officers and other representatives of Acquisition and the Company, representatives of the independent public or certified public accountants for the Company and with representatives of the Initial Purchaser at which the contents of the Offering Memorandum, and any supplements or amendments thereto, and related matters were discussed and revised and, although such counsel is not passing upon and does not assume any responsibility for, and makes no representation that such counsel has independently verified, the accuracy, completeness or fairness of the statements contained in the Offering Memorandum (other than as specified above), and any supplements or amendments thereto, subject to the foregoing, no facts have come to such counsel's attention which would lead such counsel to believe that either the Offering Memorandum, as of its date or at the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no belief as to the financial statements or other financial or statistical data derived therefrom, included or incorporated by reference in the Offering Memorandum or any amendments or supplements thereto). B-2 EXHIBIT C FORM OF OPINION OF REGULATORY COUNSEL FOR THE COMPANY The statements in the Offering Memorandum under the captions "Risk Factors--Risks Relating to Our Company and Our Industry--Changes in the rates or methods of third-party reimbursements for diagnostic imaging and therapeutic services could result in reduced demand for our services or create downward pricing pressure, which would result in a decline in our revenues and harm our financial position," "Risk Factors--Risks Relating to Government Regulation of Our Business," "Business--Reimbursement of HealthCare Costs" and "Business--Government Regulation," insofar as such statements constitute a summary of the legal or regulatory matters or legal or regulatory proceedings referred to therein, have been reviewed by such counsel, are correct in all material respects and do not omit a material fact necessary to make the statements contained therein not misleading. The statements under the captions "Business--Government Regulation" and "--Reimbursement of HealthCare Costs" in the Annual Report of the Company on Form 10-K for the year ended June 30, 2001 incorporated by reference in the Offering Memorandum, insofar as such statements constitute a summary of the legal or regulatory matters or legal or regulatory proceedings referred to therein, have been reviewed by such counsel, are correct in all material respects and do not omit a material fact necessary to make the statements contained therein not misleading. Such counsel need not express any opinion on any representation by the Company or any omission by the Company to make any disclosure in the Offering Memorandum or the Annual Report concerning its compliance with any legal or regulatory matter or the effect upon it of any legal or regulatory matter. Such counsel's opinion is confined to the summaries of legal and regulatory matters appearing in the Offering Memorandum and the Annual Report, and such counsel is not expressing any opinion on whether those summaries include summaries of all the legal and regulatory matters affecting the Company. ANNEX I TERMS AND CONDITIONS OF OFFERS AND SALES Resale Pursuant to Regulation S or Rule 144A. The Initial Purchaser understands that: (a) The Initial Purchaser agrees that it has not offered or sold and will not offer or sell the Securities in the United States or to, or for the benefit or account of, a U.S. Person (other than a distributor), in each case, as defined in Rule 902 under the Securities Act (i) as part of its distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering of the Securities pursuant hereto and the Closing Date, other than in accordance with Regulation S of the Securities Act or another exemption from the registration requirements of the Securities Act. Such Initial Purchaser agrees that, during such 40-day restricted period, it will not cause any advertisement with respect to the Securities (including any "tombstone" advertisement) to be published in any newspaper or periodical or posted in any public place and will not issue any circular relating to the Securities, except such advertisements as permitted by and include the statements required by Regulation S. (b) The Initial Purchaser agrees that, at or prior to confirmation of a sale of Securities by it to any distributor, dealer or person receiving a selling concession, fee or other remuneration during the 40-day restricted period referred to in Rule 903(c)(3) under the Securities Act, it will send to such distributor, dealer or person receiving a selling concession, fee or other remuneration a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of your distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the Offering and the Closing Date, except in either case in accordance with Regulation S under the Securities Act (or Rule 144A in transactions that are exempt from the registration requirements of the Securities Act), and in connection with any subsequent sale by you of the Notes covered hereby in reliance on Regulation S during the period referred to above to any distributor, dealer or person receiving a selling concession, fee or other remuneration, you must deliver a notice to substantially the foregoing effect. Terms used above have the meanings assigned to them in Regulation S." SCHEDULE A GUARANTORS
Guarantor Jurisdiction of Organization - --------- ---------------------------- InSight Health Corp. Delaware Signal Medical Services, Inc. Delaware Open MRI, Inc. Delaware Maxum Health Corp. Delaware Radiosurgery Centers, Inc. Delaware Maxum Health Services Corp. Delaware MRI Associates, L.P. Indiana Maxum Health Services of North Texas, Inc. Texas Maxum Health Services of Dallas, Inc. Texas NDDC, Inc. Texas Diagnostic Solutions Corp. Delaware
1/9 SCHEDULE B OUTSTANDING OPTIONS, WARRANTS, PREEMPTIVE RIGHTS ETC. None. 2/9 SCHEDULE C SUBSIDIARIES OF INSIGHT HEALTH SERVICES CORP.
Subsidiary Jurisdiction of Organization ---------- ---------------------------- InSight Health Corp. Delaware Diagnostic Solutions Corp. Delaware Maxum Health Corp. Delaware Maxum Health Services Corp. Delaware Maxum Health Services of Dallas, Inc. Texas Maxum Health Services of North Texas, Inc. Texas NDDC, Inc. Texas Open MRI, Inc. Delaware Radiosurgery Centers, Inc. Delaware Signal Medical Services, Inc. Delaware Toms River Imaging Associates, L.P. New Jersey Berwyn Magnetic Resonance Center, LLC Illinois Connecticut Lithotripsy, LLC Connecticut Daniel Freeman MRI, LLC California Dublin Diagnostic Imaging, LLC Ohio Garfield Imaging Center, Ltd. California Granada Hills Open MRI, LLC California InSight-Premier Health, LLC Maine Lockport MRI, LLC New York MRI Associates, L.P. Indiana St. John's Regional Imaging Center, LLC California Sun Coast Imaging Center, LLC Florida Wilkes-Barre Imaging, LLC Pennsylvania
3/8 SCHEDULE D MATERIAL AGREEMENTS 1. Management Agreement, dated as of October 17, 2001, by and among J.W. Childs Advisors II., L.P, Halifax Genpar, L.P., InSight Health Services Holdings Corp. and InSight Health Services Corp. 2. Stockholders Agreement, dated as of June 29, 2001, among InSight Health Services Holdings Corp., the JWC Holders (as defined therein), the Halifax Holders (as defined therein), the Management Holders (as defined therein) and the Additional Holders (as defined therein), as amended. 3. Swap Master Agreement, dated as of December 24, 1997, between NationsBank, N.A. and InSight Health Services Corp., including exercise of Swap Option dated as of March 29, 2001 4. Real Estate Lease for 11617 North Central Expressway, Suite 132, Dallas, Texas between Century Properties Fund XIII and NDDC, Inc. 5. Real Estate Lease for 4225 Rosewood Drive, Suites 4, 5 and 6, Pleasanton, California between New Plan Excel Realty Trust, Inc. and InSight Health Corp. 6. Real Estate Lease for 1001 and 1005 North Highland Avenue, Murfreesboro, Tennessee between Marlin Properties, LLC and InSight Health Corp. 7. Real Estate Lease for 800 Shadow Lane, Las Vegas, Nevada between Borstein Partners Ltd. and InSight Health Corp. 8. Real Estate Lease for 12455 East Washington Boulevard, Whittier, California between Washington Magnetic Resonance Center and InSight Health Corp. 9. Real Estate Lease for 21 Stockton Drive, Toms River, New Jersey between Center State Health Group, Inc. and Toms River Imaging Associates, LP. 10. Real Estate Lease for 1700 North Rose, Suite 110, Oxnard, California between CHW Central Coast and St. John's Regional Imaging Center, LLC. 11. Real Estate Lease for 17950 Preston Road, Suite 120, Dallas, Texas between 17950 Partners, Ltd. and InSight Health Corp. 12. Purchase Agreement between IHC and Berlex Laboratories dated 5/1/00. 13. Master Service Agreement between IHC and General Electric dated 1/1/97. 4/8 14. Agreement between the Company and Lafayette Pharmaceuticals, Inc. dated 2/14/00. 15. Distribution and Service Agreement between IHC and NHD, Inc. dated 2/14/00. 16. Operating Lease with General Electric for 1.5T Signa dated 10/00 (G1238A). 17. Operating Lease with General Electric for 1.5T Signa dated 03/01 (G1242A). 18. Operating Lease with General Electric for 1.5T Signa dated 03/01 (G1243A). 19. Operating Lease with General Electric for 1.5T Signa dated 03/01 (G1244A). 20. Operating Lease with General Electric for 1.5T Signa dated 03/01 (G1245A). 5/8 SCHEDULE E AGREEMENTS PURSUANT TO SECTION 5(k)(ii)(6) 1. Management Agreement, dated as of October 17, 2001, by and among J.W. Childs Advisors II., L.P, Halifax Genpar, L.P., InSight Health Services Holdings Corp. and InSight Health Services Corp. 2. Stockholders Agreement, dated as of June 29, 2001, among InSight Health Services Holdings Corp., the JWC Holders (as defined therein), the Halifax Holders (as defined therein), the Management Holders (as defined therein) and the Additional Holders (as defined therein), as amended 3. Administrative Services Agreement dated as of October 1, 1996 between Greater Waterbury Imaging Center, L.P. and Signal Medical Services, Inc. 4. Management Services Agreement dated March 24, 2000 between InSight Health Corp. and Metabolic Imaging of Kentucky, LLC 5. Management Services Agreement dated January 17, 1995 between InSight Health Corp. and Northern Indiana Oncology Center of Porter Memorial Hospital, LLC 6. Management Services Agreement dated September 17, 1999 between InSight Health Corp. and Parkway Imaging Center, LLC 7. Credit and Security Agreement dated September 17, 1999 between InSight Health Corp. and Parkway Imaging Center, LLC 8. Management Agreement dated January 20, 1988 between VHA Diagnostic Services, Inc. (now Maxum Health Services Corp.) and Central Maine Magnetic Imaging Associates 9. Management Services Agreement dated February 1, 2001 between InSight Health Corp. and Maine Molecular Imaging, LLC 1. 6/8 SCHEDULE F EXISTING INDEBTEDNESS 2. Summary of Joint Venture Balances Owing to InSight Health Corp.
LOANS OUTSTANDING AS OF 08/31/01: PARTNERSHIP WORKING CAP. EQUIPMENT TOTAL CONSOLIDATED GARFIELD IMAGING CENTER, LTD $ -- $ 1,129,712 $ 1,129,712 BERWYN MAGNETIC RESONANCE CENTER, LLC $ 287,115 $ 1,558,732 $ 1,845,847 TOMS RIVER IMAGING ASSOCIATES, L.P. $ 330,596 $ -- $ 330,596 DUBLIN DIAGNOSTIC IMAGING, LLC $ 71,958 $ 467,717 $ 539,675 ST. JOHN'S REGIONAL IMAGING CENTER, LLC $ 1,662,603 $ 3,337,843 $ 5,000,446 LOCKPORT MRI, LLC $ 708,701 $ 5,181,461 $ 5,890,162 CONNECTICUT LITHOTRIPSY, LLC $ (85,577) $ 305,739 $ 220,162 GRANADA HILLS OPEN MRI, LLC $ 88,139 $ 1,129,151 $ 1,217,290 DANIEL FREEMAN MRI, LLC $ 285,097 $ 560,395 $ 845,492 WILKES-BARRE IMAGING, LLC $ 321,848 $ 4,614,979 $ 4,936,827 INSIGHT-PREMIER HEALTH, LLC $ 344,864 $ 4,098,195 $ 4,443,059 $ 4,015,344 $ 22,383,924 $ 26,399,268
3. Indebtedness consisting of capital leases ALL AMOUNTS ARE AS OF AUGUST 31, 2001
DATE OF MATURITY INTEREST BALANCE COMPANY PAYEE DESCRIPTION NOTE DATE RATE 08/31/01 IHC GE GE - G1187E 12/01/99 05/01/04 9.00% $ 698,056 IHC GE GE - G1190A 12/01/99 05/01/04 9.00% $ 670,229 IHC GE GE - G1205A 12/01/99 05/01/04 9.00% $ 645,052 IHC GE GE - G1207A 12/01/99 05/01/04 9.00% $ 632,150 IHC GE GE - G3052 (Murf.) 12/01/99 05/01/04 9.00% $ 464,768
7/8 IHC GE GE - G3063 12/01/99 05/01/04 9.00% $ 526,750 (Pleasanton) IHC GE GE - G3063 02/01/00 05/01/04 10.28% $ 20,713 (Pleasanton) DF GE GE - G3074 309/01/00 07/01/06 9.30% $ 1,462,784 DF GE GE - G3074 - COIL 09/01/00 07/01/06 9.30% $ 13,791 OPEN MRI GE GE - G3051 (OC) 12/01/99 05/01/04 9.00% $ 515,216 TOTAL CAPITAL LEASES $ 5,649,509 ===========
IHC = InSight Health Corp. OPEN MRI = Open MRI, Inc. DF = Daniel Freeman MRI, LLC 4. Swap Agreement Swap Master Agreement , dated as of December 24, 1997, between NationsBank, N.A. and InSight Health Services Corp., including exercise of Swap Option dated as of March 29, 2001 5. Guaranty Obligations (as of August 31, 2001) 1. InSight Health Corp. has a guaranty outstanding in favor of Siemens Credit Corporation in the amount of $199,325 for obligations of Northern Indiana Oncology Center of Porter Memorial Hospital, LLC 2. InSight Health Corp. has a guaranty outstanding in favor of DVI Financial Services, Inc. in the amount of $641,890 for obligations of Metabolic Imaging of Kentucky, LLC 6. Joint Venture Recourse Indebtedness (as of August 31, 2001) 1. Central Maine Magnetic Imaging Associates has Indebtedness outstanding to Peoples Heritage Bank, of which $260,854 is recourse to Maxum Health Services Corp. 2. Central Maine Magnetic Imaging Associates has Indebtedness outstanding to Picker Financial, of which $483,066 is recourse to Maxum Health Services Corp. 3. Parkway Imaging Center, LLC has Indebtedness outstanding to General Electric Company, of which $361,910 is recourse to InSight Health Corp. 4. Southern Connecticut Imaging Centers, LLC has Indebtedness outstanding to Citizens Bank, of which $1,182,392 is recourse to InSight Health Corp. 8/8 EXHIBIT I [DRAFT OFFERING MEMORANDUM] ANNEX I Resale Pursuant to Regulation S or Rule 144A. Each of the Purchaser and BAS understands that: Each of the Purchaser and BAS agrees that it has not offered or sold and will not offer or sell the Notes or the Remarketed Notes in the United States or to, or for the benefit or account of, a U.S. Person (other than a distributor), in each case, as defined in Rule 902 under the Securities Act (i) as part of its distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering of the Remarketed Notes pursuant hereto and the Exchange Date, other than in accordance with Regulation S of the Securities Act or another exemption from the registration requirements of the Securities Act. Each of the Purchaser and BAS agrees that, during such 40-day restricted period, it will not cause any advertisement with respect to the Remarketed Notes (including any "tombstone" advertisement) to be published in any newspaper or periodical or posted in any public place and will not issue any circular relating to the Note or the Remarketed Notes, except such advertisements as are permitted by and include the statements required by Regulation S. Each of the Purchaser and BAS agrees that, at or prior to confirmation of a sale of Notes or Remarketed Notes by it to any distributor, dealer or person receiving a selling concession, fee or other remuneration during the 40-day restricted period referred to in Rule 903 under the Securities Act, it will send to such distributor, dealer or person receiving a selling concession, fee or other remuneration a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of your distribution at any time or (ii) otherwise until 40 days after the later of the date the Notes were first offered to persons other than "distributors" (as defined in Regulation S) in reliance upon Regulation S and the Closing Date, except in either case in accordance with Regulation S under the Securities Act (or Rule 144A or to Accredited Institutions in transactions that are exempt from the registration requirements of the Securities Act), and in connection with any subsequent sale by you of the Notes covered hereby in reliance on Regulation S during the period referred to above to any distributor, dealer or person receiving a selling concession, fee or other remuneration, you must deliver a notice to substantially the foregoing effect. Terms used above have the meanings assigned to them in Regulation S." EX-10.6 36 y55701ex10-6.txt 2001 STOCK OPTION PLAN Exhibit 10.6 INSIGHT HEALTH SERVICES HOLDINGS CORP. 2001 STOCK OPTION PLAN InSight Health Services Holdings Corp., a Delaware corporation (the "Company"), sets forth herein the terms of the InSight Health Services Holdings Corp. 2001 Stock Option Plan (the "Plan") as follows: 1. PURPOSE The Plan is to replace all of the stock option plans maintained by InSight Health Services Corp. (the "Seller") prior to the consummation of the merger (the "Merger") contemplated in the Agreement and Plan of Merger, dated as of June ___, 2001, by and among the Company, JWCH Merger Corp. and the Seller (the "Merger Agreement"), and to provide incentives for the individuals who receive stock options hereunder to maximize the growth and success of the Company and its subsidiaries. 2. ADMINISTRATION The Plan shall be administered by the Board of Directors ("Board") of the Company, unless and to the extent the Board determines to delegate the administration of the Plan to the Compensation Committee ("Committee") of the Board. The Board shall have the full power and authority to take all actions, and to make all determinations required or provided for under the Plan or any Option Agreement (as defined below) entered into hereunder, and all such other actions and determinations not inconsistent with the specific terms and provisions of the Plan deemed by the Board to be necessary or appropriate to the administration of the Plan or any option granted pursuant to the Plan (the "Option") or Option Agreement entered into hereunder. The interpretation and construction by the Board of any provision of the Plan or of any Option granted or Option Agreement entered into hereunder shall be final, binding and conclusive. 3. STOCK SUBJECT TO THE PLAN The stock that may be issued pursuant to Options granted under the Plan shall be shares of common stock, par value $0.001 per share, of the Company ("Common Stock"), which shares may be treasury shares or authorized but unissued shares. The number of shares of Common Stock that may be issued pursuant to Options granted under the Plan shall not exceed in the aggregate [175,990] shares, which number of shares is subject to adjustment as hereinafter provided in Section 13 below. 4. GRANT OF OPTIONS Subject to the terms and conditions hereof, as of the Effective Time (as defined in the Merger Agreement), the individuals listed on Exhibit A hereto (each an "Optionee") shall receive the number of options set forth opposite their name on such list. 5. EFFECTIVE DATE AND TERM OF THE PLAN The Plan shall be effective as of the Effective Time and shall continue in effect for a term of ten (10) years from such date (the "Term"). Any Options outstanding under the Plan on such date shall continue to be exercisable pursuant to their terms, except as otherwise provided herein. 6. OPTION AGREEMENTS All Options granted pursuant to the Plan shall be evidenced by an Option Agreement in the form attached hereto as Exhibit B (the "Option Agreement"). 7. OPTION PRICE The exercise price of each share of Common Stock subject to an Option (the "Option Price") shall be as set forth on Exhibit A attached hereto. 8. EXERCISE OF OPTIONS (a) Option Exercise. Each Option shall be exercisable, in whole or in part, at any time and from time to time during the Term, by delivering written notice to the Company on any business day, at its principal office, addressed to the attention of the Corporate Secretary, which notice shall specify the number of shares with respect to which the Option is being exercised, and shall be accompanied by payment in full of the Option Price of the shares for which the Option is being exercised. The minimum number of shares of Common Stock with respect to which an Option may be exercised, in whole or in part, at any time shall be the lesser of 100 shares or the maximum number of shares available for purchase under the Option at the time of exercise. Payment of the Option Price for the shares of Common Stock purchased pursuant to the exercise of an Option shall be made (i) in cash or in cash equivalents; (ii) with the consent of the Board, through the tender to the Company of shares of Common Stock, which shares shall be valued, for purposes of determining the extent to which the Option Price has been paid thereby, at their Fair Market Value (as defined below) on the date of exercise; or (iii) by such other method or methods as the Board may from time to time authorize. Promptly after the exercise of an Option and the payment in full of the Option Price of the shares of Common Stock covered thereby, the individual exercising the Option (the "Optionee") shall be entitled to the issuance of a Common Stock certificate or certificates evidencing the Optionee's ownership of such shares. Not later than the Effective Time, each Optionee shall execute the stockholders agreement by and among the Company and the stockholders named therein (the "Stockholders Agreement"), and pursuant thereto, the Option and the Common Stock underlying the Option shall be subject to the terms of the Stockholders Agreement. An individual holding or exercising an Option shall have none of the rights of a stockholder until the shares of Common Stock covered thereby are fully paid and issued to the Optionee, and except as provided in Section 13 below, no adjustment shall be made for dividends or other rights for which the record date is prior to the date of such issuance. "Fair Market Value" means the value of each share of Common Stock, as determined by the Board in good faith. 2 (b) Withholding. The Company shall have the right to withhold, or require an Optionee to remit to the Company, an amount sufficient to satisfy any applicable federal, state, local or foreign withholding tax requirements imposed with respect to the exercise of the Options. Subject to the consent of the Board which may be withheld in its sole and absolute discretion, and to the extent permissible under applicable tax, securities, and other laws, an Optionee may (a) have shares of Common Stock otherwise issuable to the Optionee hereunder withheld, or (b) tender to the Company previously acquired shares of Common Stock, having a Fair Market Value sufficient to satisfy all or part of the Optionee's federal, state and local tax obligations associated with the exercise of the Options. 