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EXHIBIT 4.2    
    

 

REGISTRATION RIGHTS AGREEMENT  

 DATED AS OF DECEMBER 29, 2004

BY AND BETWEEN  

 ALLIANCE IMAGING, INC.  

 AND  

 DEUTSCHE BANK SECURITIES INC.

CITIGROUP GLOBAL MARKETS INC.

LEHMAN BROTHERS INC.

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED  

 

        This Registration Rights Agreement (this "Agreement") is made and entered into as of December 29, 2004, by and among Alliance
Imaging, Inc., a Delaware corporation (the "Company") and Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Lehman
Brothers Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Initial Purchasers"), who have agreed to purchase the Company's
71/4% Senior Subordinated Notes due 2012 (the "Notes") pursuant to the Purchase Agreement (as defined below). 

        This
Agreement is made pursuant to the Purchase Agreement, dated December 9, 2004 (the "Purchase Agreement"), by and among the
Company and the Initial Purchasers. In order to induce the Initial Purchasers to purchase the Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers to purchase the Notes as set forth in the Purchase Agreement. Capitalized terms used herein and not
otherwise defined shall have the meaning assigned to them in the Indenture (the "Indenture"), dated December 29, 2004, between the Company and
The Bank of New York, as Trustee, relating to the Notes and the Series B Notes (as defined below). 

        The
parties hereby agree as follows: 

1.     Definitions  

        As used in this Agreement, the following capitalized terms shall have the following meanings: 

        Act:    The Securities Act of 1933, as amended. 

         Affiliate:    As defined in Rule 144 of the Act. 

         Broker-Dealer:    Any broker or dealer registered under the Exchange Act. 

         Certificated Securities:    The definitive Notes referred to in the second paragraph of Section 201 of the Indenture. 

        Closing Date:    The date hereof. 

         Commission:    The Securities and Exchange Commission. 

         Consummate:    An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (a) the filing
and
effectiveness under the Act of the Exchange Offer Registration Statement relating to the Series B Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange Offer
Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the period required pursuant to Section 3(b) hereof and (c) the
delivery by the Company to the Registrar under the Indenture of Series B Notes in the same aggregate principal amount as the aggregate principal amount of Notes tendered by Holders thereof
pursuant to the Exchange Offer. 

         Consummation Deadline:    As defined in Section 3(b) hereof. 

         Effectiveness Deadline:    As defined in Section 3(a) and 4(a) hereof. 

        Exchange Act:    The Securities Exchange Act of 1934, as amended. 

         Exchange Offer:    The issuance and exchange by the Company of a principal amount of Series B Notes (which shall be registered
pursuant to the
Exchange Offer Registration Statement) equal to the outstanding principal amount of Notes that are tendered by such Holders in connection with such exchange and issuance. 

         Exchange Offer Registration Statement:    The Registration Statement relating to the Exchange Offer, including the related Prospectus.

 

         Exempt Resales:    The transactions in which the Initial Purchasers propose to sell the Notes to certain "qualified institutional buyers,"
as such term
is defined in Rule 144A under the Act and pursuant to Regulation S under the Act. 

         Filing Deadline:    As defined in Sections 3(a) and 4(a) hereof. 

        Holders:    As defined in Section 2 hereof. 

         Prospectus:    The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as
amended or
supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. 

         Recommencement Date:    As defined in Section 6(d) hereof. 

        Registration Default:    As defined in Section 5 hereof. 

         Registration Statement:    Any registration statement of the Company relating to (a) an offering of Series B Notes pursuant to
an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case, (i) that is filed pursuant to the provisions of
this Agreement and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein. 

        Regulation S:    Regulation S promulgated under the Act. 

         Rule 144:    Rule 144 promulgated under the Act. 

         Series B Notes:    The Company's 71/4% Series B Senior Subordinated Notes due 2012 to be issued
pursuant to the Indenture:
(i) in the Exchange Offer or (ii) as contemplated by Section 4 hereof. 

        Shelf Registration Statement:    As defined in Section 4 hereof. 

         Suspension Notice:    As defined in Section 6(d) hereof. 

         TIA:    The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. 

        Transfer Restricted Securities:    Each Note, until the earliest to occur of (a) the date on which such Note is exchanged in the
Exchange Offer
and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (b) the date on which such Note has been disposed of in
accordance with a Shelf Registration Statement, (c) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act, or (d) the date on which such Note
is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including the delivery of the Prospectus contained therein). 

2.     Holders  

        A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns
Transfer Restricted Securities. 

2

 

3.     Registered Exchange Offer  

        (a)   Unless
the Exchange Offer shall not be permitted by applicable law or applicable interpretation of the Staff of the Commission, the Company shall (i) cause the
Exchange Offer Registration Statement to be filed with the Commission on or prior to 120 days after the Closing Date (such 120th day being the "Filing
Deadline"), (ii) use its commercially reasonable efforts to cause such Exchange Offer Registration Statement to become effective at the earliest possible time, but in no
event later than 200 days after the Closing Date (such day being the "Effectiveness Deadline"), (iii) in connection with the foregoing,
(A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause it to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the
registration and qualification of the Series B Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon
the effectiveness of such Exchange Offer Registration Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting (i) registration of
the Series B Notes to be offered in exchange for the Notes that are Transfer Restricted Securities and (ii) resales of Series B Notes by Broker-Dealers that tendered into the
Exchange Offer Notes that such Broker-Dealer acquired for its own account as a result of market-making activities or other trading activities (other than Notes acquired directly from the Company or
any of its Affiliates) as contemplated by Section 3(c) below. 

        (b)   The
Company shall use its commercially reasonable efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange
Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer;  provided, however, that in no event shall such period be less than twenty (20) Business Days. The
Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Series B Notes shall be included in the Exchange Offer
Registration Statement. The Company shall use its commercially reasonable efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration
Statement has become effective, but in no event later than 230 days after the Closing Date (such day being the "Consummation Deadline"). 

        (c)   The
Company shall include a "Plan of Distribution" Section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any
Broker-Dealer who holds Transfer Restricted Securities that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities (other than Notes
acquired directly from the Company or any Affiliate of the Company), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of Distribution" Section shall also
contain all other information with respect to such sales by such Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall
not name any such Broker-Dealer or disclose the amount of Transfer Restricted Securities held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in
policy, rules or regulations after the date of this Agreement. 

