Document:

Exhibit
10.35

EXECUTION
COPY

AGREEMENT
AND PLAN OF MERGER

by and
among

NOVANT
HEALTH, INC.,

STONES
MERGER CORP.

MQ
ASSOCIATES, INC.,

and

J.P.
MORGAN PARTNERS (BHCA), L.P.,

solely for purposes of Sections 5.11 and 5.12 and Article X

and in its capacity as the Stockholders’ Representative

Dated as
of August 10, 2007

TABLE
OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  
	
  ARTICLE
  I

  
	
   

  
	
  THE
  MERGER

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.1

  	
   

  	
  The Merger

  	
   

  	
  1

  
	
  Section 1.2

  	
   

  	
  Closing

  	
   

  	
  2

  
	
  Section 1.3

  	
   

  	
  Effective Time

  	
   

  	
  2

  
	
  Section 1.4

  	
   

  	
  Effect of the Merger

  	
   

  	
  2

  
	
  Section 1.5

  	
   

  	
  Organizational Documents of the Surviving
  Corporation

  	
   

  	
  2

  
	
  Section 1.6

  	
   

  	
  Directors and Officers of the Surviving Corporation

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  II

  
	
   

  
	
  EFFECT
  OF THE MERGER ON THE SECURITIES

  
	
  OF THE
  COMPANY AND MERGER SUB

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.1

  	
   

  	
  Effect on Capital Stock

  	
   

  	
  3

  
	
  Section 2.2

  	
   

  	
  Contingent Cash Amount

  	
   

  	
  4

  
	
  Section 2.3

  	
   

  	
  Exchange of Certificates

  	
   

  	
  9

  
	
  Section 2.4

  	
   

  	
  Dissenting Shares

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  III

  
	
   

  
	
  REPRESENTATIONS
  AND WARRANTIES OF THE COMPANY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1

  	
   

  	
  Organization; Qualification

  	
   

  	
  11

  
	
  Section 3.2

  	
   

  	
  Authority; Validity of Agreement

  	
   

  	
  12

  
	
  Section 3.3

  	
   

  	
  Non-Contravention

  	
   

  	
  12

  
	
  Section 3.4

  	
   

  	
  Consents and Approvals

  	
   

  	
  12

  
	
  Section 3.5

  	
   

  	
  Capitalization; Subsidiaries

  	
   

  	
  13

  
	
  Section 3.6

  	
   

  	
  SEC Filings; Financial Statements

  	
   

  	
  14

  
	
  Section 3.7

  	
   

  	
  Absence of Undisclosed Liabilities

  	
   

  	
  16

  
	
  Section 3.8

  	
   

  	
  Absence of Certain Changes

  	
   

  	
  16

  
	
  Section 3.9

  	
   

  	
  Compliance with Law; Permits.

  	
   

  	
  17

  
	
  Section 3.10

  	
   

  	
  Healthcare Regulatory Compliance

  	
   

  	
  17

  
	
  Section 3.11

  	
   

  	
  Litigation

  	
   

  	
  18

  
	
  Section 3.12

  	
   

  	
  Assets

  	
   

  	
  18

  
	
  Section 3.13

  	
   

  	
  Real Property

  	
   

  	
  19

  
	
  Section 3.14

  	
   

  	
  Material Contracts

  	
   

  	
  20

  
	
  Section 3.15

  	
   

  	
  Affiliate Arrangements

  	
   

  	
  22

  
	
  Section 3.16

  	
   

  	
  Taxes

  	
   

  	
  23

  
	
  Section 3.17

  	
   

  	
  Employee Benefit Plans; ERISA

  	
   

  	
  25

  
	
  Section 3.18

  	
   

  	
  Labor Matters

  	
   

  	
  27

  

 

 i
 

 

	
  Section 3.19

  	
   

  	
  Intellectual Property

  	
   

  	
  28

  
	
  Section 3.20

  	
   

  	
  Insurance

  	
   

  	
  29

  
	
  Section 3.21

  	
   

  	
  Environmental Matters

  	
   

  	
  29

  
	
  Section 3.22

  	
   

  	
  Suppliers

  	
   

  	
  30

  
	
  Section 3.23

  	
   

  	
  Brokers and Finders

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IV

  
	
   

  
	
  REPRESENTATIONS
  AND WARRANTIES OF PARENT AND MERGER SUB

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1

  	
   

  	
  Organization; Qualification

  	
   

  	
  31

  
	
  Section 4.2

  	
   

  	
  Authority; Validity of Agreement

  	
   

  	
  31

  
	
  Section 4.3

  	
   

  	
  Non-Contravention

  	
   

  	
  32

  
	
  Section 4.4

  	
   

  	
  Consents and Approvals

  	
   

  	
  32

  
	
  Section 4.5

  	
   

  	
  Actions

  	
   

  	
  32

  
	
  Section 4.6

  	
   

  	
  Compliance with Law

  	
   

  	
  32

  
	
  Section 4.7

  	
   

  	
  Availability of Funds

  	
   

  	
  32

  
	
  Section 4.8

  	
   

  	
  Brokers and Finders

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  V

  
	
   

  
	
  COVENANTS
  OF THE PARTIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.1

  	
   

  	
  Conduct of Business

  	
   

  	
  33

  
	
  Section 5.2

  	
   

  	
  Non-Solicitation

  	
   

  	
  35

  
	
  Section 5.3

  	
   

  	
  Cancellation of Stock Options and Warrants

  	
   

  	
  37

  
	
  Section 5.4

  	
   

  	
  Access to Information; Confidentiality

  	
   

  	
  37

  
	
  Section 5.5

  	
   

  	
  HSR Act Filings; Commercially Reasonable Efforts;
  Further Assurances

  	
   

  	
  37

  
	
  Section 5.6

  	
   

  	
  Publicity

  	
   

  	
  39

  
	
  Section 5.7

  	
   

  	
  Notification of Certain Events

  	
   

  	
  39

  
	
  Section 5.8

  	
   

  	
  Employee Matters

  	
   

  	
  40

  
	
  Section 5.9

  	
   

  	
  WARN Act

  	
   

  	
  41

  
	
  Section 5.10

  	
   

  	
  Stockholder Litigation

  	
   

  	
  41

  
	
  Section 5.11

  	
   

  	
  Non-Solicitation of Employees

  	
   

  	
  42

  
	
  Section 5.12

  	
   

  	
  Nondisclosure of Proprietary Information

  	
   

  	
  42

  
	
  Section 5.13

  	
   

  	
  Fees and Expenses

  	
   

  	
  42

  
	
  Section 5.14

  	
   

  	
  Indemnification; Director and Officer Insurance

  	
   

  	
  42

  
	
  Section 5.15

  	
   

  	
  Acknowledgement of Limitation of Warranties

  	
   

  	
  43

  
	
  Section 5.16

  	
   

  	
  Supplemental Disclosure

  	
   

  	
  44

  
	
  Section 5.17

  	
   

  	
  Change of Control Payment

  	
   

  	
  44

  
	
  Section 5.18

  	
   

  	
  Company Stockholder Approval

  	
   

  	
  44

  
	
  Section 5.19

  	
   

  	
  Retention Bonuses

  	
   

  	
  44

  

 

 ii
 

 

	
  ARTICLE VI

  
	
   

  
	
  CONDITIONS
  TO CLOSING

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.1

  	
   

  	
  Mutual Conditions

  	
   

  	
  45

  
	
  Section 6.2

  	
   

  	
  Conditions to the Obligations of Parent and Merger
  Sub to Effect the Merger

  	
   

  	
  45

  
	
  Section 6.3

  	
   

  	
  Conditions to the Obligations of Company to Effect
  the Merger

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VII

  
	
   

  
	
  SURVIVAL
  AND INDEMNIFICATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.1

  	
   

  	
  Survival of Representations, Warranties and
  Covenants

  	
   

  	
  47

  
	
  Section 7.2

  	
   

  	
  Indemnification of Parent Indemnified Parties

  	
   

  	
  47

  
	
  Section 7.3

  	
   

  	
  Indemnification of Seller Indemnified Parties

  	
   

  	
  49

  
	
  Section 7.4

  	
   

  	
  Third Party Claims

  	
   

  	
  50

  
	
  Section 7.5

  	
   

  	
  Other Indemnification Procedures

  	
   

  	
  51

  
	
  Section 7.6

  	
   

  	
  Punitive Damages

  	
   

  	
  52

  
	
  Section 7.7

  	
   

  	
  No Duplications

  	
   

  	
  52

  
	
  Section 7.8

  	
   

  	
  Tax Benefits

  	
   

  	
  52

  
	
  Section 7.9

  	
   

  	
  Exclusive Remedy

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII

  
	
   

  
	
  TAX
  MATTERS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.1

  	
   

  	
  Preparation and Filing of Tax Returns and Payment of
  Taxes

  	
   

  	
  52

  
	
  Section 8.2

  	
   

  	
  Cooperation

  	
   

  	
  53

  
	
  Section 8.3

  	
   

  	
  Purchaser Tax Covenants

  	
   

  	
  53

  
	
  Section 8.4

  	
   

  	
  Purchase Price Adjustment

  	
   

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IX

  
	
   

  
	
  TERMINATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.1

  	
   

  	
  Termination

  	
   

  	
  54

  
	
  Section 9.2

  	
   

  	
  Effect of Termination

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  X

  
	
   

  
	
  MISCELLANEOUS
  PROVISIONS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.1

  	
   

  	
  Stockholders’ Representative

  	
   

  	
  56

  
	
  Section 10.2

  	
   

  	
  Representations and Warranties

  	
   

  	
  57

  
	
  Section 10.3

  	
   

  	
  Amendment; Waiver

  	
   

  	
  58

  
	
  Section 10.4

  	
   

  	
  Entire Agreement

  	
   

  	
  58

  
	
  Section 10.5

  	
   

  	
  Knowledge Convention

  	
   

  	
  58

  

 

 iii
 

 

	
  Section 10.6

  	
   

  	
  Company Disclosure Schedule

  	
   

  	
  58

  
	
  Section 10.7

  	
   

  	
  Interpretation

  	
   

  	
  58

  
	
  Section 10.8

  	
   

  	
  Severability

  	
   

  	
  59

  
	
  Section 10.9

  	
   

  	
  Notices

  	
   

  	
  59

  
	
  Section 10.10

  	
   

  	
  Binding Effect; Persons Benefiting; No Assignment

  	
   

  	
  60

  
	
  Section 10.11

  	
   

  	
  Counterparts

  	
   

  	
  61

  
	
  Section 10.12

  	
   

  	
  Governing Law

  	
   

  	
  61

  
	
  Section 10.13

  	
   

  	
  Consent to Jurisdiction

  	
   

  	
  61

  
	
  Section 10.14

  	
   

  	
  Specific Performance

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit 2.2(b) – EBITDA Contribution by
  Facility

  
	
  Exhibit 2.2(d) – Adjusted EBITDA Definition

  
	
  Exhibit 2.2(p) – Form of Escrow Agreement

  
	
  Exhibit 6.2(j) – Management Incentive Structure

  

 

 iv
 

INDEX
OF DEFINED TERMS

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  117¤8% Notes
  Indenture

  	
   

  	
  32

  
	
  121⁄4% Notes Indenture

  	
   

  	
  32

  
	
  2008 Adjusted EBITDA Statement

  	
   

  	
  5

  
	
  2008 Income Statement

  	
   

  	
  4

  
	
  Accountants

  	
   

  	
  5

  
	
  Action

  	
   

  	
  18

  
	
  Affiliate

  	
   

  	
  23

  
	
  Affiliate Arrangement

  	
   

  	
  23

  
	
  Aggregate Indemnity Claim Amount

  	
   

  	
  7

  
	
  Agreement

  	
   

  	
  1

  
	
  Antitrust Laws

  	
   

  	
  38

  
	
  Assets

  	
   

  	
  18

  
	
  Benefit Plans

  	
   

  	
  26

  
	
  Business Day

  	
   

  	
  2

  
	
  Business Employee

  	
   

  	
  40

  
	
  CCMP

  	
   

  	
  42

  
	
  Certificate of Merger

  	
   

  	
  2

  
	
  Certificates

  	
   

  	
  9

  
	
  Class A Common Stock

  	
   

  	
  3

  
	
  Closing

  	
   

  	
  2

  
	
  Closing Date

  	
   

  	
  2

  
	
  Code

  	
   

  	
  24

  
	
  Common Stock

  	
   

  	
  3

  
	
  Company

  	
   

  	
  1

  
	
  Company Disclosure Schedule

  	
   

  	
  11

  
	
  Company Filed SEC Report

  	
   

  	
  14

  
	
  Company Financial Statements

  	
   

  	
  14

  
	
  Company Intellectual Property

  	
   

  	
  29

  
	
  Company Material Adverse Effect

  	
   

  	
  16

  
	
  Company SEC Reports

  	
   

  	
  14

  
	
  Company Stockholder Approval

  	
   

  	
  12

  
	
  Company Subsidiary

  	
   

  	
  11

  
	
  Confidentiality Agreement

  	
   

  	
  37

  
	
  Contingent Cash Amount

  	
   

  	
  8

  
	
  Contingent Consideration

  	
   

  	
  4

  
	
  Continuing Employee

  	
   

  	
  40

  
	
  Contract

  	
   

  	
  22

  
	
  control

  	
   

  	
  23

  
	
  D&O Insurance

  	
   

  	
  43

  
	
  Damages

  	
   

  	
  48

  
	
  DGCL

  	
   

  	
  1

  
	
  Dissenting Shares

  	
   

  	
  10

  

 

 v
 

 

	
  Divested Facility

  	
   

  	
  4

  
	
  Earn-Out Period

  	
   

  	
  6

  
	
  EBITDA Deficit

  	
   

  	
  4

  
	
  Effective Time

  	
   

  	
  2

  
	
  Environmental Laws

  	
   

  	
  30

  
	
  ERISA

  	
   

  	
  25

  
	
  ERISA Affiliate

  	
   

  	
  26

  
	
  Escrow Agent

  	
   

  	
  8

  
	
  Escrow Agreement

  	
   

  	
  8

  
	
