Document:

Underwriting Agreement

 Exhibit 10.26 
 5,500,000 Shares 
 NIGHTHAWK RADIOLOGY HOLDINGS, INC. 
 COMMON STOCK (PAR VALUE $0.001 PER SHARE) 
 UNDERWRITING AGREEMENT 

 October 25, 2006 
 Morgan Stanley & Co. Incorporated 
 Banc of America Securities LLC 
 Cowen & Co., LLC 
 Piper Jaffray & Co. 
 Montgomery & Co., LLC 
 c/o Morgan Stanley & Co. Incorporated 
       1585
Broadway 
       New York, New York 10036 
 Ladies and Gentlemen: 
 Certain shareholders of NightHawk Radiology Holdings, Inc., a Delaware corporation (the “Company”), named in Schedule I hereto (the “Selling Shareholders”), propose to sell to the several Underwriters
named in Schedule II hereto (the “Underwriters”), an aggregate of 5,500,000 shares (the “Firm Shares”) of the Company’s Common Stock, par value $0.001 per share, (the “Common Stock”), each
Selling Shareholder selling the amount set forth opposite such Selling Shareholder’s name in Schedule I hereto. 
 The Selling
Shareholders also propose to sell to the several Underwriters an aggregate of not more than 825,000 additional outstanding shares of the Common Stock (the “Additional Shares”), each Selling Shareholder selling up to the amount set
forth opposite such Selling Shareholder’s name in Schedule I hereto, if and to the extent that you, as managers of the offering, shall have determined to exercise, on behalf of the Underwriters, the right to purchase such shares of Common
Stock granted to the Underwriters in Section 3 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the “Shares.” 
 The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement, including a prospectus,
relating to the Shares. The registration statement as amended at the time it becomes effective, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the “Securities Act”), is hereinafter referred to as the “Registration Statement”; the prospectus in the form first used to confirm sales of Shares (or in the form first made
available to the Underwriters by the Company 

 to meet requests of purchasers pursuant to Rule 173 under the Securities Act) is hereinafter referred to as the
“Prospectus.” If the Company has filed an abbreviated registration statement to register additional shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the “Rule 462 Registration Statement”),
then any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462 Registration Statement. 
 For purposes of this Agreement, “free writing prospectus” has the meaning set forth in Rule 405 under the Securities Act and “Time of Sale Prospectus” means the preliminary prospectus together with the free
writing prospectuses, if any, each identified in Schedule III hereto, and “broadly available road show” means a “bona fide electronic road show” as defined in Rule 433(h)(5) under the Securities Act that has been made
available without restriction to any person. As used herein, the terms “Registration Statement,” “preliminary prospectus,” “Time of Sale Prospectus” and Prospectus shall include the documents, if
any, incorporated by reference therein. 
 1. Representations and Warranties of the Company. The Company represents and warrants to
and agrees with each of the Underwriters that: 
 (a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or threatened by the Commission. 
 (b) (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will
not contain any 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, (ii) the Registration Statement and the Prospectus comply and, as
amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (iii) the Time of Sale Prospectus does not, and at the time of each sale
of Shares in connection with the offering and at the Closing Date (as defined in Section 5), the Time of Sale Prospectus, as then amended or supplemented by the Company, if applicable, will not, contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (iv) each broadly available road show, if any, when considered together with the Time of
Sale Prospectus, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (v) the

  

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 Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this
paragraph do not apply to statements or omissions in the Time of Sale Prospectus, the Registration Statement (or any amendment or supplement thereto) or the Prospectus (or any amendment or supplement thereto) based upon information relating to
(i) any Underwriter furnished to the Company in writing by such Underwriter through you and (ii) any Selling Shareholder furnished to the Company in writing by such Selling Shareholder, in each case expressly for use therein. 

(c) The Company is not an “ineligible issuer” in connection with the offering pursuant to Rules 164, 405 and 433 under the
Securities Act. Any free writing prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act and the
applicable rules and regulations of the Commission thereunder. Each free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act or that was prepared by or on behalf of or used or
referred to by the Company complies or will comply in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Except for the free writing prospectuses, if any,
identified in Schedule III hereto, and electronic road shows, if any, furnished to you before first use, the Company has not prepared, used or referred to, and will not, without your prior consent, prepare, use or refer to, any free writing
prospectus. 
 (d) The Company has been duly incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Time of Sale Prospectus and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole. 
 (e) Each subsidiary of the Company has been duly organized, is validly
existing in good standing under the laws of the jurisdiction of its organization, has the corporate or other power and authority to own its 
  

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 property and to conduct its business as described in the Time of Sale Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; all of the issued and outstanding capital stock or other ownership interests of each subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and, except as described in each of the Time of Sale Prospectus and the Prospectus, are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims. 

(f) This Agreement has been duly authorized, executed and delivered by the Company. 
 (g) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in each of the Time of
Sale Prospectus and the Prospectus under the captions “Capitalization” and “Description of Capital Stock”. 
 (h) The shares of Common Stock (including the Shares to be sold by the Selling Shareholders) outstanding have been duly authorized and are validly issued, fully paid and non assessable. 
 (i) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not
contravene (i) any provision of applicable law or (ii) the certificate of incorporation or bylaws of the Company or (iii) any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the
Company and its subsidiaries, taken as a whole, or (iv) any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary except, in the case of the foregoing clauses (i) or
(iii), where such contravention would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole, and no consent, approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares.

 (j) There has not occurred any material adverse change, or any development involving a prospective material adverse change,
in the 
  

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 condition, financial or otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Time of Sale Prospectus. 
 (k) There are no legal or governmental
proceedings pending or, to the best of the Company’s knowledge after due inquiry, threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that
are required to be described in the Registration Statement, the Time of Sale Prospectus or the Prospectus and are not so described and there are no statutes, regulations, contracts or other documents to which the Company or any of its subsidiaries
is subject, or by which the Company or any of its subsidiaries is bound, that are required to be described in the Registration Statement, the Time of Sale Prospectus or the Prospectus or to be filed as exhibits to the Registration Statement that are
not described or filed as required. 
 (l) Each preliminary prospectus filed as part of the registration statement as
originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission
thereunder. 
 (m) The Company is not, and after giving effect to the offering and sale of the Shares and the application of
the proceeds thereof as described in the Prospectus will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended. 
 (n) The Company and its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, be reasonably likely to have a
material adverse effect on the Company and its subsidiaries, taken as a whole. 
  

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 (o) There are no costs or liabilities associated with Environmental Laws (including,
without limitation, any capital or operating expenditures required for clean up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, be reasonably likely to have a material adverse effect on the Company and its subsidiaries, taken as a whole. 
 (p) Except as described in the Time of Sale Prospectus, there are no contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered
pursuant to the Registration Statement. 
 (q) Subsequent to the respective dates as of which information is given in each of
the Registration Statement, the Time of Sale Prospectus and the Prospectus, (i) the Company and its subsidiaries have not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction;
(ii) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (iii) there has
not been any material change in the capital stock, short term debt or long term debt of the Company and its subsidiaries, except in each case as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus,
respectively. 
 (r) The Company and its subsidiaries have good and marketable title to all personal property owned by them
which is material to the business of the Company and its subsidiaries, taken as a whole, in each case, except as described in each of the Time of Sale Prospectus and the Prospectus, free and clear of all liens, encumbrances and defects except such
as are described in the Time of Sale Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property
and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries, in each case except as described in the Time of Sale Prospectus. Neither the Company nor any of its subsidiaries owns any real property. 
  