        Because
such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection
with its initial sale of any Series B Notes received by such Broker-Dealer in the Exchange Offer, the Company shall permit the use of the Prospectus contained in the Exchange Offer Registration
Statement by such Broker-Dealer to satisfy such prospectus delivery requirement. To the extent necessary to ensure that the prospectus contained in the Exchange Offer Registration Statement is
available for sales of Series B Notes by Broker-Dealers, the Company agrees to use its commercially reasonable efforts to keep the Exchange Offer Registration Statement continuously effective,
supplemented, amended and current as 

3

 

required
by and subject to the provisions of Section 6(a) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period the earlier of (a) 180 days from the Consummation of the Exchange Offer and (b) such shorter period as will terminate when
all Transfer Restricted Securities covered by such Registration Statement have been sold pursuant thereto. The Company shall provide sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, promptly upon request, and in no event later than one day after such request, at any time during such period. 

4.     Shelf Registration  

        (a)    Shelf Registration.    If (i) the Exchange Offer is not permitted by applicable law or applicable
interpretation of the Staff of the Commission or (ii) if any Holder of Transfer Restricted Securities shall notify the Company within twenty (20) Business Days following the Consummation
Deadline that (A) such Holder was prohibited by law or Commission policy from participating in the Exchange Offer or (B) such Holder may not resell the Series B Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Notes acquired directly from the Company or any of its Affiliates, then the Company
shall: 

	(x)
	cause
to be filed, on or prior to 30 days after the earlier of (i) the date on which the Company determines that the Exchange Offer Registration Statement cannot be
filed as a result of clause (a)(i) above and (ii) the date on which the Company receives the notice specified in clause (a)(ii) above, (such earlier date, the
"Filing Deadline"), a shelf registration statement pursuant to Rule 415 under the Act (which may be an amendment to the Exchange Offer
Registration Statement (the "Shelf Registration Statement")), relating to all Transfer Restricted Securities, and

	(y)
	shall
use its commercially reasonable efforts to cause such Shelf Registration Statement to become effective on or prior to 75 days after the Filing Deadline for the Shelf
Registration Statement (such 75th day the "Effectiveness Deadline"). 

        If,
after the Company has filed an Exchange Offer Registration Statement that satisfies the requirements of Section 3(a) above, the Company is required to file and make effective
a Shelf Registration Statement solely because the Exchange Offer is not permitted under applicable federal law (i.e., clause (a)(i) above), then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of clause (x) above; provided that, in such event, the Company shall remain
obligated to meet the Effectiveness Deadline set forth in clause (y). 

        To
the extent necessary to ensure that the Shelf Registration Statement is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this
Section 4(a) and the other securities required to be registered therein pursuant to Section 6(b)(ii) hereof, the Company shall use its commercially reasonable efforts to keep any
Shelf Registration Statement required by this Section 4(a) continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(b) and
(c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least
two years (as extended pursuant to Section 6(c)(i)) following the Closing Date, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Shelf
Registration Statement have been sold pursuant thereto. 

        (b)    Provision By Holders of Certain Information In Connection With The Shelf Registration Statement.    No Holder
of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the
Company in writing, within 20 days after receipt of a request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Act for use in
connection with any 

4

 

Shelf
Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to liquidated damages pursuant to Section 5
hereof unless and until such Holder shall have provided all such information. Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially misleading. 

5.     Liquidated Damages  

        If (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline,
(ii) any such Registration Statement has not been declared effective by the Commission on or prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not been
Consummated on or prior to the Consummation Deadline or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or
fail to be usable for its intended purpose without being succeeded within two (2) Business Days by a post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective within two (2) Business Days of filing such post-effective amendment to such Registration Statement (each such event referred to in clauses
(i) through (iv), a "Registration Default"), then the Company hereby agrees to pay to each Holder of Transfer Restricted Securities affected
thereby Liquidated Damages. Liquidated Damages shall accrue at an annual rate of 0.25% of the aggregate principal amount of Transfer Restricted Securities on the date of such Registration Default,
payable in cash semi-annually in arrears on each Interest Payment Date. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of
a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement) to again be declared effective or made usable in the case of (iv) above, the liquidated damages payable with respect to the Transfer Restricted Securities as a result of
such clause (i), (ii), (iii) or (iv), as applicable, shall cease. 

        All
accrued liquidated damages shall be paid to the Holders entitled thereto, in the manner provided for the payment of interest in the Indenture, on each Interest Payment Date, as more
fully set forth in the Indenture and the Notes. Notwithstanding the fact that any securities for which liquidated damages are due cease to be Transfer Restricted Securities, all obligations of the
Company to pay liquidated
damages with respect to securities shall survive until such time as such obligations with respect to such securities shall have been satisfied in full. 

6.     Registration Procedures  

        (a)    Exchange Offer Registration Statement.    In connection with the Exchange Offer, the Company shall
(x) comply with all applicable provisions of Section 6(c) below, (y) use its commercially reasonable efforts to effect such exchange and to permit the resale of Series B
Notes by Broker-Dealers that tendered in the Exchange Offer Notes that such Broker-Dealer acquired for its own account as a result of its market-making activities or other trading activities (other
than Notes acquired directly from the Company or any of its Affiliates) being sold in accordance with the intended method or methods of distribution thereof, and (z) comply with all of the
following provisions: 

        (i)    As
a condition to its participation in the Exchange Offer, each Holder of Transfer Restricted Securities (including, without limitation, any Holder who is a
Broker-Dealer) shall furnish, upon the request of the Company, prior to the Consummation of the Exchange Offer, a written representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an 

5

 

Affiliate
of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the
Series B Notes to be issued in the Exchange Offer and (C) it is acquiring the Series B Notes in its ordinary course of business. As a condition to its participation in the
Exchange Offer each Holder using the Exchange Offer to participate in a distribution of the Series B Notes shall acknowledge and agree that, if the resales are of Series B Notes obtained
by such Holder in exchange for Notes acquired directly from the Company or an Affiliate thereof, it (1) could not, under Commission policy as in effect on the date of this Agreement, rely on
the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of
Regulation S-K. 