  Escrow Amount

  	
   

  	
  7

  
	
  Exchange Act

  	
   

  	
  11

  
	
  Facilities

  	
   

  	
  4

  
	
  Facility

  	
   

  	
  4

  
	
  GAAP

  	
   

  	
  4

  
	
  Governmental Approval

  	
   

  	
  13

  
	
  Governmental Authority

  	
   

  	
  13

  
	
  Grant Date

  	
   

  	
  13

  
	
  Hazardous Materials

  	
   

  	
  30

  
	
  HSR Act

  	
   

  	
  13

  
	
  Indemnified Party

  	
   

  	
  50

  
	
  Indemnifying Party

  	
   

  	
  50

  
	
  Indemnity Basket

  	
   

  	
  48

  
	
  Initial Contingent Cash Amount

  	
   

  	
  7

  
	
  Intellectual Property

  	
   

  	
  29

  
	
  Internal Controls

  	
   

  	
  15

  
	
  JPMP

  	
   

  	
  1

  
	
  Laws

  	
   

  	
  12

  
	
  Lease

  	
   

  	
  19

  
	
  Leased Real Property

  	
   

  	
  19

  
	
  Liability

  	
   

  	
  22

  
	
  License Agreements

  	
   

  	
  28

  
	
  Liens

  	
   

  	
  12

  
	
  March 31 Balance Sheet

  	
   

  	
  16

  
	
  Material Contract

  	
   

  	
  22

  
	
  Merger

  	
   

  	
  1

  
	
  Merger Consideration

  	
   

  	
  9

  
	
  Merger Sub

  	
   

  	
  1

  
	
  NOL Reps

  	
   

  	
  49

  
	
  Organizational Documents

  	
   

  	
  11

  
	
  Owned Real Property

  	
   

  	
  19

  
	
  Parent

  	
   

  	
  1

  
	
  Parent Basket

  	
   

  	
  50

  
	
  Parent Indemnified Parties

  	
   

  	
  47

  
	
  Pending Claim

  	
   

  	
  51

  
	
  Pending Claim Objection Notice

  	
   

  	
  51

  
	
  Pending Claim Review Period

  	
   

  	
  51

  

 

 vi
 

 

	
  Permits

  	
   

  	
  17

  
	
  Permitted Liens

  	
   

  	
  18

  
	
  Person

  	
   

  	
  12

  
	
  Post-Closing Period

  	
   

  	
  53

  
	
  Pre-Closing Period

  	
   

  	
  52

  
	
  Q3/Q4 2008 Income Statement

  	
   

  	
  4

  
	
  Real Property

  	
   

  	
  19

  
	
  Representatives

  	
   

  	
  35

  
	
  Retention Bonus Program

  	
   

  	
  45

  
	
  Sarbanes-Oxley Act

  	
   

  	
  14

  
	
  SEC

  	
   

  	
  11

  
	
  Second Contingent Cash Amount

  	
   

  	
  7

  
	
  Seller Indemnified Parties

  	
   

  	
  49

  
	
  Series A Preferred Stock

  	
   

  	
  3

  
	
  Series B Preferred Stock

  	
   

  	
  3

  
	
  Stock Option Plan

  	
   

  	
  13

  
	
  Stock Options

  	
   

  	
  13

  
	
  Stockholders

  	
   

  	
  56

  
	
  Stockholders’ Representative

  	
   

  	
  56

  
	
  Stockholders’ Representative Objection

  	
   

  	
  5

  
	
  Stockholders’ Representative Objection Notice

  	
   

  	
  5

  
	
  Stockholders’ Representative Review Period

  	
   

  	
  5

  
	
  Straddle Period

  	
   

  	
  52

  
	
  Subsequent Contingent Cash Amounts

  	
   

  	
  7

  
	
  Subsidiary

  	
   

  	
  11

  
	
  Superior Proposal

  	
   

  	
  36

  
	
  Surviving Corporation

  	
   

  	
  2

  
	
  Takeover Proposal

  	
   

  	
  36

  
	
  Target EBITDA

  	
   

  	
  4

  
	
  Tax

  	
   

  	
  25

  
	
  Tax Arbitrator

  	
   

  	
  49

  
	
  Tax Authority

  	
   

  	
  25

  
	
  Tax Basket

  	
   

  	
  48

  
	
  Tax Proceeding

  	
   

  	
  25

  
	
  Tax Return

  	
   

  	
  25

  
	
  Taxes

  	
   

  	
  25

  
	
  Termination Date

  	
   

  	
  47

  
	
  Termination Fee

  	
   

  	
  55

  
	
  Third Party Claim

  	
   

  	
  50

  
	
  Treasury Regulations

  	
   

  	
  25

  
	
  Voting Agreement

  	
   

  	
  1

  
	
  WARN

  	
   

  	
  28

  
	
  Warrant

  	
   

  	
  37

  

 

 vii

AGREEMENT
AND PLAN OF MERGER

This AGREEMENT AND PLAN
OF MERGER, dated as of August 10, 2007 (this “Agreement”), is made and
entered into by and among Novant Health, Inc., a North Carolina nonprofit
corporation (“Parent”), Stones Merger Corp., a Delaware corporation and
wholly-owned subsidiary of Parent (“Merger Sub”), MQ Associates, Inc., a
Delaware corporation (the “Company”), and J.P. Morgan Partners (BHCA),
L.P. (“JPMP”), solely for purposes of Sections 5.11 and 5.12 and Article
X and in its capacity as the Stockholders’ Representative (as defined in
Section 10.1 below).

WHEREAS, the Board of
Trustees of Parent has determined that the merger of Merger Sub with and into
the Company (the “Merger”) is advisable and in the best interests of
Parent, and the respective Boards of Directors of Merger Sub and the Company
have each determined that the Merger is advisable and in the best interests of
their respective stockholders;

WHEREAS, the Board of
Trustees of Parent and the respective Boards of Directors of Merger Sub and the
Company have each approved and declared advisable this Agreement and the Merger
upon the terms and subject to the conditions set forth herein;

WHEREAS, Parent, in its
capacity as the sole stockholder of Merger Sub, has adopted this Agreement and
approved the Merger upon the terms and subject to the conditions set forth
herein; and

WHEREAS, concurrently
with the execution and delivery of this Agreement, JPMP, which beneficially
owns shares with voting power sufficient to approve the Merger in accordance
with the General Corporation Law of the State of Delaware (the “DGCL”)
and the Company’s Organizational Documents (as defined in Section 3.1(c)
below), and Parent have entered into an agreement pursuant to which JPMP has
agreed to vote all of the shares of voting stock of the Company beneficially
owned by JPMP
in favor of this Agreement and the Merger and against any transaction or other
action that would interfere with this Agreement or any of the transactions
contemplated herby (including the Merger) (the “Voting Agreement”).

NOW THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements contained
herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereby agree as follows:

ARTICLE I

THE MERGER

Section 1.1             The
Merger.  Upon the terms and subject
to the conditions of this Agreement, and in accordance with the DGCL, at the Effective
Time (as defined in Section 1.3 below), Merger Sub shall be merged with and
into the Company.  As a result of the
Merger, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving entity following the Merger (sometimes
referred to herein as the “Surviving

Corporation”).  The existence of the Company shall continue
unaffected and unimpaired by the Merger and, as the Surviving Corporation, it
shall be governed by the DGCL.

Section 1.2             Closing.  The closing of the Merger (the “Closing”)
shall take place at 10:00 a.m., local time, on a date to be specified by the
parties, which shall be no later than the third Business Day (as defined below)
following the satisfaction or waiver of all of the conditions set forth in
Article VI hereof (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of those
conditions), at the offices of Skadden, Arps, Slate, Meagher & Flom LLP,
Four Times Square, New York, New York 10036, unless another time, date or place
is agreed to in writing by the parties hereto. 
The date on which the Closing occurs is referred to herein as the “Closing
Date.”  As used in this Agreement,
the term “Business Day” means a day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York are authorized or
required by Law (as defined in Section 3.3 below) to close.

Section 1.3             Effective
Time.  Subject to the terms and
conditions of this Agreement, as soon as practicable on the Closing Date, the
parties shall cause the Merger to be consummated by filing a certificate of
merger (the “Certificate of Merger”) with the Secretary of State of the
State of Delaware and by making all other filings or recordings required under
the DGCL.  The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware, or at such subsequent date or time
as Parent and the Company shall agree and specify in the Certificate of
Merger.  The time at which the Merger
becomes effective is referred to herein as the “Effective Time.”

Section 1.4             Effect
of the Merger.  At the Effective
Time, the effect of the Merger shall be as provided in the applicable provisions
of the DGCL.  Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, except
as otherwise provided herein, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions,
disabilities and duties of the Company and Merger Sub shall become the debts,
liabilities, obligations, restrictions, disabilities and duties of the
Surviving Corporation.

Section 1.5             Organizational
Documents of the Surviving Corporation. 
The Company’s certificate of incorporation, as in effect immediately
prior to the Effective Time, shall be the certificate of incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein
or by applicable Law.  The bylaws of the
Company, as in effect immediately prior to the Effective Time, shall be the
bylaws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable Law.

Section 1.6             Directors
and Officers of the Surviving Corporation. 
The directors of Merger Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly
designated, as the case may be.  The
officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly
designated, as the case may be.

 2
 

ARTICLE II

EFFECT OF THE MERGER ON THE SECURITIES

OF THE COMPANY AND MERGER SUB

Section 2.1             Effect
on Capital Stock.  Subject to the
terms and conditions of this Agreement, at the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Sub, the Company or
the holders of any shares of (i) the Company’s Series A Redeemable Preferred
Stock, par value $.001 per share (the “Series A Preferred Stock”), (ii)
the Company’s Class A Common Stock, par value $.001 per share (the “Class A
Common Stock”), (iii) the Company’s Common Stock, par value $.001 per share
(the “Common Stock”), or (iv) the Company’s Series B Redeemable
Preferred Stock, par value $.001 per share (the “Series B Preferred Stock”),
the following shall occur:

(a)           Series
A Preferred Stock.  Each share of
Series A Preferred Stock issued and outstanding immediately prior to the
Effective Time (other than shares to be cancelled pursuant to Section 2.1(e) hereof
and Dissenting Shares (as defined in Section 2.4 below)) shall be converted
into the right to receive:

(i)            an
amount in cash determined by dividing $45,000,000 by the number of shares of
Series A Preferred Stock outstanding as of the Effective Time; and

(ii)           a contingent right to receive an
amount in cash determined by dividing the Contingent Cash Amount (as finally
determined pursuant to Section 2.2) by the number of shares of Series A
Preferred Stock outstanding as of the Effective Time; provided, however,
that if the Contingent Cash Amount exceeds $10,000,000, the amount in cash
determined pursuant to this Section 2.1(a)(ii) shall be determined by dividing
(x) $10,000,000 by (y) the number of shares of Series A Preferred
Stock outstanding as of the Effective Time.

(b)           Class
A Common Stock.  Each share of Class
A Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be cancelled pursuant to Section 2.1(e) hereof and
Dissenting Shares) shall be converted into a contingent right to receive an
amount in cash, if any, determined by dividing (i) (x) the Contingent Cash
Amount (as finally determined pursuant to Section 2.2) minus (y) $10,000,000,
by (ii) the number of shares of Class A Common Stock outstanding as of the
Effective Time.  For the avoidance of
doubt, if the Contingent Cash Amount does not exceed $10,000,000, such
contingent right to receive an amount in cash shall expire and no amount in
cash shall be delivered with respect to the shares of Class A Common Stock
outstanding as of the Effective Time.

(c)           Common
Stock.  Each share of Common Stock
issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares) shall be automatically cancelled and retired and shall cease
to exist, and no consideration shall be delivered in respect thereof.

 3
 

(d)           Series B Preferred Stock.  Each share of Series B Preferred Stock issued
and outstanding immediately prior to the Effective Time (other than Dissenting
Shares) shall be automatically cancelled and retired and shall cease to exist,
and no consideration shall be delivered in respect thereof.

(e)           Cancellation
of Treasury Stock.  Each share of
Series A Preferred Stock, Class A Common Stock, Common Stock and Series B
Preferred Stock issued and outstanding immediately prior to the Effective Time
that is owned by the Company (as treasury stock or otherwise), if any, shall be
automatically cancelled and retired and shall cease to exist, and no
consideration shall be delivered in respect thereof.

(f)            Conversion
of Merger Sub Common Stock.  Each
share of common stock, par value $.01 per share, of Merger Sub that is issued
and outstanding immediately prior to the Effective Time shall be converted into
one validly issued, fully paid and nonassessable share of common stock, par
value $0.001 per share, of the Surviving Corporation, and the shares of the
Surviving Corporation into which the shares of Merger Sub common stock are so
converted shall be the only shares of the Surviving Corporation that are issued
and outstanding immediately after the Effective Time.  Following the Effective Time, each
certificate evidencing ownership of shares of Merger Sub common stock shall
evidence ownership of such shares of the Surviving Corporation.

Section 2.2             Contingent
Cash Amount.  The Contingent Cash
Amount shall be determined as set forth in this Section 2.2.

(a)           “Contingent
Consideration” means (i) in the event that the Surviving Corporation’s 2008
Adjusted EBITDA (as defined in Section 2.2(d) below) equals or exceeds Target
EBITDA (as defined in Section 2.2(b) below), then Contingent Consideration
shall mean $35,000,000 and (ii) in the event that 2008 Adjusted EBITDA is less
than Target EBITDA (the amount by which 2008 Adjusted EBITDA is less than
Target EBITDA is referred to as the “EBITDA Deficit”), then Contingent
Consideration shall mean $35,000,000 minus the product of (x) the EBITDA
Deficit multiplied by (y) four (but in no event shall the Contingent
Consideration be less than zero).

(b)           “Target
EBITDA” means $53,000,000, provided that if any of the Company’s
outpatient diagnostic imaging centers (each a “Facility” and,
collectively, the “Facilities”) in operation as of the date of this
Agreement are sold or otherwise divested by Parent (including pursuant to an asset
swap) or closed (other than in the context of consolidating two or more
Facilities, which consolidation shall be accomplished, if at all, in accordance
with the last sentence of Section 2.2(h)) (each a “Divested Facility”),
Target EBITDA shall mean $53,000,000 minus, for each Divested Facility, the
amount set forth in Exhibit 2.2(b) corresponding to such Divested Facility.