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 (s) Except as described in the Time of Sale Prospectus, the Company and its subsidiaries
own, possess or have rights to use, or can acquire on reasonable terms, all material patents, patent rights, licenses, inventions, copyrights, know how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and trade names currently employed by them in connection with the business now operated by them, and neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would be reasonably likely to have a material adverse
effect on the Company and its subsidiaries, taken as a whole. 
 (t) No material labor dispute with the employees of the
Company or any of its subsidiaries exists, except as described in the Time of Sale Prospectus, or, to the knowledge of the Company, is imminent; and the Company is not aware of any existing, threatened or imminent labor disturbance by the employees
of any of its principal suppliers, manufacturers or contractors that would be reasonably likely to have a material adverse effect on the Company and its subsidiaries, taken as a whole. 
 (u) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which they are engaged; neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not be reasonably likely to have a material adverse effect on the Company and its subsidiaries, taken as a
whole, except as described in the Time of Sale Prospectus. 
 (v) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign governmental or regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or 
  

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 finding, would be reasonably likely to have a material adverse effect on the Company and its
subsidiaries, taken as a whole, except as described in the Time of Sale Prospectus. 
 (w) Except as described in the Time of
Sale Prospectus, the Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (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 the existing assets at reasonable intervals and appropriate action is taken with respect to any
differences. Except as described in the Time of Sale Prospectus, since the end of the Company’s most recent audited fiscal year, there has been (i) no material weakness in the Company’s internal control over financial reporting
(whether or not remediated) and (ii) no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial
reporting. 
 (x) Except as described in the Registration Statement containing the Time of Sale Prospectus, the Company has
not sold, issued or distributed any shares of Common Stock during the six month period preceding the date hereof, including any sales pursuant to Rule 144A under, or Regulation D or S of, the Securities Act, other than shares issued pursuant to
employee benefit plans, qualified stock option plans or other employee compensation plans or pursuant to outstanding options, rights or warrants. 
 (y) The Company and its subsidiaries have established and maintain disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”). Such
disclosure controls and procedures are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company’s principal executive officer and its principal financial officer
by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared. Such disclosure controls and procedures are effective in timely alerting the Company’s principal
executive officer and principal financial officer to material information required to be included in the Company’s periodic reports required under the Exchange Act. 
  

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 (z) There are no outstanding loans made by the Company or any of its subsidiaries to any
executive officer (as defined in Rule 3b-7 under the Exchange Act) or member of the board of directors of the Company. The Company has not since the initial filing of the Registration Statement with the Commission, taken any action prohibited by
Section 402 of the Sarbanes-Oxley Act of 2002, as amended. 
 (aa) Each of the Company and each of its subsidiaries has
operated its business and currently is in compliance in all material respects with all applicable federal, state and foreign laws and all applicable rules, regulations and policies of any domestic or foreign regulatory organization, except where the
failure to be in compliance would not be reasonably likely to have a material adverse effect on the Company and its subsidiaries, taken as a whole. 
 2. Representations and Warranties of the Selling Shareholders. Each Selling Shareholder represents and warrants to and agrees with each of the Underwriters that: 
 (a) This Agreement has been duly authorized, executed and delivered by or on behalf of such Selling Shareholder. 
 (b) The execution and delivery by such Selling Shareholder of, and the performance by such Selling Shareholder of its obligations under,
this Agreement will not contravene any (i) provision of applicable law, (ii) the limited partnership agreement of such Selling Shareholder (if such Selling Shareholder is a limited partnership), (iii) the trust agreements governing
such Selling Shareholder (if such Selling Shareholder is a trust), (iv) any agreement or other instrument binding upon such Selling Shareholder, to the extent such agreement or instrument is material to the Selling Shareholder and its
subsidiaries, taken as a whole, or (v) any judgment, order or decree of any governmental body, agency or court having jurisdiction over such Selling Shareholder and no consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by such Selling Shareholder of its obligations under this Agreement, except in each case above as have already been obtained or as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the Shares. 
 (c) Such Selling Shareholder has, and on the Closing
Date will have, valid title to, or a valid “security entitlement” within the meaning of Section 8-501 of the New York Uniform Commercial Code in respect of, the Shares to be sold by such Selling Shareholder free and clear of all

  

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 security interests, claims, liens, equities or other encumbrances and the legal right and power, and all
authorization and approval required by law, to enter into this Agreement, the Custody Agreement and the Power of Attorney and to sell, transfer and deliver the Shares to be sold by such Selling Shareholder or a security entitlement in respect of
such Shares. 
 (d) With respect to any Shares delivered by such Selling Shareholder in certificated form endorsed to the
Underwriters, delivery of the Shares to be sold by such Selling Shareholder and payment therefor pursuant to this Agreement will pass valid title to such Shares, free and clear of any adverse claim within the meaning of Section 8-102 of the New
York Uniform Commercial Code, to each Underwriter who has purchased such Shares without notice of an adverse claim. 
 (e)
With respect to any Shares delivered by such Selling Shareholder through DTC, upon payment for the Shares to be sold by such Selling Shareholder pursuant to this Agreement, delivery of such Shares, as directed by the Underwriters, to Cede &
Co. (“Cede”) or such other nominee as may be designated by the Depository Trust Company (“DTC”), registration of such Shares in the name of Cede or such other nominee and the crediting of such Shares on the books of
DTC to securities accounts of the Underwriters (assuming that neither DTC nor any such Underwriter has notice of any adverse claim (within the meaning of Section 8-105 of the New York Uniform Commercial Code (the “UCC”)) to
such Shares), (A) DTC shall be a “protected purchaser” of such Shares within the meaning of Section 8-303 of the UCC, (B) under Section 8-501 of the UCC, the Underwriters will acquire a valid security entitlement in
respect of such Shares and (C) no action based on any “adverse claim”, within the meaning of Section 8-102 of the UCC, to such Shares may be asserted against the Underwriters with respect to such security entitlement; for
purposes of this representation, such Selling Shareholder may assume that when such payment, delivery and crediting occur, (x) such Shares will have been registered in the name of Cede or another nominee designated by DTC, in each case on the
Company’s share registry in accordance with its certificate of incorporation, bylaws and applicable law, (y) DTC will be registered as a “clearing corporation” within the meaning of Section 8-102 of the UCC and
(z) appropriate entries to the accounts of the several Underwriters on the records of DTC will have been made pursuant to the UCC. 
 (f) Such Selling Shareholder is not prompted by any information concerning the Company or its subsidiaries which is not set forth in the Time of Sale Prospectus to sell its Shares pursuant to this Agreement.

  

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 (g) To the extent that any statements or omissions made in the Registration Statement,
the Time of Sale Prospectus, the Prospectus, or any amendments or supplements thereto are made in reliance upon and in conformity with written information furnished to the Company by such Selling Shareholder expressly for use therein, (i) the
Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, (ii) the Time of Sale Prospectus does not, and at the time of each sale of the Shares in connection with the offering and at the Closing Date (as defined in Section 5), the Time of Sale
Prospectus, as then amended or supplemented by the Company, if applicable, will not, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not
misleading, and (iii) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make
the statements therein not misleading. 
 In addition, each Selling Shareholder listed on Schedule I-B hereto further represents and
warrants to and agrees with each of the Underwriters that: 
 (h) The execution and delivery by such Selling Shareholder of,
and the performance by such Selling Shareholder of its obligations under, the Custody Agreement signed by such Selling Shareholder and Mellon Investor Services, LLC, as Custodian, relating to the deposit of the Shares to be sold by such Selling
Shareholder (the “Custody Agreement”) and the Power of Attorney appointing certain individuals as such Selling Shareholder’s attorneys in fact to the extent set forth therein, relating to the transactions contemplated hereby
and by the Registration Statement (the “Power of Attorney”) will not contravene any provision of applicable law, or the trust agreement governing such Selling Shareholder (if such Selling Shareholder is a trust), or any agreement or
other instrument binding upon such Selling Shareholder or any judgment, order or decree of any governmental body, agency or court having jurisdiction over such Selling Shareholder, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the performance by such Selling Shareholder of its obligations under the Custody Agreement or Power of Attorney of such Selling Shareholder. 
  