        (ii)   Prior
to effectiveness of the Exchange Offer Registration Statement, if the Commission so requests, the Company shall provide a supplemental letter to the Commission
(A) stating that the Company is registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5,
1991) as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993 and (B) including a representation that the Company has not entered into any arrangement
or understanding with any Person to distribute the Series B Notes to be received in the Exchange Offer and that, to the best of the Company's information and belief, each Holder participating
in the Exchange Offer is acquiring the Series B Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the
Series B Notes received in the Exchange Offer. 

        (b)    Shelf Registration Statement.    

        (i)    In
connection with the Shelf Registration Statement, the Company shall comply with all applicable provisions of Section 6(c) below and use its commercially
reasonable efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as
indicated in the information furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company will prepare and file with the Commission a Registration Statement
relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods
of distribution thereof within the time periods and otherwise in accordance with the provisions hereof, and 

        (ii)   issue,
upon the request of any Holder or purchaser of Notes covered by any Shelf Registration Statement contemplated by this Agreement, Series B Notes having an
aggregate principal amount equal to the aggregate principal amount of Notes sold pursuant to the Shelf Registration Statement and surrendered to the Company for cancellation; the Company shall
register Series B Notes on the Shelf Registration Statement for this purpose and issue the Series B Notes to the purchaser(s) of securities subject to the Shelf Registration Statement in
the names such purchaser(s) shall designate. 

        (c)    General Provisions.    In connection with any Registration Statement and any related Prospectus required by
this Agreement, the Company shall: 

        (i)    use
its commercially reasonable efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period
specified in Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to
contain an untrue statement of 

6

 

material
fact or omit to state any material fact necessary to make the statements therein not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company shall file promptly an appropriate amendment to such Registration Statement curing such defect, and, if Commission review is required, use its
commercially reasonable efforts to cause such amendment to be declared effective as soon as practicable; 

        (ii)   prepare
and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as the case may be; cause the Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with
the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; 

        (iii)  advise
each Holder promptly and, if requested by such Holder, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of
the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification
of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any
additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company shall use its commercially reasonable efforts to obtain the withdrawal or
lifting of such order at the earliest possible time; 

        (iv)  subject
to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or
post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading; 

        (v)   furnish
to each Holder in connection with such exchange or sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the reasonable review and comment of such Holders in connection with such sale, if any, for a period of at least two (2) Business Days, and the
Company will not file 

7

 

any
such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which such
Holders shall reasonably object within two (2) Business Days after the receipt thereof; 

        (vi)  make
available, at reasonable times, for inspection by each Holder and any attorney or accountant retained by such Holders, all financial and other records, pertinent
corporate documents of the Company and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Holder, attorney or accountant in connection
with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness;  provided, however,
 that such persons shall first agree in writing with the Company that any information
that is reasonably and in good faith designated by the Company in writing as confidential at the time of delivery of such information shall be kept confidential by such Persons, unless
(i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities, (ii) disclosure of such information is
required by law (including any disclosure requirements pursuant to federal securities laws in connection with the filing of such Registration Statement or the use of any Prospectus), (iii) such
information becomes generally available to the public other than as a result of a disclosure or failure to safeguard such information by such person or (iv) such information becomes available
to such person from a source other than the Company and its subsidiaries and such source is not known, after due inquiry, by the relevant Holder to be bound by a confidentiality agreement;  provided further, that the foregoing investigation shall be coordinated on behalf of the Holders by one representative designated by and on behalf of
such Holders and any such confidential information shall be available from such representative to such Holders so long as any Holder agrees to be bound by such confidentiality agreement; 

        (vii)  if
requested by any Holders in connection with such exchange or sale, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such Holders may reasonably request to have included therein, including, without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is
notified of the matters to be included in such Prospectus supplement or post-effective amendment; 

        (viii)  furnish
to each Holder in connection with such exchange or sale, without charge, at least one copy of the Registration Statement, as first filed with the Commission,
and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); 

        (ix)  deliver
to each Holder without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons
reasonably may request; the Company hereby consents to the use (in accordance with law) of the Prospectus and any amendment or supplement thereto by each selling Holder in connection with the offering
and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; 

        (x)   upon
the request of any Holder, enter into such agreements (including underwriting agreements) and make such representations and warranties and take all such other
actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any applicable Registration Statement contemplated by this
Agreement as may be reasonably requested by any Holder in connection with any sale or resale pursuant to any applicable Registration Statement. In such connection, the Company shall: 

        (A)  upon
request of any Holder, furnish (or in the case of paragraphs (2) and (3), use its commercially reasonable efforts to cause to be furnished) to the Holders,
upon Consummation 

8

 

of
the Exchange Offer or upon the effectiveness of the Shelf Registration Statement, as the case may be: 

        (1)   a
certificate, dated such date, signed on behalf of the Company by (x) the President or any Vice President and (y) a principal financial or accounting
officer of the Company, confirming, as of the date thereof, the matters set forth in Sections 7(d)-(f) of the Purchase Agreement and such other similar matters as such Holders may reasonably request; 

        (2)   an
opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the
Company covering matters customarily covered in opinions requested in similar sales of securities or underwritten offerings; 

        (3)   a
customary comfort letter, dated the date of Consummation of the Exchange Offer, or as of the date of effectiveness of the Shelf Registration Statement, as the case may
be, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with similar underwritten
offerings; and 

        (B)  deliver
such other documents and certificates as may be reasonably requested by the selling Holders to evidence compliance with the matters covered in clause (A)
above and with any customary conditions contained in the any agreement entered into by the Company pursuant to this clause (x); 

        (xi)  prior
to any public offering of Transfer Restricted Securities, cooperate with the selling Holders and their counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders may request and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement;  provided, however, that the Company shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so subject; 

        (xii) in
connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the
Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer
Restricted Securities in such denominations and such names as the selling Holders may request at least two (2) Business Days prior to such sale of Transfer Restricted Securities; 

        (xiii)  use
its commercially reasonable efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities, subject to
the proviso contained in clause (xi) above; 

        (xiv)  provide
a CUSIP number for all Transfer Restricted Securities not later than the effective date of a Registration Statement covering such Transfer Restricted
Securities and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company; 

        (xv) otherwise
use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security
holders with regard to 

9

 

any
applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) covering a twelve-month period
beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act); 

        (xvi)  cause
the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection
therewith, cooperate with the
Trustee and the Holders to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use its commercially
reasonable efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and 

        (xvii)  provide
promptly to each Holder, upon request, each document filed with the Commission pursuant to the requirements of Section 13 or Section 15(d) of
the Exchange Act. 