(c)           2008
Statements.  Within 90 calendar days
after the end of the Surviving Corporation’s fiscal year ending December 31,
2008, Parent shall deliver to the Stockholders’ Representative (i) a
consolidated income statement of the Surviving Corporation for (x) the
fiscal year ending December 31, 2008 (the “2008 Income Statement”) and
(y) the period beginning July 1, 2008 and ending December 31, 2008 (the “Q3/Q4
2008 Income Statement”), in each case prepared in accordance with United
States generally accepted accounting principles (“GAAP”), 

 4
 

applied in
a manner consistent with the accounting policies and methods employed in the
financial statements contained in the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2006, and (ii) a statement (the “2008
Adjusted EBITDA Statement”) setting forth Parent’s calculation of 2008
Adjusted EBITDA determined (A) in accordance with the 2008 Adjusted EBITDA
definition set forth in Section 2.2(d) and (B) on the basis of the 2008
Income Statement and the Q3/Q4 2008 Income Statement.

(d)           “2008
Adjusted EBITDA” has the meaning set forth on Exhibit 2.2(d).

(e)           Review
by the Stockholders’ Representative. 
The Stockholders’ Representative shall have 60 calendar days after the
delivery to the Stockholders’ Representative of the 2008 Income Statement, the
Q3/Q4 2008 Income Statement and the 2008 Adjusted EBITDA Statement (the “Stockholders’
Representative Review Period”) in which to notify Parent in writing (the “Stockholders’
Representative Objection Notice”) of any good faith disagreement with the
2008 Income Statement, the Q3/Q4 2008 Income Statement and/or the 2008 Adjusted
EBITDA Statement, setting forth in reasonable detail (i) the items or amounts
with which Stockholders’ Representative disagrees and the basis for such
disagreement and (ii) the Stockholders’ Representative’s proposed adjustments
to the 2008 Income Statement, the Q3/Q4 2008 Income Statement and/or the 2008
Adjusted EBITDA Statement (collectively, the “Stockholders’ Representative
Objection”).  If the Stockholders’
Representative delivers a written acceptance of the 2008 Adjusted EBITDA
Statement at any time during the Stockholders’ Representative Review Period or
does not deliver a Stockholders’ Representative Objection Notice within the
Stockholders’ Representative Review Period, the Stockholders’ Representative
shall be deemed to agree in all respects with the 2008 Income Statement, the
Q3/Q4 2008 Income Statement and the 2008 Adjusted EBITDA Statement and the
items and amounts reflected thereon shall be final and binding.

(f)            Review
by Accountants.  If a Stockholders’
Representative Objection Notice is properly and timely delivered, Parent and
the Stockholders’ Representative shall use good faith efforts to resolve their
differences with respect to the Stockholders’ Representative Objection within
30 calendar days after Parent’s receipt of the Stockholders’ Representative
Objection Notice.  If Parent and the
Stockholders’ Representative resolve their differences with respect to the 2008
Income Statement, the Q3/Q4 2008 Income Statement and/or the 2008 Adjusted
EBITDA Statement within such 30-day period, the 2008 Income Statement, the
Q3/Q4 2008 Income Statement and/or the 2008 Adjusted EBITDA Statement shall be
immediately modified as necessary to reflect such agreement and, as so
modified, shall be final and binding. 
Any differences with respect to the Stockholders’ Representative
Objection not resolved by Parent and the Stockholders’ Representative within
such 30-day period shall be submitted for the purpose of resolving such dispute
to such nationally recognized public accounting firm as shall be mutually
agreed upon by Parent and the Stockholders’ Representative and, if not so
mutually agreed upon within ten calendar days, shall be Deloitte & Touche
(such public accounting firm, the “Accountants”).  The Accountants shall be instructed to render
their decision in accordance with the terms of this Agreement and shall
consider only those items or amounts on the 2008 Income Statement, the Q3/Q4
2008 Income Statement and/or in the 2008 Adjusted EBITDA Statement as to which
the Stockholders’ Representative has, in the Stockholders’ Representative
Objection Notice, disagreed and such other issues as may reasonably be affected
by the items as to which the Stockholders’ Representative has so
disagreed.  The Accountants shall deliver
to 

 5
 

Parent and
the Stockholders’ Representative, as promptly as practicable, but no later than
45 calendar days after the Accountants are engaged, a written report setting
forth their resolution and, if applicable, their calculation of the disputed
items or amounts.  In no event shall the
Accountants’ determination result in 2008 Adjusted EBITDA that is greater than
that set forth in the Stockholders’ Representative Objection Notice or less
than that set forth in the 2008 Adjusted EBITDA Statement.  The parties shall promptly comply with all
reasonable requests by the Accountants for information, books, records and
similar items.  Upon delivery of the
Accountants’ report to Parent and the Stockholders’ Representative, such report
and the calculations set forth therein shall be final and binding.  The fees and expenses relating to such review
and report from the Accountants shall be allocated between the parties in
inverse proportion to the resolution of the disagreements by the Accountants
such that the party whose determination of 2008 Adjusted EBITDA as first
submitted to the Accountants is closer to the Accountants’ determination of
2008 Adjusted EBITDA pays a smaller percentage of such fees and expenses.

(g)           Cooperation.  Each of Parent, on the one hand, and the
Stockholders’ Representative, on the other hand, shall provide reasonable
cooperation and assistance to each other in the preparation of the 2008 Income
Statement, the Q3/Q4 2008 Income Statement and the 2008 Adjusted EBITDA
Statement and in the conduct of the reviews referred to in this Section 2.2,
including Parent providing reasonable access to the books, records, work papers
and personnel of the Company.

(h)           Operation
of the Surviving Corporation.  Parent
agrees that from and after the Closing Date and until and including December
31, 2008 (the “Earn-Out Period”), Parent shall (i) operate the Surviving
Corporation as a stand-alone, separate entity and in a manner consistent with
the past practices and the ordinary course of business of the Company prior to
the Closing and (ii) ensure that the Surviving Corporation has adequate capital
as set forth in the Company’s 2008 capital budget previously provided to Parent
and working capital as otherwise needed to conduct its business in the ordinary
course as conducted prior to the Closing. 
Parent acknowledges and agrees that during the Earn-Out Period
management of the Surviving Corporation will attempt to maximize 2008 Adjusted
EBITDA and Parent agrees to cooperate, to the extent commercially reasonable,
with those efforts (including assisting management’s efforts to obtain
increased reimbursement rates from commercial payors (other than as described
in the next sentence)).  In furtherance thereof, Parent
agrees to use commercially reasonable efforts during the Earn-Out Period to add
each Facility located in North Carolina to Parent’s material commercial payor
contracts where doing so would result in reimbursement rates (in the aggregate)
greater than the reimbursement rates of such Facility as of the Closing Date; provided,
however, that, for purposes of this sentence, Parent, the Company and
the Stockholders’ Representative acknowledge and agree that Parent shall be
deemed to have used commercially reasonable efforts in those instances in which
it has contacted such commercial payor and engaged in good faith negotiations
with such commercial payor regarding increased reimbursement rates for the
Facilities and that in no event shall Parent be required to make any
concessions or agree to other terms in exchange for such increased
reimbursement rates that Parent determines, in good faith, are not in the best
interests of Parent and its Subsidiaries (including the Surviving Corporation)
on an aggregate basis (disregarding for the purpose of such determination any
impact such higher reimbursement rates would have on Parent’s obligation to pay
the Contingent Consideration pursuant to the terms of this Agreement).  Parent 

 6
 

agrees that
during the Earn-Out Period it will not cause the Surviving Corporation to
consolidate two or more Facilities without the prior written consent of the
Stockholders’ Representative, and Parent and the Stockholders’ Representative
agree that, in connection with any request for such consent, Parent and the
Stockholders’ Representative shall negotiate, in good faith, with respect to an
appropriate adjustment, if any, to the Target EBITDA to reflect the proposed
consolidation.

(i)            Acceleration.  Notwithstanding anything in this Agreement to
the contrary, the Contingent Consideration shall be immediately due and payable
in the event that (i) prior to the date of the first to occur of (x) the
delivery by the Stockholders’ Representative of a written acceptance of the
2008 Adjusted EBITDA Statement, (y) the expiration of the Stockholders’
Representative Review Period without the delivery of a Stockholders’
Representative Objection Notice and (z) the final resolution of the
Stockholders’ Representative Objection pursuant to this Section 2.2, Parent
shall, or shall cause the Surviving Corporation to, terminate (other than for
willful misconduct or malfeasance or “cause” (as defined in such person’s
employment agreement, if any)) or demote from their current position with the
Company, any two of Chris Winkle, Todd Andrews, Todd Latz, Daniel Schaefer and
Bruce Elder, or (ii) prior to December 31, 2008, Parent conveys, or
causes the Surviving Corporation to convey, to any Person other than a
wholly-owned Subsidiary of the Surviving Corporation, Facilities representing
in excess of $20,000,000 of Target EBITDA (based on Exhibit 2.2(b)) (including
by virtue of multiple conveyances over time).

(j)            The “Initial
Contingent Cash Amount” means an amount, but not less than zero, equal to
(i) the Contingent Consideration minus (ii) the sum of (x) the Escrow
Amount (as defined in Section 2.2(k) below) and (y) the sum of
(A) any amounts paid to or on behalf of Parent Indemnified Parties in
connection with undisputed and/or resolved claims for indemnification pursuant
to Article VII of this Agreement and (B) Parent’s good faith estimate
of the dollar amount of any unresolved claims for indemnification actually made
by Parent Indemnified Parties pursuant to Article VII of this Agreement (the
sum of clause (A) and clause (B) referred to as the “Aggregate
Indemnity Claim Amount”).

(k)           The “Escrow
Amount” means $10,000,000; provided, however, that if
(i) the Contingent Consideration minus (ii) the Aggregate Indemnity
Claim Amount is less than $10,000,000, then the Escrow Amount shall mean such
remaining amount.

(l)            The “Second
Contingent Cash Amount” means an amount, but not less than zero, equal to
(i) the Escrow Amount minus (ii) the sum of (x) any amounts paid
to or on behalf of Parent Indemnified Parties in connection with undisputed
and/or resolved claims for indemnification pursuant to indemnification claims made
after March 31, 2009 and on or prior to March 31, 2010 pursuant to Section
7.2(a)(iii) of this Agreement and (y) Parent’s good faith estimate of the
dollar amount of any unresolved claims for indemnification actually made by
Parent Indemnified Parties after March 31, 2009 and on or prior to March 31,
2010 pursuant to Section 7.2(a)(iii) of this Agreement.

(m)          “Subsequent
Contingent Cash Amounts” means amounts which were deducted pursuant to
Section 2.2(j)(ii)(y)(B) or Section 2.2(l)(ii)(y) from amounts otherwise
payable and which amounts are not required to be paid to or on behalf of Parent
Indemnified Parties upon final resolution of the relevant claim for
indemnification.

 7
 

(n)           The “Contingent
Cash Amount” means the sum of (i)  the Initial Contingent Cash Amount,
if any, (ii) the Second Contingent Cash Amount, if any, and (iii) all
Subsequent Contingent Cash Amounts, if any.

(o)           Timing
of Initial Distribution.  The Initial
Contingent Cash Amount, if any, shall be distributed to the former holders of
shares of Series A Preferred Stock and Class A Common Stock, as applicable, in
accordance with the procedures set forth in this Article II, on the date five
Business Days after the earliest to occur of either (i) the delivery by the
Stockholders’ Representative of a written acceptance of the 2008 Adjusted
EBITDA Statement or (ii) the expiration of the Stockholders’ Representative
Review Period; provided that if the 2008 Income Statement, the Q3/Q4
2008 Income Statement or the 2008 Adjusted EBITDA Statement is disputed
pursuant to this Section 2.2, any undisputed amounts owing in respect of the
Initial Contingent Cash Amount shall be distributed on the date five Business
Days after the delivery by the Stockholders’ Representative of the Stockholders’
Representative Objection Notice and any disputed amount of the Initial
Contingent Cash Amount shall be distributed on the date five Business Days
after the final resolution of such dispute.

(p)           Deposit
Into Escrow.  Concurrently with the
first distribution of any part of the Initial Contingent Cash Amount, Parent
shall deposit the Escrow Amount into an escrow account pursuant to the terms of
the escrow agreement to be entered into among Parent, the Stockholders’
Representative and the escrow agent (the “Escrow Agent”), the form of
which is attached hereto as Exhibit 2.2(p) (the “Escrow Agreement”).  In the event the Escrow Amount is less than
$10,000,000 (resulting in there being no Initial Contingent Cash Amount to
distribute), the Escrow Amount shall be deposited into the escrow account on
the date on which the Initial Contingent Cash Amount would have been
distributed if such amount was greater than zero.

(q)           Timing
of Second Distribution.  The Second
Contingent Cash Amount, if any, shall be distributed to the former holders of
shares of Series A Preferred Stock and Class A Common Stock, as applicable, in
accordance with the procedures set forth in this Article II, no later than the
date five Business Days after such amount is released from the escrow account
pursuant to the terms of the Escrow Agreement.

(r)            Timing
of Subsequent Distribution.  Each
Subsequent Contingent Cash Amount, if any, shall be distributed to the former
holders of shares of Series A Preferred Stock and Class A Common Stock, as
applicable, in accordance with the procedures set forth in this
Article II, no later than the date five Business Days after the final
resolution of the relevant indemnification claim.