9. TRANSFERABILITY OF OPTIONS During the lifetime of an Optionee, only such Optionee (or, in the event of legal incapacity or incompetency, the Optionee's guardian or legal representative) may exercise an Option. No Option shall be assignable or transferable by the Optionee to whom it is granted, other than by will, the laws of descent and distribution, or pursuant to a qualified domestic relations order as defined in section 414 of the Internal Revenue Code of 1986, as amended (the "Code"), and no Option shall be pledged or hypothecated (by operation of law or otherwise), or subject to execution, attachment or similar process. 10. TERMINATION OF EMPLOYMENT Upon the termination of the employment of an Optionee for any reason, any Option granted to an Optionee pursuant to the Plan shall terminate on the earlier to occur of (i) the expiration of the Term and (ii) a Change in Control (as defined below). 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 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. 11. REQUIREMENTS OF LAW Violations of Law. The Company shall not be required to sell or issue any shares of Common Stock under any Option if the sale or issuance of such shares would constitute a violation by the Optionee or the Company of any provisions of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations. Specifically in connection with the Securities Act of 1933, as amended (the "1933 Act"), upon exercise of any Option, unless a registration statement under the 1933 Act is in effect with respect to the shares of Common Stock covered by such Option, the Company shall not be required to sell or issue such shares unless the Board has received evidence satisfactory to it that the holder of such Option may acquire such shares pursuant to an exemption from registration under the 1933 Act. Any 3 determination in this connection by the Board shall be final, binding and conclusive. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the 1933 Act, provided that the Company will use its reasonable best efforts to comply with any available exemption from registration and qualification of the shares of Common Stock that may be acquired under the Option, pursuant to applicable federal and state securities laws. 12. AMENDMENT AND TERMINATION OF THE PLAN The Board may, at any time and from time to time, amend or terminate the Plan, provided that no such amendment or termination may adversely affect any rights or obligations under any Option theretofore granted under the Plan, without the consent of the holder of any such Option. 13. EFFECT OF CHANGES IN CAPITALIZATION (a) Changes in Common Stock. If the outstanding shares of Common Stock are increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any recapitalization, reclassification, stock split-up, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, or other increase or decrease affecting such outstanding shares generally that is effected without receipt of consideration by the Company, occurring after the effective date of the Plan, the number and kind of shares for the purchase of which Options may be granted under the Plan shall be adjusted proportionately and accordingly by the Board. In addition, the number and kind of shares for which Options are outstanding shall be adjusted proportionately and accordingly so that the proportionate ownership interest of the holder of the Option immediately following such event shall, to the extent practicable, be the same as immediately prior to such event. Any such adjustment in outstanding Options shall not change the aggregate Option Price payable with respect to shares subject to the unexercised portion of the Option outstanding but shall include a corresponding proportionate adjustment in the Option Price per share. (b) Reorganization in Which the Company Is the Surviving Corporation. If the Company shall be the surviving corporation in any reorganization, merger, or consolidation of the Company with one or more other corporations, any Option theretofore granted pursuant to the Plan shall pertain to and apply to the securities to which a holder of the number of shares of Common Stock subject to such Option would have been entitled immediately following such reorganization, merger, or consolidation, with a corresponding proportionate adjustment of the Option Price per share so that the aggregate Option Price thereafter shall be the same as the aggregate Option Price of the shares remaining subject to the Option immediately prior to such reorganization, merger, or consolidation. (c) Reorganization in Which the Company Is Not the Surviving Corporation; Sale of Assets or Stock. Upon the dissolution or liquidation of the Company, or upon a merger, consolidation or reorganization of the Company with one or more other corporations in which the Company is not the surviving corporation, or upon a sale of substantially all of the assets of the Company to another corporation, or upon any transaction (including, without limitation, a merger or reorganization in which the Company is the surviving corporation) approved by the Board which results in any person or entity owning 80% or more of the combined voting power of all classes of 4 stock of the Company, the Plan and all Options outstanding hereunder shall terminate, except to the extent provision is made in writing in connection with such transaction for the continuation of the Plan and/or the assumption of the Options theretofore granted, or for the substitution for such Options of new options covering the stock of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and Option Prices, to preserve the then excess, if any, of the aggregate Fair Market Value of the shares subject to Options over the purchase price for the shares under the Options, in which event the Plan and Options theretofore granted shall continue in the manner and under the terms so provided. The Board shall send written notice of an event that will result in such a termination to all individuals who hold Options not later than the time at which the Company gives notice thereof to its stockholders. (d) Adjustments. Adjustments under this Section 13 related to stock or securities of the Company shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. No fractional shares of Common Stock or units of other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share or unit. (e) No Limitations on the Company. The grant of an Option pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve or liquidate, or to sell or transfer all or any part of its business or assets. In addition, the Options hereunder, including the effect of this Section 13, are subject to the Stockholders Agreement among the Company and its stockholders. 14. DISCLAIMER OF RIGHTS No provision in the Plan or in any Option granted or Option Agreement entered into pursuant to the Plan shall be construed to confer upon any individual the right to remain in the employ of the Company or any subsidiary of the Company, or to interfere in any way with the right and authority of the Company or any subsidiary of the Company either to increase or decrease the compensation of any individual at any time, or to terminate any employment or other relationship between any individual and the Company or any subsidiary of the Company. 15. GOVERNING LAW The validity, interpretation and effect of the Plan, and the rights of all persons hereunder, shall be governed by and determined in accordance with the laws of the State of Delaware, other than the choice of law rules thereof. 16. HEADINGS The headings herein are for convenience only and shall not be used in interpreting the Plan. 5 EXHIBIT A
Name Number of Options Granted Option Price - ---- ------------------------- ------------ Steven T. Plochocki 52,500 $8.37 Thomas V. Croal 52,500 $8.37 Michael A. Boylan 46,990 $8.37 Michael S. Madler 24,000 $8.37
EXHIBIT B INSIGHT HEALTH SERVICES HOLDINGS CORP. 2001 STOCK OPTION PLAN STOCK OPTION AGREEMENT AGREEMENT is dated as of June __, 2001 between InSight Health Services Holdings Corp., a Delaware corporation ("Company"), and ____________________ ("Optionee"). This Agreement shall become effective as of the Effective Time. The stockholders and the Board of Directors of the Company ("Board") have adopted the InSight Health Services Holdings Corp. 2001 Stock Option Plan ("Plan") of the Company for the purpose of advancing the interests of the Company by providing certain individuals with an opportunity to develop a proprietary interest in the Company, which will thereby create strong performance incentives for such individuals to maximize the growth and success of the Company and its subsidiaries and will encourage such individuals to remain in the employ of the Company or any of its subsidiaries. The Optionee is a full time employee of the Company or its subsidiaries, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the grant by the Company of a stock option to the Optionee. NOW, THEREFORE, it is hereby agreed as follows: 1. Grant of Option. Subject to and upon the terms and conditions set forth in this Agreement and the Plan, the Company hereby grants to the Optionee, as of the Effective Time, a stock option ("Option") to purchase up to _____ shares ("Option Shares") of the common stock, par value $0.001 per share, of the Company ("Common Stock") from time to time during the Option Period at the price of $8.37 per share ("Option Price"). 2. Option Period. The Option shall be exercisable only during the Option Period. In addition, upon the Expiration Date, the Option shall cease to be exercisable and have no further force or effect whatsoever. 3. Vesting and Exercisability. The Option shall be vested and exercisable as of the Effective Time. 4. Termination of Employment. Upon termination of the Optionee's employment with the Company, the Option granted herein shall be treated in accordance with the Plan. 5. Timing and Method of Exercise. In order to exercise the Option with respect to all or any part of the Option Shares for which the Option is at the time exercisable, the Optionee (or in the case of exercise after the Optionee's death, the Optionee's executor, administrator, heir or legatee, as the case may be) must comply with the provisions of Section 8 of the Plan. A form of exercise notice is attached hereto as Exhibit A. 6. Termination of Existing Options. Immediately prior to the Effective Time, the stock options set forth on Exhibit B granted to the Optionee pursuant to any of the Company's stock option plans and any stock option agreement entered into in connection therewith shall be terminated in their entirety and be of no further force and effect. In addition, the Optionee irrevocably waives any and all rights and benefits the Optionee has thereunder. 7. Stockholders Agreement. Not later than the Effective Time, the Optionee hereby agrees to execute the stockholders agreement by and among the Company and the parties named therein (the "Stockholders Agreement"), and pursuant thereto, the Option and the Common Stock underlying the Option shall be subject to the terms of the Stockholders Agreement. 8. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, devisees, legal representatives and permitted assigns, in each case, subject to the Stockholders Agreement, of the Optionee and the successors and assigns of the Company. 9. Liability of the Company. The inability of the Company, despite its best efforts, to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Common Stock pursuant to the Option shall relieve the Company of any liability in respect of the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. 10. Construction. This Agreement and the Option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the express terms and provisions of the Plan. 11. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware. 12. Warranties and Obligations of the Optionee. (a) The Optionee represents, warrants and agrees that the Optionee will acquire and hold the Option Shares for the Optionee's own account for investment and not with the view to the resale or distribution thereof, except for resales or distributions in accordance with federal and state securities laws, and that the Optionee will not, at any time or times, directly or indirectly, offer, sell, distribute, pledge or otherwise grant a security interest in or otherwise dispose of or transfer all, any portion of or any interest in, any Option Shares (or solicit an offer to buy, take in pledge or otherwise acquire or receive, all or any portion thereof), except pursuant to either (i) a Registration Statement on an appropriate form under the Securities Act of 1933, as amended ("1933 Act"), which Registration Statement has become effective and is current with respect to the shares being offered or sold, or (ii) a specific exemption from the registration requirements of the 1933 Act, the availability of which exemption shall be the subject matter of an opinion of counsel reasonably acceptable to the Company that no registration 2 under the 1933 Act is required with respect to such offer, sale, distribution, pledge, grant or other disposition or transfer. (b) The Optionee acknowledges that the Optionee understands that (i) the Option has been granted and the shares to be sold to the Optionee upon exercise of the Option will be sold to the Optionee pursuant to an exemption from the registration requirements in the 1933 Act until such time as the Company shall file a Registration Statement under the 1933 Act which has become effective and is current with respect to the shares being offered or sold and in this connection the Company is relying in part on the representations set forth in this Agreement; (ii) such shares must be held indefinitely unless they are registered or an exemption from registration becomes available under the 1933 Act and the securities laws of any state; (iii) the Company is under no obligation to register such shares or to comply with any exemption from such registration, including those portions of Rule 144 under the 1933 Act to be complied with by the Company; (iv) if Rule 144 is available for sales of such shares, and there is no assurance that the Optionee will ever be able to sell under Rule 144, such sales in reliance upon Rule 144 may be made only after the shares have been held for the requisite holding period and then only in limited amounts in accordance with the conditions of that Rule, all of which must be met; and (v) the Optionee must, therefore, continue to bear the economic risks of the investment in such shares for an indefinite period of time after the exercise of the Option. (c) The Optionee acknowledges that the Optionee has had the opportunity to ask questions of, and receive answers from, the officers and representatives of the Company concerning all material information concerning the Company and the terms and conditions of the transactions in which the Optionee is acquiring the Option and may subsequently acquire Option Shares. The Optionee further acknowledges that the Optionee understands that the Company may use the proceeds from the exercise of the Option for general corporate purposes. (d) Immediately prior to the exercise of all or any portion of the Option, the Optionee shall deliver to the Company a signed statement, in a form satisfactory to the Company, confirming that each of the representations, warranties, acknowledgments and agreements contained in this Section is true as to the Optionee as of the date of such exercise. (e) The Optionee understands that all certificates representing shares transferred pursuant to this Agreement, unless made pursuant to an appropriate Registration Statement under the 1933 Act, will bear the following restrictive legend: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be transferred or hypothecated without prior registration under said Act or an exemption therefrom established to the satisfaction of the issuer." (f) If the legal counsel of the Company, at the request of the Company, advises it that registration under the 1933 Act of the shares deliverable upon the exercise of the 3 Option is required prior to delivery thereof, or that listing of such shares on any exchange is required prior to delivery thereof, the Company shall not be required to issue or deliver such shares unless and until such legal counsel shall advise that such registration and/or listing has been completed and is then effective, or is not required. 13. Severability. In the event that any provision of this Agreement is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability shall not be construed as rendering any other provisions contained herein invalid or unenforceable, and all such other provisions shall be given full force and effect to the same extent as though the invalid and unenforceable provision was not contained herein. 14. Definitions. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan. For purposes of interpreting this Agreement, the following definitions shall also apply: (a) "Effective Time" shall have the meaning set forth in the Agreement and Plan of Merger, by and among InSight Health Services Holdings Corp., JWCH Merger Corp. and InSight Health Services Corp. (b) "Expiration Date" means, unless earlier terminated pursuant to the terms of this Agreement or the Plan, the day immediately preceding the tenth anniversary of the Effective Time. (c) "Option Period" means the period commencing at the Effective Time and, unless earlier terminated in accordance with Section 4, ending on the close of business on the Expiration Date. 4 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in duplicate on its behalf and the Optionee has also executed this Agreement in duplicate, all as of the date first above written. INSIGHT HEALTH SERVICES HOLDINGS CORP. By: -------------------------------- Name: Title: OPTIONEE ---------------------------------- EXHIBIT A Form of Stock Option Exercise Notice Optionee Information: Name: __________________ Social Security Number: ____ - ___ - _____ Address: __________________ Employee Number: __________________ __________________ Option Information: Date of Grant of Option: __________________ Exercise Price per Share: $ 8.37 Total number of shares of Common Stock of the Company covered by the Option: _________ shares Exercise Information: Number of shares of Common Stock of the Company for which Option is being exercised now: _______ (hereinafter referred to as "Purchased Shares") Form of payment enclosed (CHECK ALL THAT APPLY): / / Check for $ _____ made payable to InSight Health Services Holdings Corp. / / Certificate(s) for ___ shares of Common Stock of the Company that I have owned for at least six months. (These shares will be valued as of the date when this notice is received by the Company.) / / Attestation Form covering _____ shares of Common Stock of the Company (These shares will be valued as of the date when this notice is received by the Company.) Names in which the Purchased Shares should be registered (YOU MUST CHECK ONE): / / In my name only / / In the name of my spouse and myself as joint tenants with the right of survivorship. My spouse's name is: ___________________. I agree to seek the consent of my spouse to the extent required by the Company to enforce the foregoing. The certificate(s) of the Purchased Shares shall be sent to the following address: ____________________ ____________________ ____________________ I hereby acknowledge that I am acquiring the Purchased Shares subject to all terms and conditions of the InSight Health Services Holdings Corp. 2001 Stock Option Plan Stock Option Agreement dated June ___, 2001. ______________, ___________ Place Date ___________________________ Name: EXHIBIT B
Plan Number of Options Terminated Option Price ---- ---------------------------- ------------