        (d)    Restrictions On Holders.    Each Holder agrees by acquisition of a Transfer Restricted Security that, upon
receipt of the notice referred to in Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof (in each case,
a "Suspension Notice"), such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration
Statement until (i) such Holder has received copies of the supplemented or amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in
writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (in each
case, the "Recommencement Date"). Each Holder receiving a Suspension Notice hereby agrees that it will either (i) destroy any Prospectuses, other
than permanent file copies, then in such Holder's possession which have been replaced by the Company with more recently dated Prospectuses or (ii) deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Holder's possession of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of the
Suspension Notice. The time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by a number of days equal to
the number of days in the period from and including the date of delivery of the Suspension Notice to the date of delivery of the Recommencement Date. 

7.     Registration Expenses  

        (a)   All
expenses incident to the Company's performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement
becomes effective, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates for the Series B Notes to be issued in the Exchange Offer) and printing of Prospectuses, messenger and
delivery services and telephone; (iv) all reasonable fees and disbursements of counsel for the Company and, subject to the limitations set forth in Section 7(b), the Holders of Transfer
Restricted Securities; (v) all application and filing fees in connection with listing the Series B Notes on a national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all reasonable fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance). 

        The
Company will, in any event, bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties),
the expenses 

10

 

of
any annual audit and the fees and expenses of any Person, including special experts, retained by the Company. 

        (b)   In
connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf
Registration Statement), the Company will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities who are tendering Notes in the Exchange Offer and/or selling or reselling
Notes or Series B Notes pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees
and disbursements of not more than one counsel, who shall be Cahill Gordon & Reindel llp, unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being prepared. 

8.     Indemnification  

        (a)   The
Company agrees to indemnify and hold harmless each Holder, its directors, officers and each Person, if any, who controls such Holder (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, liabilities, judgments, caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto) provided by the Company to any Holder or any
prospective purchaser of Series B Notes or registered Notes, 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, liabilities or judgments are caused by an untrue statement or omission or alleged untrue statement or omission
that is based upon information relating to any of the Holders furnished in writing to the Company by any of the Holders. 

        (b)   Each
Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and its directors and officers, and each
person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company, to the same extent as the foregoing indemnity from the Company
set forth in Section (a) above, but only with reference to information relating to such Holder furnished in writing to the Company by such Holder expressly for use in any Registration
Statement. In no event shall any Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount
received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted
Securities and (ii) the amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. 

        (c)   In
case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"Indemnified Party"), the Indemnified Party shall promptly notify the person against whom such indemnity may be sought (the
"Indemnifying Party") in writing and the Indemnifying Party shall assume the defense of such action, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense
thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holder). Any Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnified Party unless (i) the employment of such counsel shall have
been specifically authorized in writing by the Indemnifying Party, (ii) the Indemnifying Party shall have failed 

11

 

to
assume the defense of such action or employ counsel reasonably satisfactory to the Indemnified Party or (iii) the named parties to any such action (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party, and the Indemnified Party shall have been advised by such counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the Indemnifying Party (in which case the Indemnifying Party shall not have the right to assume the defense of such action on behalf of the
Indemnified Party). In any such case, the Indemnifying Party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to one separate firm of local counsel in each such
jurisdiction) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by a majority of the Holders, in the case of
the parties indemnified pursuant to Section 8(a), and by the Company, in the case of parties indemnified pursuant to Section 8(b). The Indemnifying Party shall indemnify and hold
harmless the Indemnified Party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with its written consent or
(ii) effected without its written consent if the settlement is entered into more than forty (40) Business Days after the Indemnifying Party shall have received a request from the
Indemnified Party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the Indemnifying Party) and, prior to the date of such
settlement, the Indemnifying Party shall have failed to comply with such reimbursement request. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any
settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the Indemnified Party is or could have been a party and indemnity
or contribution may be or could have been sought hereunder by the Indemnified Party, unless such settlement, compromise or judgment (i) includes an unconditional release of the Indemnified
Party from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure
to act, by or on behalf of the Indemnified Party. 

        (d)   To
the extent that the indemnification provided for in this Section 8 is unavailable to an Indemnified Party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as
a result of such losses, claims, damages, liabilities or judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the
Holders, on the other hand, from their sale of Transfer Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Company, on the one hand, and of the Holder,
on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The
relative fault of the Company, on the one hand, and of the Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or by the Holder, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and judgments referred to above shall be deemed to include, subject to the limitations set forth in Section 8(c), any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim. 

        The
Company and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders
were treated as one entity for such purpose) or by any other method of allocation which does not take account of 

12

 

the
equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, no Holder, its directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which
the total received by such Holder with respect to the sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer
Restricted Securities and (ii) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several in proportion to the respective principal amount of Transfer Restricted Securities
held by each Holder hereunder and not joint. 

9.     Rule 144A and Rule 144  

        The Company agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company (i) is
not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in
order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the Exchange Act, to make all filings required
thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. 

10.   Miscellaneous  

        (a)    Remedies.    The Liquidated Damages contemplated hereby shall be the exclusive remedy available to Holders of
Transfer Restricted Securities for any failure by the Company to comply with the registration requirements of this Agreement. 

        (b)    No Inconsistent Agreements.    The Company will not, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. 

        (c)    Amendments and Waivers.    The provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to or departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities (excluding Transfer Restricted Securities held by the Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent to departure from the provisions
hereof that relates exclusively to the rights of Holders whose Transfer Restricted Securities are being tendered pursuant to the Exchange Offer, and that does not affect directly or indirectly the
rights of other Holders whose Transfer Restricted Securities are not being tendered pursuant to such Exchange Offer, may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities subject to such Exchange Offer. 