(s)           Financial
Reports.  Parent shall cause the
Surviving Corporation to deliver to the Stockholders’ Representative
(i) not later than 30 days after the end of each calendar month, financial
statements of the Surviving Corporation as of the end of, and for, such month,
as produced by management of the Surviving Corporation in the ordinary course
of business (which shall be substantially comparable to the monthly financial
statements produced by management of the Company in the ordinary course of
business as conducted prior to the date of this Agreement), and (ii) not
later than 45 days after the end of each fiscal quarter or, in the case of any
fourth quarter, not later than 90 days after the end of each fourth quarter (x)
if the Surviving Corporation does not otherwise file with the SEC (as defined
in the preamble to 

 8
 

Article III
below) a Quarterly Report on Form 10-Q or an Annual Report on Form 10-K, as
applicable, a balance sheet of the Surviving Corporation as of the end of each
fiscal quarter and the related statements of income and cash flows, in each
case, prepared in accordance with GAAP applied in a manner consistent with the
application of GAAP in the financial statements contained in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2006, and (y) for
the first three fiscal quarters of 2008, a calculation of 2008 Adjusted EBITDA
for such quarter calculated in accordance with this Section 2.2.

Section 2.3             Exchange
of Certificates.

(a)           Exchange
Procedures.  Immediately following
the Effective Time, Parent shall pay, or shall cause to be paid, to each holder
of certificates which immediately prior to the Effective Time represented
outstanding shares of Series A Preferred Stock or Class A Common Stock (the “Certificates”),
upon surrender to Parent of one or more Certificates for cancellation, the
amount of cash which such holder of Certificates has the right to receive, if
any, pursuant to Section 2.1 and Section 2.2 (such amounts referred to as the “Merger
Consideration”).

(b)           Transfer
Taxes.  If any portion of the Merger
Consideration is to be paid to a Person (as defined in Section 3.1(d) below)
other than the Person in whose name the surrendered Certificate is registered,
it shall be a condition to such payment that (i) either such Certificate shall
be properly endorsed or shall otherwise be in proper form for transfer and (ii)
the Person requesting such payment shall establish to the satisfaction of
Parent that any Tax required as a result of such payment to a Person other than
the registered holder of such Certificate has been paid or is not payable.

(c)           Withholding
Tax.  Each of the Company, Parent and
the Surviving Corporation shall be entitled to deduct and withhold from the
consideration otherwise payable to any Person pursuant to this Article II such
amounts as it is required to deduct and withhold with respect to the making of
such payment under any provision of federal, state, local or foreign Tax Law,
including any withholding from any payment that is treated as wages or
compensation for the performance of services. 
To the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the Person
in respect of which such deduction and withholding was made.

(d)           No
Further Ownership Rights in Company Capital Stock.  At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
shares of Series A Preferred Stock, Class A Common Stock, Common Stock or
Series B Preferred Stock which were outstanding immediately prior to the
Effective Time.  If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged, if applicable, as provided in this Article
II.  All cash paid in respect of the
shares of Series A Preferred Stock and the shares of Class A Common Stock (if
any) in accordance with the terms of this Agreement shall be deemed to have
been paid in full satisfaction of all rights pertaining to such shares.

(e)           No
Liability.  None of Parent, Merger
Sub or the Company or any of their respective directors, officers, employees
and agents shall be liable to any Person in respect of 

 9
 

any cash
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.  If any
Certificate shall not have been surrendered prior to five years after the
Effective Time, or immediately prior to such earlier date on which any cash in
respect of such Certificate would otherwise escheat to or become the property
of any Governmental Authority (as defined in Section 3.4 below), any such cash
shall, to the extent permitted by applicable Law, become the property of the
Surviving Corporation, free and clear of all claims or interests of any Person
previously entitled thereto.

(f)            Lost,
Stolen or Destroyed Certificates.  In
the event any Certificates shall have been lost, stolen or destroyed, Parent
shall pay, or cause to be paid, in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder
thereof, such Merger Consideration as may be required pursuant to this Article
II; provided, however, that Parent may, in its discretion and as
a condition precedent to the payment thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver an agreement of indemnification in
form reasonably satisfactory to Parent, or a bond in such sum as Parent may
reasonably direct as indemnity, against any claim that may be made against Parent
in respect of the Certificates alleged to have been lost, stolen or destroyed.

Section 2.4             Dissenting
Shares.  Notwithstanding any
provision of this Agreement to the contrary, shares of Series A Preferred
Stock, Class A Common Stock, Common Stock and Series B Preferred Stock that are
issued and outstanding immediately prior to the Effective Time and which are
held by holders of such shares who properly exercise appraisal rights, if any,
with respect thereto in accordance with Section 262 of the DGCL (the “Dissenting
Shares”) shall not be exchangeable for the right to receive the Merger
Consideration, if any, or cancelled, as applicable, and holders of such
Dissenting Shares will be entitled only to receive payment of the appraised
value of such shares in accordance with the provisions of such Section 262,
unless and until such holders fail to perfect or effectively withdraw or lose
their rights to appraisal and payment under the DGCL.  If, after the Effective Time, any such holder
fails to perfect or effectively withdraws or loses such right, such shares will
thereupon be treated as if they had been converted into, at the Effective Time,
the right to receive the Merger Consideration, without any interest thereon, or
cancelled without consideration therefor, as applicable.  The Company shall give Parent prompt notice
of any demands received by the Company for appraisals of shares of Series A
Preferred Stock, Class A Common Stock, Common Stock and Series B Preferred
Stock.  The Surviving Corporation shall
provide the Stockholders’ Representative the opportunity (at the Stockholders’
Representatives’ sole cost and expense) to participate in all negotiations and
proceedings with respect to demands for appraisal under the DGCL.  The Surviving Corporation shall not, except
with the prior written consent of the Stockholders’ Representative, make any
payment with respect to any demands for appraisal or offer to settle or settle
any such demands.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent and
Merger Sub as of the date of this Agreement and as of the Closing Date (except
for those representations and warranties made as of a specific date) that,
except as set forth in the disclosure schedule 

 10
 

delivered by
the Company to Parent concurrently herewith (the “Company Disclosure
Schedule”) (as such Company Disclosure Schedule is construed pursuant to
Section 10.6) and except as set forth in any forms, reports and documents filed
or furnished by the Company with the Securities and Exchange Commission (the “SEC”)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
prior to the date of this Agreement (and without regard to any amendment
thereto filed or furnished after the date of this Agreement) to the extent such
information is reasonably apparent as pertaining to any section of this Article
III:

Section 3.1             Organization;
Qualification.

(a)           Each of
the Company and each Company Subsidiary (as defined in Section 3.1(b) below) is
a corporation or limited liability company duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation or
organization, has all requisite corporate (or similar) power and authority to
carry on its business as it is now being conducted and is duly qualified or
licensed to do business and in good standing in each of the jurisdictions in
which the conduct of its business or the ownership, operation or leasing of its
assets and properties requires it to be so qualified, licensed or in good
standing, other than failures to be so qualified, licensed and in good standing
that would not, individually or in the aggregate, be reasonably likely to have
a Company Material Adverse Effect (as defined in Section 3.8 below).  Section 3.1 of the Company Disclosure
Schedule sets forth the jurisdiction in which the Company and each Company
Subsidiary is organized, each jurisdiction in which the Company and each
Company Subsidiary is qualified or licensed to do business and the current
directors and executive officers of the Company and each Company
Subsidiary.  The Company has made
available to Parent, at the Company’s offices or otherwise, (i) the
Organizational Documents of the Company and each Company Subsidiary, each as in
effect on the date hereof, and (ii) copies of the minutes of all meetings of
the stockholders, the boards of directors and each committee of the boards of
directors (or, in each case, the comparable bodies) of the Company and each
Company Subsidiary held since January 1, 2004. 
Neither the Company nor any Company Subsidiary is or, since January 1,
2004 has been, in violation of its Organizational Documents in any material
respect.

(b)           As used
in this Agreement, the term “Subsidiary” of any Person means another
Person, an amount of voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a majority of
its board of directors or other governing body, or, if there are no such voting
interests, more than 50% of the equity interests of which are owned directly or
indirectly by such first Person, and the term “Company Subsidiary” means
a Subsidiary of the Company.

(c)           As used
herein, the term “Organizational Documents” means, with respect to any
Person that is a corporation, its articles or certificate of incorporation and
bylaws; with respect to any Person that is a partnership, its certificate of
partnership and partnership agreement; with respect to any Person that is a
limited liability company, its certificate of formation and limited liability
company or operating agreement; with respect to any Person that is a trust or
other entity, its declaration or agreement of trust or constituent document;
and with respect to any other Person, its comparable organizational documents, in
each case, as has been amended or restated.

 11
 

(d)           As used
herein, the term “Person” means any natural person or any firm,
partnership, limited liability partnership, association, corporation, limited
liability company, joint venture, trust, business trust, sole proprietorship,
Governmental Authority or other entity or any division thereof.

Section 3.2             Authority;
Validity of Agreement.  The Company
has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and, subject to obtaining the
Company Stockholder Approval (as defined below) in connection with this
Agreement and the Merger, to consummate the Merger and the other transactions
contemplated hereby.  The execution,
delivery and performance by the Company of this Agreement and the consummation
by the Company of the Merger and the other transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of the Company
and all other requisite corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the Merger or the other transactions
contemplated hereby (other than obtaining the Company Stockholder Approval and
filing the Certificate of Merger as required by the DGCL).  This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery thereof by the other parties hereto, constitutes a legally
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally or by general equitable
principles.  The affirmative vote of a
majority of the outstanding shares of Class A Common Stock and Common Stock
entitled to vote in accordance with the DGCL and the Company’s Organizational
Documents, voting together as a single class (the “Company Stockholder
Approval”), is the only vote of the holders of capital stock of the Company
necessary to approve this Agreement, the Merger and the other transactions
contemplated hereby.

Section 3.3             Non-Contravention.  Except as set forth in Section 3.3 of the
Company Disclosure Schedule, the execution and delivery of this Agreement by
the Company does not, and the performance of this Agreement by the Company and
the consummation of the Merger and the other transactions contemplated hereby
will not:  (i) conflict with or
result in any breach of any provision of the Organizational Documents of the
Company or any Company Subsidiary, (ii) result in a material violation or breach
of any provision of, constitute (with or without due notice or lapse of time or
both) a material default under, give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of any benefit
under, or require any consent under, any Material Contract (as defined in
Section 3.14(a) below), (iii) result in the creation or imposition of any
material lien, pledge, security interest, claim, charge, restriction or other
encumbrance (“Liens”) (other than Permitted Liens (as defined in Section
3.12(b) below)) upon any of the properties or assets of the Company or any
Company Subsidiary, or (iv) subject to the Governmental Approvals referred to
in Section 3.4, violate in any material respect any statute, law, ordinance,
rule, regulation, judgment, decree, order, injunction, writ, permit or license
(collectively, “Laws”), which is material and which is applicable to the
Company or any Company Subsidiary or any of their respective properties or
assets.

Section 3.4             Consents
and Approvals.  Except (i) as set
forth in Section 3.4 of the Company Disclosure Schedule, (ii) for compliance
with the Hart-Scott-Rodino Antitrust 

 12
 

Improvements
Act of 1976, as amended (the “HSR Act”), (iii) for filing the
Certificate of Merger in accordance with the DGCL and (iv) for any reports
required to be filed with the SEC under the Exchange Act (each of (i) through
(iv) a “Governmental Approval”), no material declaration, filing or
registration with, or notice to or authorization, consent or approval of, any
court, federal, state, local or foreign governmental or regulatory body
(including a national securities exchange or other self-regulatory body) or
authority (each a “Governmental Authority”) is required for the
execution, delivery and performance of this Agreement by the Company or the
consummation by the Company of the Merger and the other transactions
contemplated hereby, except as may be required as a result of any facts or
circumstances relating solely to Parent or Merger Sub, including Parent’s
status as a tax-exempt organization pursuant to Section 501(c)(3) of the Code
(or as provided for in the North Carolina Nonprofit Corporations Act).

Section 3.5             Capitalization;
Subsidiaries.

(a)           Section
3.5(a)(i) of the Company Disclosure Schedule sets forth the number of
authorized, issued and outstanding shares of capital stock and the record owner
or owners thereof of the Company (setting forth for each record owner or owners
of capital stock of the Company the numbers of shares of each class and series
of capital stock owned by such owners) and each of the Company
Subsidiaries.  All of the outstanding
shares of capital stock of the Company and each Company Subsidiary are validly
issued, fully paid and nonassessable, were issued in conformity with applicable
Laws, and have not been issued in violation of any preemptive or similar
rights.  All of the outstanding shares of
capital stock of each of the Company Subsidiaries are owned directly or
indirectly by the Company free and clear of any Liens.  Section 3.5(a)(ii) of the Company Disclosure
Schedule sets forth, as of the date of this Agreement, (w) the name of the
holder of each outstanding option and warrant to purchase any shares of capital
stock of the Company, (x) the number, class and series of such shares issuable
upon the exercise of each such stock option and warrant, (y) the expiration
date of each such stock option and warrant and (z) the exercise price of each
such stock option and warrant.  Except as
set forth in Section 3.5(a)(ii) of the Company Disclosure Schedule, as of the
date of this Agreement, there are no outstanding options, warrants, calls,
rights or commitments or any other agreements of any kind relating to the sale,
issuance or voting of, or the granting of rights to acquire, any shares of the
capital stock of the Company or any such Company Subsidiary, or any securities
or other instruments convertible into, exchangeable or exercisable for, or
evidencing the right to purchase any shares of capital stock of the Company or
any such Company Subsidiary.  All of the
options set forth in Section 3.5(a)(ii) of the Company Disclosure Schedule are
stock options issued pursuant to the MQ Associates, Inc. 2003 Stock Option Plan
(the “Stock Option Plan” and stock options issued thereunder, “Stock
Options”).

(b)           With
respect to the Stock Options:  (i) each
grant of a Stock Option was duly authorized no later than the date on which the
grant of such option was by its terms to be effective (the “Grant Date”)
by all necessary corporate action, including, as applicable, approval by the
Board of Directors of the Company, or a committee thereof, or a duly authorized
delegate thereof, and any required approval by the stockholders of the Company
by the necessary number of votes or written consents, and the award agreement
governing such grant, if any, was duly executed and delivered by each party
thereto within a reasonable time following the Grant Date, (ii) each such grant
was made in accordance with the terms of the Stock Option Plan and in
compliance with all applicable Laws, (iii) the per share exercise price of each
Stock Option was 

 13
 

not less
than the “fair market value” (within the meaning of Section 409A of the Code
(as defined in Section 3.16(k) below), and the proposed or final regulations
issued thereunder) of a share of the underlying stock on the applicable Grant
Date, (iv) each such grant was properly accounted for in all material
respects in accordance with GAAP in the Company’s financial statements
(including the related notes) and (v) no such grant involved any “back
dating,” “forward dating” or similar practices with respect to the Grant Date.