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 (i) The Custody Agreement and the Power of Attorney have been duly authorized, executed
and delivered by such Selling Shareholder and are valid and binding agreements of such Selling Shareholder. 
 3. Agreements to Sell and
Purchase. Each Selling Shareholder, severally and not jointly, hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from such Selling Shareholder at $17.575 a share (the “Purchase Price”) the number of Firm Shares (subject to such adjustments to eliminate fractional shares as you
may determine) that bears the same proportion to the number of Firm Shares to be sold by such Selling Shareholder as the number of Firm Shares set forth in Schedule II hereto opposite the name of such Underwriter bears to the total number of
Firm Shares. 
 On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the
Selling Shareholders agree, severally and not jointly, to sell to the Underwriters the Additional Shares, and the Underwriters shall have the right to purchase, severally and not jointly, up to 825,000 Additional Shares from the Selling Shareholders
at the Purchase Price. You may exercise this right on behalf of the Underwriters in whole or from time to time in part by giving written notice not later than 30 days after the date of this Agreement. Any exercise notice shall specify the number of
Additional Shares to be purchased by the Underwriters and the date on which such shares are to be purchased. Each purchase date must be at least one business day after the written notice is given and may not be earlier than the closing date for the
Firm Shares nor later than ten business days after the date of such notice. Additional Shares may be purchased as provided in Section 5 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm
Shares. On each day, if any, that Additional Shares are to be purchased (an “Option Closing Date”), each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to
eliminate fractional shares as you may determine) that bears the same proportion to the total number of Additional Shares to be purchased on such Option Closing Date as the number of Firm Shares set forth in Schedule I hereto opposite the name of
such Underwriter bears to the total number of Firm Shares. On each Option Closing Date, each Selling Shareholder agrees, severally and not jointly, to sell to the Underwriters the number of Additional Shares (subject to such adjustments to eliminate
fractional shares as you may determine) obtained by multiplying the total number of Additional Shares to be purchased on such Option Closing Date by a fraction, the numerator of which is the number of shares set forth opposite the name of such
Selling Shareholder in Schedule I hereto and the denominator of which is the total number of Additional Shares. 
  

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 4. Terms of Public Offering. The Selling Shareholders are advised by you that the Underwriters
propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in your judgment is advisable. The Selling Shareholders are further advised by you that
the Shares are to be offered to the public initially at $18.50 a share (the “Public Offering Price”) and to certain dealers selected by you at a price that represents a concession not in excess of $0.56 a share under the Public
Offering Price. 
 5. Payment and Delivery. Payment for the Firm Shares to be sold by each Selling Shareholder shall be made to such
Selling Shareholder in Federal or other funds immediately available in New York City against delivery of such Firm Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on October 31, 2006, or at such
other time on the same or such other date, not later than November 1, 2006, as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the “Closing Date.” 
 Payment for any Additional Shares shall be made to the Selling Shareholders in Federal or other funds immediately available in New York City against
delivery of such Additional Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on the date specified in the corresponding notice described in Section 3 or at such other time on the same or on such
other date, in any event not later than December 8, 2006, as shall be designated in writing by you. 
 The Firm Shares and any
Additional Shares shall be registered in such names and in such denominations as you shall request in writing not later than one full business day prior to the Closing Date or the applicable Option Closing Date, as the case may be. The Firm Shares
and Additional Shares shall be delivered to you on the Closing Date or an Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the Shares
to the Underwriters duly paid, against payment of the Purchase Price therefor. 
 6. Conditions to the Underwriters’ Obligations.
The obligations of the Selling Shareholders to sell the Shares to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Shares on the Closing Date are subject to the condition that the Registration Statement
shall have become effective not later than 4:00 p.m. (New York City time) on the date hereof. 
  

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 The several obligations of the Underwriters are subject to the following further conditions: 

(a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date: 
 (i) 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 of the 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; and 
 (ii) there shall
not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the
Time of Sale Prospectus that, in your judgment, is material and adverse and that makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus. 
 (b) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in Section 6(a)(i) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied in
all material respects with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date. 
 The officer signing and delivering such certificate may rely upon the best of his or her knowledge as to proceedings threatened. 
 (c) The Underwriters shall have received on the Closing Date an opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, outside counsel for the Company, dated the Closing Date, to the effect that: 
 (i) the Company has been duly
incorporated, is validly existing under, and by virtue of, the laws of the jurisdiction of its incorporation, and is in good standing under such laws. The Company has the corporate power and authority to own its property and to conduct its business
as described in the Time of Sale Prospectus. The Company is qualified to transact 
  

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 business and is in good standing in each jurisdiction in which the conduct of its business or its leasing
of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; 
 (ii) each subsidiary of the Company has been duly incorporated or formed, is validly existing as a corporation or other entity in good
standing under the laws of the jurisdiction of its incorporation or formation and has the corporate or limited liability company power and authority, as the case may be, to own its property and to conduct its business as described in the Time of
Sale Prospectus. Each such subsidiary is qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; 
 (iii) the authorized capital stock of the Company as of [September 30], 2006 was as set forth in each of the Time of Sale Prospectus and the Prospectus under the “Actual” column under the caption
“Capitalization;” 
 (iv) the shares of Common Stock (including the Shares to be sold by the Selling Shareholders)
outstanding have been duly authorized and are validly issued, fully paid and non-assessable; 
 (v) all of the issued and
outstanding capital stock or membership or other equity interests of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and
clear (except as described in each of the Time of Sale Prospectus and the Prospectus) of all liens, encumbrances, equities or claims; 
 (vi) this Agreement has been duly authorized, executed and delivered by the Company; 
 (vii)
the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement do not contravene any provision of the Certificate of 
  

 15 

 Incorporation or Bylaws of the Company, any provision of any applicable federal or Washington State law,
rule or regulation or of the Delaware General Corporation Law, or, to such counsel’s knowledge after inquiry, any agreement or other instrument binding upon the Company or any of its subsidiaries that is filed as an exhibit to the Registration
Statement, or, to such counsel’s knowledge after inquiry, any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement; 
 (viii) the statements relating to legal matters, documents or proceedings included in (A) the Time of Sale Prospectus and the Prospectus under the captions “Risk Factors–If our arrangements with our
affiliated radiologists or our customers are found to violate....”, “Risk Factors–If our affiliated radiologists are characterized as employees....”, “Risk Factors–Changes in the regulatory environment may
constrain or require us to restructure our operations,” “Business–Operations–Affiliated radiologists,” “Business–Intellectual Property,” “Management–Employee Benefit Plans,” “Management
–Limitation on Liability and Indemnification Matters,” “Certain Relationships and Related Party Transactions,” “Description of Capital Stock,” “Shares Eligible for Future Sale,” “Material United States
Federal Tax Considerations for Non-U.S. Holders of Common Stock,” and “Underwriters” (except for the statements in the third and seventh paragraphs under “Underwriters” as to which such counsel expresses no opinion) and
(B) the Registration Statement in Items 14 and 15, in each case fairly summarize in all material respects such matters, documents or proceedings; 
 (ix) To such counsel’s knowledge, there are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company
or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or of any statutes, regulations, contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required; 
  

 16 

 (x) the Company is not, and after giving effect to the offering and sale of the Shares
and the application of the proceeds thereof as described in the Prospectus will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended; and 
 (xi) the Registration Statement was declared effective under the Act; any required filing of the Prospectus, and any supplements thereto,
pursuant to Rule 424(b) have been made in the manner and within the time period required by Rule 424(b); and to such counsel’s knowledge, no stop order suspending the effectiveness of the Registration Statement or any part thereof has been
issued, and no proceedings for that purpose have been instituted or are pending or contemplated under the Act. 
 In addition, the opinion
shall include a statement from such counsel to the effect that (i) such counsel has participated in conferences with certain officers and other representatives of the Company, the representatives of the Underwriters, counsel for the
Underwriters and the independent public accountants of the Company, at which conferences the contents of the Registration Statement and Prospectus and related matters were reviewed and discussed, and (ii) although such counsel does not assume
any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement, the Time of Sale Prospectus or the Prospectus, nothing has come to the attention of such counsel through such review and
discussion as described therein, that causes such counsel to believe that the Registration Statement, at the time it became effective, or the Time of Sale Prospectus (except for the financial statements and financial schedules and other financial
and statistical data included therein, as to which such counsel need not express any belief) as of the date of this Agreement or as amended or supplemented, if applicable, as of the Closing Date or the Prospectus (except for the financial statements
and financial schedules and other financial and statistical data included therein, as to which such counsel need not express any belief) as of its date or as amended or supplemented, if applicable, as of the Closing Date contained or contains any
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. In addition, the opinion shall include
a statement from such counsel that the Registration Statement and the Prospectus (except for the financial statements and financial schedules and other financial and statistical data included therein, as to which such counsel need not express any
belief) comply as to form in all material respects to the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. 
  