EX-10.7 37 y55701ex10-7.txt 2001 STOCK OPTION PLAN Exhibit 10.7 INSIGHT HEALTH SERVICES HOLDINGS CORP. 2001 STOCK OPTION PLAN STOCK OPTION AGREEMENT AGREEMENT is dated as of June 29, 2001 between InSight Health Services Holdings Corp., a Delaware corporation ("Company"), and Steven T. Plochocki ("Optionee"). This Agreement shall become effective as of the Effective Time. The stockholders and the Board of Directors of the Company ("Board") have adopted the InSight Health Services Holdings Corp. 2001 Stock Option Plan ("Plan") of the Company for the purpose of advancing the interests of the Company by providing certain individuals with an opportunity to develop a proprietary interest in the Company, which will thereby create strong performance incentives for such individuals to maximize the growth and success of the Company and its subsidiaries and will encourage such individuals to remain in the employ of the Company or any of its subsidiaries. The Optionee is a full time employee of the Company or its subsidiaries, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the grant by the Company of a stock option to the Optionee. NOW, THEREFORE, it is hereby agreed as follows: 1. Grant of Option. Subject to and upon the terms and conditions set forth in this Agreement and the Plan, the Company hereby grants to the Optionee, as of the Effective Time, a stock option ("Option") to purchase up to 52,500 shares ("Option Shares") of the common stock, par value $0.001 per share, of the Company ("Common Stock") from time to time during the Option Period at the price of $8.37 per share ("Option Price"). 2. Option Period. The Option shall be exercisable only during the Option Period. In addition, upon the Expiration Date, the Option shall cease to be exercisable and have no further force or effect whatsoever. 3. Vesting and Exercisability. The Option shall be vested and exercisable as of the Effective Time. 4. Termination of Employment. Upon termination of the Optionee's employment with the Company, the Option granted herein shall be treated in accordance with the Plan. 5. Timing and Method of Exercise. In order to exercise the Option with respect to all or any part of the Option Shares for which the Option is at the time exercisable, the Optionee (or in the case of exercise after the Optionee's death, the Optionee's executor, administrator, heir or legatee, as the case may be) must comply with the provisions of Section 8 of the Plan. A form of exercise notice is attached hereto as Exhibit A. 6. Termination of Existing Options. Immediately prior to the Effective Time, the stock options set forth on Exhibit B granted to the Optionee pursuant to any of the Company's stock option plans and any stock option agreement entered into in connection therewith shall be terminated in their entirety and be of no further force and effect. In addition, the Optionee irrevocably waives any and all rights and benefits the Optionee has thereunder. 7. Stockholders Agreement. Not later than the Effective Time, the Optionee hereby agrees to execute the stockholders agreement by and among the Company and the parties named therein (the "Stockholders Agreement"), and pursuant thereto, the Option and the Common Stock underlying the Option shall be subject to the terms of the Stockholders Agreement. 8. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, devisees, legal representatives and permitted assigns, in each case, subject to the Stockholders Agreement, of the Optionee and the successors and assigns of the Company. 9. Liability of the Company. The inability of the Company, despite its best efforts, to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Common Stock pursuant to the Option shall relieve the Company of any liability in respect of the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. 10. Construction. This Agreement and the Option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the express terms and provisions of the Plan. 11. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware. 12. Warranties and Obligations of the Optionee. (a) The Optionee represents, warrants and agrees that the Optionee will acquire and hold the Option Shares for the Optionee's own account for investment and not with the view to the resale or distribution thereof, except for resales or distributions in accordance with federal and state securities laws, and that the Optionee will not, at any time or times, directly or indirectly, offer, sell, distribute, pledge or otherwise grant a security interest in or otherwise dispose of or transfer all, any portion of or any interest in, any Option Shares (or solicit an offer to buy, take in pledge or otherwise acquire or receive, all or any portion thereof), except pursuant to either (i) a Registration Statement on an appropriate form under the Securities Act of 1933, as amended ("1933 Act"), which Registration Statement has become effective and is current with respect to the shares being offered or sold, or (ii) a specific exemption from the registration requirements of the 1933 Act, the availability of which exemption shall be 2 the subject matter of an opinion of counsel reasonably acceptable to the Company that no registration under the 1933 Act is required with respect to such offer, sale, distribution, pledge, grant or other disposition or transfer. (b) The Optionee acknowledges that the Optionee understands that (i) the Option has been granted and the shares to be sold to the Optionee upon exercise of the Option will be sold to the Optionee pursuant to an exemption from the registration requirements in the 1933 Act until such time as the Company shall file a Registration Statement under the 1933 Act which has become effective and is current with respect to the shares being offered or sold and in this connection the Company is relying in part on the representations set forth in this Agreement; (ii) such shares must be held indefinitely unless they are registered or an exemption from registration becomes available under the 1933 Act and the securities laws of any state; (iii) the Company is under no obligation to register such shares or to comply with any exemption from such registration, including those portions of Rule 144 under the 1933 Act to be complied with by the Company; (iv) if Rule 144 is available for sales of such shares, and there is no assurance that the Optionee will ever be able to sell under Rule 144, such sales in reliance upon Rule 144 may be made only after the shares have been held for the requisite holding period and then only in limited amounts in accordance with the conditions of that Rule, all of which must be met; and (v) the Optionee must, therefore, continue to bear the economic risks of the investment in such shares for an indefinite period of time after the exercise of the Option. (c) The Optionee acknowledges that the Optionee has had the opportunity to ask questions of, and receive answers from, the officers and representatives of the Company concerning all material information concerning the Company and the terms and conditions of the transactions in which the Optionee is acquiring the Option and may subsequently acquire Option Shares. The Optionee further acknowledges that the Optionee understands that the Company may use the proceeds from the exercise of the Option for general corporate purposes. (d) Immediately prior to the exercise of all or any portion of the Option, the Optionee shall deliver to the Company a signed statement, in a form satisfactory to the Company, confirming that each of the representations, warranties, acknowledgments and agreements contained in this Section is true as to the Optionee as of the date of such exercise. (e) The Optionee understands that all certificates representing shares transferred pursuant to this Agreement, unless made pursuant to an appropriate Registration Statement under the 1933 Act, will bear the following restrictive legend: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be transferred or hypothecated without prior registration under said Act or an exemption therefrom established to the satisfaction of the issuer." 3 (f) If the legal counsel of the Company, at the request of the Company, advises it that registration under the 1933 Act of the shares deliverable upon the exercise of the Option is required prior to delivery thereof, or that listing of such shares on any exchange is required prior to delivery thereof, the Company shall not be required to issue or deliver such shares unless and until such legal counsel shall advise that such registration and/or listing has been completed and is then effective, or is not required. 13. Severability. In the event that any provision of this Agreement is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability shall not be construed as rendering any other provisions contained herein invalid or unenforceable, and all such other provisions shall be given full force and effect to the same extent as though the invalid and unenforceable provision was not contained herein. 14. Definitions. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan. For purposes of interpreting this Agreement, the following definitions shall also apply: (a) "Effective Time" shall have the meaning set forth in the Agreement and Plan of Merger, by and among InSight Health Services Holdings Corp., JWCH Merger Corp. and InSight Health Services Corp. (b) "Expiration Date" means, unless earlier terminated pursuant to the terms of this Agreement or the Plan, the day immediately preceding the tenth anniversary of the Effective Time. (c) "Option Period" means the period commencing at the Effective Time and, unless earlier terminated in accordance with Section 4, ending on the close of business on the Expiration Date. 4 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in duplicate on its behalf and the Optionee has also executed this Agreement in duplicate, all as of the date first above written. INSIGHT HEALTH SERVICES HOLDINGS CORP. By:/s/ Mark J. Tricolli --------------------------------- Name: Mark J. Tricolli Title: Vice President & Secretary OPTIONEE /s/ Steven T. Plochocki ------------------------------ Steven T. Plochocki 5 EXHIBIT A 6 Form of Stock Option Exercise Notice Optionee Information: Name:__________________ Social Security Number: ____ - ____ - _____ Address:______________________ Employee Number: __________________ ______________________ Option Information: Date of Grant of Option: __________________ Exercise Price per Share: $ 8.37 Total number of shares of Common Stock of the Company covered by the Option: _________ shares Exercise Information: Number of shares of Common Stock of the Company for which Option is being exercised now: _______ (hereinafter referred to as "Purchased Shares") Form of payment enclosed (CHECK ALL THAT APPLY): : Check for $ _____ made payable to InSight Health Services Holdings Corp. : Certificate(s) for ___ shares of Common Stock of the Company that I have owned for at least six months. (These shares will be valued as of the date when this notice is received by the Company.) : Attestation Form covering _____ shares of Common Stock of the Company (These shares will be valued as of the date when this notice is received by the Company.) Names in which the Purchased Shares should be registered (YOU MUST CHECK ONE): 7 : In my name only : In the name of my spouse and myself as joint tenants with the right of survivorship. My spouse's name is: ___________________. I agree to seek the consent of my spouse to the extent required by the Company to enforce the foregoing. The certificate(s) of the Purchased Shares shall be sent to the following address: ____________________ ____________________ ____________________ I hereby acknowledge that I am acquiring the Purchased Shares subject to all terms and conditions of the InSight Health Services Holdings Corp. 2001 Stock Option Plan Stock Option Agreement dated June ___, 2001. _____________, _____________ Place Date ____________________________ Name: 8 EXHIBIT B
Plan Number of Options Terminated Option Price ---- ---------------------------- ------------ InSight Health Services Corp. 1999 Stock Option Plan 52,500 $8.37
Plochocki 9 EX-10.8 38 y55701ex10-8.txt 2001 STOCK OPTION PLAN Exhibit 10.8 INSIGHT HEALTH SERVICES HOLDINGS CORP. 2001 STOCK OPTION PLAN STOCK OPTION AGREEMENT AGREEMENT is dated as of June 29, 2001 between InSight Health Services Holdings Corp., a Delaware corporation ("Company"), and Michael A. Boylan ("Optionee"). This Agreement shall become effective as of the Effective Time. The stockholders and the Board of Directors of the Company ("Board") have adopted the InSight Health Services Holdings Corp. 2001 Stock Option Plan ("Plan") of the Company for the purpose of advancing the interests of the Company by providing certain individuals with an opportunity to develop a proprietary interest in the Company, which will thereby create strong performance incentives for such individuals to maximize the growth and success of the Company and its subsidiaries and will encourage such individuals to remain in the employ of the Company or any of its subsidiaries. The Optionee is a full time employee of the Company or its subsidiaries, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the grant by the Company of a stock option to the Optionee. NOW, THEREFORE, it is hereby agreed as follows: 1. Grant of Option. Subject to and upon the terms and conditions set forth in this Agreement and the Plan, the Company hereby grants to the Optionee, as of the Effective Time, a stock option ("Option") to purchase up to 46,990 shares ("Option Shares") of the common stock, par value $0.001 per share, of the Company ("Common Stock") from time to time during the Option Period at the price of $8.37 per share ("Option Price"). 2. Option Period. The Option shall be exercisable only during the Option Period. In addition, upon the Expiration Date, the Option shall cease to be exercisable and have no further force or effect whatsoever. 3. Vesting and Exercisability. The Option shall be vested and exercisable as of the Effective Time. 4. Termination of Employment. Upon termination of the Optionee's employment with the Company, the Option granted herein shall be treated in accordance with the Plan. 5. Timing and Method of Exercise. In order to exercise the Option with respect to all or any part of the Option Shares for which the Option is at the time exercisable, the Optionee (or in the case of exercise after the Optionee's death, the Optionee's executor, administrator, heir or legatee, as the case may be) must comply with the provisions of Section 8 of the Plan. A form of exercise notice is attached hereto as Exhibit A. 6. Termination of Existing Options. Immediately prior to the Effective Time, the stock options set forth on Exhibit B granted to the Optionee pursuant to any of the Company's stock option plans and any stock option agreement entered into in connection therewith shall be terminated in their entirety and be of no further force and effect. In addition, the Optionee irrevocably waives any and all rights and benefits the Optionee has thereunder. 7. Stockholders Agreement. Not later than the Effective Time, the Optionee hereby agrees to execute the stockholders agreement by and among the Company and the parties named therein (the "Stockholders Agreement"), and pursuant thereto, the Option and the Common Stock underlying the Option shall be subject to the terms of the Stockholders Agreement. 8. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, devisees, legal representatives and permitted assigns, in each case, subject to the Stockholders Agreement, of the Optionee and the successors and assigns of the Company. 9. Liability of the Company. The inability of the Company, despite its best efforts, to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Common Stock pursuant to the Option shall relieve the Company of any liability in respect of the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. 10. Construction. This Agreement and the Option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the express terms and provisions of the Plan. 11. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware. 12. Warranties and Obligations of the Optionee. (a) The Optionee represents, warrants and agrees that the Optionee will acquire and hold the Option Shares for the Optionee's own account for investment and not with the view to the resale or distribution thereof, except for resales or distributions in accordance with federal and state securities laws, and that the Optionee will not, at any time or times, directly or indirectly, offer, sell, distribute, pledge or otherwise grant a security interest in or otherwise dispose of or transfer all, any portion of or any interest in, any Option Shares (or solicit an offer to buy, take in pledge or otherwise acquire or receive, all or any portion thereof), except pursuant to either (i) a Registration Statement on an appropriate form under the Securities Act of 1933, as amended ("1933 Act"), which Registration Statement has become effective and is current with respect to the shares being offered or sold, or (ii) a specific exemption from the registration requirements of the 1933 Act, the availability of which exemption shall be 2 the subject matter of an opinion of counsel reasonably acceptable to the Company that no registration under the 1933 Act is required with respect to such offer, sale, distribution, pledge, grant or other disposition or transfer. (b) The Optionee acknowledges that the Optionee understands that (i) the Option has been granted and the shares to be sold to the Optionee upon exercise of the Option will be sold to the Optionee pursuant to an exemption from the registration requirements in the 1933 Act until such time as the Company shall file a Registration Statement under the 1933 Act which has become effective and is current with respect to the shares being offered or sold and in this connection the Company is relying in part on the representations set forth in this Agreement; (ii) such shares must be held indefinitely unless they are registered or an exemption from registration becomes available under the 1933 Act and the securities laws of any state; (iii) the Company is under no obligation to register such shares or to comply with any exemption from such registration, including those portions of Rule 144 under the 1933 Act to be complied with by the Company; (iv) if Rule 144 is available for sales of such shares, and there is no assurance that the Optionee will ever be able to sell under Rule 144, such sales in reliance upon Rule 144 may be made only after the shares have been held for the requisite holding period and then only in limited amounts in accordance with the conditions of that Rule, all of which must be met; and (v) the Optionee must, therefore, continue to bear the economic risks of the investment in such shares for an indefinite period of time after the exercise of the Option. (c) The Optionee acknowledges that the Optionee has had the opportunity to ask questions of, and receive answers from, the officers and representatives of the Company concerning all material information concerning the Company and the terms and conditions of the transactions in which the Optionee is acquiring the Option and may subsequently acquire Option Shares. The Optionee further acknowledges that the Optionee understands that the Company may use the proceeds from the exercise of the Option for general corporate purposes. (d) Immediately prior to the exercise of all or any portion of the Option, the Optionee shall deliver to the Company a signed statement, in a form satisfactory to the Company, confirming that each of the representations, warranties, acknowledgments and agreements contained in this Section is true as to the Optionee as of the date of such exercise. (e) The Optionee understands that all certificates representing shares transferred pursuant to this Agreement, unless made pursuant to an appropriate Registration Statement under the 1933 Act, will bear the following restrictive legend: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be transferred or hypothecated without prior registration under said Act or an exemption therefrom established to the satisfaction of the issuer." 3 (f) If the legal counsel of the Company, at the request of the Company, advises it that registration under the 1933 Act of the shares deliverable upon the exercise of the Option is required prior to delivery thereof, or that listing of such shares on any exchange is required prior to delivery thereof, the Company shall not be required to issue or deliver such shares unless and until such legal counsel shall advise that such registration and/or listing has been completed and is then effective, or is not required. 13. Severability. In the event that any provision of this Agreement is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability shall not be construed as rendering any other provisions contained herein invalid or unenforceable, and all such other provisions shall be given full force and effect to the same extent as though the invalid and unenforceable provision was not contained herein. 14. Definitions. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan. For purposes of interpreting this Agreement, the following definitions shall also apply: (a) "Effective Time" shall have the meaning set forth in the Agreement and Plan of Merger, by and among InSight Health Services Holdings Corp., JWCH Merger Corp. and InSight Health Services Corp. (b) "Expiration Date" means, unless earlier terminated pursuant to the terms of this Agreement or the Plan, the day immediately preceding the tenth anniversary of the Effective Time. (c) "Option Period" means the period commencing at the Effective Time and, unless earlier terminated in accordance with Section 4, ending on the close of business on the Expiration Date. 4 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in duplicate on its behalf and the Optionee has also executed this Agreement in duplicate, all as of the date first above written. INSIGHT HEALTH SERVICES HOLDINGS CORP. By: /s/ Mark J. Tricolli ------------------------------- Name: Mark J. Tricolli Title: Vice President & Secretary OPTIONEE /s/ Michael A. Boylan ------------------------------------ Michael A. Boylan 5 EXHIBIT A 6 Form of Stock Option Exercise Notice Optionee Information: Name:__________________ Social Security Number: ____ - ____ - _____ Address:______________________ Employee Number: __________________ ______________________ Option Information: Date of Grant of Option: __________________ Exercise Price per Share: $ 8.37 Total number of shares of Common Stock of the Company covered by the Option: _________ shares Exercise Information: Number of shares of Common Stock of the Company for which Option is being exercised now: _______ (hereinafter referred to as "Purchased Shares") Form of payment enclosed (CHECK ALL THAT APPLY): : Check for $ _____ made payable to InSight Health Services Holdings Corp. : Certificate(s) for ___ shares of Common Stock of the Company that I have owned for at least six months. (These shares will be valued as of the date when this notice is received by the Company.) : Attestation Form covering _____ shares of Common Stock of the Company (These shares will be valued as of the date when this notice is received by the Company.) Names in which the Purchased Shares should be registered (YOU MUST CHECK ONE): 7 : In my name only : In the name of my spouse and myself as joint tenants with the right of survivorship. My spouse's name is: ___________________. I agree to seek the consent of my spouse to the extent required by the Company to enforce the foregoing. The certificate(s) of the Purchased Shares shall be sent to the following address: ____________________ ____________________ ____________________ I hereby acknowledge that I am acquiring the Purchased Shares subject to all terms and conditions of the InSight Health Services Holdings Corp. 2001 Stock Option Plan Stock Option Agreement dated June ___, 2001. _____________, _____________ Place Date ____________________________ Name: 8 EXHIBIT B
Plan Number of Options Terminated Option Price ---- ---------------------------- ------------ InSight Health Services Corp. 1997 Management Stock Option Plan 46,990 $8.37