(c)           Other
than as listed in Section 3.5(c) of the Company Disclosure Schedule, there are
no joint ventures or other Persons in which the Company or any Company
Subsidiary owns, of record or beneficially, any direct or indirect equity
interest, or in which the Company or any Company Subsidiary is subject to any
obligation or other requirement to acquire any direct or indirect equity
interest.

(d)           As of
the Closing Date, the options and warrants set forth on Section 3.5(a)(ii) of
the Company Disclosure Schedule, including the Stock Options, will have been
cancelled or terminated and of no further force and effect.  As of the Closing Date there will be no
outstanding options, warrants, calls, rights or commitments or any other
agreements of any kind relating to the sale, issuance or voting of, or the
granting of rights to acquire, any shares of the capital stock of the Company
or any Company Subsidiary, or any securities or other instruments convertible
into, exchangeable or exercisable for, or evidencing the right to purchase any
shares of capital stock of the Company or any Company Subsidiary.

Section 3.6             SEC
Filings; Financial Statements.

(a)           Except
as set forth in Section 3.6 of the Company Disclosure Schedule, each of the
Company and the Company Subsidiaries filed all forms, reports, statements and
documents required to be filed with the SEC since January 1, 2004 (the “Company
SEC Reports”), each of which complied in all material respects with the
applicable requirements of the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, the Exchange Act and the rules
and regulations promulgated thereunder, and the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”) and the rules and regulations promulgated
thereunder, on the date so filed, except to the extent updated, amended,
restated or corrected by a subsequent Company SEC Report filed or furnished to
the SEC by the Company, and in either case, publicly available prior to the
date hereof (each, a “Company Filed SEC Report”).  Except as set forth in Section 3.6 of the
Company Disclosure Schedule, none of the Company SEC Reports (including any
financial statements or schedules included or incorporated by reference
therein) contained when filed any untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, except to the extent updated, amended, restated or
corrected by a subsequent Company Filed SEC Report.

(b)           Except
to the extent updated, amended, restated or corrected by a subsequent Company
Filed SEC Report, all of the financial statements included in the Company SEC
Reports, in each case, including any related notes thereto, as filed with the
SEC (those filed with the SEC are collectively referred to as the “Company
Financial Statements”), complied as of their respective filing dates as to
form in all material respects with applicable accounting requirements and the
published rules of the SEC with respect thereto and were prepared in 

 14
 

accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of the unaudited
statements, as may be permitted by Form 10-Q of the SEC and subject, in the
case of the unaudited statements, to normal, recurring year-end audit
adjustments).  The consolidated balance sheets
(including the related notes) included in such Company Financial Statements (if
applicable, as updated, amended, restated or corrected in a subsequent Company
Filed SEC Report) fairly present, in all material respects, the consolidated
financial position of the Company and the Company Subsidiaries at the
respective dates thereof, and the consolidated statements of operations,
stockholders’ equity and cash flows (in each case, including the related notes)
included in such Company Financial Statements (if applicable, as updated,
amended, restated or corrected in a subsequent Company Filed SEC Report) fairly
present, in all material respects, the consolidated statements of operations,
stockholders’ equity and cash flows of the Company and the Company Subsidiaries
for the periods indicated, subject, in the case of the unaudited statements, to
normal year-end audit adjustments.

(c)           Except
as set forth in Section 3.6(c) of the Company Disclosure Schedule, each
principal executive officer of the Company and each principal financial officer
of the Company, in each case, at the time of the applicable certification, has
made all applicable certifications required by Rule 13a-14 or 15d-14 under the
Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act with respect to
the Company SEC Reports, and the statements contained in such certifications at
the time of filing or submission of such certifications are true and
accurate.  For purposes of this
Agreement, “principal executive officer” and “principal financial officer”
shall have the meanings given to such terms in the Sarbanes-Oxley Act and the
rules and regulations promulgated thereunder.

(d)           The
Company maintains a system of internal accounting controls (“Internal
Controls”) sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management’s general or specific
authorization; (ii) transactions are recorded as necessary (x) to permit
preparation of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such statements, and
(y) to maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management’s general or specific authorization; and
(iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.

(e)           The
Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act) are reasonably designed to ensure that
all information (both financial and non-financial) required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC, and that all such information is accumulated
and communicated to the Company’s management as appropriate to allow timely
decisions regarding required disclosure and to make the certifications of the
principal executive officer and principal financial officer of the Company
required under the Exchange Act with respect to such reports.

(f)            Neither
the Company nor any of the Company Subsidiaries is a party to, or has any
commitment to become a party to, any joint venture, off-balance sheet
partnership or any 

 15
 

similar
Contract (including any Contract or arrangement relating to any transaction or
relationship between or among the Company or any of the Company Subsidiaries,
on the one hand, and any unconsolidated affiliate, including any structured
finance, special purpose or limited purpose entity or Person, on the other
hand), or any “off-balance sheet arrangements” (as defined in Item 303(a) of
Regulation S-K of the SEC), where the result, purpose or intended effect of
such Contract is to avoid disclosure of any material transaction involving, or
material liabilities of, the Company or any of the Company Subsidiaries in the
Company’s or such Company Subsidiary’s published financial statements or other
Company SEC Reports.

(g)           The
Company has made available to Parent copies of all written communications
required pursuant to Statement of Auditing Standards No. 61 to be delivered to
the Company or any Company Subsidiary by independent public accountants in
connection with the Company Financial Statements and the Company’s Internal
Controls during the one-year period ended December 31, 2006 or thereafter.

Section 3.7             Absence
of Undisclosed Liabilities.  Neither
the Company nor any Company Subsidiary has any material liabilities that would
be required to be reflected on, or disclosed or reserved against in, a
consolidated balance sheet of the Company and the Company Subsidiaries,
prepared in accordance with GAAP, except for (i) liabilities that are
reflected, or for which reserves were established, on the audited consolidated
balance sheet of the Company and the Company Subsidiaries as of December 31,
2006 or on the unaudited consolidated balance sheet of the Company and the
Company Subsidiaries as of March 31, 2007 (the “March 31 Balance Sheet”),
(ii) liabilities incurred in the ordinary course of business and
consistent with past practice since March 31, 2007 and (iii) liabilities
disclosed in Section 3.7 of the Company Disclosure Schedule.

Section 3.8             Absence
of Certain Changes.

(a)           Except
as expressly contemplated by this Agreement, since December 31, 2006:  (i) the Company and Company Subsidiaries have
operated only in the ordinary course of business consistent with past practice
and (ii) there has not occurred any Company Material Adverse Effect or any
fact, occurrence, condition, change, development, effect, circumstance or event
that would, individually or in the aggregate, be reasonably likely to have or
result in a Company Material Adverse Effect. 
As used in this Agreement, the term “Company Material Adverse Effect”
means any material adverse effect on the business, assets, liabilities,
financial condition, or results of operations of the Company and the Company
Subsidiaries, taken as a whole, excluding any effects resulting from (v) events
or circumstances affecting any principal markets served by the Company and the
Company Subsidiaries or the industry in which the Company operates, except any
changes that affect the Company materially disproportionately compared to its
competitors, (w) changes in Law or applicable accounting regulations or
principles, (x) the announcement or pendency of the Merger and the other
transactions contemplated by this Agreement, (y) any actions taken by the
Company at Parent’s written request or explicitly required to be taken pursuant
to this Agreement or (z) changes in general economic or political conditions or
the securities, credit or financial markets in general.

 16

(b)           Except
as set forth in Section 3.8 of the Company Disclosure Schedule, since December
31, 2006, none of the Company or any Company subsidiary has entered into or
terminated any (i) material payor Contracts or (ii) material supplier
Contracts.

Section 3.9             Compliance
with Law; Permits.

(a)           Except
as set forth in Section 3.9 of the Company Disclosure Schedule, since January
1, 2004, the Company and the Company Subsidiaries have been in compliance in
all material respects with all material Laws applicable to them and neither the
Company nor any of the Company Subsidiaries has received any written notice of
any failure to comply in any material respect with any such material Laws.

(b)           The
Company and the Company Subsidiaries have obtained all material permits,
franchises, authorizations, licenses or other approvals issued or granted by
any Governmental Authority (collectively, “Permits”) that are necessary
to conduct their respective businesses as presently being conducted and all
such Permits are in full force and effect. 
None of the Company or any of the Company Subsidiaries is in material
violation or default of such Permits, and none of the Company or any of the
Company Subsidiaries has received any written notification from any
Governmental Authority threatening to suspend, revoke, withdraw, modify or
materially limit any of the Permits.

Section 3.10           Healthcare
Regulatory Compliance.

(a)           The
Company and each applicable Company Subsidiary are qualified for participation
in the Medicare program and each applicable state’s Medicaid program and,
except as set forth in Section 3.10(a) of the Company Disclosure Schedule, each
Facility qualifies, and is enrolled in Medicare, as an independent diagnostic
testing facility, physician practice, or both, as determined and approved by
the applicable Medicare carrier.  Neither
the Company nor any applicable Company Subsidiary has received any written
notice indicating that such qualification may be terminated or withdrawn nor
has any Knowledge that such qualification may be terminated or withdrawn.  The Company and the Company Subsidiaries have
timely filed, in all material respects, all claims filed with respect to the
purchase of products or services by third-party payors (including, without
limitation, Medicare and Medicaid), and all such claims are, in the aggregate,
complete and accurate in all material respects.

(b)           The
Company and the Company Subsidiaries have complied in all material respects
with all applicable material healthcare Laws (including, in each case, any
regulations issued pursuant thereto), including (i) the Social Security Act, as
amended, Sections 1128, 1128A and 1128B, including criminal penalties for acts
involving Federal health care programs, commonly referred to as the “Federal
Anti-Kickback Statute,” (ii) the Social Security Act, as amended, Section 1877
(Prohibition of Certain Referrals), commonly referred to as the “Stark Statute,”
(iii) the Federal False Claims Act, as amended, (iv) the Health Insurance
Portability and Accountability Act of 1996 and (v) corporate practice of
medicine laws.

(c)           Since
January 1, 2004, no employee, or to the Company’s Knowledge, contractor or
agent, of the Company or any Company Subsidiary during such person’s employment
or relationship with the Company or any Company Subsidiary have been convicted
of, charged with or, to the Company’s Knowledge, investigated for a Medicare,
Medicaid or 

 17
 

other Federal Health Care Program (as defined in 42 U.S.C.
§ 1320a-7b(f)) related offense, or, to the Company’s Knowledge, convicted of,
charged with or investigated for a violation of federal or state law relating
to fraud, theft, embezzlement, breach of fiduciary responsibility, financial
misconduct, obstruction of an investigation or controlled substances.  Since January 1, 2004, no employee, or to the
Company’s Knowledge, contractor or agent of the Company or any Company
Subsidiary during such person’s employment or relationship with the Company or
any Company Subsidiary, or to the Company’s Knowledge, any other individual or
entity with which the Company or any Company Subsidiary has contracted, has
been excluded or suspended from participation in Medicare, Medicaid or any
other Federal Health Care Program, or has been debarred, suspended or are
otherwise ineligible to participate in federal programs.  To the Company’s Knowledge, since
January 1, 2004, no employee, contractor or agent of the Company or any
Company Subsidiary during such person’s employment or relationship with the
Company or any Company Subsidiary has committed any offense which would be
reasonably likely to result in such exclusion, suspension, debarment or other
ineligibility.

Section 3.11           Litigation.  Except as set forth in Section 3.11 of the
Company Disclosure Schedule, as of the date hereof (i) there are no Actions or
arbitrations pending against the Company or any Company Subsidiary or any of
their respective Assets (x) that request injunctive relief or
(y) that claim monetary damages in excess of $200,000, (ii) to the Company’s
Knowledge, there are no Actions or arbitrations threatened against the Company
or any Company Subsidiary or any of their respective Assets other than Actions
and arbitrations for which damages payable by the Company or a Company
Subsidiary would not reasonably be expected to exceed $200,000, (iii) to
the Company’s Knowledge, there are no investigations or formal or informal
inquiries by any Governmental Authority or any internal investigations or
whistle-blower complaints pending or threatened against the Company or any
Company Subsidiary and (iv) there are no material judgments, decrees,
injunctions, rules or orders of any Governmental Authority applicable to the
Company or any Company Subsidiary.  “Action”
shall mean any claims, suits, actions, charges or proceedings before any
Governmental Authority.

Section 3.12           Assets.

(a)           The
Company and each Company Subsidiary has, and immediately after giving effect to
the Merger and other transactions contemplated hereby will have, good, valid
and marketable title to, or in the case of leased assets good and valid
leasehold interests in, or otherwise has sufficient and legally enforceable
rights to use, all of the material assets (other than Contracts) used or held
for use in connection with, necessary for the conduct of, or otherwise material
to, its business as presently conducted, including all such assets reflected in
the March 31 Balance Sheet or acquired since the date thereof (other than
assets sold, consumed or otherwise disposed of in the ordinary course of
business) (the “Assets”), in each case free and clear of any Liens other
than Permitted Liens.  The Assets, in the
aggregate, are in sufficient repair and operating condition for the conduct of
the business of the Company and the Company Subsidiaries as presently
conducted.