 17 

 (d) The Underwriters shall have received on the Closing Date an opinion of Barandun Hess
von Graffenried, Swiss counsel for the Company, dated the Closing Date, covering the matters set forth in Exhibit B, in form and substance satisfactory to the Underwriters. 
 (e) The Underwriters shall have received on the Closing Date an opinion of Baker & McKenzie, Australian counsel for the Company,
dated the Closing Date, covering the matters set forth in Exhibit C, in form and substance satisfactory to the Underwriters. 
 (f) The Underwriters shall have received on the Closing Date an opinion of Reed Smith LLP, regulatory counsel for the Company, dated the Closing Date, to the effect that: 
 (i) To such counsel’s knowledge, the execution and delivery of this Agreement and the consummation of the transactions contemplated
hereby do not violate any U.S. federal or state statute, regulation or other law relating to the practice of medicine and the regulation of the radiology and radiological interpretation industry that is applicable to the business and operations of
the Company and its subsidiaries, as described in the section of the Prospectus and the Time of Sale Prospectus captioned “Business”; 
 (ii) The statements specifically contained in each of the Prospectus and the Time of Sale Prospectus under “Risk Factors–Enforcement of state and federal anti-kickback laws may adversely affect....”,
“Risk Factors–Because our customers submit claims to the Medicare program based on the services we provide....”, “Risk Factors—Medicare and Medicaid rules governing reassignment of payments....”, Risk
Factors—Our business could be materially affected if a U.S. Department of Health & Human Services Office of Inspector General....” and “Business–Government Regulation and Supervision” have been reviewed by such
counsel, and to such counsel’s knowledge, such statements are accurate in all material respects. To such counsel’s knowledge, other than the laws and the regulations described in such sections, there are no other U.S. federal or state laws
or regulations specifically and primarily relating to the practice of medicine and the regulation of the radiology and radiological interpretation industry that are material to the business and operations of the Company and its subsidiaries, as
described in the section of the Prospectus and the Time of Sale Prospectus captioned “Business.” 
  

 18 

 (g) The Underwriters shall have received on the Closing Date opinions, dated the Closing
Date, of each of Kirkland & Ellis LLP and Paul Cartee, Vice President and General Counsel of the Company, as counsel for the Selling Shareholders in the forms of Exhibit D and Exhibit E hereto, respectively. 
 (h) The Underwriters shall have received on the Closing Date an opinion of Davis Polk & Wardwell, counsel for the Underwriters,
dated the Closing Date, covering the matters referred to in Sections 6(c)(vi) and 6(c)(viii) (but only as to the statements in each of the Time of Sale Prospectus and the Prospectus under “Description of Capital Stock” and
“Underwriters”) and the last paragraph of Section 6(c) above. 
 With respect to the last paragraph of Section 6(c)
above, Wilson Sonsini Goodrich and Rosati, Professional Corporation and Davis Polk & Wardwell may state that their opinions and beliefs are based upon their participation in the preparation of the Registration Statement, the Time of Sale
Prospectus and Prospectus and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification, except as specified. 
 The opinions of Wilson Sonsini Goodrich and Rosati, Professional Corporation, Barandun Hess von Graffenried, Baker & McKenzie, Reed Smith LLP,
Kirkland & Ellis LLP and Paul Cartee described in and delivered pursuant to Sections 6(c), 6(d), 6(e), 6(f), and 6(g), respectively, above shall be rendered to the Underwriters at the request of the Company or one or more of the Selling
Shareholders, as the case may be, and shall so state therein. 
 (i) The Underwriters shall have received, on the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, from Deloitte and Touche LLP, independent public accountants, containing statements and information
of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the Time of Sale Prospectus and the
Prospectus; provided that the letter delivered on the Closing Date shall use a “cut off date” not earlier than the date hereof. 
 (j) The Underwriters shall have received on the date hereof a letter dated the date hereof in form and substance satisfactory to the Underwriters, from Magnuson, McHugh & Company, P.A., independent public
accountants, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with 
  

 19 

 respect to the financial statements and certain financial information contained in the Registration
Statement, the Time of Sale Prospectus and the Prospectus; 
 (k) The “lock up” agreements, each substantially in
the form of Exhibit A hereto, between you and each officer, director and certain stockholders of the Company relating to sales and certain other dispositions of shares of Common Stock or certain other securities, delivered to you on or before the
date hereof, shall be in full force and effect on the Closing Date. 
 The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the applicable Option Closing Date of such documents as you may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional Shares
to be sold on such Option Closing Date and other matters related to the issuance of such Additional Shares. 
 7. Covenants of the
Company. The Company covenants with each Underwriter as follows: 
 (a) To furnish to you, without charge, six signed
copies of the Registration Statement (including exhibits thereto) and for delivery to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and to furnish to you in New York City, without charge, prior to
10:00 a.m. New York City time on the business day next succeeding the date of this Agreement and during the period mentioned in Section 7(e) or 7(f) below, as many copies of the Time of Sale Prospectus, the Prospectus and any supplements and
amendments thereto or to the Registration Statement as you may reasonably request. 
 (b) Before amending or supplementing the
Registration Statement, the Time of Sale Prospectus or the Prospectus, to furnish to you a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which you reasonably object, and to file with
the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule. 
 (c) To furnish to you a copy of each proposed free writing prospectus to be prepared by or on behalf of, used by, or referred to by the Company and not to use or refer to any proposed free writing prospectus to which
you reasonably object. 
  

 20 

 (d) Not to take any action that would result in an Underwriter or the Company being
required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of the Underwriter that the Underwriter otherwise would not have been required to file thereunder. 

(e) If the Time of Sale Prospectus is being used to solicit offers to buy the Shares at a time when the Prospectus is not yet available
to prospective purchasers and any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Time of Sale Prospectus in order to make the statements therein, in the light of the circumstances, not
misleading, or if any event shall occur or condition exist as a result of which the Time of Sale Prospectus conflicts with the information contained in the Registration Statement then on file, or if, in the opinion of counsel for the Underwriters,
it is necessary to amend or supplement the Time of Sale Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to any dealer upon request, either amendments
or supplements to the Time of Sale Prospectus so that the statements in the Time of Sale Prospectus as so amended or supplemented will not, in the light of the circumstances under which they were made, when delivered to a prospective purchaser, be
misleading or so that the Time of Sale Prospectus, as amended or supplemented, will no longer conflict with the Registration Statement, or so that the Time of Sale Prospectus, as amended or supplemented, will comply with applicable law. 

(f) If, during such period after the first date of the public offering of the Shares as in the opinion of counsel for the Company or
the Underwriters the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) under the Securities Act) is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as
a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) under the Securities
Act) is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Company or the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses you will furnish to the Company) to which Shares may have been sold by you on behalf of the Underwriters and to any other dealers upon
request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or 
  

 21 

 supplemented will not, in the light of the circumstances when the Prospectus (or in lieu thereof the
notice referred to in Rule 173(a) under the Securities Act) is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with law. 
 (g) To endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request. 
 (h) To make generally available to the Company’s security holders and to you as soon as
practicable an earnings statement covering a period of at least twelve months beginning with the first fiscal quarter of the Company occurring after the date of this Agreement which shall satisfy the provisions of Section 11(a) of the
Securities Act and the rules and regulations of the Commission thereunder. 
 The Company also covenants with each Underwriter that, without
the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period ending 90 days after the date of the Prospectus, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or
(2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise or (3) file any registration statement with the Commission relating to the offering of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock. 
 The restrictions contained in the preceding paragraph shall not apply to
(a) the Shares to be sold hereunder, (b) the issuance by the Company of shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and (x) reflected in the
Prospectus or (y) of which the Underwriters have been advised in writing, (c) the issuance of shares of, or options to purchase shares of, Common Stock to employees, officers, directors, advisors or consultants of the Company pursuant to
employee benefit plans described in the Prospectus, provided that, prior to the issuance of any such shares or the grant of any such options where the shares subject to such option vest within the period ending 90 days after the date of the
Prospectus, the Company shall cause each recipient of such grant or issuance to execute and deliver to you a “lock-up” agreement, substantially in the form of Exhibit A hereto, (d) the filing of registration statements on Form S-8,
(e) the issuance of 
  