Boylan 9 EX-10.9 39 y55701ex10-9.txt 2001 STOCK OPTION PLAN Exhibit 10.9 INSIGHT HEALTH SERVICES HOLDINGS CORP. 2001 STOCK OPTION PLAN STOCK OPTION AGREEMENT AGREEMENT is dated as of June 29, 2001 between InSight Health Services Holdings Corp., a Delaware corporation ("Company"), and Thomas V. Croal ("Optionee"). This Agreement shall become effective as of the Effective Time. The stockholders and the Board of Directors of the Company ("Board") have adopted the InSight Health Services Holdings Corp. 2001 Stock Option Plan ("Plan") of the Company for the purpose of advancing the interests of the Company by providing certain individuals with an opportunity to develop a proprietary interest in the Company, which will thereby create strong performance incentives for such individuals to maximize the growth and success of the Company and its subsidiaries and will encourage such individuals to remain in the employ of the Company or any of its subsidiaries. The Optionee is a full time employee of the Company or its subsidiaries, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the grant by the Company of a stock option to the Optionee. NOW, THEREFORE, it is hereby agreed as follows: 1. Grant of Option. Subject to and upon the terms and conditions set forth in this Agreement and the Plan, the Company hereby grants to the Optionee, as of the Effective Time, a stock option ("Option") to purchase up to 52,500 shares ("Option Shares") of the common stock, par value $0.001 per share, of the Company ("Common Stock") from time to time during the Option Period at the price of $8.37 per share ("Option Price"). 2. Option Period. The Option shall be exercisable only during the Option Period. In addition, upon the Expiration Date, the Option shall cease to be exercisable and have no further force or effect whatsoever. 3. Vesting and Exercisability. The Option shall be vested and exercisable as of the Effective Time. 4. Termination of Employment. Upon termination of the Optionee's employment with the Company, the Option granted herein shall be treated in accordance with the Plan. 5. Timing and Method of Exercise. In order to exercise the Option with respect to all or any part of the Option Shares for which the Option is at the time exercisable, the Optionee (or in the case of exercise after the Optionee's death, the Optionee's executor, administrator, heir or legatee, as the case may be) must comply with the provisions of Section 8 of the Plan. A form of exercise notice is attached hereto as Exhibit A. 6. Termination of Existing Options. Immediately prior to the Effective Time, the stock options set forth on Exhibit B granted to the Optionee pursuant to any of the Company's stock option plans and any stock option agreement entered into in connection therewith shall be terminated in their entirety and be of no further force and effect. In addition, the Optionee irrevocably waives any and all rights and benefits the Optionee has thereunder. 7. Stockholders Agreement. Not later than the Effective Time, the Optionee hereby agrees to execute the stockholders agreement by and among the Company and the parties named therein (the "Stockholders Agreement"), and pursuant thereto, the Option and the Common Stock underlying the Option shall be subject to the terms of the Stockholders Agreement. 8. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, devisees, legal representatives and permitted assigns, in each case, subject to the Stockholders Agreement, of the Optionee and the successors and assigns of the Company. 9. Liability of the Company. The inability of the Company, despite its best efforts, to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Common Stock pursuant to the Option shall relieve the Company of any liability in respect of the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. 10. Construction. This Agreement and the Option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the express terms and provisions of the Plan. 11. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware. 12. Warranties and Obligations of the Optionee. (a) The Optionee represents, warrants and agrees that the Optionee will acquire and hold the Option Shares for the Optionee's own account for investment and not with the view to the resale or distribution thereof, except for resales or distributions in accordance with federal and state securities laws, and that the Optionee will not, at any time or times, directly or indirectly, offer, sell, distribute, pledge or otherwise grant a security interest in or otherwise dispose of or transfer all, any portion of or any interest in, any Option Shares (or solicit an offer to buy, take in pledge or otherwise acquire or receive, all or any portion thereof), except pursuant to either (i) a Registration Statement on an appropriate form under the Securities Act of 1933, as amended ("1933 Act"), which Registration Statement has become effective and is current with respect to the shares being offered or sold, or (ii) a specific exemption from the registration requirements of the 1933 Act, the availability of which exemption shall be 2 the subject matter of an opinion of counsel reasonably acceptable to the Company that no registration under the 1933 Act is required with respect to such offer, sale, distribution, pledge, grant or other disposition or transfer. (b) The Optionee acknowledges that the Optionee understands that (i) the Option has been granted and the shares to be sold to the Optionee upon exercise of the Option will be sold to the Optionee pursuant to an exemption from the registration requirements in the 1933 Act until such time as the Company shall file a Registration Statement under the 1933 Act which has become effective and is current with respect to the shares being offered or sold and in this connection the Company is relying in part on the representations set forth in this Agreement; (ii) such shares must be held indefinitely unless they are registered or an exemption from registration becomes available under the 1933 Act and the securities laws of any state; (iii) the Company is under no obligation to register such shares or to comply with any exemption from such registration, including those portions of Rule 144 under the 1933 Act to be complied with by the Company; (iv) if Rule 144 is available for sales of such shares, and there is no assurance that the Optionee will ever be able to sell under Rule 144, such sales in reliance upon Rule 144 may be made only after the shares have been held for the requisite holding period and then only in limited amounts in accordance with the conditions of that Rule, all of which must be met; and (v) the Optionee must, therefore, continue to bear the economic risks of the investment in such shares for an indefinite period of time after the exercise of the Option. (c) The Optionee acknowledges that the Optionee has had the opportunity to ask questions of, and receive answers from, the officers and representatives of the Company concerning all material information concerning the Company and the terms and conditions of the transactions in which the Optionee is acquiring the Option and may subsequently acquire Option Shares. The Optionee further acknowledges that the Optionee understands that the Company may use the proceeds from the exercise of the Option for general corporate purposes. (d) Immediately prior to the exercise of all or any portion of the Option, the Optionee shall deliver to the Company a signed statement, in a form satisfactory to the Company, confirming that each of the representations, warranties, acknowledgments and agreements contained in this Section is true as to the Optionee as of the date of such exercise. (e) The Optionee understands that all certificates representing shares transferred pursuant to this Agreement, unless made pursuant to an appropriate Registration Statement under the 1933 Act, will bear the following restrictive legend: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be transferred or hypothecated without prior registration under said Act or an exemption therefrom established to the satisfaction of the issuer." 3 (f) If the legal counsel of the Company, at the request of the Company, advises it that registration under the 1933 Act of the shares deliverable upon the exercise of the Option is required prior to delivery thereof, or that listing of such shares on any exchange is required prior to delivery thereof, the Company shall not be required to issue or deliver such shares unless and until such legal counsel shall advise that such registration and/or listing has been completed and is then effective, or is not required. 13. Severability. In the event that any provision of this Agreement is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability shall not be construed as rendering any other provisions contained herein invalid or unenforceable, and all such other provisions shall be given full force and effect to the same extent as though the invalid and unenforceable provision was not contained herein. 14. Definitions. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan. For purposes of interpreting this Agreement, the following definitions shall also apply: (a) "Effective Time" shall have the meaning set forth in the Agreement and Plan of Merger, by and among InSight Health Services Holdings Corp., JWCH Merger Corp. and InSight Health Services Corp. (b) "Expiration Date" means, unless earlier terminated pursuant to the terms of this Agreement or the Plan, the day immediately preceding the tenth anniversary of the Effective Time. (c) "Option Period" means the period commencing at the Effective Time and, unless earlier terminated in accordance with Section 4, ending on the close of business on the Expiration Date. 4 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in duplicate on its behalf and the Optionee has also executed this Agreement in duplicate, all as of the date first above written. INSIGHT HEALTH SERVICES HOLDINGS CORP. By:/s/ Mark J. Tricolli --------------------------------- Name: Mark J. Tricolli Title: Vice President & Secretary OPTIONEE /s/ Thomas V. Croal ------------------------------------ Thomas V. Croal 5 EXHIBIT A 6 Form of Stock Option Exercise Notice Optionee Information: Name:__________________ Social Security Number: ____ - ____ - _____ Address:______________________ Employee Number: __________________ ______________________ Option Information: Date of Grant of Option: __________________ Exercise Price per Share: $ 8.37 Total number of shares of Common Stock of the Company covered by the Option: _________ shares Exercise Information: Number of shares of Common Stock of the Company for which Option is being exercised now: _______ (hereinafter referred to as "Purchased Shares") Form of payment enclosed (CHECK ALL THAT APPLY): : Check for $ _____ made payable to InSight Health Services Holdings Corp. : Certificate(s) for ___ shares of Common Stock of the Company that I have owned for at least six months. (These shares will be valued as of the date when this notice is received by the Company.) : Attestation Form covering _____ shares of Common Stock of the Company (These shares will be valued as of the date when this notice is received by the Company.) Names in which the Purchased Shares should be registered (YOU MUST CHECK ONE): 7 : In my name only : In the name of my spouse and myself as joint tenants with the right of survivorship. My spouse's name is: ___________________. I agree to seek the consent of my spouse to the extent required by the Company to enforce the foregoing. The certificate(s) of the Purchased Shares shall be sent to the following address: ____________________ ____________________ ____________________ I hereby acknowledge that I am acquiring the Purchased Shares subject to all terms and conditions of the InSight Health Services Holdings Corp. 2001 Stock Option Plan Stock Option Agreement dated June ___, 2001. _____________, _____________ Place Date ____________________________ Name: 8 EXHIBIT B
Plan Number of Options Terminated Option Price ---- ---------------------------- ------------ InSight Health Services Corp. 1997 Stock Option Plan 52,500 $8.37
Croal 9 EX-10.10 40 y55701ex10-10.txt 2001 STOCK OPTION PLAN Exhibit 10.10 INSIGHT HEALTH SERVICES HOLDINGS CORP. 2001 STOCK OPTION PLAN STOCK OPTION AGREEMENT AGREEMENT is dated as of June 29, 2001 between InSight Health Services Holdings Corp., a Delaware corporation ("Company"), and Michael S. Madler ("Optionee"). This Agreement shall become effective as of the Effective Time. The stockholders and the Board of Directors of the Company ("Board") have adopted the InSight Health Services Holdings Corp. 2001 Stock Option Plan ("Plan") of the Company for the purpose of advancing the interests of the Company by providing certain individuals with an opportunity to develop a proprietary interest in the Company, which will thereby create strong performance incentives for such individuals to maximize the growth and success of the Company and its subsidiaries and will encourage such individuals to remain in the employ of the Company or any of its subsidiaries. The Optionee is a full time employee of the Company or its subsidiaries, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the grant by the Company of a stock option to the Optionee. NOW, THEREFORE, it is hereby agreed as follows: 1. Grant of Option. Subject to and upon the terms and conditions set forth in this Agreement and the Plan, the Company hereby grants to the Optionee, as of the Effective Time, a stock option ("Option") to purchase up to 24,000 shares ("Option Shares") of the common stock, par value $0.001 per share, of the Company ("Common Stock") from time to time during the Option Period at the price of $8.37 per share ("Option Price"). 2. Option Period. The Option shall be exercisable only during the Option Period. In addition, upon the Expiration Date, the Option shall cease to be exercisable and have no further force or effect whatsoever. 3. Vesting and Exercisability. The Option shall be vested and exercisable as of the Effective Time. 4. Termination of Employment. Upon termination of the Optionee's employment with the Company, the Option granted herein shall be treated in accordance with the Plan. 5. Timing and Method of Exercise. In order to exercise the Option with respect to all or any part of the Option Shares for which the Option is at the time exercisable, the Optionee (or in the case of exercise after the Optionee's death, the Optionee's executor, administrator, heir or legatee, as the case may be) must comply with the provisions of Section 8 of the Plan. A form of exercise notice is attached hereto as Exhibit A. 6. Termination of Existing Options. Immediately prior to the Effective Time, the stock options set forth on Exhibit B granted to the Optionee pursuant to any of the Company's stock option plans and any stock option agreement entered into in connection therewith shall be terminated in their entirety and be of no further force and effect. In addition, the Optionee irrevocably waives any and all rights and benefits the Optionee has thereunder. 7. Stockholders Agreement. Not later than the Effective Time, the Optionee hereby agrees to execute the stockholders agreement by and among the Company and the parties named therein (the "Stockholders Agreement"), and pursuant thereto, the Option and the Common Stock underlying the Option shall be subject to the terms of the Stockholders Agreement. 8. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, devisees, legal representatives and permitted assigns, in each case, subject to the Stockholders Agreement, of the Optionee and the successors and assigns of the Company. 9. Liability of the Company. The inability of the Company, despite its best efforts, to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Common Stock pursuant to the Option shall relieve the Company of any liability in respect of the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. 10. Construction. This Agreement and the Option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the express terms and provisions of the Plan. 11. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware. 12. Warranties and Obligations of the Optionee. (a) The Optionee represents, warrants and agrees that the Optionee will acquire and hold the Option Shares for the Optionee's own account for investment and not with the view to the resale or distribution thereof, except for resales or distributions in accordance with federal and state securities laws, and that the Optionee will not, at any time or times, directly or indirectly, offer, sell, distribute, pledge or otherwise grant a security interest in or otherwise dispose of or transfer all, any portion of or any interest in, any Option Shares (or solicit an offer to buy, take in pledge or otherwise acquire or receive, all or any portion thereof), except pursuant to either (i) a Registration Statement on an appropriate form under the Securities Act of 1933, as amended ("1933 Act"), which Registration Statement has become effective and is current with respect to the shares being offered or sold, or (ii) a specific exemption from the registration requirements of the 1933 Act, the availability of which exemption shall be 2 the subject matter of an opinion of counsel reasonably acceptable to the Company that no registration under the 1933 Act is required with respect to such offer, sale, distribution, pledge, grant or other disposition or transfer. (b) The Optionee acknowledges that the Optionee understands that (i) the Option has been granted and the shares to be sold to the Optionee upon exercise of the Option will be sold to the Optionee pursuant to an exemption from the registration requirements in the 1933 Act until such time as the Company shall file a Registration Statement under the 1933 Act which has become effective and is current with respect to the shares being offered or sold and in this connection the Company is relying in part on the representations set forth in this Agreement; (ii) such shares must be held indefinitely unless they are registered or an exemption from registration becomes available under the 1933 Act and the securities laws of any state; (iii) the Company is under no obligation to register such shares or to comply with any exemption from such registration, including those portions of Rule 144 under the 1933 Act to be complied with by the Company; (iv) if Rule 144 is available for sales of such shares, and there is no assurance that the Optionee will ever be able to sell under Rule 144, such sales in reliance upon Rule 144 may be made only after the shares have been held for the requisite holding period and then only in limited amounts in accordance with the conditions of that Rule, all of which must be met; and (v) the Optionee must, therefore, continue to bear the economic risks of the investment in such shares for an indefinite period of time after the exercise of the Option. (c) The Optionee acknowledges that the Optionee has had the opportunity to ask questions of, and receive answers from, the officers and representatives of the Company concerning all material information concerning the Company and the terms and conditions of the transactions in which the Optionee is acquiring the Option and may subsequently acquire Option Shares. The Optionee further acknowledges that the Optionee understands that the Company may use the proceeds from the exercise of the Option for general corporate purposes. (d) Immediately prior to the exercise of all or any portion of the Option, the Optionee shall deliver to the Company a signed statement, in a form satisfactory to the Company, confirming that each of the representations, warranties, acknowledgments and agreements contained in this Section is true as to the Optionee as of the date of such exercise. (e) The Optionee understands that all certificates representing shares transferred pursuant to this Agreement, unless made pursuant to an appropriate Registration Statement under the 1933 Act, will bear the following restrictive legend: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be transferred or hypothecated without prior registration under said Act or an exemption therefrom established to the satisfaction of the issuer." 3 (f) If the legal counsel of the Company, at the request of the Company, advises it that registration under the 1933 Act of the shares deliverable upon the exercise of the Option is required prior to delivery thereof, or that listing of such shares on any exchange is required prior to delivery thereof, the Company shall not be required to issue or deliver such shares unless and until such legal counsel shall advise that such registration and/or listing has been completed and is then effective, or is not required. 13. Severability. In the event that any provision of this Agreement is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability shall not be construed as rendering any other provisions contained herein invalid or unenforceable, and all such other provisions shall be given full force and effect to the same extent as though the invalid and unenforceable provision was not contained herein. 14. Definitions. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan. For purposes of interpreting this Agreement, the following definitions shall also apply: (a) "Effective Time" shall have the meaning set forth in the Agreement and Plan of Merger, by and among InSight Health Services Holdings Corp., JWCH Merger Corp. and InSight Health Services Corp. (b) "Expiration Date" means, unless earlier terminated pursuant to the terms of this Agreement or the Plan, the day immediately preceding the tenth anniversary of the Effective Time. (c) "Option Period" means the period commencing at the Effective Time and, unless earlier terminated in accordance with Section 4, ending on the close of business on the Expiration Date. 4 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in duplicate on its behalf and the Optionee has also executed this Agreement in duplicate, all as of the date first above written. INSIGHT HEALTH SERVICES HOLDINGS CORP. By:/s/ Mark J. Tricolli ---------------------------------------------- Name: Mark J. Tricolli Title: Vice President & Secretary OPTIONEE /s/ Michael S. Madler ------------------------------------------------- Michael S. Madler 5 EXHIBIT A 6 Form of Stock Option Exercise Notice Optionee Information: Name: Social Security Number: - - ------------------ ---- ---- ---- Address: Employee Number: ------------------ ------------------ ------------------ Option Information: Date of Grant of Option: ------------------ Exercise Price per Share: $ 8.37 Total number of shares of Common Stock of the Company covered by the Option: shares --------- Exercise Information: Number of shares of Common Stock of the Company for which Option is being exercised now: (hereinafter referred to as "Purchased Shares") ------- Form of payment enclosed (CHECK ALL THAT APPLY): : Check for $ _____ made payable to InSight Health Services Holdings Corp. : Certificate(s) for ___ shares of Common Stock of the Company that I have owned for at least six months. (These shares will be valued as of the date when this notice is received by the Company.) : Attestation Form covering _____ shares of Common Stock of the Company (These shares will be valued as of the date when this notice is received by the Company.) Names in which the Purchased Shares should be registered (YOU MUST CHECK ONE): 7 : In my name only : In the name of my spouse and myself as joint tenants with the right of survivorship. My spouse's name is: ___________________. I agree to seek the consent of my spouse to the extent required by the Company to enforce the foregoing. The certificate(s) of the Purchased Shares shall be sent to the following address: -------------------- -------------------- -------------------- I hereby acknowledge that I am acquiring the Purchased Shares subject to all terms and conditions of the InSight Health Services Holdings Corp. 2001 Stock Option Plan Stock Option Agreement dated June ___, 2001. -------------, ------------- Place Date --------------------------- Name: 8 EXHIBIT B
Plan Number of Options Terminated Option Price ---- ---------------------------- ------------ InSight Health Services 24,000 $8.37 Corp. 1999 Stock Option Plan