13

 

        (d)    Third Party Beneficiary.    The Holders shall be third party beneficiaries to the agreements made hereunder
between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary
or advisable to protect its rights or the rights of Holders hereunder. 

        (e)    Notices.    All notices and other communications provided for or permitted hereunder shall be made in writing
by hand delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: 

        (i)    if
to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and 

        (ii)   if
to the Company: 

Alliance
Imaging, Inc.

1900 S. State College Blvd., Suite 600

Anaheim, CA 92806

Telecopier No.: (714) 688-3377

Attention: General Counsel 

With
a copy to: 

Latham &
Watkins LLP

135 Commonwealth Drive

Menlo Park, CA 94025

Telecopier No.: (650) 463-2600

Attention: Peter F. Kerman, Esq. 

        All
such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five (5) Business Days after being deposited
in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. 

        Copies
of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. 

        (f)    Successors and Assigns.    This Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided, that nothing
herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the
terms of this Agreement, and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and
provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits
hereof. 

        (g)    Counterparts.    This Agreement may be executed in any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 

        (h)    Headings.    The headings in this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof. 

14

 

        (i)    GOVERNING LAW.    THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. 

        (j)    Severability.    In the event that any one or more of the provisions contained herein, or the application
thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby. 

        (k)    Entire Agreement.    This Agreement is intended by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement
supersedes all prior agreements and understandings between the parties with respect to such subject matter. 

15

   
        IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. 

	 	 	ALLIANCE IMAGING, INC.
	

 	
 	

 	

 	

 
	 	 	By:	/s/  RUSSELL D. PHILLIPS, JR.      

	 	 	 	Name:	Russell D. Phillips, Jr.
	 	 	 	Title:	Executive Vice President, General Counsel, Secretary
	 	 	 	 	 

S-1

 

	DEUTSCHE BANK SECURITIES INC.	 	 
	

 	

 	

 	
 	

 
	By:	/s/  JOHN C. CUSHMAN      
	 	 
	 	Name:	John C. Cushman	 	 
	 	Title:	Director	 	 
	

 	

 	

 	
 	

 
	By:	/s/  THOMAS PRIOR      
	 	 
	 	Name:	Thomas Prior	 	 
	 	Title:	Managing Director	 	 
	

 	

 	

 	
 	

 
	For itself and on behalf of the several Initial Purchasers named on Schedule 1 to the Purchase Agreement	 	 
	 	 	 	 	 

S-2

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Exhibit 4.1    
    

DUSA PHARMACEUTICALS, INC.

1996 OMNIBUS PLAN

(AS AMENDED April 23, 2004)  

Article I—Purpose  

        This Omnibus Plan (the "Plan") is intended to promote the growth and general prosperity of DUSA Pharmaceuticals, Inc. (the "Company") and its shareholders
by offering incentives to its key directors, employees and consultants of the Company who are primarily responsible for the growth of the Company and to attract and retain qualified directors,
employees and consultants of the Company and thereby benefit its shareholders based on the growth of the Company. 

Article II—Definitions  

        Unless the context indicates otherwise, the following terms, when used in this Plan, shall have the meanings set forth in this Section: 

        (a)   "Award"
shall mean grants under this Plan that provide the participants with the right to purchase Common Stock or that are valued by reference to the Fair Market Value
of the Common Stock. 

        (b)   "Board"
shall mean the Board of Directors of the Company. 

        (c)   "Cause"
shall mean deliberate, willful or gross misconduct. 

        (d)   A
"Change of Control" shall be deemed to have taken place upon (i) the acquisition by a third person, including a "group" as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, of shares of the Company having 50% or more of the total number of votes that may be cast for the election of Directors of the Company;
(ii) shareholder approval of a transaction for the acquisition of the Company, or substantially all of its assets by another entity or for a merger, reorganization, consolidation or other
business combination to which the Company is a part; or (iii) the election during any period of 24 months or less of 50% or more of the Directors of the Company where such Directors were
not in office immediately prior to such period provided, however, that no "Change of Control" shall be deemed to have taken place if the Directors of
the Company in office on the date of adoption of the Plan, or their successors in office nominated by such Directors, affirmatively approve a resolution to such effect. 

        (e)   "Code"
shall mean the Internal Revenue Code of 1986 as it may be amended from time to time. 

        (f)    "Committee"
shall mean, collectively, the Board, or any Committee of two or more Non-Employee Directors, that may be designated by the Board to administer
the Plan. 

        (g)   "Common
Stock" shall mean all classes of stock, without par value, including convertible preferred, stock purchase warrants and all common stock equivalents. 

        (h)   "Consultant"
shall mean any person who (i) is engaged to perform services for the Company or its Subsidiaries, other than as an Employee or Director, or
(ii) has agreed to become a consultant within the meaning of clause (i). 

        (i)    "Director"
shall mean any member of the Board. 

        (j)    "Disability"
shall mean inability to perform the services required hereunder due to mental or physical disability which continues for either (i) a total of 180
working days during any 12- month period or (ii) 150 consecutive working days. 

        (k)   "Employee"
shall mean (i) any full-time employee of the Company or its Subsidiaries (including Directors who are otherwise employed on a
full-time basis by the Company or its 

 

Subsidiaries),
or (ii) any person who has agreed to become an employee within the meaning of clause (i). 

        (l)    "Exchange
Act" shall mean the Securities Exchange Act of 1934 as it may be amended from time to time. 

        (m)  "Fair
Market Value" of the Common Stock on a given date shall be based upon, the last sales price or, if unavailable, the average of the closing bid and asked prices per
share of the Common Stock on such date (or, if there was no trading or quotation in the Common Stock on such date, on the next preceding date on which there was trading or quotation). 

        (n)   "Grantee"
shall mean a person granted an Award under the Plan. 

        (o)   "ISO"
shall mean an Option granted pursuant to the Plan to purchase shares of the Common Stock and intended to qualify as an incentive stock option under
Section 422 of the Code, as now or hereafter constituted. 

        (p)   "1933
Act" shall mean the Securities Act of 1933; as amended. 

        (q)   "Non-Employee
Director" shall mean a non-employee director as defined in Exchange Act Rule 16b-3(b)(3)(i). 