 22 

 securities in connection with the acquisition by the Company or any of its subsidiaries of the securities, businesses,
property or other assets of another person or entity or pursuant to any employee benefit plan assumed by the Company in connection with any such acquisition, or (f) the issuance of securities in connection with joint ventures, commercial
relationships or other strategic transactions; provided that, in the case of clauses (e) and (f), prior to any issuance the Company shall cause each recipient of such securities to execute and deliver to you a “lock-up”
agreement substantially in the form of Exhibit A hereto. Notwithstanding the foregoing, if (a) during the last 17 days of the 90-day restricted period the Company issues an earnings release or a release regarding other material news events
relating to the Company; or (b) prior to the expiration of the 90-day restricted period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the 90-day period, the restrictions
imposed by this agreement shall continue to apply until the expiration of the 18-day period beginning on the issuance of such release. The Company shall promptly notify Morgan Stanley & Co. Incorporated of any such release, news or event
that may give rise to an extension of the initial 90-day restricted period. 
 8. Expenses. Whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is terminated, the Company agrees to pay or cause to be paid all expenses incident to the performance of their obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Company’s counsel, the Company’s accountants and counsel for the Selling Shareholders in connection with the registration and delivery of the Shares under the Securities Act and all other fees or expenses
in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, the Prospectus, any free writing prospectus prepared by or on behalf of, used by, or referred to by the Company and
amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and
expenses related to the transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable in respect of such transfer and delivery, (iii) all expenses in connection with the qualification of the Shares for
offer and sale under state securities laws as provided in Section 7(g) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification, (iv) all filing fees and
the reasonable fees and disbursements of counsel to the Underwriters incurred in connection with the review and qualification of the offering of the Shares by the National Association of Securities Dealers, Inc., (v) all fees and expenses in
connection with the preparation and filing of the registration statement on Form 8 A relating to the Common Stock and all costs and expenses incident to listing the 
  

 23 

 Shares on the Nasdaq Global Market, (vi) the cost of printing certificates representing the Shares, (vii) the
costs and charges of any transfer agent, registrar or depositary, (viii) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the offering of the
Shares, including, without limitation, expenses associated with the preparation or dissemination of any electronic roadshow, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants of the
Company, and one-half of the travel and lodging expenses incurred in connection with the road show (which shall include costs of lodging and transport and costs of any aircraft chartered in connection with the road show), (ix) the document
production charges and expenses associated with printing this Agreement, (x) all expenses in connection with any offer and sale of the Shares outside of the United States, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection with offers and sales outside of the United States, and (xi) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise
made in this Section. It is understood, however, that except as provided in this Section, Section 10 entitled “Indemnity and Contribution,” and the last paragraph of Section 12 below, the Underwriters will pay all of their costs
and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Shares by them and any advertising expenses connected with any offers they may make. 
 The provisions of this Section shall not supersede or otherwise affect any agreement that the Selling Shareholders may otherwise have for the allocation
of such expenses among themselves. 
 9. Covenants of the Underwriters. Each Underwriter severally covenants with the Company not to
take any action that would result in the Company being required to file with the Commission under Rule 433(d) a free writing prospectus prepared by or on behalf of such Underwriter that otherwise would not be required to be filed by the Company
thereunder, but for the action of the Underwriter. 
 10. Indemnity and Contribution. (a) The Company agrees to indemnify and
hold harmless each Underwriter, each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and each affiliate of any Underwriter within the meaning of Rule 405 under the Securities Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably
incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any 
  

 24 

 preliminary prospectus, Time of Sale Prospectus, the Prospectus, any free writing prospectus prepared by or on behalf of,
used by, or referred to by the Company or the Prospectus or any amendment or supplement thereto, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use therein. 
 (b) Each Selling Shareholder agrees, severally and not
jointly, to indemnify and hold harmless each Underwriter, each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act of 1934, and each affiliate of any
Underwriter within the meaning of Rule 405 under the Securities Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus, Time of Sale Prospectus, the
Prospectus, any free writing prospectus prepared by or on behalf of, used by, or referred to by the Company or the Prospectus or any amendment or supplement thereto, or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with
written information relating to the Selling Shareholder and furnished by or on behalf of the Selling Shareholder specifically for use therein; provided, however, that the liability of a Selling Shareholder pursuant to this subsection (b) hereof
shall be limited to an amount equal to the aggregate Public Offering Price of the Shares sold by such Selling Shareholder under this Agreement. 
 (c) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, the Selling Shareholders, the directors and officers of the Company who sign the Registration Statement and each
person, if any, who controls the Company or any Selling Shareholder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or 
  

 25 

 alleged untrue statement of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus, Time of Sale Prospectus, the Prospectus, any free writing prospectus prepared by or on behalf of, used by, or referred to by the Company or the Prospectus or any amendment or supplement thereto, or caused by any
omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only with reference to information relating to such Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use in the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, any other free writing prospectus that the Company has filed or is required to file pursuant to Rule
433(d) of the Securities Act or the Prospectus or any amendment or supplement thereto. 
 (d) In case any proceeding
(including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 10(a), 10(b),10(c) or 10(e), such person (the “indemnified party”) shall
promptly notify the person against whom such indemnity may be sought (the “indemnifying party”) in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for any of (i) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Underwriters and all persons, if any, who control any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act or who are affiliates of any Underwriter within the meaning of Rule 405 under the Securities Act, (ii) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the 
  

 26 

 Company within the meaning of either such Section or (iii) the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Selling Shareholders and all persons, if any, who control any Selling Shareholder within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the Underwriters and such control persons and affiliates of any Underwriters, such firm shall be designated in writing by Morgan Stanley & Co. Incorporated. In the case of any such
separate firm for the Company, and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. In the case of any such separate firm for the Selling Shareholders and such control persons of
any Selling Shareholders, such firm shall be designated in writing by the persons named as attorneys in fact for the Selling Shareholders under the Powers of Attorney. The indemnifying party 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 judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability 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 the second and
third sentences of this paragraph, 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 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) 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 of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. 
 (e) To the extent the indemnification provided for in Section 10(a), 10(b) or 10(c) is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying 
  

 27 

 party or parties on the one hand and the indemnified party or parties on the other hand from the offering
of the Shares or (ii) if the allocation provided by clause 10(e)(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 10(e)(i) above but also the
relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the Selling Shareholders on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Shares (after deducting the underwriting discount but before deducting expenses) received by each Selling Shareholder and the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares. The relative fault of the Selling Shareholders on the one hand and the Underwriters 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 Selling Shareholders or by
the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters’ respective obligations to contribute pursuant to this Section 10
are several in proportion to the respective number of Shares they have purchased hereunder, and not joint. The liability of each Selling Shareholder under the indemnity agreement contained in this paragraph shall be limited to an amount equal to the
aggregate Public Offering Price of the Shares sold by such Selling Shareholder under this Agreement. 
 (f) The Selling
Shareholders and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 10 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable considerations referred to in Section 10(e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in
Section 10(e) 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 such action or claim.
Notwithstanding the provisions of this Section 10, no Underwriter shall be required to contribute any amount 
  

 28 

 in excess of the amount by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages that such Underwriter 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 Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 10 are not
exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. 
 (g) The indemnity and contribution provisions contained in this Section 10 and the representations, warranties and other statements of the Company and the Selling Shareholders contained in this Agreement shall remain operative and in
full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter, any person controlling any Underwriter or any affiliate of any Underwriter, any Selling Shareholder
or any person controlling any Selling Shareholder, or the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares. 
 11. Termination. The Underwriters may terminate this Agreement by notice given by you to the Company, if after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on, or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq Global Market, the Chicago
Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over the counter market, (iii) a material
disruption in securities settlement, payment or clearance services in the United States shall have occurred, (iv) any moratorium on commercial banking activities shall have been declared by Federal or New York State authorities or
(v) there shall have occurred any outbreak or escalation of hostilities, or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and which, singly or together with any other event specified
in this clause (v), makes it, in your judgment, impracticable or inadvisable to proceed with the offer, sale or delivery of the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus or the Prospectus. 
 12. Effectiveness; Defaulting Underwriters. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.