Madler 9 EX-10.11 41 y55701ex10-11.txt EXECUTIVE EMPLOYMENT AGREEMENT Exhibit 10.11 EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT dated as of June 29, 2001 between InSight Health Services Corp., a Delaware corporation ("Company"), and STEVEN T. PLOCHOCKI ("Executive"). InSight Health Services Holdings Corp., a Delaware corporation ("Parent") is a party to this Agreement solely for the purposes of Section 3.07. 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 The term of this Agreement and of Executive's employment hereunder shall commence on the date provided in Section 7.10 ("Effective Time") and shall continue for a period of three (3) years from the Effective Time 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 initial appointment as Company's President and Chief Executive Officer 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 an officer of Company and of any of its 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 at 4400 MacArthur Boulevard, Suite 800, Newport Beach, California 92660. 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's 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 $280,000 per annum ("Annual Salary"), payable in accordance with the payroll policies of Company for senior executives as from time to time in effect, less such amounts as may be required to be withheld by applicable federal, state and local law and regulations (the "Payroll Policies"). In addition to the Annual Salary, Executive shall be eligible to receive and Company shall pay (a) a discretionary bonus of up to 75% of the Annual Salary if Company achieves the goals set forth in a budget prepared by Company management and adopted or approved by the Board; and (b) a discretionary bonus of up to an additional 25% of the Annual Salary 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 Company'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. 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 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 $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. 2 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 eight (8) 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 mutually agreed upon by the board of directors of Parent and Executive. 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 (as defined below). 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 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 have a material adverse impact on the business operations or financial or other condition of Company, or any felony offense; (b) Executive has committed fraud or embezzlement; 3 (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. Executive shall have the right, effective upon 60 days' written notice to Company, 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. 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, 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 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. 4 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 twenty-four (24) 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) twenty-four (24) 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 his 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 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. 5 (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. 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) 6 to disclose any Trade Secrets, Executive shall provide Company with prompt, prior written notice of such requirement so that Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Section. Executive agrees that his obligations under this Section 5.01 shall be absolute and unconditional. (b) BREACH. Executive understands and agrees that Executive's employment with Company may be terminated if Executive breaches this Agreement or in any way divulges such Trade Secrets. Executive further understands and agrees that Company may be irreparably harmed by any violation or threatened violation of this Agreement and, therefore, Company may be entitled to injunctive relief to enforce any of the provisions contained herein. (c) NON-COMPETE. During the period of Executive's employment, Executive will not directly or indirectly either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any activity or business which Company shall determine in good faith to be in competition in any substantial way with Company Business within any metropolitan area in the United States or elsewhere in which Company is then engaged in Company Business. The parties acknowledge that in California and some states post-employment non-compete clauses may be generally unenforceable, but that other states and jurisdictions permit such agreements. Executive hereby agrees that Executive will not directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any activity or business which Company shall determine in good faith to be in competition in any substantial way with Company Business as conducted at the effective date of termination of Executive's employment by Company for or a period of twenty-four (24) 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 twenty-four (24) months after the termination of Executive's employment, Executive will not, either directly or indirectly, either alone or in concert with others, solicit or entice or participate in the solicitation or attempt to solicit or in any manner encourage employees of Company to leave Company or work for anyone that is in competition in any substantial way with Company Business (which in the case of the period following Executive's termination, shall mean Company Business as conducted as of the effective date of termination of Executive's employment with Company); provided, however, that the public listing, advertising or posting of an available position shall not constitute solicitation or an attempt to solicit hereunder and this subsection (d) shall not preclude Executive from hiring an individual pursuant thereto. (e) NO SOLICITATION OF CUSTOMERS. Executive will not during the course of Executive's employment, or for twenty-four (24) 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 twenty-four (24) months thereafter, Executive will not accept 7 any employment or engage in any activities which Company shall determine in good faith to be competitive with Company, if the fulfillment of the duties of the competitive employment or activities would inherently require Executive to reveal Trade Secrets to which Executive has access or learned during Executive's employment on behalf of any business that is in competition in any substantial way with Company. (f) RETURN OF COMPANY PROPERTY. In the event of the termination of Executive's employment, Executive will deliver to Company all devices, records, sketches, reports, proposals, files, customer lists, mailing or contact lists, correspondence, computer tapes, discs and design and other document and data storage and retrieval materials (and all copies, compilations and summaries thereof), equipment, documents, duplicates, notes, drawings, specifications, research tape or other electronic recordings, programs, data and other materials or property of any nature belonging to Company or relating to Company Business, and Executive will not take with Executive or allow a third party to take, any of the foregoing or any reproduction of any of the foregoing. Company property includes personal property, made or compiled by Executive, in whole or in part and alone or with others, or in any way coming into Executive's possession concerning Company Business or other affairs of Company or any of its affiliates. (g) DISCLOSURE AND ASSIGNMENT OF RIGHTS. (i) Executive shall promptly disclose and assign to Company and its affiliates or its nominee(s), to the maximum extent permitted by Section 2870 of the California Labor Code, as it may be hereafter amended from time to time, all right, title and interest of Executive in and to any and all ideas, inventions, discoveries, secret processes and methods and improvements, together with any and all patents that may be issued thereon in the United States and in all foreign countries, which Executive may invent, develop or improve, or cause to be invented, developed or improved, during the term of this Agreement or which are (1) conceived and developed during normal working hours, and (2) related to the scope of Company Business. As used in this Agreement, the term "invent" includes "make", "discover", "develop", "manufacture" or "produce", or any of them; "invention" includes the phrase "any new or useful original art, machine, methods of manufacture, process, composition of matter, design, or configuration of any kind"; "improvement" includes "discovery" or "production"; and "patent" includes "Letters Patent" and "all the extensions, renewals, modifications, improvements and reissues of such patents". (ii) Executive shall disclose immediately to duly authorized representatives of Company any ideas, inventions, discoveries, secret processes and methods and improvements covered by the provisions of paragraph (i) above, and execute all documents reasonably required in connection with the application for an issuance of Letters Patent in the United States and in any foreign country and the assignment thereof to Company and its affiliates or its nominee(s). SECTION 5.02 RIGHTS AND REMEDIES UPON BREACH. If Executive breaches, or threatens to breach, in any material respect any of the provisions of Section 5.01 hereof ("Restrictive Covenants"), Company shall, in addition to all its other rights hereunder and under applicable law and in equity, have the right to seek specific enforcement of the Restrictive Covenants by any court having jurisdiction, including, without limitation, the granting of a preliminary injunction which may be granted without the necessity of proving damages or the posting of a bond or other security, it being acknowledged that any such breach or threatened breach may 8 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 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. 9 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. 4400 MacArthur Boulevard, Suite 800 Newport Beach, CA 92660 Attention: General Counsel Facsimile No.: (949) 476-0137 (ii) If to Parent, addressed to it at: InSight Health Services Holdings Corp. c/o J.W. Childs Associates, L.P. One Federal Street, 21st Floor Boston, MA 02110 Attention: Edward D. Yun Facsimile No.: (617) 753-1101 with a 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 his signature hereto. Any party hereto may, by notice to the other, change its address for receipt of notices hereunder. SECTION 7.02 ENTIRE AGREEMENT. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto. SECTION 7.03 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms and conditions hereof may be waived, amended, modified, superseded, canceled, renewed or extended, only by a written instrument signed by Executive, 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 10 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. SECTION 7.10 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 Company). Immediately prior to the Effective Time, Executive's current employment agreement with Company shall be terminated and be of no further force or effect, and Executive waives any and all rights he may have under such employment agreement, including any payments for severance or in respect of a change of control contained therein. SECTION 7.11 (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 11 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 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/ Thomas V. Croal ---------------------------------------- Name: Thomas V. Croal Title: Executive Vice President & CFO EXECUTIVE /s/ Steven T. Plochocki -------------------------------------------- Name: Steven T. Plochocki Address and Facsimile Number: 22446 Rosebriar Mission Viejo, CA 92692 INSIGHT HEALTH SERVICES HOLDINGS CORP. (solely for the purpose of Section 3.07) By: /s/ Mark J. Tricolli --------------------------------------- Name: Mark J. Tricolli Title: Vice President & Secretary 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 - -------- * 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 Schedule I by the eighth (8th) anniversary of the Grant Date, they shall be deemed to vest on such date. 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 16 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. (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 17 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 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 18 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. 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 19 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] 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 HOLDINGS CORP. EMPLOYEE I. BY BY: ---------------------------------------- ------------------------------------------ Name: Name: Title: Address: ------------------------------------------ ------------------------------------------ ------------------------------------------ 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 ("ROE") 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 ROE in any fiscal year, the Options available to vest in that year shall vest in the ratio by which ROE achieved exceeds 90% of Base Target ROE for such fiscal year (i.e., for ROE of 90.5% of Base Target ROE, one-twentieth of the available Options would vest; for ROE of 96%, six-tenths of the available Options would vest). For purposes hereof, ROE 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 ROE 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 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 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 J.W. 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 II-2 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." Exhibit A-2 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] Exhibit A-3 EX-10.12 42 y55701ex10-12.txt EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 10.12 EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT dated as of June 29, 2001 between InSight Health Services Corp., a Delaware corporation (the "Company"), and Patricia R. Blank (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 Executive Vice President and Chief Information Officer 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 4400 MacArthur Boulevard, Suite 800, Newport Beach, California 92660. 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 $185,000.00 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. 2 SECTION 3.06. VACATION. The Executive shall be entitled to three (3) weeks of paid vacation per year during the term of this Agreement, which she may accumulate up to six (6) 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. 3 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 4 payments and benefits set forth in Section 4.06(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 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 5 of securities of such entity. 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. (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. 6 (c) Property of the Company. All correspondence, memoranda, notes, lists, records, computer tapes, discs and design and other document and data storage and retrieval 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. 7 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. 8 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. 4400 MacArthur Boulevard, Suite 800 Newport Beach, CA 92660 Attention: General Counsel Facsimile No.: (949) 476-0137 (ii) If to Parent, addressed to it at: InSight Health Services Holdings Corp. c/o J.W. Childs Associates, L.P. One Federal Street, 21st Floor Boston, MA 02110 Attention: Edward D. Yun Facsimile No.: (617) 753-1101 9 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 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. 10 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/ Steven T. Plochocki -------------------------------- Name: Steven T. Plochocki Title: President & CEO EXECUTIVE /s/ Patricia R. Blank ------------------------------------ Name: Patricia R. Blank Address and Facsimile Number: 22 Regalo ------------------------------------ Mission Viejo, CA 92692 ------------------------------------ ------------------------------------ ------------------------------------ INSIGHT HEALTH SERVICES HOLDINGS CORP. (solely for the purpose of Section 3.07) By: /s/ Mark J. Tricolli -------------------------------- Name: Mark J. Tricolli Title: Vice President & Secretary 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 - ---------- * 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 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. 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 16 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. (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. 17 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 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 18 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 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 19 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] 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 HOLDINGS CORP. EMPLOYEE BY: BY: ---------------------------------- ----------------------------------- Name: Name: Title: Address: ----------------------------------- ----------------------------------- ----------------------------------- 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 ("ROE") 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 ROE in any fiscal year, the Options available to vest in that year shall vest in the ratio by which ROE achieved exceeds 90% of Base Target ROE for such fiscal year (i.e., for ROE of 90.5% of Base Target ROE, one-twentieth of the available Options would vest; for ROE of 96%, six-tenths of the available Options would vest). For purposes hereof, ROE 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 SCHEDULE I-1 in those years, the vesting percentage achieved in fiscal year ending June 30, 2006 shall be 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 ROE 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 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 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 SCHEDULE I-2 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 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 J.W. 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 SCHEDULE II-1 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 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 II-2 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." EXHIBIT A-2 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] EXHIBIT A-3 EX-10.13 43 y55701ex10-13.txt EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 10.13 EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT dated as of June 29, 2001 between InSight Health Services Corp., a Delaware corporation ("Company"), and Michael A. Boylan ("Executive"). InSight Health Services Holdings Corp., a Delaware corporation ("Parent") is a party to this Agreement solely for the purposes of Section 3.07. 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 at the Effective Time (as defined below), 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 Executive Vice President - Operations 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 an officer of Company and of any of its 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 220 Gibraltar, Suite 205, Horsham, Pennsylvania 19044. 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's 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 $210,000.00 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 (a) a discretionary bonus of up to 75% of the Annual Salary if Company achieves the goals set forth in a budget prepared by Company management and adopted or approved by the Board; and (b) a discretionary bonus of up to an additional 25% of the Annual Salary upon the achievement of other goals mutually agreed upon by Executive and the President and Chief Executive Officer of Company and approved by the Board. Such bonuses are payable on the earlier to occur of the date Company'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. 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 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 $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. 2 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 eight (8) 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 President and Chief Executive Officer of 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 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 have a material adverse impact on the business operations or financial or other condition of Company, or any felony offense; (b) Executive has committed fraud or embezzlement; 3 (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. Executive shall have the right, effective upon 60 days' written notice to Company, 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. 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, 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 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. 4 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 his 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 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 5 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. During and after the term of this Agreement (otherwise than in the performance of this Agreement), without Company's prior written consent, Executive shall not divulge or use all or any of the Trade Secrets to or for any person or entity except (i) for the benefit of Company and as necessary to perform Executive's services under this Agreement; and (ii) when required by law, and then only after consultation with Company or unless such information is in the public domain. In the event that Executive, becomes or is legally compelled (whether by deposition, interrogatories, request for documents, subpoena, civil investigative demand or similar process) to disclose any Trade Secrets, Executive shall provide Company with prompt, prior written notice of such requirement so that Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Section. Executive agrees that his obligations under this Section 5.01 shall be absolute and unconditional. 