        (r)   "NQSO"
shall mean an Option granted pursuant to the Plan to purchase shares of the Common Stock that is not an ISO. 

        (s)   "Options"
shall refer collectively to NQSOs and ISOs issued under and subject to the Plan. Each option is exercisable into one share of Common Stock of the Company. 

        (t)    "Parent"
shall mean any parent corporation as defined in Section 424 of the Code. 

        (u)   "Performance
Awards" shall mean grants under the Plan, payable in cash, Common Stock, other securities or other awards and shall confer on the holder there of the right
to receive payments, upon the achievement of such performance goals during such performance periods as the Committee shall establish. 

        (v)   "Restricted
Stock" shall mean Common Stock subject to restrictions on transfer and/or such other restrictions on incidents of ownership as the Committee may determine. 

        (w)  "SAR"
shall mean a right to receive, upon surrender of the right, but without payment, an amount payable in cash. 

        (x)   "Subsidiary"
shall mean (i) any corporation with respect to which the Company owns, directly or indirectly, 50% or more of the total combined voting power of all
classes of stock of such Company, or (ii) any entity which the Committee reasonably expects to become a subsidiary within the meaning of clause (i). 

Article III—Administration  

        The Plan shall be administered by the Committee. Subject to the provisions of the Plan, the Committee shall have full discretion and the exclusive power
(i) to select the Employees, Consultants and Directors who will participate in the Plan and to make Awards to such Employees, Consultants, and Directors, (ii) to determine the time at
which such Awards shall be granted and any terms and conditions with respect to such Awards as shall not be inconsistent with the provisions of the Plan, and (iii) to resolve all questions
relating to the administration of the Plan. The interpretation of and application by the Committee of any provision of the Plan shall be final and conclusive. The Committee may in its discretion
establish such rules and guidelines relating to the Plan as it may deem desirable. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Awards granted hereunder. The 

2

 

Committee
may employ such legal counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion received from any such counsel or consultant
and any computation received from any such consultant or agent. The Committee shall keep minutes of its actions under the Plan. 

Article IV—Shares of Common Stock Subject to the Plan  

        Subject to the provisions of Article XV, the maximum number of shares with respect to which the Awards may be granted under the Plan shall not exceed
twenty percent (20%) of the number of shares of Common Stock outstanding or a maximum of 3,343,874 shares. Any shares subject to an Award under the Plan, which Award for any reason expires or is
terminated unexercised as to such shares, shall again be available for the grant of other Awards under the Plan provided, however, that forfeited Common
Stock or other securities shall not be available for further Awards if the participant has realized any benefits of ownership from such Common Stock. Shares delivered upon exercise of the Awards, at
the election of the Board of Directors of the Company, may be stock that is authorized but previously unissued or stock reacquired by the Company or both. 

Article V—Eligibility  

        The individuals who shall be eligible to participate in the Plan shall be Employees, Consultants and Directors of the Company. An Employee, Consultant or Director
who has been granted an Award in one year shall not necessarily be entitled to be granted Awards in subsequent years. 

Article VI—Grants of Stock Options to Employees and Consultants  

        The Committee may grant Options, as follows, which may be designated as (i) NQSOs or (ii) ISOs intended to qualify under Code Section 422: 

        (a)   Nonqualified Stock Options. A NQSO is a right to purchase a specified number of shares of Common Stock during such
specified time as the Committee may determine, not to exceed ten (10) years, at a price determined by the Committee that, unless deemed otherwise by the Committee, is not less than the Fair
Market Value of the Common Stock on the date the option is granted. NQSOs granted to Employees and Consultants shall vest at the rate of one quarter of the total granted on each of the first, second,
third and fourth anniversaries of the day of the grant, subject to satisfaction of certain conditions involving continuous periods of service or engagement. 

        (i)    The
purchase price of the Common Stock subject to the NQSO may be paid in cash. At the discretion of the Committee, the purchase price may also be paid by the tender of
Common Stock or through a combination of Common Stock and cash or through such other means as the Committee determines are consistent with the Plan's purpose and applicable law. No fractional shares
of Common Stock will be issued or accepted. 

        (ii)   Without
limiting the foregoing, to the extent permitted by law (including relevant state law), (A) the Committee may agree to accept, as full or partial payment
of the purchase price of Common Stock issued upon the exercise of the NQSO, a promissory note of the person exercising the NQSO evidencing the person's obligation to make future cash payments to the
Company, which promissory note shall be payable as determined by the Company (but in no event later than five (5) years after the date thereof), shall be secured by a pledge of the shares of
Common Stock purchased and shall bear interest at a rate established by the Committee and (B) the Committee may also permit the person exercising the NQSO, either on a selective or aggregate
basis, to simultaneously exercise the NQSO and sell the shares of Common Stock acquired, pursuant to a brokerage or similar arrangement approved in advance by the Committee, and use the proceeds from
sale as payment of the purchase price of such Common Stock. 

3

 

        (b)   Incentive Stock Options. An ISO is an Award in the form of an Option to purchase Common Stock that complies with the
requirements of Code Section 422 or any successor section. 

        (i)    The
aggregate Fair Market Value (determined at the time of the grant of the Award) of the shares of Common Stock subject to ISOs which are exercisable by one person for
the first time during a particular calendar year shall not exceed $100,000. To the extent that ISOs granted to an employee exceed the limitation set forth in the preceding sentence, ISOs granted last
shall be treated as NQSOs. 

        (ii)   No
ISO may be granted under this Plan on or after the tenth anniversary of the date this Plan is adopted or the date this Plan is approved by shareholders, whichever is
earlier. 

        (iii)  No
ISO may be exercisable more than: 

        (A)  in
the case of an Employee who is not a Ten Percent Shareholder, within the meaning of Code Section 422, on the date the ISO is granted; ten (10) years
after the date the ISO is granted; and 

        (B)  in
the case of an Employee who is a Ten Percent Shareholder, within the meaning of Code Section 422, on the date the ISO is granted, five (5) years after
the date the ISO is granted. 