  

 29 

 If, on the Closing Date or an Option Closing Date, as the case may be, any one or more of the
Underwriters shall fail or refuse to purchase Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is
not more than one tenth of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in
Schedule II bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as you may specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 12 by
an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares
with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares to be purchased on such date, and arrangements satisfactory to you, the Company and the Selling Shareholders for the purchase of such Firm Shares
are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter the Company or the Selling Shareholders. In any such case either you or the relevant Selling Shareholders
shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement, in the Time of Sale Prospectus, in the Prospectus or in any other documents or
arrangements may be effected. If, on an Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Additional Shares to be purchased on such Option Closing Date, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase the Additional Shares to be sold
on such Option Closing Date or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall
not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 
 If this
Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of any Selling Shareholder to comply with the terms or to fulfill any of the conditions of this Agreement (other than the condition set
forth in Section 6(h)), or if for any reason any Selling Shareholder shall be unable to perform its obligations under this Agreement, each of the 
  

 30 

 defaulting Selling Shareholders pro rata (based on the number of Shares to be sold by such defaulting Selling
Shareholders hereunder) will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses approved in writing by you (including the fees and disbursements
of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder. 
 13.
Entire Agreement. (a) This Agreement, together with any contemporaneous written agreements and any prior written agreements (to the extent not superseded by this Agreement) that relate to the offering of the Shares, represents the entire
agreement between the Company and the Selling Shareholders, on the one hand, and the Underwriters, on the other, with respect to the preparation of the Prospectus, the conduct of the offering, and the purchase and sale of the Shares. 
 (b) The Company acknowledges that in connection with the offering of the Shares: (i) the Underwriters have acted at arms length, are
not agents of, and owe no fiduciary duties to, the Company or any other person, (ii) the Underwriters owe the Company only those duties and obligations set forth in this Agreement and (iii) the Underwriters may have interests that differ
from those of the Company. The Company waives to the full extent permitted by applicable law any claims it may have against the Underwriters arising from an alleged breach of fiduciary duty in connection with the offering of the Shares. 

14. Counterparts. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. 
 15. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York. 
 16. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part of this Agreement. 
 17. Notices. All communications
hereunder shall be in writing and effective only upon receipt and if to the Underwriters shall be delivered, mailed or sent to you in care of Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, New York 10036, Attention: Equity
Syndicate Desk, with a copy to the Legal Department, Fax No. (212) 761-0316; if to the Company or the Selling Shareholders listed on Schedule I-B shall be delivered, mailed or sent to Paul Cartee, Vice President and General Counsel,
NightHawk Radiology Holdings, Inc., 
  

 31 

 250 Northwest Boulevard, Suite 202, Coeur d’Alene, Idaho 83814, Fax No. (208) 292-2825 and if to the Selling
Shareholders listed on Schedule I-A shall be delivered, mailed or sent to Peter Y. Chung, Summit Partners, 499 Hamilton Avenue, Palo Alto, California 94301, Fax No. (650) 321-1188. 
  

 32 

			
	Very truly yours,
	
	NIGHTHAWK RADIOLOGY HOLDINGS, INC.
		
	By:	 	 /s/ Paul E. Berger

		 	Name: Paul E. Berger, M.D.
		 	Title: President and Chief Executive Officer

			
	 The Selling Shareholders named in
 Schedule I-B hereto, acting severally

		
	By:	 	 /s/ Paul E. Berger

		 	Name: Paul E. Berger, M.D.

  

			
		
	By:	 	 /s/ Jon D. Berger

		 	Name: Jon D. Berger

  

			
		
	By:	 	 /s/ Christopher R. Huber

		 	Name: Christopher R. Huber

			
	SUMMIT VI ENTREPRENEURS FUND, L.P.
		
	By:	 	Summit Partners VI (GP), L.P.
	Its:	 	General Partner
		
	By:	 	Summit Partners VI (GP), LLC
	Its:	 	General Partner
		
	By:	 	 /s/ Peter Chung

		 	Peter Chung, Member
	
	SUMMIT VENTURES VI-A, L.P.
		
	By:	 	Summit Partners VI (GP), L.P.
	Its:	 	General Partner
		
	By:	 	Summit Partners VI (GP), LLC
	Its:	 	General Partner
		
	By:	 	 /s/ Peter Chung

		 	Peter Chung, Member
	
	SUMMIT VENTURES VI-B, L.P.
		
	By:	 	Summit Partners VI (GP), L.P.
	Its:	 	General Partner
		
	By:	 	Summit Partners VI (GP), LLC
	Its:	 	General Partner
		
	By:	 	 /s/ Peter Chung

		 	Peter Chung, Member

			
	SUMMIT VI ADVISORS FUND, L.P.
		
	By:	 	Summit Partners VI (GP), L.P.
	Its:	 	General Partner
		
	By:	 	Summit Partners VI (GP), LLC
	Its:	 	General Partner
		
	By:	 	 /s/ Peter Chung

		 	Peter Chung, Member
	
	SUMMIT INVESTORS VI, L.P.
		
	By:	 	Summit Partners VI (GP), L.P.
	Its:	 	General Partner
		
	By:	 	Summit Partners VI (GP), LLC
	Its:	 	General Partner
		
	By:	 	 /s/ Peter Chung

		 	Peter Chung, Member
	
	SUMMIT SUBORDINATED DEBT FUND II, L.P.
		
	By:	 	Summit Partners VI (GP), L.P.
	Its:	 	General Partner
		
	By:	 	Summit Partners VI (GP), LLC
	Its:	 	General Partner
		
	By:	 	 /s/ Peter Chung

		 	Peter Chung, Member

 Accepted as of the date hereof 
 Morgan Stanley & Co. Incorporated 
 Banc of America Securities LLC

 Cowen & Co., LLC 
 Piper Jaffray & Co.

 Montgomery & Co., LLC 
  

			
	 Acting severally on behalf of themselves
and the several Underwriters named in 
Schedule II hereto.

		
	By:	 	Morgan Stanley & Co. Incorporated
		
	By:	 	 /s/ Bryan Andrzejewski

	Name:	 	Bryan Andrzejewski
	Title:	 	

 SCHEDULE I 
  

					
	 Selling Shareholder
	  	Number of Firm
Shares To Be
Sold	  	Number of
Additional
Shares To Be
Sold
	 Summit Ventures VI-A, L.P.
	  	2,942,265	  	0
	 Summit Ventures VI-B, L.P.
	  	1,227,042	  	0
	 Summit VI Advisors Fund, L.P.
	  	61,192	  	0
	 Summit VI Entrepreneurs Fund, L.P.
	  	93,948	  	0
	 Summit Investors VI, L.P.
	  	34,928	  	0
	 Summit Subordinated Debt Fund II, L.P.
	  	140,625	  	0
	 Paul E. Berger
	  	500,000	  	412,500
	 Jon D. Berger
	  	250,000	  	206,250
	 Christopher R. Huber
	  	250,000	  	206,250
		  	 	  	 
	 Total:
	  	5,500,000	  	825,000
		  	 	  	 

 SCHEDULE II 
  

			
	 Underwriter
	  	Number of Firm Shares
To Be Purchased
	 Morgan Stanley & Co. Incorporated
	  	3,575,000
	 Banc of America Securities LLC
	  	550,000
	 Cowen & Co., LLC
	  	550,000
	 Piper Jaffray & Co.
	  	550,000
	 Montgomery & Co., LLC
	  	275,000
		  	 
	 Total:
	  	5,500,000
		  	 

 SCHEDULE I-A 
  

			
	 Selling Shareholder
	 	  
	 Summit Ventures VI-A, L.P.
	 	
	 Summit Ventures VI-B, L.P.
	 	
	 Summit VI Advisors Fund, L.P.
	 	
	 Summit VI Entrepreneurs Fund, L.P.
	 	
	 Summit Investors VI, L.P.
	 	
	 Summit Subordinated Debt Fund II, L.P.
	 	