6 (b) BREACH. Executive understands and agrees that Executive's employment with Company may be terminated if Executive breaches this Agreement or in any way divulges such Trade Secrets. Executive further understands and agrees that Company may be irreparably harmed by any violation or threatened violation of this Agreement and, therefore, Company may be entitled to injunctive relief to enforce any of the provisions contained herein. (c) NON-COMPETE. During the period of Executive's employment, Executive will not directly or indirectly either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any activity or business which Company shall determine in good faith to be in competition in any substantial way with Company Business within any metropolitan area in the United States or elsewhere in which Company is then engaged in Company Business. The parties acknowledge that in California and some states post-employment non-compete clauses may be generally unenforceable, but that other states and jurisdictions permit such agreements. Executive hereby agrees that Executive will not directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any activity or business which Company shall determine in good faith to be in competition in any substantial way with Company Business as conducted at the effective date of termination of Executive's employment by Company for or a period of twelve (12) months after the termination of Executive's employment and that this Section will be enforceable to the greatest extent of the law. (d) NO SOLICITATION OF EMPLOYEES. During Executive's employment and for a period of twelve (12) months after the termination of Executive's employment, Executive will not, either directly or indirectly, either alone or in concert with others, solicit or entice or participate in the solicitation or attempt to solicit or in any manner encourage employees of Company to leave Company or work for anyone that is in competition in any substantial way with Company Business (which in the case of the period following Executive's termination, shall mean Company Business as conducted as of the effective date of termination of Executive's employment with Company); provided, however, that the public listing, advertising or posting of an available position shall not constitute solicitation or an attempt to solicit hereunder and this subsection (d) shall not preclude Executive from hiring an individual pursuant thereto. (e) NO SOLICITATION OF CUSTOMERS. Executive will not during the course of Executive's employment, or for twelve (12) months thereafter, either directly or indirectly call on, solicit, or take away, or attempt to call on, solicit or take away any of Company's customers on behalf of any business that is in competition in any substantial way with Company. Executive promises and agrees not to engage in any unfair competition with Company. During Executive's employment, Executive agrees not to plan or otherwise take any preliminary steps, either alone or in concert with others, to set up or engage in any business enterprise that would be in competition with Company Business. In the event of the termination of Executive's employment and for a period of twelve (12) months thereafter, Executive will not accept any employment or engage in any activities which Company shall determine in good faith to be competitive with Company, if the fulfillment of the duties of the competitive employment or activities would inherently require Executive to reveal Trade Secrets to which Executive has access or learned during Executive's employment on behalf of any business that is in competition in any substantial way with Company. 7 (f) RETURN OF COMPANY PROPERTY. In the event of the termination of Executive's employment, Executive will deliver to Company all devices, records, sketches, reports, proposals, files, customer lists, mailing or contact lists, correspondence, computer tapes, discs and design and other document and data storage and retrieval materials (and all copies, compilations and summaries thereof), equipment, documents, duplicates, notes, drawings, specifications, research tape or other electronic recordings, programs, data and other materials or property of any nature belonging to Company or relating to Company Business, and Executive will not take with Executive or allow a third party to take, any of the foregoing or any reproduction of any of the foregoing. Company property includes personal property, made or compiled by Executive, in whole or in part and alone or with others, or in any way coming into Executive's possession concerning Company Business or other affairs of Company or any of its affiliates. (g) DISCLOSURE AND ASSIGNMENT OF RIGHTS. (i) Executive shall promptly disclose and assign to Company and its affiliates or its nominee(s), to the maximum extent permitted by Section 2870 of the California Labor Code, as it may be hereafter amended from time to time, all right, title and interest of Executive in and to any and all ideas, inventions, discoveries, secret processes and methods and improvements, together with any and all patents that may be issued thereon in the United States and in all foreign countries, which Executive may invent, develop or improve, or cause to be invented, developed or improved, during the term of this Agreement or which are (1) conceived and developed during normal working hours, and (2) related to the scope of Company Business. As used in this Agreement, the term "invent" includes "make", "discover", "develop", "manufacture" or "produce", or any of them; "invention" includes the phrase "any new or useful original art, machine, methods of manufacture, process, composition of matter, design, or configuration of any kind"; "improvement" includes "discovery" or "production"; and "patent" includes "Letters Patent" and "all the extensions, renewals, modifications, improvements and reissues of such patents". (ii) Executive shall disclose immediately to duly authorized representatives of Company any ideas, inventions, discoveries, secret processes and methods and improvements covered by the provisions of paragraph (i) above, and execute all documents reasonably required in connection with the application for an issuance of Letters Patent in the United States and in any foreign country and the assignment thereof to Company and its affiliates or its nominee(s). SECTION 5.02 RIGHTS AND REMEDIES UPON BREACH. If Executive breaches, or threatens to breach, in any material respect any of the provisions of Section 5.01 hereof ("Restrictive Covenants"), Company shall, in addition to all its other rights hereunder and under applicable law and in equity, have the right to seek specific enforcement of the Restrictive Covenants by any court having jurisdiction, including, without limitation, the granting of a preliminary injunction which may be granted without the necessity of proving damages or the posting of a bond or other security, it being acknowledged that any such breach or threatened breach may cause irreparable injury to Company and that money damages may not provide an adequate remedy to Company. In addition to and not in lieu of any other remedy that Company may have pursuant to this Agreement or otherwise, in the event of any breach of any provision of Section 5.01 during the period which Executive is entitled to receive payments and benefits pursuant to Section 4.07, such period shall terminate as of the date of such breach and Executive shall not 8 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 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. 4400 MacArthur Boulevard, Suite 800 Newport Beach, CA 92660 Attention: General Counsel Facsimile No.: (949) 476-0137 9 (ii) If to Parent, addressed to it at: InSight Health Services Holdings Corp. c/o J.W. Childs Associates, L.P. One Federal Street, 21st Floor Boston, MA 02110 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 his signature hereto. Any party hereto may, by notice to the other, change its address for receipt of notices hereunder. SECTION 7.02 ENTIRE AGREEMENT. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto. SECTION 7.03 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms and conditions hereof may be waived, amended, modified, superseded, canceled, renewed or extended, only by a written instrument signed by Executive, 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. 10 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 New York, 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 New York, or if it has or can acquire jurisdiction, in the United States District Court for the Southern District of New York, 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 New York. SECTION 7.09 EXPENSES. Should either party institute an action to enforce this Agreement or any provision hereof, or for damages by reason of any alleged breach of this Agreement or any provisions hereof, Executive shall be entitled to receive from Company Executive's reasonable travel and living expenses, incurred by Executive in connection with preparation for and participation in any proceeding relating to the action if Executive is the prevailing party or such portion thereof as the court may award. SECTION 7.10 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 Company). Immediately prior to the Effective Time, Executive's current employment agreement with Company shall be terminated and be of no further force or effect, and Executive waives any and all rights he may have under such employment agreement, including any payments for severance or in respect of a change of control contained therein. 11 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/ Steven T. Plochocki -------------------------------- Name: Steven T. Plochocki Title: President & CEO EXECUTIVE /s/ Michael A. Boylan ------------------------------------ Name: Michael A. Boylan Address and Facsimile Number: 1005 Putters Place ------------------------------------ Doylestown, PA 18901 ------------------------------------ ------------------------------------ ------------------------------------ INSIGHT HEALTH SERVICES HOLDINGS CORP. (solely for the purpose of Section 3.07) By: /s/ Mark J. Tricolli -------------------------------- Name: Mark J. Tricolli Title: Vice President & Secretary 12 EXHIBIT A STOCK OPTION AGREEMENT 13 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 - ---------- * Intended to be the subscription price for all stockholders who subscribe as of the Effective Time. Currently anticipated to be $18.00 per share. 14 Schedule I by the eighth (8th) anniversary of the Grant Date, they shall be deemed to vest on such date. 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 15 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. (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 16 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 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 17 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. 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 18 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] 19 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: BY: --------------------------------- --------------------------------- Name: Name: Title: Address: ------------------------------------ ------------------------------------ ------------------------------------ ------------------------------------ Telecopier Number: ------------------ Social Security Number: ------------- 20 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 ("ROE") 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 ROE in any fiscal year, the Options available to vest in that year shall vest in the ratio by which ROE achieved exceeds 90% of Base Target ROE for such fiscal year (i.e., for ROE of 90.5% of Base Target ROE, one-twentieth of the available Options would vest; for ROE of 96%, six-tenths of the available Options would vest). For purposes hereof, ROE 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 ROE 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 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 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 J.W. 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 II-2 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." EXHIBIT A-2 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] EXHIBIT A-3 EX-10.14 44 y55701ex10-14.txt EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 10.14 EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT dated as of June 29, 2001 between InSight Health Services Corp., a Delaware corporation ("Company"), and Thomas V. Croal ("Executive"). InSight Health Services Holdings Corp., a Delaware corporation ("Parent") is a party to this Agreement solely for the purposes of Section 3.07. 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 at the Effective Time (as defined below), 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 Executive Vice President and Chief Financial 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 an officer of Company and of any of its 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 4400 MacArthur Boulevard, Suite 800, Newport Beach, California 92660. 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's 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 $236,000.00 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 (a) a discretionary bonus of up to 75% of the Annual Salary if Company achieves the goals set forth in a budget prepared by Company management and adopted or approved by the Board; and (b) a discretionary bonus of up to an additional 25% of the Annual Salary upon the achievement of other goals mutually agreed upon by Executive and the President and Chief Executive Officer of Company and approved by the Board. Such bonuses are payable on the earlier to occur of the date Company'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. 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 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 $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. 2 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 eight (8) 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 President and Chief Executive Officer of 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 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 have a material adverse impact on the business operations or financial or other condition of Company, or any felony offense; (b) Executive has committed fraud or embezzlement; 3 (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. Executive shall have the right, effective upon 60 days' written notice to Company, 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. 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, 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 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. 4 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 his 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 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 5 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. During and after the term of this Agreement (otherwise than in the performance of this Agreement), without Company's prior written consent, Executive shall not divulge or use all or any of the Trade Secrets to or for any person or entity except (i) for the benefit of Company and as necessary to perform Executive's services under this Agreement; and (ii) when required by law, and then only after consultation with Company or unless such information is in the public domain. In the event that Executive, becomes or is legally compelled (whether by deposition, interrogatories, request for documents, subpoena, civil investigative demand or similar process) to disclose any Trade Secrets, Executive shall provide Company with prompt, prior written notice of such requirement so that Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Section. Executive agrees that his obligations under this Section 5.01 shall be absolute and unconditional. 6 (b) BREACH. Executive understands and agrees that Executive's employment with Company may be terminated if Executive breaches this Agreement or in any way divulges such Trade Secrets. Executive further understands and agrees that Company may be irreparably harmed by any violation or threatened violation of this Agreement and, therefore, Company may be entitled to injunctive relief to enforce any of the provisions contained herein. (c) NON-COMPETE. During the period of Executive's employment, Executive will not directly or indirectly either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any activity or business which Company shall determine in good faith to be in competition in any substantial way with Company Business within any metropolitan area in the United States or elsewhere in which Company is then engaged in Company Business. The parties acknowledge that in California and some states post-employment non-compete clauses may be generally unenforceable, but that other states and jurisdictions permit such agreements. Executive hereby agrees that Executive will not directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any activity or business which Company shall determine in good faith to be in competition in any substantial way with Company Business as conducted at the effective date of termination of Executive's employment by Company for or a period of twelve (12) months after the termination of Executive's employment and that this Section will be enforceable to the greatest extent of the law. (d) NO SOLICITATION OF EMPLOYEES. During Executive's employment and for a period of twelve (12) months after the termination of Executive's employment, Executive will not, either directly or indirectly, either alone or in concert with others, solicit or entice or participate in the solicitation or attempt to solicit or in any manner encourage employees of Company to leave Company or work for anyone that is in competition in any substantial way with Company Business (which in the case of the period following Executive's termination, shall mean Company Business as conducted as of the effective date of termination of Executive's employment with Company); provided, however, that the public listing, advertising or posting of an available position shall not constitute solicitation or an attempt to solicit hereunder and this subsection (d) shall not preclude Executive from hiring an individual pursuant thereto. (e) NO SOLICITATION OF CUSTOMERS. Executive will not during the course of Executive's employment, or for twelve (12) months thereafter, either directly or indirectly call on, solicit, or take away, or attempt to call on, solicit or take away any of Company's customers on behalf of any business that is in competition in any substantial way with Company. Executive promises and agrees not to engage in any unfair competition with Company. During Executive's employment, Executive agrees not to plan or otherwise take any preliminary steps, either alone or in concert with others, to set up or engage in any business enterprise that would be in competition with Company Business. In the event of the termination of Executive's employment and for a period of twelve (12) months thereafter, Executive will not accept any employment or engage in any activities which Company shall determine in good faith to be competitive with Company, if the fulfillment of the duties of the competitive employment or activities would inherently require Executive to reveal Trade Secrets to which Executive has access or learned during Executive's employment on behalf of any business that is in competition in any substantial way with Company. 7 (f) RETURN OF COMPANY PROPERTY. In the event of the termination of Executive's employment, Executive will deliver to Company all devices, records, sketches, reports, proposals, files, customer lists, mailing or contact lists, correspondence, computer tapes, discs and design and other document and data storage and retrieval materials (and all copies, compilations and summaries thereof), equipment, documents, duplicates, notes, drawings, specifications, research tape or other electronic recordings, programs, data and other materials or property of any nature belonging to Company or relating to Company Business, and Executive will not take with Executive or allow a third party to take, any of the foregoing or any reproduction of any of the foregoing. Company property includes personal property, made or compiled by Executive, in whole or in part and alone or with others, or in any way coming into Executive's possession concerning Company Business or other affairs of Company or any of its affiliates. (g) DISCLOSURE AND ASSIGNMENT OF RIGHTS. (i) Executive shall promptly disclose and assign to Company and its affiliates or its nominee(s), to the maximum extent permitted by Section 2870 of the California Labor Code, as it may be hereafter amended from time to time, all right, title and interest of Executive in and to any and all ideas, inventions, discoveries, secret processes and methods and improvements, together with any and all patents that may be issued thereon in the United States and in all foreign countries, which Executive may invent, develop or improve, or cause to be invented, developed or improved, during the term of this Agreement or which are (1) conceived and developed during normal working hours, and (2) related to the scope of Company Business. As used in this Agreement, the term "invent" includes "make", "discover", "develop", "manufacture" or "produce", or any of them; "invention" includes the phrase "any new or useful original art, machine, methods of manufacture, process, composition of matter, design, or configuration of any kind"; "improvement" includes "discovery" or "production"; and "patent" includes "Letters Patent" and "all the extensions, renewals, modifications, improvements and reissues of such patents". (ii) Executive shall disclose immediately to duly authorized representatives of Company any ideas, inventions, discoveries, secret processes and methods and improvements covered by the provisions of paragraph (i) above, and execute all documents reasonably required in connection with the application for an issuance of Letters Patent in the United States and in any foreign country and the assignment thereof to Company and its affiliates or its nominee(s). SECTION 5.02 RIGHTS AND REMEDIES UPON BREACH. If Executive breaches, or threatens to breach, in any material respect any of the provisions of Section 5.01 hereof ("Restrictive Covenants"), Company shall, in addition to all its other rights hereunder and under applicable law and in equity, have the right to seek specific enforcement of the Restrictive Covenants by any court having jurisdiction, including, without limitation, the granting of a preliminary injunction which may be granted without the necessity of proving damages or the posting of a bond or other security, it being acknowledged that any such breach or threatened breach may cause irreparable injury to Company and that money damages may not provide an adequate remedy to Company. In addition to and not in lieu of any other remedy that Company may have pursuant to this Agreement or otherwise, in the event of any breach of any provision of Section 5.01 during the period which Executive is entitled to receive payments and benefits pursuant to Section 4.07, such period shall terminate as of the date of such breach and Executive shall not 8 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 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. 