        (iv)  The
exercise price of any ISO shall be determined by the Committee and shall be no less than: 

        (A)  in
the case of an Employee who is not a Ten Percent Shareholder, on the date the ISO is granted, the Fair Market Value of the Common Stock subject to the ISO on such
date; and 

        (B)  in
the case of an Employee who is a Ten Percent Shareholder, on the date the ISO is granted, not less than 110 percent of the Fair Market Value of the Common
Stock subject to the ISO on such date. 

        (v)   The
Committee may provide that the option price under an ISO may be paid by one or more of the methods available for paying the option price of an NQSO. 

        (vi)  ISOs
shall vest at the rate of one quarter of the total granted on each of the first, second, third and fourth anniversaries of the day of the grant, subject to
satisfaction of certain conditions involving continuous periods of service or engagement. 

Article VII—Grants of Stock Appreciation Rights to Employees and Consultants  

        An SAR is a right to receive, upon surrender of the right, but without payment, an amount payable in cash. 

        (i)    The
amount payable with respect to each SAR shall be equal in value to the applicable percentage of the excess, if any, of the Fair Market Value of a share of Common
Stock on the exercise date over the exercise price of the SAR. The exercise price of the SAR shall be determined by the Committee and shall not be less than the Fair Market Value of a share of Common
Stock on the date the SAR is granted. 

        (ii)   In
the case of an SAR granted in tandem with an ISO to an Employee or Consultant who is a Ten Percent Shareholder on the date of such grant, the amount payable with
respect to each SAR shall be equal in value to the applicable percentage of the excess, if any, of the Fair Market Value of a share of Common Stock on the exercise date over the exercise price of the
SAR, which exercise price shall not be less than 110% of the Fair Market Value of a share of Common Stock on the date the SAR is granted. 

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        (iii)  The
applicable percentage and exercise price shall be established by the Committee at the time the SAR is granted. 

        (iv)  SARs
shall vest at the rate of one quarter of the total granted on each of the first, second, third and fourth anniversaries of the day of the grant, subject to
satisfaction of certain conditions involving continuous periods of service or engagement. 

Article VIII—Grants of Restricted Stock to Employees and Consultants  

        Restricted Stock is Common Stock of the Company that is issued to a participant at a price determined by the Committee, which price may be zero, and is subject to
restrictions on transfer and/or such other restrictions on incidents of ownership as the Committee may determine. 

Article IX—Grants of Performance Awards to Employees and Consultants  

        A Performance Award granted under the Plan (i) may be denominated or payable in cash, Common Stock (including without limitation, Restricted Stock), other
securities or other Awards and (ii) shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan and any applicable Award agreement, the performance goals to be achieved during any performance period, the length of any
performance period, the amount of any Performance Award granted and the amount of any payment or transfer to be made pursuant to any Performance Award shall be determined by the Committee. 

Article X—Grants of Other Stock-Based Incentive Awards to Employees and Consultants  

        The Committee may from time to time grant Awards under this Plan that provide the participant with the right to purchase Common Stock or that are valued by
reference to the Fair Market Value of the Common Stock (including, but not limited to, phantom securities or dividend equivalents). Such Awards shall be in a form determined by the Committee (and may
include terms contingent upon a change of control of the Company), provided that such Awards shall not be inconsistent with the terms and purposes of
the Plan. The Committee will determine the price of any Award and may accept any lawful consideration. 

Article XI—Grants of Stock Options to Directors  

        (a)   Directors
of the Company shall be eligible to receive NQSOs under the Plan. Each individual who agrees to become a Director shall receive, on
June 30th of the first year of such service or as of the close of business thirty (30) days following his/her election, whichever shall first occur, and without the
exercise of the discretion of any person, a NQSO under the Plan relating to the purchase of 15,000 shares of Common Stock at an exercise price equal to the Fair Market Value. Thereafter, on
June 30th of each year, each individual who is a continuing Director shall receive, without the exercise of the discretion of any person, a NQSO under the Plan relating to the
purchase of 10,000 shares of Common Stock. 

        (i)    Notwithstanding
the preceding, all continuing directors on June 30, 2001, shall receive, for that year only, a NQSO under the Plan relating to the purchase of
5,000 shares of Common Stock. 

        (b)   The
exercise price of each share of Common Stock subject to a NQSO granted to a Director shall equal the Fair Market Value of a share of Common Stock on the date such
NQSO is granted. The option price of a NQSO granted to a Director may be paid in accordance with Article VI (a) (i) and (ii) of the Plan. 

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        (c)   Each
automatic NQSO granted to a Director shall vest in full on the date of the grant. The NQSOs to directors shall have a term not to exceed ten (10) years from
the date of grant, or, if later, the date the Grantee becomes a Director. Notwithstanding the exercise period of any NQSO granted to a Director, all such NQSOs shall immediately become exercisable
upon (i) the death of a Director while serving as such, or (ii) a Change of Control. 

Article XII—Exercise of Options  

        Options granted under the Plan may be exercised by a Grantee only while the Employee, Consultant or Director is and, continuously since the date the Option was
granted, has been an Employee, Consultant or Director of the Company or one of its subsidiaries, except that: 

        (i)    if
the Grantee's termination of employment is other than for Cause, any Options held by the Grantee may be exercised, to the extent then exercisable, for a period of
three months after the date of such termination of employment; 

        (ii)   if
such termination of employment is by reason of retirement or disability, any Options held by the Grantee at the time of death or disability will be exercisable for a
period of 12 months after the date of such termination of employment; 

        (iii)  in
the event of death after termination of employment pursuant to (i) or (ii) above, the person or persons to whom the Grantee's rights are transferred
by will or the laws of descent and distribution shall have a period of three years from the date of termination of the Grantee's employment to exercise any Options which the Grantee could have
exercised during such period; and 

        (iv)  in
the event of the death of an Grantee while employed, any Options then held by the Grantee shall become fully and immediately exercisable and may be exercised by the
person or persons to whom the Grantee's rights are transferred by will or the laws of descent and distribution for a period of three years after the Grantee's death. In no event, however, shall any
Option be exercisable after the date specified in Article VI, as applicable. 

        An
Option granted hereunder shall be exercisable, in whole or in part, only by written notice delivered in person or by mail to the Secretary of the Company at its principal office,
specifying the number of shares of Common Stock to be purchased and accompanied by payment thereof and otherwise in accordance with the option agreement pursuant to which the Option was granted. 