(b)           As used
in this Agreement, the term “Permitted Liens” means, collectively:  (i) Liens for current Taxes (as defined in
Section 3.16(s) below) or governmental assessments not yet due and payable or
which are being contested in good faith by appropriate proceedings or may
thereafter be paid without penalty; (ii) builder, mechanic, warehousemen,
materialmen,

 18
 

contractor,
workmen, repairmen, carrier Liens, or other similar Liens arising and
continuing in the ordinary course of business for obligations which are not
delinquent or which are being contested in good faith by appropriate legal
proceedings; (iii) other similar common law or statutory Liens which do not
materially affect the value of the property so subject or the usefulness
thereof to the Company in the conduct of its business as presently conducted;
(iv) easements, rights of way, restrictions, encumbrances, covenants,
conditions, encroachments or any other matters affecting title to the Real
Property which do not materially impair the current use or the current value of
such Real Property to which they relate; and (v) those liens set forth in
Section 3.12 of the Company Disclosure Schedule.

Section 3.13           Real
Property.

(a)           Section
3.13(a)(i) of the Company Disclosure Schedule lists, as of the date of this
Agreement, all real property owned in fee by the Company and the Company
Subsidiaries (the “Owned Real Property”) (identifying the street address
of the property and the record owner thereof) and Section 3.13(a)(ii) of the
Company Disclosure Schedule lists all real property (whether by virtue of
direct lease, ground lease or sublease, each a “Lease”) leased by the
Company and the Company Subsidiaries as lessee other than Leases requiring
annual payments not in excess of $25,000 but including any Leases below such
threshold if the Lease is for real property that is used as a Facility (the “Leased
Real Property” and, together with the Owned Real Property, the “Real
Property”) (identifying the street address of the property and parties to
the Lease).  The Real Property
constitutes all of the material land, buildings and structures used by the
Company and the Company Subsidiaries in the conduct of their business.

(b)           With
respect to the Real Property:

(i)            other than as set forth in Section
3.13(b)(i) of the Company Disclosure Schedule, there are no pending or, to the
Company’s Knowledge, threatened material condemnation proceedings relating to
such Real Property;

(ii)           to the Company’s Knowledge, there are
no outstanding options or rights of first refusal to purchase or lease such
Real Property (other than extension or option rights in the Leases), or any
portion thereof or interest therein, except to the extent set forth in Section
3.13(b)(ii) of the Company Disclosure Schedule;

(iii)          other than as set forth in Section 3.13(b)(iii)
of the Company Disclosure Schedule, there are no leases, subleases, licenses or
agreements, written or oral, granting to any party or parties (other than the
Company or a Company Subsidiary) the right of use or occupancy of any material
portion of any Real Property;

(iv)          no portion of such Real Property has
suffered any damage by fire or other casualty loss which has not heretofore
been repaired and restored to its condition before such loss or casualty
(ordinary wear and tear excepted), except as would not, individually or in the
aggregate, reasonably be expected to interfere in any material respect with the
Company’s use of such Real Property, or with respect to any Leased Real
Property, which has not heretofore been repaired and restored in accordance
with the terms of the applicable Lease; and

 19
 

(v)           the Company has delivered or made
available to Parent, at the Company’s offices or otherwise, complete and
accurate copies of all of the following materials relating to such Real
Property, to the extent in the Company’s or any Company Subsidiary’s possession
or control: all Leases (including any amendments, modifications or supplements
thereto); title insurance policies; deeds; encumbrance and easement documents
and other documents and agreements affecting title to or for operation of the
Owned Real Property; surveys of the Owned Real Property; environmental
assessment and similar reports; and leases, subleases, licenses or agreements
(including any amendments or modifications thereto) granting to any other party
the right of use or occupancy of any portion of such Real Property.

(c)           With
respect to the Owned Real Property, such Owned Real Property is in material
compliance with the terms and provisions of any declaration of condominium,
restrictive covenants, easements, or agreements affecting such Owned Real
Property.

(d)           With
respect to the Leased Real Property:

(i)            there
are no material disputes, oral agreements or forbearance programs in effect as
to any Lease;

(ii)           neither the Company nor any Company
Subsidiary has transferred, conveyed, mortgaged, deeded in trust or encumbered
any interest in the leasehold or subleasehold created by any Lease, except
(i) transfers or conveyances to the Company or any Company Subsidiary and
(ii) as set forth in Section 3.13(d)(ii) of the Company Disclosure
Schedule; and

(iii)          other than as set forth in any Lease,
there are no outstanding options or rights of any party to terminate such Lease
prior to the expiration of the term thereof except to the extent set forth on
Section 3.13(d)(iii) of the Company Disclosure Schedule.

Section 3.14           Material
Contracts.

(a)           Except
as set forth in Section 3.14(a) of the Company Disclosure Schedule (which shall
reference the applicable clause of this subsection (a)), as of the date hereof
and, except for Contracts entered into after the date hereof as permitted
pursuant to Section 5.1, as of the Closing Date, neither the Company nor any
Company Subsidiary is a party to or bound by any:

(i)            employment,
severance or consulting Contract with an employee or former employee that is
not terminable at will by the Company or the Company Subsidiary party thereto
(other than any Contract for the employment of any such employee or former
employee implied in Law), and which will require the payment of amounts by the
Company or the Company Subsidiary, as applicable, after the date of this
Agreement in excess of $100,000 in base pay per annum;

(ii)           Contract providing for benefits under
any Benefit Plan;

 20
 

(iii)          collective bargaining Contract with
any labor union;

(iv)          Contract for capital expenditures or
the acquisition or construction of fixed assets which requires aggregate future
payments in excess of $100,000 other than Contracts for projects which are
currently accounted for in the Company’s 2007 capital budget;

(v)           Contract expressly prohibiting or
materially restricting the ability of the Company or any Company Subsidiary to
conduct its respective business, to compete in any line of business or to
engage in any business or operate in any geographical area;

(vi)          Contract (or group of Contracts
relating to the same site) requiring aggregate future payments or expenditures
in excess of $100,000 and relating to cleanup, abatement, remediation or
similar actions in connection with environmental Liabilities (as defined in
Section 3.14(d) below);

(vii)         Contract pursuant to which the Company
or any Company Subsidiary has entered into a joint venture, partnership,
strategic alliance or similar arrangement with any other Person (other than the
Company or another Company Subsidiary);

(viii)        indenture, mortgage, loan or credit
Contract under which the Company or a Company Subsidiary has outstanding
indebtedness or any outstanding note, bond, indenture or other evidence of
indebtedness for borrowed money, or guaranteed indebtedness for money borrowed
by persons other than controlled Affiliates, in an amount greater than
$100,000;

(ix)           Contract (including any so-called
take or pay or keep well agreements) under which the Company or any Company
Subsidiary has directly or indirectly guaranteed or otherwise agreed to be
responsible for indebtedness, Liabilities or obligations of another Person
(other than the Company or any Company Subsidiary);

(x)            Contract or commitment providing for
an interest rate, currency or commodity swap, derivative, hedge, forward
purchase or sale or other transaction similar in nature or effect to any
off-balance sheet financing;

(xi)           Contract under which the Company or a
Company Subsidiary is (A) a lessee of any machinery, equipment, vehicle or
other tangible personal property owned by a third person or entity, or (B) a
lessor of any tangible personal property owned by the Company or the applicable
Company Subsidiary, in each of cases (A) and (B) which requires annual payments
in excess of $100,000;

(xii)          Contract for acquisitions of capital
stock or all or substantially all of the assets of another Person (whether by
merger or stock or asset purchase) which Contract includes payment obligations
continuing or in effect as of the date hereof in excess of $100,000;

 21
 

(xiii)         Contract relating to (A) services
provided by the Company or a Company Subsidiary to or at hospitals, clinics,
medical or healthcare providers or other customers or services paid for by
health maintenance organizations, health insurers, managed care plans or other
third party payors that accounts for ten percent or more of the gross revenue
of the Company for the Company region in which the Contract applies (based on
the Company’s 2006 gross revenue), or (B) the maintenance or service of imaging
equipment;

(xiv)        Contract (other than Contracts of the
type described in subclauses (i) through (xiii) above) that (A) was entered
into outside of the ordinary course of business consistent with past practice
and (B) involves future payments by or to the Company or a Company Subsidiary
in excess of $350,000 per annum;

(xv)         Lease for any Facility; and

(xvi)        other Contract the termination of which
would be reasonably expected to result in a Company Material Adverse Effect.

Each such
Contract described in clauses (i) – (xvi) is referred to herein as a “Material
Contract.”

(b)           Copies
of all written Material Contracts have been previously delivered to or made
available for inspection by Parent, and such copies are complete and correct in
all material respects.  Except as set
forth in Section 3.14(b) of the Company Disclosure Schedule, (i) each of the
Material Contracts is in full force and effect and is a valid and binding
obligation of the Company or Company Subsidiary, as applicable, and enforceable
against the Company or such Company Subsidiary, and, to the Company’s
Knowledge, a valid and binding obligation enforceable against each other party
thereto; (ii) the Company or Company Subsidiary, as applicable, has duly
performed all of its material obligations required to be performed by it to
date under each of the Material Contracts and is not (with or without the lapse
of time or the giving of notice, or both) in material breach or default
thereunder; (iii) to the Company’s Knowledge, each of the other parties to such
Material Contract has performed all obligations required to be performed by it
to date under such Material Contract and is not (with or without the lapse of
time or the giving of notice, or both) in material breach or default thereunder;
and (iv) neither the Company nor any Company Subsidiary has received any
written notice of any intention to terminate, not renew or challenge the
validity or enforceability of any Material Contract.

(c)           As used
in this Agreement, the term “Contract” means any contract, agreement,
lease, license, purchase order, indenture, note, bond, loan, instrument,
commitment or other arrangement that is binding on any Person under applicable
Law.

(d)           As used
in this Agreement, the term “Liability” means any and all debts,
liabilities and obligations, whether accrued or fixed, absolute or contingent
or matured or unmatured including those arising under any Law and those arising
under any Contract, including any letters of credit.

Section 3.15           Affiliate
Arrangements.  Except as set forth in
Section 3.15(i) of the Company Disclosure Schedule, there are no Contracts
between the Company or a Company Subsidiary, on the one hand, and any current
stockholder of the Company or any Affiliate of

 22
 

such
current stockholder, on the other hand (any such Contract, an “Affiliate
Arrangement”).  Except as set forth
in Section 3.15(ii) of the Company Disclosure Schedule, each Affiliate
Arrangement shall terminate and be of no further force or effect as of the
Closing Date.  As used in this Agreement,
the term “Affiliate” means, with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.  For purposes of this definition, the term “control”
as applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management of such Person,
whether through ownership of voting securities, as trustee or executor, by
contract or any other means; and the terms “controlling” and “controlled”
have meanings correlative to the foregoing.

Section 3.16           Taxes.  Except as set forth in Section 3.16 of the
Company Disclosure Schedule:

(a)           (i) Each
of the Company and the Company Subsidiaries has timely filed, or has caused to
be timely filed on its behalf, (taking into account any extension of time
within which to file) all material Tax Returns (as defined in Section 3.16(s)
below) required to be filed by it and all such Tax Returns are true, correct
and complete in all material respects, (ii) all Taxes due and payable by each
of the Company and the Company Subsidiaries have been timely paid other than
Taxes that have been reserved for in the Company Financial Statements or that
are being contested in good faith, and (iii) the Company and the Company
Subsidiaries have established reserves in the most recently filed Company
Financial Statements for the payment of any unpaid Taxes as required by GAAP,
consistently applied, as of the date of the March 31 Balance Sheet and the
other balance sheets included therein.

(b)           There
are no material Liens for Taxes upon any property or Assets of the Company or
the Company Subsidiaries, except for Liens arising by operation of Law for
Taxes not yet due and payable or being contested in good faith.

(c)           Each of
the Company and the Company Subsidiaries has complied with all applicable Laws
relating to the payment and withholding of material Taxes and has, within the
time and in the manner prescribed by Law, withheld and paid over to the proper
Tax Authority (as defined in Section 3.16(s) below) all amounts required to be
so withheld and paid over under applicable Law.

(d)           No
material Tax Proceeding (as defined in Section 3.16(s) below) is currently in
existence or, to the Company’s Knowledge, threatened with regard to any Taxes
or Tax Returns of the Company or any of the Company Subsidiaries.

(e)           No
deficiencies for any material Taxes have been proposed, asserted or assessed
against Company or the Company Subsidiaries that are not adequately reserved
for or taken into account on the Company Financial Statements filed with the
SEC prior to the date of this Agreement.

(f)            Neither
the Company nor any of the Company Subsidiaries has granted in writing any
power of attorney that is currently in force with respect to any Taxes or Tax
Returns or entered into any “closing agreement” as described in Section 7121 of
the Code or any similar provision of state, local or foreign Tax Law.

(g)           Neither
the Company nor any of the Company Subsidiaries has requested an extension of
time within which to file any Tax Return that has not since been filed.

 23
 

(h)           No
agreement or other document waiving or extending the statute of limitations or
the period of assessment for collection of any Taxes payable by the Company or
any of the Company Subsidiaries has been filed or entered into with any Tax
Authority.

(i)            Neither
the Company nor any of the Company Subsidiaries is a party to any Contract
providing for the allocation, sharing or indemnification of Taxes.

(j)            Neither
the Company nor any of the Company Subsidiaries has been included in any “consolidated,”
“unitary” or “combined” Tax Return (other than Tax Returns which include only
the Company and any of the Company Subsidiaries) for U.S. federal Tax purposes
or for any foreign, state or local Tax purposes with respect to Taxes for any
taxable year.

(k)           Neither
the Company nor any of the Company Subsidiaries has constituted either a “distributing
corporation” or a “controlled corporation” (within the meaning of Section
355(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the “Code”))
in a distribution of stock qualifying for Tax-free treatment under Section 355
of the Code (i) in the two years prior to the date of this Agreement or (ii) in
a distribution that could otherwise constitute part of a “plan” or “series of
related transactions” (within the meaning of Section 355(e) of the Code) in
conjunction with the transactions contemplated by this Agreement.

(l)            Neither
the Company nor any of the Company Subsidiaries has since January 1, 2006 (i)
changed an annual accounting period or changed any accounting method, (ii)
settled any material Tax claim or assessment, or (iii) received a Tax ruling or
entered into a closing agreement with any Tax Authority.