4400 MacArthur Boulevard, Suite 800 Newport Beach, CA 92660 Attention: General Counsel Facsimile No.: (949) 476-0137 9 (ii) If to Parent, addressed to it at: InSight Health Services Holdings Corp. c/o J.W. Childs Associates, L.P. One Federal Street, 21st Floor Boston, MA 02110 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 his signature hereto. Any party hereto may, by notice to the other, change its address for receipt of notices hereunder. SECTION 7.02 ENTIRE AGREEMENT. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto. SECTION 7.03 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms and conditions hereof may be waived, amended, modified, superseded, canceled, renewed or extended, only by a written instrument signed by Executive, 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. 10 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. SECTION 7.10 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 Company). Immediately prior to the Effective Time, Executive's current employment agreement with Company shall be terminated and be of no further force or effect, and Executive waives any and all rights he may have under such employment agreement, including any payments for severance or in respect of a change of control contained therein. 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. 11 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/ Steven T. Plochocki -------------------------------- Name: Steven T. Plochocki Title: President & CEO EXECUTIVE /s/ Thomas V. Croal ------------------------------------ Name: Thomas V. Croal Address and Facsimile Number: 2306 Cottonwood Street ------------------------------------ Santa Ana, CA 92701 ------------------------------------ ------------------------------------ ------------------------------------ INSIGHT HEALTH SERVICES HOLDINGS CORP. (solely for the purpose of Section 3.07) By: /s/ Mark J. Tricolli -------------------------------- Name: Mark J. Tricolli Title: Vice President & Secretary 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 - ---------- * 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 Schedule I by the eighth (8th) anniversary of the Grant Date, they shall be deemed to vest on such date. 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 16 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. (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 17 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 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 18 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. 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 19 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] 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: Title: Address: ---------------------------------------- ---------------------------------------- ---------------------------------------- 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 ("ROE") 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 ROE in any fiscal year, the Options available to vest in that year shall vest in the ratio by which ROE achieved exceeds 90% of Base Target ROE for such fiscal year (i.e., for ROE of 90.5% of Base Target ROE, one-twentieth of the available Options would vest; for ROE of 96%, six-tenths of the available Options would vest). For purposes hereof, ROE 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 ROE 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 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 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 J.W. 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 II - 2 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." Exhibit A-2 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] Exhibit A-3 EX-10.15 45 y55701ex10-15.txt EXECUTIVE EMPLOYMENT AGREEMENT Exhibit 10.15 EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT dated as of June 29, 2001 between InSight Health Services Corp., a Delaware corporation (the "Company"), and Brian G. Drazba (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, Finance and Controller 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 he 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 his 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 him. 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 4400 MacArthur Boulevard, Suite 800, Newport Beach, California 92660. 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 his principal residence to within 50 miles of such office. Notwithstanding the foregoing, the Executive acknowledges that the duties to be performed by him hereunder are such that he 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 $136,000.00 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 his 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. 2 SECTION 3.06. VACATION. The Executive shall be entitled to three (3) weeks of paid vacation per year during the term of this Agreement, which he may accumulate up to six (6) weeks, to be taken at a time or times which do not unreasonably interfere with his 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 his 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 he is unable substantially to perform the services required by this Agreement to be rendered by him 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 his duties hereunder, has performed such duties negligently, is guilty of misconduct in connection with performance of his 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. 3 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 4 payments and benefits set forth in Section 4.06(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 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 him 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 his 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 his 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 5 of securities of such entity. 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. (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, he 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 his termination of employment, he shall have delivered to the Company all documents and materials in his possession or under his control which constitute Confidential Information, including all copies thereof, and no copies thereof shall be retained by the Executive. 6 (c) Property of the Company. All correspondence, memoranda, notes, lists, records, computer tapes, discs and design and other document and data storage and retrieval 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 his 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, he 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. 7 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. 8 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. 4400 MacArthur Boulevard, Suite 800 Newport Beach, CA 92660 Attention: General Counsel Facsimile No.: (949) 476-0137 (ii) If to Parent, addressed to it at: InSight Health Services Holdings Corp. c/o J.W. Childs Associates, L.P. One Federal Street, 21st Floor Boston, MA 02110 Attention: Edward D. Yun Facsimile No.: (617) 753-1101 with copies to: 9 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 his 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. 10 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 he 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/ Steven T. Plochocki ---------------------------------------- Name: Steven T. Plochocki Title: President & CEO EXECUTIVE /s/ Brian G. Drazba -------------------------------------------- Name: Brian G. Drazba Address and Facsimile Number: 18 Nutcracker Lane Aliso Viejo, CA 92656 INSIGHT HEALTH SERVICES HOLDINGS CORP. (solely for the purpose of Section 3.07) By: /s/ Mark J. Tricolli ---------------------------------------- Name: Mark J. Tricolli Title: Vice President & CEO 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 - ---------- * 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 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. 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 16 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. (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. 17 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 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 18 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 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 19 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] 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: _______________________________ Address: Name: _______________________________________ 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 ("ROE") 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 ROE in any fiscal year, the Options available to vest in that year shall vest in the ratio by which ROE achieved exceeds 90% of Base Target ROE for such fiscal year (i.e., for ROE of 90.5% of Base Target ROE, one-twentieth of the available Options would vest; for ROE of 96%, six-tenths of the available Options would vest). For purposes hereof, ROE 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 SCHEDULE I-1 in those years, the vesting percentage achieved in fiscal year ending June 30, 2006 shall be 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 ROE 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 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 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 SCHEDULE I-2 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 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 J.W. 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 SCHEDULE II-1 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 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 II-2 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." Exhibit A-2 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] Exhibit A-3 EX-10.16 46 y55701ex10-16.txt EXECUTIVE EMPLOYMENT AGREEMENT Exhibit 10.16 EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT dated as of June 29, 2001 between InSight Health Services Corp., a Delaware corporation ("Company"), and Michael S. Madler ("Executive"). InSight Health Services Holdings Corp., a Delaware corporation ("Parent") is a party to this Agreement solely for the purposes of Section 3.07. 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 at the Effective Time (as defined below), 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 Executive Vice President - Operations 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 an officer of Company and of any of its 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 4400 MacArthur Boulevard, Suite 800, Newport Beach, California 92660. 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's 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 $200,000.00 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 (a) a discretionary bonus of up to 75% of the Annual Salary if Company achieves the goals set forth in a budget prepared by Company management and adopted or approved by the Board; and (b) a discretionary bonus of up to an additional 25% of the Annual Salary upon the achievement of other goals mutually agreed upon by Executive and the President and Chief Executive Officer of Company and approved by the Board. Such bonuses are payable on the earlier to occur of the date Company'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. 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 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. 2 SECTION 3.05 AUTOMOBILE ALLOWANCE. 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. SECTION 3.06 VACATION. Executive shall be entitled to three (3) 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 President and Chief Executive Officer of 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 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 3 have a material adverse impact on the business operations or financial or other 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. Executive shall have the right, effective upon 60 days' written notice to Company, 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. 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, 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 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. 4 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 his 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 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 5 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. 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 6 law, and then only after consultation with Company or unless such information is in the public domain. In the event that Executive, becomes or is legally compelled (whether by deposition, interrogatories, request for documents, subpoena, civil investigative demand or similar process) to disclose any Trade Secrets, Executive shall provide Company with prompt, prior written notice of such requirement so that Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Section. Executive agrees that his obligations under this Section 5.01 shall be absolute and unconditional. (b) BREACH. Executive understands and agrees that Executive's employment with Company may be terminated if Executive breaches this Agreement or in any way divulges such Trade Secrets. Executive further understands and agrees that Company may be irreparably harmed by any violation or threatened violation of this Agreement and, therefore, Company may be entitled to injunctive relief to enforce any of the provisions contained herein. (c) NON-COMPETE. During the period of Executive's employment, Executive will not directly or indirectly either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any activity or business which Company shall determine in good faith to be in competition in any substantial way with Company Business within any metropolitan area in the United States or elsewhere in which Company is then engaged in Company Business. The parties acknowledge that in California and some states post-employment non-compete clauses may be generally unenforceable, but that other states and jurisdictions permit such agreements. Executive hereby agrees that Executive will not directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any activity or business which Company shall determine in good faith to be in competition in any substantial way with Company Business as conducted at the effective date of termination of Executive's employment by Company for or a period of twelve (12) months after the termination of Executive's employment and that this Section will be enforceable to the greatest extent of the law. (d) NO SOLICITATION OF EMPLOYEES. During Executive's employment and for a period of twelve (12) months after the termination of Executive's employment, Executive will not, either directly or indirectly, either alone or in concert with others, solicit or entice or participate in the solicitation or attempt to solicit or in any manner encourage employees of Company to leave Company or work for anyone that is in competition in any substantial way with Company Business (which in the case of the period following Executive's termination, shall mean Company Business as conducted as of the effective date of termination of Executive's employment with Company); provided, however, that the public listing, advertising or posting of an available position shall not constitute solicitation or an attempt to solicit hereunder and this subsection (d) shall not preclude Executive from hiring an individual pursuant thereto. (e) NO SOLICITATION OF CUSTOMERS. Executive will not during the course of Executive's employment, or for twelve (12) months thereafter, either directly or indirectly call on, solicit, or take away, or attempt to call on, solicit or take away any of Company's customers on behalf of any business that is in competition in any substantial way with Company. Executive promises and agrees not to engage in any unfair competition with Company. During Executive's employment, Executive agrees not to plan or otherwise take any preliminary steps, either alone 7 or in concert with others, to set up or engage in any business enterprise that would be in competition with Company Business. In the event of the termination of Executive's employment and for a period of twelve (12) months thereafter, Executive will not accept any employment or engage in any activities which Company shall determine in good faith to be competitive with Company, if the fulfillment of the duties of the competitive employment or activities would inherently require Executive to reveal Trade Secrets to which Executive has access or learned during Executive's employment on behalf of any business that is in competition in any substantial way with Company. (f) RETURN OF COMPANY PROPERTY. In the event of the termination of Executive's employment, Executive will deliver to Company all devices, records, sketches, reports, proposals, files, customer lists, mailing or contact lists, correspondence, computer tapes, discs and design and other document and data storage and retrieval materials (and all copies, compilations and summaries thereof), equipment, documents, duplicates, notes, drawings, specifications, research tape or other electronic recordings, programs, data and other materials or property of any nature belonging to Company or relating to Company Business, and Executive will not take with Executive or allow a third party to take, any of the foregoing or any reproduction of any of the foregoing. Company property includes personal property, made or compiled by Executive, in whole or in part and alone or with others, or in any way coming into Executive's possession concerning Company Business or other affairs of Company or any of its affiliates. (g) DISCLOSURE AND ASSIGNMENT OF RIGHTS. (i) Executive shall promptly disclose and assign to Company and its affiliates or its nominee(s), to the maximum extent permitted by Section 2870 of the California Labor Code, as it may be hereafter amended from time to time, all right, title and interest of Executive in and to any and all ideas, inventions, discoveries, secret processes and methods and improvements, together with any and all patents that may be issued thereon in the United States and in all foreign countries, which Executive may invent, develop or improve, or cause to be invented, developed or improved, during the term of this Agreement or which are (1) conceived and developed during normal working hours, and (2) related to the scope of Company Business. As used in this Agreement, the term "invent" includes "make", "discover", "develop", "manufacture" or "produce", or any of them; "invention" includes the phrase "any new or useful original art, machine, methods of manufacture, process, composition of matter, design, or configuration of any kind"; "improvement" includes "discovery" or "production"; and "patent" includes "Letters Patent" and "all the extensions, renewals, modifications, improvements and reissues of such patents". (ii) Executive shall disclose immediately to duly authorized representatives of Company any ideas, inventions, discoveries, secret processes and methods and improvements covered by the provisions of paragraph (i) above, and execute all documents reasonably required in connection with the application for an issuance of Letters Patent in the United States and in any foreign country and the assignment thereof to Company and its affiliates or its nominee(s). SECTION 5.02 RIGHTS AND REMEDIES UPON BREACH. If Executive breaches, or threatens to breach, in any material respect any of the provisions of Section 5.01 hereof ("Restrictive Covenants"), Company shall, in addition to all its other rights hereunder and under applicable law and in equity, have the right to seek specific enforcement of the Restrictive Covenants by 8 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 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. 9 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. 4400 MacArthur Boulevard, Suite 800 Newport Beach, CA 92660 Attention: General Counsel Facsimile No.: (949) 476-0137 (ii) If to Parent, addressed to it at: InSight Health Services Holdings Corp. c/o J.W. Childs Associates, L.P. One Federal Street, 21st Floor Boston, MA 02110 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 his signature hereto. Any party hereto may, by notice to the other, change its address for receipt of notices hereunder. SECTION 7.02 ENTIRE AGREEMENT. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto. SECTION 7.03 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms and conditions hereof may be waived, amended, modified, superseded, canceled, renewed or extended, only by a written instrument signed by Executive, 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 10 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. SECTION 7.10 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 Company). Immediately prior to the Effective Time, Executive's current employment agreement with Company shall be terminated and be of no further force or effect, and Executive waives any and all rights he may have under such employment agreement, including any payments for severance or in respect of a change of control contained therein. 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 11 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/ Steven T. Plochocki -------------------------- Name: Steven T. Plochocki Title: President & CEO EXECUTIVE /s/ Michael S. Madler -------------------------- Name: Michael S. Madler Address and Facsimile Number: 9 Santa Isabel Rancho Santa Margarita, CA 92688 INSIGHT HEALTH SERVICES HOLDINGS CORP. (solely for the purpose of Section 3.07) By: /s/ Mark J. Tricolli -------------------------- Name: Mark J. Tricolli Title: Vice President & Secretary 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 * 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 Schedule I by the eighth (8th) anniversary of the Grant Date, they shall be deemed to vest on such date. 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 16 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. (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. 17 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 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 18 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 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 19 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 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] 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: ------------------------------------- Name: I. BY - --------------------------------- Name: Title: Address: ------------------------------------- ------------------------------------- ------------------------------------- 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 ("ROE") 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 ROE in any fiscal year, the Options available to vest in that year shall vest in the ratio by which ROE achieved exceeds 90% of Base Target ROE for such fiscal year (i.e., for ROE of 90.5% of Base Target ROE, one-twentieth of the available Options would vest; for ROE of 96%, six-tenths of the available Options would vest). For purposes hereof, ROE 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 SCHEDULE I- 1 in those years, the vesting percentage achieved in fiscal year ending June 30, 2006 shall be 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 ROE 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 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 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 SCHEDULE I- 2 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 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 J.W. 