        In
the event of a Change of Control affecting the Company, then, notwithstanding any provision of the Plan or of any provisions of any Award agreements entered into between the Company
and any participant to the contrary, all Awards that have not expired and which are then held by any participant (or the person or persons to whom any deceased participant's rights have been
transferred) shall, as of such Change of Control, become fully and immediately vested and exercisable and may be exercised for the remaining term of such Awards. 

Article XIII—Award Agreements  

        Each Award granted under the Plan shall be evidenced by an Award agreement between the Grantee and the Company, setting forth the number of shares of Common
Stock, SARs, or units subject to the Award and such other terms and conditions applicable to the Award not inconsistent with the Plan as the Committee may deem appropriate. 

Article XIV—Tax Withholding  

        The Committee may establish such rules and procedures as it considers desirable in order to satisfy any obligation of the Company or any subsidiary to withhold
federal income taxes or other taxes with 

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respect
to any Award made under the Plan. Such rules and procedures may provide (i) in the case of Awards paid in shares of Common Stock, that the person receiving the Award may satisfy the
withholding obligation by instructing the Company to withhold shares of Common Stock otherwise issuable upon exercise of such Award in order to satisfy such withholding obligation and (ii) in
the case of an Award paid in cash, that the withholding obligation shall be satisfied by withholding the applicable amount and paying the net amount in cash to the participant. 

Article XV—Dilution or Other Adjustment  

        If the Company is a party to any merger or consolidation, or undergoes any separation, reorganization or liquidation, the Board of Directors of the Company shall
have the power to make arrangements, which shall be binding upon the holders of unexpired Awards, for the substitution of new Awards for, or the assumption by another corporation of, any unexpired
Awards then outstanding hereunder. In the case of any ISO, such action shall be taken only in the manner and to the extent permitted by Sections 422 and 424 of the Code. In addition, in the event of a
reclassification, stock split, combination of shares, separation (including a spin-off), dividend on shares of the Common Stock payable in stock, or other similar change in capitalization
or in the corporate structure of shares of the Common Stock of the Company, the Committee shall conclusively determine the appropriate adjustment in the option prices of outstanding Options, in the
number and kind of shares or other securities as to which outstanding Awards shall be exercisable, and in the aggregate number of shares with respect to which Awards may be granted. In the case of any
ISO, any such adjustment in the shares or other securities subject to the ISO (including any adjustment in the Option price) shall be made in such manner as not to constitute a modification as defined
by Section 424(h)(3) of the Code and only to the extent permitted by Sections 422 and 424 of the Code. 

Article XVI—Assignability  

        No Award granted under this Plan shall be sold, pledged, assigned or transferred other than by will or the laws of descent and distribution, and Awards shall be
exercisable during the Grantee's lifetime only by the Grantee. 

Article XVII—Amendment or Termination  

        The Board of Directors of the Company may at any time amend, suspend or terminate the Plan subject to the regulatory requirements of the United States Securities
and Exchange Commission and the National Association of Securities Dealers or other applicable federal or state regulatory authority, provided, however,
that no change in any Awards previously granted may be made without the consent of the holder thereof. 

Article XVIII—General Provisions  

        (a)   Common
Stock acquired pursuant to the exercise of an Option under the Plan shall be subject to applicable transfer restrictions under applicable Canadian or United
States federal securities laws, under the requirements of any national securities exchange or market upon which such Common Stock are then listed and/or traded, and under any blue sky or state
securities laws applicable to such Common Stock. If the instrument evidencing the Option so provides, Common Stock issued on exercise of an Option granted under the Plan may upon issuance be subject
to additional restrictions. 

        (b)   At
the discretion of the Board of Directors, the Options and the shares of Common Stock received upon exercise of an Option shall be registered with the United States
Securities and Exchange Commission and any applicable state securities law commission. In the absence of such registration, both the Options and the shares of Common Stock underlying the Options:
1) will be 

7

 

issued
only pursuant to an exemption from registration; 2) cannot be sold, pledged, traded or otherwise disposed of in the absence of an effective registration statement or an opinion of
counsel satisfactory to the Company that such registration is not required; 3) will bear an appropriate restrictive legend to that effect. Individuals receiving Options may be required to sign
an investment letter satisfactory to the Board of Directors at the time the Options are exercised, and may be required to comply with any other requirements for an exemption under the Securities Act
of 1933 and any applicable state securities law exemption. 

        (c)   The
proceeds received by the Company from the sale of Common Stock, pursuant to the exercise of Options granted under the Plan, shall be added to the Company's general
funds and used for general corporate purposes. 

        (d)   No
Awards may be exercised by the holder thereof if such exercise, and the receipt of cash or stock thereunder, would be, in the opinion of counsel selected by the
Company, contrary to law or the regulations of any duly constituted authority having jurisdiction over the Plan. 

        (e)   No
Award recipient shall have any rights as a shareholder with respect to any shares subject to Awards granted to him or her under the Plan prior to the date as of which
he or she is actually recorded as the holder of such shares upon the stock records of the Company. 

        (f)    Nothing
contained in the Plan or in Awards granted thereunder shall confer upon any Employee, Consultant or Director any right to continue in the employ of the Company
or any of its subsidiaries or interfere in any way with the right of the Company or any of its subsidiaries to terminate his or her employment at any time. 

Article XIX—Effective Date  

        The Plan shall become effective on the date of its adoption by the Board of Directors of the Company subject to approval of the Plan by the holders of a majority
of the outstanding voting shares of the Company within 12 months after the date of the Plan's adoption by said Board of Directors. In the event of the failure to obtain such shareholder
approval, the Plan shall be null and void and the Company shall have no liability thereunder. No Award granted under the Plan shall be exercisable until such shareholder approval has been obtained. 

Article XX—Termination  

        No Award may be granted under the Plan on or after the date which is ten years following the effective date specified in Article XIX, but Awards previously
granted may be exercised in accordance with their terms. 

Adopted
June 6, 1996

As amended June 5, 1997, June 11, 1998,

February 28, 2001, May 1, 2003 and April 23, 2004 

8

QuickLinks

Exhibit 4.1

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