(m)          Neither
the Company nor any of the Company Subsidiaries will be required to include any
amount in taxable income or exclude any item of deduction or loss from taxable
income for any taxable period (or portion thereof) ending after the Closing
Date as a result of (i) any change in method of accounting for a taxable period
ending on or prior to the Closing Date, or (ii) deferred intercompany items or
excess loss accounts arising prior to the Closing Date.

(n)           Neither
the Company nor any of the Company Subsidiaries has engaged or participated,
within the meaning of Treasury Regulation Section 1.6011-4(c), or has been a “material
advisor” or “promoter” (as those terms are defined in Section 6111 and 6112 of
the Code) in (i) any “reportable transaction” within the meaning of Sections
6011, 6662A and 6707A of the Code, (ii) any “confidential corporate tax shelter”
within the meaning of Section 6111 of the Code or (iii) any “potentially
abusive tax shelter” within the meaning of Section 6112 of the Code.

(o)           As of
December 31, 2006, the Company had (i) regular net operating loss carryforwards
in the amount of approximately $84.3 million for federal income tax purposes
and (ii) regular net operating loss carryforwards in the amount of
approximately $157.6 million for state income tax purposes.

(p)           Section
3.16(p) of the Company Disclosure Schedule sets forth the net operating loss
carryforwards of the Company and each of the Company Subsidiaries in each state
in which the Company and/or each Company Subsidiary files an income or
franchise Tax Return.

(q)           As of
the date hereof, none of the net operating loss carryovers, capital loss
carryovers, or tax credits of any kind of the Company or any of the Company
Subsidiaries is

 24
 

subject to
any limitation on its use under Section 382, 383 or 1502 of the Code, or any
provision of any Treasury Regulation promulgated under such Code provisions.

(r)            The
Company has an overall net unrealized built-in gain as defined in Section 382
of the Code.

(s)           As used
in this Agreement:

(i)            “Tax Authority” means any
Governmental Authority having jurisdiction over the assessment, determination,
collection or imposition of any Tax.

(ii)           “Tax Return” means any return,
report or similar statement (including any attachment or supplements thereto)
supplied to or required to be supplied to any Tax Authority, including, any
information return, claim for refund, amended return or declaration of
estimated Tax, and including, where permitted or required, combined, consolidated
or unitary returns for any group of entities that includes the Company, any of
the Company Subsidiaries or any of their respective Affiliates.

(iii)          “Tax” or “Taxes” means
(i) any and all federal, state, local, foreign or other taxes of any kind imposed
by any Tax Authority, including, taxes, fees, duties, levies, customs, tariffs,
imposts, assessments, obligations or other similar charges of any kind on or
with respect to income, franchises, premiums, windfall or other profits, gross
receipts, property, sales, use, transfer, capital stock, payroll, employment,
social security, workers’ compensation, unemployment compensation or net worth,
and taxes or other similar charges of any kind in the nature of excise,
withholding, ad valorem or value added; (ii) all interest, penalties, fines,
additions to tax or additional amounts imposed by any Tax Authority in
connection with any item described in clause (i); and (iii) any transferee
liability in respect of any items described in clauses (i) or (ii) payable by
reason of Contract, assumption, transferee liability, operation of Law,
Treasury Regulation Section 1.1502-6 (or any predecessor or successor
provisions thereof and any similar provision of state, local or foreign Law) or
otherwise.

(iv)          “Treasury Regulations” means
the regulations, including temporary regulations, promulgated under the Code,
as the same may be amended hereafter from time to time (including corresponding
provisions of succeeding regulations).

(v)           “Tax Proceeding” means any
pending or threatened audit or assessment, suit, proposed adjustment,
deficiency, dispute, administrative or judicial proceeding or similar claim
with respect to Taxes.

Section 3.17           Employee
Benefit Plans; ERISA.

(a)           Section
3.17(a) of the Company Disclosure Schedule sets forth each material employee
benefit plan, policy, Contract or agreement (including employment agreements,
change of control agreements and severance agreements, deferred compensation,
incentive compensation, bonus, stock option, equity-based and stock purchase
plans) of any type (including “employee benefit plans” within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”)), maintained by the Company,

 25
 

any of the
Company Subsidiaries or any trade or business, whether or not incorporated (an “ERISA
Affiliate”), that together with the Company would be deemed to be a “single
employer,” within the meaning of Section 4001(b)(1) of ERISA, or with respect
to which the Company or any of the Company Subsidiaries has or may have a
Liability, or which is maintained for the benefit of current or former
employees of the Company or any of the Company Subsidiaries (collectively, the “Benefit
Plans”).  Section 3.17(a) of the
Company Disclosure Schedule separately lists or identifies each Benefit Plan
(i) that is not sponsored or maintained by the Company or any of the Company
Subsidiaries or (ii) which provides change of control benefits.  Except as disclosed in Section 3.17(a) of the
Company Disclosure Schedule, neither the Company nor any Company Subsidiary has
any formal plan or commitment, whether legally binding or not, to create any
additional Benefit Plan or modify or change any existing Benefit Plan that
would affect any employee or former employee of the Company or any Company
Subsidiary.

(b)           With
respect to each Benefit Plan, the Company has delivered or made available to
Parent true and complete copies (to the extent such documents exist) of all
plan documents, summary plan descriptions, summaries of material modifications,
trust agreements and other related agreements including all amendments to the
foregoing; the two most recent annual reports; the most recent annual and
periodic accounting of plan assets; the most recent determination letter
received from the Internal Revenue Service; and the two most recent actuarial
reports, to the extent any of the foregoing may be applicable to a particular
Benefit Plan.

(c)           Except
as disclosed in Section 3.17(c) of the Company Disclosure Schedule with respect
to any Benefit Plan, there are no material amounts accrued but unpaid as of the
date of the Company Financial Statements most recently filed with the SEC that
have not been reflected on such Company Financial Statements.

(d)           With
respect to each Benefit Plan: (i) if intended to qualify under section 401(a)
of the Code, such plan so qualifies, and its trust is exempt from taxation
under section 501(a) of the Code; (ii) such plan has been administered in
accordance with its terms and in all material respects with all applicable
Laws; (iii) no claims are pending or, to the Company’s Knowledge, threatened by
or on behalf of any Benefit Plan, by any employee or beneficiary under any such
Plan or otherwise involving any such Benefit Plan (other than routine claims
for benefits); (iv) none of the Company, any of the Company Subsidiaries, any
ERISA Affiliate, nor, to the Company’s Knowledge, any trustee or administrator
thereof, has engaged in a transaction or has taken or failed to take any action
in connection with which the Company or any of the Company Subsidiaries could
be subject to any material Liability for either a civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a Tax imposed pursuant to Section
4975 or 4976 of the Code; (v) no Lien imposed under the Code or ERISA exists
or, to the Company’s Knowledge, is reasonably likely to exist; and (vi) all
contributions and premiums due (including any extensions for such contributions
and premiums) have been timely made in full.

(e)           Except
as disclosed on Section 3.17(e) of the Company Disclosure Schedule:  (i) neither the Company nor any ERISA
Affiliate has incurred any outstanding Liability under Title IV of ERISA and no
basis for any such Liability exists; (ii) neither the Company nor any ERISA
Affiliate maintains (or contributes to), or has maintained (or has contributed
to) within the last six years, any employee benefit plan that is subject to
Title IV of ERISA or Section 412 of the Code; and (iii) there is no pending
dispute involving the Company

 26
 

or any ERISA
Affiliate concerning payment of contributions to or payment of withdrawal
liability payments or Section 412 of the Code.

(f)            With
respect to each Benefit Plan that is an “employee welfare benefit plan” (as
defined in Section 3(1) of ERISA), except as disclosed in Section 3.17(f) of
the Company Disclosure Schedule, no such plan provides medical or death
benefits with respect to current or former employees of the Company or any of
the Company Subsidiaries beyond their termination of employment, other than on
an employee-pay-all basis or except as required by applicable Law, and each
such welfare plan may be amended or terminated under the terms of such plan by
the Company or any of the Company Subsidiaries at any time with respect to such
former or current employees.  With
respect to each Benefit Plan that is a “group health plan” (as defined in
Section 5000(b) of the Code), each such Benefit Plan currently complies and has
complied in all material respects with the requirements of Part 6 of Title I of
ERISA and Sections 4980B and 5000 of the Code.

(g)           Except
as set forth in Section 3.17(g) of the Company Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement will not,
either alone or in combination with any other event, (i) entitle any current or
former employee, officer, director or consultant of the Company or any of the
Company Subsidiaries to severance pay, unemployment compensation or any other
termination payment, (ii) accelerate the time of payment or vesting, or increase
the amount of, or otherwise enhance, any benefit due to any such employee,
officer, director or consultant, including, without limitation, with respect to
any equity-based awards held by them under the equity compensation plans
maintained by the Company or its Affiliates, or (iii) result in any payment
that would fail to be deductible under Section 280G of the Code.

(h)           Neither
the Company nor any ERISA Affiliate has used the services or workers provided
by third party contract labor suppliers, temporary employees, “leased employees”
(within the meaning of Section 414(n) of the Code) or individuals who have
provided services as independent contractors to an extent that would reasonably
be expected to result in the disqualification of any of the Benefit Plans or
the imposition of penalties or excise taxes with respect to the Benefit Plans
by the Internal Revenue Service, the Department of Labor, the Pension Benefit
Guaranty Corporation, or any other Governmental Authority.

(i)            No
Benefit Plan is a “multiemployer plan,” (as defined in Section 3(37) or
4001(a)(3) of ERISA) or is covered by Section 4063 or 4064 of ERISA.

Section 3.18           Labor
Matters.  Except as set forth in
Section 3.18 of the Company Disclosure Schedule:  (i) the Company and the Company Subsidiaries
are neither party to, nor bound by, any collective bargaining agreement or
other Contract relating to organized labor; (ii) to the Company’s
Knowledge, there are no collective bargaining agreements or other Contracts
relating to organized labor that govern the terms and conditions of employment
of any of the employees of the Company or the Company Subsidiaries; (iii) no
employees of the Company or the Company Subsidiaries are represented by any
labor organization with respect to their employment with the Company or the
Company Subsidiaries; (iv) there are no pending or, to the Company’s Knowledge,
threatened organizational campaigns or activities, petitions, demands or other
unionization activities seeking recognition of a collective bargaining unit or
representation with respect to or involving any employees of the Company or the
Company Subsidiaries, and, to the Company’s Knowledge, no union claims to
represent any such employees and there are no jurisdictional disputes between
any unions with respect to such

 27
 

employees;
(v) from January 1, 2004 to the date of this Agreement, there has been no
actual, or, to the Company’s Knowledge, threatened strikes, lockouts,
slowdowns, work stoppages, material grievances, material labor-related
arbitrations or material labor-related controversies against or affecting the
Company or the Company Subsidiaries; (vi) there are no pending, or, to the
Company’s Knowledge, threatened unfair labor practice charges or complaints
against or affecting the Company or the Company Subsidiaries before any
Governmental Authority, and none of the Company, the Company Subsidiaries nor
any of their respective employees, agents or representatives (during the course
and scope of their relationship with the Company and the Company Subsidiaries)
has committed any material unfair labor practice as defined in the National
Labor Relations Act or similar Law; (vii) since January 1, 2004, the Company
and the Company Subsidiaries have not effectuated (A) a “plant closing” (as
defined in the Workers’ Adjustment and Retraining Notification Act and any
similar state or local Law relating to plant closings and layoffs (“WARN”))
affecting any site of employment or one or more facilities or operating units
within any site of employment; (B) a “mass layoff” (as defined in WARN)
affecting any site of employment; or (C) any similar action under WARN
requiring notice to employees in the event of an employment loss or layoff;
(viii) neither the Company nor the Company Subsidiaries is a party to, or
otherwise bound by, any consent decree with, order of, judgment or material
citation by, any Governmental Authority relating to employees or employment
practices, and neither the Company nor the Company Subsidiaries have received
written notice of the intent of any Governmental Authority to conduct an
investigation with respect to such matters or written notice that any such
investigation is in progress (nor, to the Company’s Knowledge, has any such
investigation been threatened); and (ix) since January 1, 2004, the Company
and the Company Subsidiaries have not received written notice of any Action
(A) that is pending against them pending before the Equal Employment
Opportunity Commission or any other Governmental Authority responsible for the
prevention of unlawful employment practices, or (B) pending or, to the
Company’s Knowledge, threatened against them in any forum by or on behalf of
any present or former employee of such entities, any applicant for employment
or classes of the foregoing alleging breach of any express or implied contract
of employment, breach of any applicable Law governing employment or the
termination thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship.

Section 3.19           Intellectual
Property.

(a)           Section
3.19(a) of the Company Disclosure Schedule sets forth a complete and accurate
list of all of the following Company Intellectual Property (as defined in
Section 3.19(d) below):  (i) patents
and patent applications; (ii) trademark registrations and applications; (iii)
Internet domain names; and (iv) copyright registrations and applications.

(b)           Section
3.19(b) of the Company Disclosure Schedule sets forth all material Intellectual
Property (as defined in Section 3.19(d) below) licenses to which the Company or
any Company Subsidiary is a party as either a licensee or licensor and material
agreements pursuant to which any of them otherwise grants or receives rights to
Intellectual Property, except for licenses for commercially available “off the
shelf” software (collectively, the “License Agreements”).  The License Agreements included in Section
3.19(b) of the Company Disclosure Schedule are valid and binding obligations of
the Company and/or any Company Subsidiary, enforceable in accordance with their
terms, and neither the Company nor 

 28
 

any Company
Subsidiary, and to the Company’s Knowledge no other party, is in material
breach or default thereunder.

(c)           Except
as set forth in Section 3.19(c) of the Company Disclosure Schedule:

(i)            the
Company or a Company Subsidiary is the sole and exclusive owner of, or, to the
Company’s Knowledge, has a valid and enforceable license to use and possess,
free and clear of all Liens other than Permitted Liens, all Company
Intellectual Property;

(ii)           no claim is pending, or to the
Company’s Knowledge, threatened against the Company or any Company Subsidiary
that the conduct of the Company’s business or the Company Intellectual Property
is, and to the Company’s Knowledge, neither the Company nor any Company
Subsidiary is, violating, diluting, misappropriating or infringing upon the
Intellectual Property rights of any third party; and

(iii)          no claim is pending or has been
threatened by the Company or any Company Subsidiary that a third party is
infringing upon, diluting, misappropriating or otherwise violating any rights
in any Company Intellectual Property and, to the Company’s Knowledge, no third
party is infringing upon, diluting, misappropriating or otherwise violating any
rights in any Company Intellectual Property.