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): SCHEDULE 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 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 II- 2 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." Exhibit A-2 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] Exhibit A-3 EX-10.17 47 y55701ex10-17.txt EXECUTIVE EMPLOYMENT AGREEMENT Exhibit 10.17 EXECUTIVE EMPLOYMENT AGREEMENT AGREEMENT dated as of December 7, 2001 between InSight Health Services Corp., a Delaware corporation ("Company"), and Marilyn U. MacNiven-Young ("Executive"). InSight Health Services Holdings Corp., a Delaware corporation ("Parent") is a party to this Agreement solely for the purposes of Section 3.07. 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 date hereof, 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 Executive Vice President, General Counsel and Secretary 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 an officer of Company and of any of its 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 4400 MacArthur Boulevard, Suite 800, Newport Beach, California 92660. 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's 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 $260,331 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 (a) a discretionary bonus of up to 75% of the Annual Salary if Company achieves the goals set forth in a budget prepared by Company management and adopted or approved by the Board; and (b) a discretionary bonus of up to an additional 25% of the Annual Salary upon the achievement of other goals mutually agreed upon by Executive and the President and Chief Executive Officer of Company and approved by the Board. Such bonuses are payable on the earlier to occur of the date Company'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. 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 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 $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. 2 SECTION 3.06 VACATION. Executive shall be entitled to three (3) 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 President and Chief Executive Officer of 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 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 have a material adverse impact on the business operations or financial or other condition of Company, or any felony offense; (b) Executive has committed fraud or embezzlement; 3 (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. Executive shall have the right, effective upon 60 days' written notice to Company, 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. 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, 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 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. 4 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 her 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 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 5 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. 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 her obligations under this Section 5.01 shall be absolute and unconditional. 6 (b) BREACH. Executive understands and agrees that Executive's employment with Company may be terminated if Executive breaches this Agreement or in any way divulges such Trade Secrets. Executive further understands and agrees that Company may be irreparably harmed by any violation or threatened violation of this Agreement and, therefore, Company may be entitled to injunctive relief to enforce any of the provisions contained herein. (c) NON-COMPETE. During the period of Executive's employment, Executive will not directly or indirectly either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any activity or business which Company shall determine in good faith to be in competition in any substantial way with Company Business within any metropolitan area in the United States or elsewhere in which Company is then engaged in Company Business. The parties acknowledge that in California and some states post-employment non-compete clauses may be generally unenforceable, but that other states and jurisdictions permit such agreements. Executive hereby agrees that Executive will not directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any activity or business which Company shall determine in good faith to be in competition in any substantial way with Company Business as conducted at the effective date of termination of Executive's employment by Company for or a period of twelve (12) months after the termination of Executive's employment and that this Section will be enforceable to the greatest extent of the law. (d) NO SOLICITATION OF EMPLOYEES. During Executive's employment and for a period of twelve (12) months after the termination of Executive's employment, Executive will not, either directly or indirectly, either alone or in concert with others, solicit or entice or participate in the solicitation or attempt to solicit or in any manner encourage employees of Company to leave Company or work for anyone that is in competition in any substantial way with Company Business (which in the case of the period following Executive's termination, shall mean Company Business as conducted as of the effective date of termination of Executive's employment with Company); provided, however, that the public listing, advertising or posting of an available position shall not constitute solicitation or an attempt to solicit hereunder and this subsection (d) shall not preclude Executive from hiring an individual pursuant thereto. (e) NO SOLICITATION OF CUSTOMERS. Executive will not during the course of Executive's employment, or for twelve (12) months thereafter, either directly or indirectly call on, solicit, or take away, or attempt to call on, solicit or take away any of Company's customers on behalf of any business that is in competition in any substantial way with Company. Executive promises and agrees not to engage in any unfair competition with Company. During Executive's employment, Executive agrees not to plan or otherwise take any preliminary steps, either alone or in concert with others, to set up or engage in any business enterprise that would be in competition with Company Business. In the event of the termination of Executive's employment and for a period of twelve (12) months thereafter, Executive will not accept any employment or engage in any activities which Company shall determine in good faith to be competitive with Company, if the fulfillment of the duties of the competitive employment or activities would inherently require Executive to reveal Trade Secrets to which Executive has access or learned during Executive's employment on behalf of any business that is in competition in any substantial way with Company. 7 (f) RETURN OF COMPANY PROPERTY. In the event of the termination of Executive's employment, Executive will deliver to Company all devices, records, sketches, reports, proposals, files, customer lists, mailing or contact lists, correspondence, computer tapes, discs and design and other document and data storage and retrieval materials (and all copies, compilations and summaries thereof), equipment, documents, duplicates, notes, drawings, specifications, research tape or other electronic recordings, programs, data and other materials or property of any nature belonging to Company or relating to Company Business, and Executive will not take with Executive or allow a third party to take, any of the foregoing or any reproduction of any of the foregoing. Company property includes personal property, made or compiled by Executive, in whole or in part and alone or with others, or in any way coming into Executive's possession concerning Company Business or other affairs of Company or any of its affiliates. (g) DISCLOSURE AND ASSIGNMENT OF RIGHTS. (i) Executive shall promptly disclose and assign to Company and its affiliates or its nominee(s), to the maximum extent permitted by Section 2870 of the California Labor Code, as it may be hereafter amended from time to time, all right, title and interest of Executive in and to any and all ideas, inventions, discoveries, secret processes and methods and improvements, together with any and all patents that may be issued thereon in the United States and in all foreign countries, which Executive may invent, develop or improve, or cause to be invented, developed or improved, during the term of this Agreement or which are (1) conceived and developed during normal working hours, and (2) related to the scope of Company Business. As used in this Agreement, the term "invent" includes "make", "discover", "develop", "manufacture" or "produce", or any of them; "invention" includes the phrase "any new or useful original art, machine, methods of manufacture, process, composition of matter, design, or configuration of any kind"; "improvement" includes "discovery" or "production"; and "patent" includes "Letters Patent" and "all the extensions, renewals, modifications, improvements and reissues of such patents". (ii) Executive shall disclose immediately to duly authorized representatives of Company any ideas, inventions, discoveries, secret processes and methods and improvements covered by the provisions of paragraph (i) above, and execute all documents reasonably required in connection with the application for an issuance of Letters Patent in the United States and in any foreign country and the assignment thereof to Company and its affiliates or its nominee(s). SECTION 5.02 RIGHTS AND REMEDIES UPON BREACH. If Executive breaches, or threatens to breach, in any material respect any of the provisions of Section 5.01 hereof ("Restrictive Covenants"), Company shall, in addition to all its other rights hereunder and under applicable law and in equity, have the right to seek specific enforcement of the Restrictive Covenants by any court having jurisdiction, including, without limitation, the granting of a preliminary injunction which may be granted without the necessity of proving damages or the posting of a bond or other security, it being acknowledged that any such breach or threatened breach may cause irreparable injury to Company and that money damages may not provide an adequate remedy to Company. In addition to and not in lieu of any other remedy that Company may have pursuant to this Agreement or otherwise, in the event of any breach of any provision of Section 5.01 during the period which Executive is entitled to receive payments and benefits pursuant to Section 4.07, such period shall terminate as of the date of such breach and Executive shall not 8 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 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. 4400 MacArthur Boulevard, Suite 800 Newport Beach, CA 92660 Attention: General Counsel Facsimile No.: (949) 476-0137
9 (ii) If to Parent, addressed to it at: InSight Health Services Holdings Corp. c/o J.W. Childs Associates, L.P. One Federal Street, 21st Floor Boston, MA 02110 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 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, 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. 10 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. SECTION 7.10 EFFECTIVE DATE. This Agreement shall be effective as of the date hereof. Upon the execution of this Agreement, Executive's current employment agreement with 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. Effective Time is defined in the Agreement and Plan of Merger, dated as of June 29, 2001, by and among Parent, JWCH Merger Corp. and Company. 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); 11 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/ Steven T. Plochocki -------------------------------- Name: Steven T. Plochocki Title: President & CEO EXECUTIVE /s/ Marilyn U. MacNiven-Young ------------------------------ Name: Marilyn U. MacNiven-Young Address and Facsimile Number: 78 Park Crest ------------------------------ Newport Coast, CA 92657 ------------------------------ (949) 644-1351 ------------------------------ ------------------------------ INSIGHT HEALTH SERVICES HOLDINGS CORP. (solely for the purpose of Section 3.07) By: /s/ Edward D. Yun -------------------------------- Name: Edward D. Yun 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 - -------- * 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 Schedule I by the eighth (8th) anniversary of the Grant Date, they shall be deemed to vest on such date. 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 16 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. (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 17 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 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 18 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. 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 19 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] 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 HOLDINGS CORP. EMPLOYEE I. BY BY: __________________________________ ______________________________________ Name: Name: Title: Address: _________________________________________ _________________________________________ _________________________________________ 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 ("ROE") 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 ROE in any fiscal year, the Options available to vest in that year shall vest in the ratio by which ROE achieved exceeds 90% of Base Target ROE for such fiscal year (i.e., for ROE of 90.5% of Base Target ROE, one-twentieth of the available Options would vest; for ROE of 96%, six-tenths of the available Options would vest). For purposes hereof, ROE 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 ROE 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 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 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 J.W. 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 II - 2 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] 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." Exhibit A-2 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] Exhibit A-3 EX-10.18 48 y55701ex10-18.txt FORM OF PERFORMANCE BASED OPTION AGREEMENT Exhibit 10.18 STOCK OPTION AGREEMENT AGREEMENT entered into as of the ___ day of October, 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, as amended, by and among the Company, InSight Health Services Acquisition Corp. (formerly known as 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 $____(*) per share. 3. Vesting and Exercisability. Twenty percent (20%) of the total Option set forth in Section 1 shall be available for vesting in the respective fiscal years set forth in clauses (A) and (B) below as follows: (A) twenty-five percent (25%) of the number of available Options shall vest and become exercisable upon the anniversary of the Grant Date in the fiscal years ending on June 30 in the years 2003-2007 and (B) seventy-five percent (75%) of the number of available Options shall vest and become exercisable for each fiscal year ending on June 30 in the years 2002-2006 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 - ---------- (*) Intended to be the subscription price for all stockholders who subscribe as of the Effective Time. Currently anticipated to be $18.00 per share. 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. 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 be made in whole or in part in Shares 2 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 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. 3 (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 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. 4 (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. However, during the period of the Employee's employment, the Employee shall render diligently and faithfully the services which are assigned to the Employee from time to time by the Board and shall at no time take any action which directly or indirectly would be inconsistent with the best interests of the Company.** 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 - ---------- ** This sentence shall be included in Stock Option Agreements entered into by employees of the Company who will not have employment agreements. 5 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] 6 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: _________________________________ Name: Address: Title: _________________________________ _________________________________ _________________________________ Telecopier Number: _________________________________ Social Security Number 7 SCHEDULE I OPTION PERFORMANCE VESTING SCHEDULE (a) For each of the Company's fiscal years ending on 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 ("ROE") 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 ROE in any fiscal year, the Options available to vest in that year shall vest in the ratio by which ROE achieved exceeds 90% of Base Target ROE for such fiscal year (i.e., for ROE of 90.5% of Base Target ROE, one- twentieth of the available Options would vest; for ROE of 96%, six-tenths of the available Options would vest). For purposes hereof, ROE 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 on 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 on June 30 in the years 2002-2005 that did vest in those years, the vesting percentage achieved in fiscal year ending on June 30, 2006 shall be carried back to the fiscal years ending on 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 on 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 ROE 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 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 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 and not overdue beyond such period as SCHEDULE I - 2 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 J.W. 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): SCHEDULE I - 4 (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 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 II - 2 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: 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 EXHIBIT A - 1 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: (a) 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. (b) 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. (c) 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. (d) I have a high degree of familiarity with the business, operations, financial condition and prospects of the Company. Very truly yours, ___________________________ [Employee] EXHIBIT A - 2 EX-12.1 49 y55701ex12-1.txt COMPUTATION OF RATIO EARNINGS EXHIBIT 12.1 SUPPLEMENTAL SCHEDULE - CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES (AMOUNTS IN THOUSANDS)
Year ended June 30, --------------------------------------------------- 1997 1998 1999 2000 ------------ ------------ ------------ ------------ RATIO OF EARNINGS TO FIXED CHARGES: Earnings: Pretax income from continuing operations $ 1,708 $ 943 $ 2,922 $ 8,320 Add: Fixed charges 10,197 12,501 20,673 23,219 Distributions received from unconsolidated partnerships (14) 123 656 450 Less - equity in income of unconsolidated partnerships (566) (707) (548) (817) ------------ ------------ ------------ ------------ Total earnings 11,325 12,860 23,703 31,172 ------------ ------------ ------------ ------------ Fixed Charges: Interest expense 4,066 6,827 14,500 18,696 Interest factor of rental expense (a) 6,131 5,674 6,173 4,523 ------------ ------------ ------------ ------------ Total fixed charges 10,197 12,501 20,673 23,219 ------------ ------------ ------------ ------------ Ratio of earnings to fixed charges 1.1 1.0 1.1 1.3 (a) COMPUTATION OF INTEREST FACTOR OF RENTAL EXPENSE: Operating rental expense (e) 18,396 17,023 18,522 13,569 Interest factor 33% 33% 33% 33% ------------ ------------ ------------ ------------ Total 6,131 5,674 6,173 4,523 ============ ============ ============ ============
Year ended June 30, Three months ended September 30, ------------------------- -------------------------------------- Pro Forma Pro Forma 2001 2001 2000 2001 2001 ------------ ------------ ------------ ------------ ------------ RATIO OF EARNINGS TO FIXED CHARGES: Earnings: Pretax income from continuing operations $ 16,425 $ 4,019 (1) $ 3,063 $ 7,384 $ 3,505 Add: Fixed charges 26,036 38,442 6,796 6,052 9,931 Distributions received from unconsolidated partnerships 970 970 - 334 334 Less - equity in income of unconsolidated partnerships (971) (971) - (328) (328) ------------ ------------ ------------ ------------ ------------ Total earnings 42,460 42,460 9,859 13,442 13,442 ------------ ------------ ------------ ------------ ------------ Fixed Charges: Interest expense 23,394 35,800 6,032 5,336 9,215 Interest factor of rental expense (a) 2,642 2,642 764 716 716 ------------ ------------ ------------ ------------ ------------ Total fixed charges 26,036 38,442 6,796 6,052 9,931 ------------ ------------ ------------ ------------ ------------ Ratio of earnings to fixed charges 1.6 1.1 1.5 2.2 1.4 (a) COMPUTATION OF INTEREST FACTOR OF RENTAL EXPENSE: Operating rental expense (e) 7,928 7,928 2,292 2,148 2,148 Interest factor 33% 33% 33% 33% 33% ------------ ------------ ------------ ------------ ------------ Total 2,642 2,642 764 716 716 ============ ============ ============ ============ ============
(1) pretax of 9,549, less adjustment for amort of 5,530 EX-21 50 y55701ex21.txt SUBSIDIARIES OF INSIGHT SUBSIDIARIES OF THE REGISTRANT NAME OF SUBSIDIARY STATE OF INCORPORATION - ------------------ ---------------------- InSight Health Corp. Delaware Radiosurgery Centers, Inc. Delaware Maxum Health Corp. Delaware Maxum Health Services Corp. Delaware Diagnostic Solutions Corp. Delaware Maxum Health Services of North Texas, Inc. Texas Maxum Health Services of Dallas, Inc. Texas NDDC, Inc. Texas Open MRI, Inc. Delaware Signal Medical Services, Inc. Delaware EX-23.1 51 y55701ex23-1.txt CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports (and to all references to our Firm) included in or made a part of this registration statement. ARTHUR ANDERSEN LLP Orange County, California December 19, 2001 -----END PRIVACY-ENHANCED MESSAGE-----