 SCHEDULE I-B 
  

			
	 Selling Shareholder
	  	  
	 Paul E. Berger
	  	
	 Jon D. Berger
	  	
	 Christopher R. Huber
	  	

 SCHEDULE III 
 Time of Sale Prospectus 
  

	1.	Preliminary Prospectus issued October 18, 2006 

  

	2.	Issuer Free Writing Prospectus dated October 23, 2006 

  

	3.	Issuer Free Writing Prospectus dated October 25, 2006 

 EXHIBIT A 
 FORM OF LOCK-UP LETTER 

 EXHIBIT B 
 FORM OF SWISS COUNSEL OPINION 

 EXHIBIT C 
 FORM OF AUSTRALIAN COUNSEL OPINION 

 EXHIBIT D 
 FORM OF OPINION OF KIRKLAND & ELLIS LLP 

 EXHIBIT E 
 FORM OF OPINION OF PAUL CARTEEThird Modification Agreement

 EXHIBIT 10.1 
  
 THIRD MODIFICATION AGREEMENT TO BORROWING BASE REVOLVING 
 LINE OF CREDIT AGREEMENT 
  

					
	 DATE:
	  	As of October 23, 2006	  	 
			
	 PARTIES:
	  	 	  	 
	 	  	Borrower:	  	WILLIAM LYON HOMES, INC., a California corporation
			
	 	  	Guarantor:	  	WILLIAM LYON HOMES, a Delaware corporation
			
	 	  	Bank:	  	JPMORGAN CHASE BANK, N.A. (successor by merger to Bank One, NA (Main Office Chicago, Illinois)), a national banking association

  
 JPMORGAN CHASE BANK, N.A. (successor
by merger to Bank One, NA (Main Office Chicago, Illinois)), a national banking association (“Bank”), and WILLIAM LYON HOMES, INC., a California corporation (“Borrower”), hereby enter into this Third Modification
Agreement (the “Modification”) to the Borrowing Base Revolving Line of Credit Agreement dated as of June 28, 2004, as modified by a Modification Agreement, dated as of December 7, 2004, and as further modified by a Second
Modification Agreement, dated as of July 14, 2005 (the “Loan Agreement”), with the consent of guarantor WILLIAM LYON HOMES, a Delaware corporation (“Guarantor”). 
  
 RECITALS 
  
 A. Bank has extended to Borrower credit (“Loan”) up to the maximum principal amount of One Hundred Million
Dollars ($100,000,000) pursuant to the Loan Agreement, as further evidenced by that certain Amended and Restated Promissory Note dated as of July 14, 2005 (the “Note”) executed by Borrower and payable to the order of Bank.

  
 B. The Loan is secured by, among other things, certain
Construction Deeds of Trust and Fixture Filing (With Assignment of Rents and Security Agreement) executed by Borrower as Trustor for the benefit of Bank (such Deeds of Trust, as amended to dated, shall be hereinafter referred to, individually, as a
“Deed of Trust” and, collectively, as the “Deeds of Trust”). The Loan is further secured by the personal property described in certain UCC-1 Financing Statements relating to the property encumbered by the Deeds of
Trust naming Borrower as Debtor and Bank as Secured Party (as amended to date, the “UCC Financing Statements”). The Deeds of Trust, the UCC Financing Statements, and such other agreements, documents and instruments securing the Loan
are referred to individually and collectively as the “Security Documents”). 
  

 1 

 C. Repayment of the Loan and the completion of the improvements have been, and continue to be, guaranteed
by the Repayment Guaranty dated as of June 28, 2004 and executed by Guarantor in favor of Bank (the “Guaranty”). The Guaranty and any other agreements, documents and instruments guarantying the Loan are referred to individually
and collectively as the “Guaranty Documents”. 
  
 D. The Loan Agreement, the Note, the Security Documents, the Guaranty Documents, any environmental certification and indemnity agreement, and all other agreements, documents, and instruments evidencing, securing, or otherwise relating to
the Loan, as may be amended, modified, extended or restated from time to time, are sometimes referred to individually and collectively as the “Loan Documents”. Hereinafter, the Loan Documents shall mean such documents as modified in
this Modification. 
  
 E. The Borrower has requested that the Bank
agree to extend the Revolving Credit Termination Date from June 28, 2007 to June 28, 2008, and to extend the Maturity Date from June 28, 2008, to June 28, 2009. Based on the representations of Borrower, Bank is willing to so
extend the Revolving Credit Termination Date and the Maturity Date, subject to the terms and conditions herein. 
  
 F. The Borrower has also requested that the Bank revise the limitation on Spec Units to be based on the lesser of the number of units specified, the
appraised absorption rate or the actual absorption rate. Based on the representations of Borrower, Bank is willing to so revise the limitation on Spec Units, subject to the terms and conditions herein. 
  
 G. The Borrower has also requested that the Bank increase the limitation on
the Collateral Value of all Lots and Units in any Approved Subdivision located in California from Twenty-Five Million Dollars ($25,000,000) to Thirty Million Dollars ($30,000,000). Based on the representations of Borrower, Bank is willing to so
increase the limitation on Collateral Value for Approved Subdivisions located in California, subject to the terms and conditions herein. 
  
 H. All capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Loan Agreement. 
  
 AGREEMENT 
  
 For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Bank agree
as follows: 
  

	1.	ACCURACY OF RECITALS. 

  
 Borrower acknowledges the accuracy of the Recitals. 
  

 2 

	2.	MODIFICATION OF LOAN DOCUMENTS. 

  
 2.1 The Revolving Credit Termination Date is hereby extended from June 28, 2007 to June 28, 2008. In no event shall the Bank be required to make
Advances of the Loan to Borrower and to issue Facility LCs for the account of Borrower after the Revolving Credit Termination Date, as extended hereby. 
  
 2.2 The Maturity Date is hereby extended from June 28, 2008 to June 28, 2009. All principal, interest and Other Amounts shall be immediately due
and payable on the Maturity Date, as extended hereby. 
  
 2.3
Section 2.5 of the Loan Agreement is deleted in its entirety and replaced with the following: 
  
 “2.5 Method of Advances. 
  
 (a) Advances may be made by Bank at the written request of the Person or Persons designated by Borrower from time to time on Bank’s form of signature
authorization; provided, however, that Bank shall have acknowledged receipt of any changes in the Person or Persons designated by Borrower, and such Person or Persons designated by Borrower will have executed a new signature authorization form.
Subject to Section 2.4 and the other terms and conditions of this Agreement (including those hereinafter set forth), such Person or Persons are hereby authorized by Borrower to request Advances (subject to the limitations in this
Agreement) not more frequently than one (1) time per day, and to direct the disposition of the proceeds of Advances until written notice of the revocation of such authority is received from Borrower by Bank and Bank has had a reasonable time to
act upon such notice. Bank has no duty to monitor for Borrower or Guarantor, or to report to any such Person, the use of proceeds of Advances. Subject to the satisfaction of all applicable terms and conditions, (i) with respect to each Draw
Request submitted on or before 11:00 a.m. on any Business Day, Bank will make the requested advance on or before Noon on the next Business Day and (ii) with respect to a Draw Request received by Bank after 11:00 a.m. on any Business Day, Bank
will make the requested advance on or before Noon on the second (2nd) Business Day thereafter. Notwithstanding the foregoing, at the sole option of Bank, advances may be paid in the joint names of Borrower and the contractor, engineer,
subcontractor(s), or supplier(s) in payment of sums due under any applicable construction or similar contract to which Borrower is a party. At its sole option, Bank may directly pay the contractor, engineer, and any subcontractors or other parties
the sums due under such construction or similar contract to which Borrower is a party. Borrower appoints Bank as its attorney-in-fact to make such payments. This power shall be deemed to be coupled with an interest, shall be irrevocable, and shall
survive an Event of Default under this Agreement. 
  
 (b) Bank,
in its sole and absolute discretion, may elect to permit the Borrower to transmit Draw Requests electronically through an Internet website developed 

  

 3 

 
by Bank (“Website”). Bank shall deliver written notice of such election to the Borrower. Thereafter, upon completion of enrollment for appropriate
access on the Website, any of the Persons authorized to request Advances under Section 2.5(a) above, may transmit a Draw Request to Bank through the Website and such transmission shall be considered a “writing” in satisfaction of the
requirement under this Agreement for a written Draw Request for any Advance. Borrower’s access to, and use of, the Website shall be subject to Borrower’s compliance with all of the terms and conditions established by Bank for access to and
use of the Website, including, without limitation, the Terms of Use and Privacy Policy, as published on the Website and amended from time to time. Bank reserves the right to deny the Borrower access to the Website, or withdraw its permission for
Borrower to furnish Draw Requests through the Website, at any time, for any reason, without notice. The ability of Borrower to furnish Draw Requests through the Website is at all times subject to the availability of the Website.” 
  
 2.4 Section 3.6(c) of the Loan Agreement is deleted in its entirety and
replaced with the following: 
  
 “(c) Limitation on Spec
Units by Subdivision. With respect to each Approved Subdivision, Borrower may not include in Eligible Collateral at any time more than the following: (i) for each Approved Subdivision other than a High End Subdivision which will contain SFR
Units, the lesser of (A) thirty (30) Spec Units per each Approved Subdivision, (B) a five (5) Calendar Month supply based on the appraised absorption rate set forth in the most recent Appraisal for the Approved Subdivision or
(C) a five (5) Calendar Month supply based on Bank’s then most recent determination, which determination shall be based on the actual absorption rate for the six (6) Calendar Month period preceding the date of such determination,
(ii) for each High End Subdivision which will contain SFR Units, the lesser of (A) twenty-four (24) Spec Units per each Approved Subdivision, (B) a four (4) Calendar Month supply based on the appraised absorption rate set
forth in the most recent Appraisal for the Approved Subdivision or (C) a four (4) Calendar Month supply based on Bank’s then most recent determination, which determination shall be based on the actual absorption rate for the six
(6) Calendar Month period preceding the date of such determination, and (iii) for each Approved Subdivision which will contain Attached Units, such Spec Unit limitations as Bank shall determine upon admission of such Subdivision into the
Borrowing Base (the “Absolute Maximum for Spec Units”).” 
  
 2.5 Section 3.8(c) of the Loan Agreement is deleted in its entirety and replaced with the following: 
  
 “(c) Limitation on Collateral Value of Subdivision. The Collateral Value of all Lots and Units in any Approved Subdivision located in a state
other than California shall not exceed Twenty-Five Million Dollars ($25,000,000). The Collateral Value of all Lots and Units in any Approved Subdivision located in California shall not exceed Thirty Million Dollars ($30,000,000).” 

 

 4 

 2.6 The Deeds of Trust are modified to secure payment and performance of the Loan as amended to date, in
addition to all other “Obligations” of Borrower as therein defined. The foregoing notwithstanding, certain obligations continue to be excluded from the Obligations, as provided in the Deeds of Trust. 
  
 2.7 Each of the Loan Documents is modified to provide that it shall be a
default or an event of default thereunder if Borrower shall fail to comply with any of the covenants of Borrower herein or if any representation or warranty by Borrower herein or by any guarantor in any related Consent and Agreement of Guarantor is
materially incomplete, incorrect, or misleading as of the date hereof. 
  
 2.8 Each reference in the Loan Documents to any of the Loan Documents shall be a reference to such document as modified herein. 
  

	3.	RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL. 

  
 The Loan Documents are ratified and affirmed by Borrower and shall remain in full force and effect as modified herein. Any property or rights to or
interests in property granted as security in the Loan Documents shall remain as security for the Loan and the obligations of Borrower in the Loan Documents. 
  

	4.	CONDITIONS PRECEDENT. 

  
 Before this Agreement becomes effective and any party becomes obligated under it, all of the following conditions shall have been satisfied at
Borrower’s sole cost and expense in a manner acceptable to Bank in the exercise of Bank’s sole judgment: 
  
 4.1 Bank shall have received fully executed and, where appropriate, acknowledged originals of this Modification, the attached consents signed by
Guarantor, and any other documents which Bank may require or request in accordance with this Agreement or the other Loan Documents. 
  
 4.2 Bank shall have received reimbursement, in immediately available funds, of all costs and expenses incurred by Bank in connection with this Agreement,
including charges for title insurance (including endorsements), recording, filing and escrow charges, fees for appraisal, architectural and engineering review, construction services and environmental services, mortgage taxes, and legal fees and
expenses of Bank’s counsel. Such costs and expenses may include the allocated costs for services of Bank’s in-house staffs, such as legal, appraisal, construction services and environmental services. Borrower acknowledges that any
extension and modification fees payable in connection with this transaction do not include the amounts payable by Borrower under this subsection. 
  

	5.	ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER. 

  
 The Loan Documents as modified herein contain the entire understanding and agreement of Borrower and Bank in respect of the Loan and supersede all prior

  

 5 

 
representations, warranties, agreements, arrangements, and understandings. No provision of the Loan Documents as modified herein may be changed, discharged,
supplemented, terminated, or waived except in a writing signed by Bank and Borrower. 
  

	6.	BINDING EFFECT. 

  
 The Loan Documents as modified herein shall be binding upon, and inure to the benefit of, Borrower and Bank and their respective successors and assigns.

  

	7.	CHOICE OF LAW. 

  
 This Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving effect to conflicts of law
principles. 
  

	8.	COUNTERPART EXECUTION. 

  
 This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and
the same document. Signature pages may be detached from the counterparts and attached to a single copy of this Agreement to physically form one document. 
  
 [Signatures on following page] 
  

 6 

 DATED as of the date first above stated. 
  

									
	 BORROWER:
	 	 	 	 WILLIAM LYON HOMES, INC.,
 a California
corporation

					
	 	 	 	 	 	 	By:	 	/S/    MICHAEL D.
GRUBBS        
	 	 	 	 	 	 	Name:	 	Michael D. Grubbs
	 	 	 	 	 	 	Title:	 	Sr. Vice President
					
	 	 	 	 	 	 	By:	 	/S/    RICHARD S.
ROBINSON        
	 	 	 	 	 	 	Name:	 	 Richard S. Robinson

	 	 	 	 	 	 	Title:	 	Sr. Vice President
			
	 BANK:
	 	 	 	JPMORGAN CHASE BANK, N.A. (successor by merger to Bank One, NA (Main Office Chicago, Illinois)), a national banking association
					
	 	 	 	 	 	 	By:	 	/S/    KIMBERLEE
EDWARDS        
	 	 	 	 	 	 	Name:	 	Kimberlee Edwards
	 	 	 	 	 	 	Title:	 	F.V.P.

  

 7 

 CONSENT AND AGREEMENT OF GUARANTOR 
  
 With respect to that certain Third Modification Agreement to the Borrowing Base Revolving Line of Credit Agreement
(hereinafter, the “Modification”) between WILLIAM LYON HOMES, INC., a California corporation (“Borrower”), and JPMORGAN CHASE BANK, N.A. (successor by merger to Bank One, NA (Main Office Chicago, Illinois)), a
national banking association (“Bank”), to which this Consent is attached, the undersigned (“Guarantor”), hereby (i) ratifies and reaffirms all of its obligations to Bank under the Guaranty, (ii) consents to the
execution and delivery by Borrower of the attached Modification, and (iii) confirms that the Guaranty remains in full force and effect notwithstanding Borrower’s execution of the attached Modification. The undersigned agrees that the execution
of this Consent and Reaffirmation of Guarantor (the “Consent”) is not necessary for the continued validity and enforceability of the Guaranty, but it is executed to induce Bank to enter into the Modification Agreement. 

 
 This Consent may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and the same document. Signature pages may be detached from the counterparts and attached to a single copy of this Consent to physically form one document. Facsimile
transmission of the signed original of this Consent or the retransmission of any signed facsimile transmission will be deemed the same as delivery of an original. 
  
 IN WITNESS WHEREOF, Guarantor has executed this Agreement as of the date set forth on the attached Third Modification
Agreement. 
  

									
	“Guarantor”	 	 	 	 WILLIAM LYON HOMES,
 a Delaware
corporation

					
	 	 	 	 	 	 	By:	 	/S/    MICHAEL D.
GRUBBS        
	 	 	 	 	 	 	Name:	 	Michael D. Grubbs
	 	 	 	 	 	 	Title:	 	Sr. Vice President
					
	 	 	 	 	 	 	By:	 	/S/    RICHARD S.
ROBINSON        
	 	 	 	 	 	 	Name:	 	Richard S. Robinson
	 	 	 	 	 	 	Title:	 	Sr. Vice President

  

 8

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