(d)           As used
in this Agreement, the term “Intellectual Property” means all patents,
patent rights, trademarks, trademark rights, trade names, trade name rights,
service marks, service mark rights, copyrights (other than copyrights in “off-the-shelf”
computer programs), all applications and registrations for any of the
foregoing, trade secrets and other intangible proprietary rights.  “Company Intellectual Property” means
all material Intellectual Property owned by the Company or any Company
Subsidiary used in the conduct of its business as currently conducted.

Section 3.20           Insurance.  Section 3.20 of the Company Disclosure
Schedule sets forth a list of all material insurance coverage for the Company
and Company Subsidiaries in effect as of the date of this Agreement.  All such policies are in full force and
effect, and no notice of default, cancellation or termination, coverage
limitation or reduction or material premium increase with respect to any such
policy has been received by the Company or any Company Subsidiary with respect
to any such policy.  There is no material
claim by the Company or any Company Subsidiary pending under any of such
policies or bonds as to which coverage has been denied or disputed by the
underwriters of such policies or bonds.

Section 3.21           Environmental
Matters.

(a)           Except
as set forth in Section 3.21 of the Company Disclosure Schedule:  (i) the Company and the Company
Subsidiaries have obtained all permits, licenses and other authorizations which
are required under the Environmental Laws for the operation of their respective
businesses and the ownership, use and operation of the Real Property and each
are in compliance in all material respects with all terms and conditions of all
such permits, licenses and authorizations; (ii) the Company and the
Company Subsidiaries have been and are in compliance in all material respects
with all applicable Environmental Laws; (iii) there is no civil, criminal or

 29
 

administrative
action, suit, demand, claim, hearing, notice of violation, order, decree, judgment,
investigation, proceeding, notice or demand letter existing or pending, or, to
the Company’s Knowledge, threatened, with respect to the Company, the Company
Subsidiaries or the Real Property under the Environmental Laws; (iv) the Owned
Real Property has not been impacted by any release, spill, discharge or other
disposal of any Hazardous Materials that is reasonably likely to result in a
claim against or obligation of the Company or any Company Subsidiary to
remediate the Owned Real Property; (v) the Company and the Company
Subsidiaries have not, and, to the Company’s Knowledge, no other person has,
released, spilled, discharged or otherwise disposed of any Hazardous Materials
on, beneath or adjacent to the Leased Real Property or any property formerly
owned, operated or leased by the Company or the Company Subsidiaries, other
than such releases, spills, discharges or other disposals that are not
reasonably likely to result in a claim against or obligation of the Company or
any Company Subsidiary to remediate such real property; (vi) other than
pursuant to terms contained in any Leases, neither the Company nor any Company
Subsidiary has entered into any material agreement requiring them to indemnify,
reimburse, defend or hold harmless any other person from and against any
Liabilities under Environmental Law; and (vii) the Company has made available
to Parent all material reports, audits, studies, analyses and, since January 1,
2004, correspondence with Governmental Authorities, in each case, in its possession
or control or the possession or control of any Company Subsidiary, relating to
the Company’s or the Company Subsidiaries’ Liabilities under or compliance with
Environmental Laws, or the environmental condition of the Real Property or any
property formerly owned, leased or operated by the Company or the Company
Subsidiaries.

(b)           As used
in this Agreement:

(i)            “Environmental Laws” means
all foreign, federal, state and local Laws relating to pollution or protection
of the environment or human health and safety, including Laws relating to
releases or threatened releases of Hazardous Materials (defined below in
Section 3.21(b)(ii)) into the indoor or outdoor environment (including ambient
air, surface water, groundwater, land, surface and subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, release, transport or handling of Hazardous Materials and
all Laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials, and all Laws relating to
endangered or threatened species of fish, wildlife and plants and the
management or use of natural resources; and

(ii)           “Hazardous Materials” means
any pollutant, contaminant, toxic mold, toxic substance, hazardous waste,
hazardous material, or hazardous substance, or any oil, petroleum, or petroleum
product, as defined in or pursuant to the Resource Conservation and Recovery
Act, as amended, the Comprehensive Environmental Response, Compensation, and
Liability Act, as amended, the Federal Clean Water Act, as amended, the Federal
Clean Air Act, or any other Environmental Law.

Section 3.22           Suppliers.  Section 3.22 of the Company Disclosure
Schedule sets forth the names of each of the ten suppliers to whom the Company
and the Company Subsidiaries paid the highest aggregate amounts for the
twelve-month period ended December 31, 2006, for supplies and other goods.  Except as set forth in Section 3.22 of the
Company

 30
 

Disclosure
Schedule, since December 31, 2006, none of the Company nor any Company
Subsidiary has received notice in writing that any such supplier will not sell
supplies and other goods to the Company or any Company Subsidiary at any time
after the Closing Date on terms and conditions substantially similar to those
used in its current sales to the Company, subject only to general and customary
price increases.

Section 3.23           Brokers
and Finders.  No broker, finder or
similar intermediary has acted for or on behalf of, or is entitled to any
broker’s, finder’s or similar fee or other commission from the Company or any
Company Subsidiary in connection with the Merger and the other transactions
contemplated by this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB

Each of Parent and Merger Sub hereby represents and
warrants to the Company as of the date of this Agreement and as of the Closing
Date (except for those representations and warranties made as of a specific
date) as follows:

Section 4.1             Organization;
Qualification.  Parent is a nonprofit
corporation, and Merger Sub is a corporation, in each case duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, has all requisite corporate power and authority to carry on its
business as it is now being conducted and is duly qualified or licensed to do
business and in good standing in each of the jurisdictions in which the conduct
of its business or the ownership, operation or leasing of its assets and
properties requires it to be so qualified, licensed or in good standing other
than failures to be so qualified, licensed and in good standing that would not,
individually or in the aggregate, be reasonably likely to have a material
adverse effect on the ability of Parent or Merger Sub to perform its
obligations under this Agreement or to consummate the Merger and the other
transactions contemplated hereby.  Parent
and Merger Sub have made available to the Company their respective
Organizational Documents as in effect on the date hereof.

Section 4.2             Authority;
Validity of Agreement.  Each of
Parent and Merger Sub has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the Merger and the other transactions contemplated hereby.  The execution, delivery and performance by
each of Parent and Merger Sub of this Agreement and the consummation by each of
Parent and Merger Sub of the Merger and the other transactions contemplated
hereby have been duly and validly authorized by the Board of Trustees of Parent
and the Board of Directors and the sole stockholder of Merger Sub and all other
requisite corporate action on the part of Parent and Merger Sub and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the Merger or the other transactions
contemplated hereby (other than filing the Certificate of Merger as required by
the DGCL).  This Agreement has been duly
and validly executed and delivered by Parent and Merger Sub and, assuming the
due authorization, execution and delivery thereof by the other parties hereto,
constitutes a legally valid and binding obligation of Parent and Merger Sub,
enforceable against each of Parent and Merger Sub in accordance with its terms,
except as enforceability may be limited by bankruptcy,

 31
 

insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally or by general equitable principles.

Section 4.3             Non-Contravention.  The execution and delivery of this Agreement
by each of Parent and Merger Sub does not, and the performance of this
Agreement by each of Parent and Merger Sub and the consummation of the Merger
and the other transactions contemplated hereby will not:  (i) conflict with or result in any breach of
any provision of the Organizational Documents of Parent and Merger Sub, (ii)
result in a material violation or breach of any provision of, constitute (with
or without due notice or lapse of time or both) a material default under, give
rise to a right of termination, cancellation or acceleration of any obligation
or the loss of any benefit under, or require any consent under, any material
Contract of any kind to which Parent or Merger Sub is a party or by which any
of their respective properties or assets may be bound or affected, (iii) result
in the creation or imposition of any material Lien upon any of the properties
or assets of Parent or Merger Sub, or (iv) subject to the Governmental
Approvals defined in Section 3.4, violate in any material respect any material
Laws applicable to Parent or Merger Sub or any of their respective properties
or assets, except, in the case of clauses (ii), (iii) and (iv), for any such
conflicts, violations, breaches, defaults or other occurrences that would not,
individually or in the aggregate, be reasonably likely to have a material
adverse effect on the ability of Parent and Merger Sub to perform its
obligations under this Agreement or to consummate the Merger and the other
transactions contemplated hereby.

Section 4.4             Consents
and Approvals.  Except for the
Governmental Approvals, no declaration, filing or registration with, or notice
to or authorization, consent or approval of, any Governmental Authority is
necessary for the execution, delivery and performance of this Agreement by
Parent and Merger Sub or the consummation by Parent and Merger Sub of the
Merger or the other transactions contemplated hereby.

Section 4.5             Actions.  There are no Actions or arbitrations pending
or, to the knowledge of Parent, threatened against or affecting Parent or
Merger Sub that individually or when aggregated with one or more other Actions
or arbitrations would reasonably be expected to have a material adverse effect
on the ability of Parent or Merger Sub to perform its obligations under this
Agreement or to consummate the Merger and the other transactions contemplated
hereby.

Section 4.6             Compliance
with Law.  Parent is operating its
businesses in compliance with all applicable Laws, except for violations of
applicable Laws that would not be reasonably expected to have a material
adverse effect on Parent’s ability to perform its obligations under this
Agreement or to consummate the Merger and the other transactions contemplated
hereby.

Section 4.7             Availability
of Funds.  At Closing, Parent will
have immediately available funds in cash or cash equivalents, short-term
investments and available lines of credit, in the aggregate, which are
sufficient to pay (i) the amounts required to pay the consideration set forth
in Article II, (ii) the Change of Control Payment (as defined in each of
(x) the Indenture dated as of August 24, 2004 with respect to the Company’s
121⁄4% Senior Discount Notes due 2012, as amended (the “121⁄4% Notes Indenture”)
and (y) the Indenture dated as of August 15, 2002 with respect to the Company’s
117¤8%
Senior Subordinated Notes due 2012, as amended (the “117¤8% Notes Indenture”)) required pursuant to the 12 1⁄4% Notes Indenture and the
117⁄8%

 32
 

Notes
Indenture, and (iii) all amounts due and payable under the Amended and Restated
Credit Agreement by and among the Company, MedQuest, Inc., as Borrower, the
lenders party thereto, JPMorgan Chase Bank, as syndication agent, General
Electric Capital Corporation and Wachovia Bank, National Association, as
co-documentation agents, and Wachovia Bank, National Association, as
administrative agent, in connection with the transactions contemplated by this
Agreement.

Section 4.8             Brokers
and Finders.  Other than Shattuck
Hammond Partners, a division of Morgan Keegan & Company, Inc., the fees and
expenses of which will be paid by Parent, no broker, finder or similar
intermediary has acted for or on behalf of, or is entitled to any broker’s,
finder’s or similar fee or other commission from, Parent or any of its
Affiliates in connection with the Merger and the other transactions
contemplated by this Agreement.

ARTICLE V

COVENANTS OF THE PARTIES

Section 5.1             Conduct
of Business.  From and after the date
hereof until the Effective Time, the Company shall, and shall cause the Company
Subsidiaries to, conduct their respective businesses in the ordinary course
consistent with past practice and in compliance with all applicable Laws and to
use their commercially reasonable efforts to: 
(i) preserve intact their Assets and current business
organizations, (ii) retain the services of current key officers and
employees other than in connection with the performance enhancement initiative
as previously disclosed to Parent, (iii) maintain Medicare and Medicaid
provider status and other material medical service provider licenses and
permits, and (iv) preserve its relationship with customers, suppliers,
third-party payors and others with whom the Company and the Company
Subsidiaries have material business dealings. 
Without limiting the generality of the foregoing, except as otherwise
expressly provided for by this Agreement or as set forth in Section 5.1 of the
Company Disclosure Schedule, from and after the date hereof until the Effective
Time, the Company shall not, and shall cause each Company Subsidiary not to,
take any of the following actions without the prior written consent of Parent
(which consent shall not be unreasonably withheld, conditioned or delayed):

(a)           adopt
any amendment to the Organizational Documents of the Company or any Company
Subsidiary;

(b)           adopt a
plan or agreement of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization;

(c)           (i)
issue, sell, pledge, dispose of or encumber any shares of its capital stock or
any other voting securities or securities convertible into or exercisable or
exchangeable for, or any rights, warrants or options to acquire, any of the
foregoing, (ii) split, combine, subdivide or reclassify any class or series of
its capital stock; (iii) declare, set aside or pay any dividend or distribution
(whether in cash, stock or other property) in respect of any capital stock
(other than dividends or distributions from a wholly-owned Company Subsidiary
payable to the Company and/or one or more Company Subsidiaries and other than
payments in respect of Stock Options consistent with Section 5.3); or (iv)
repurchase, redeem or otherwise acquire any shares of its capital stock or any
securities convertible into or exchangeable or exercisable for any shares of
its capital stock;

 33
 

(d)           (i)
incur or modify any material indebtedness other than in the ordinary course of
business, (ii) mortgage, pledge or encumber any Assets (including capital
stock of any Company Subsidiary), or (iii) other than in the ordinary course of
business, transfer, lease, sublease, license, guarantee, sell or dispose of,
any Assets (including capital stock of any Company Subsidiary);

(e)           make any
acquisition of, or investment in, or capital contribution to, any Person, other
than a Company Subsidiary that is wholly-owned, directly or indirectly, by the
Company;

(f)            except
in the ordinary course of business consistent with past practice,
(i) exercise any option or first refusal rights or any rights of renewal
relating to any Real Property, (ii) enter into any Contract or commitment to
lease, purchase or sell any real property or (iii) enter into or materially modify
any Contract relating to Real Property;

(g)           grant
any increase in wages or bonus, severance, profit sharing, retirement, deferred
compensation, insurance or other compensation or benefits, or establish any new
Benefit Plans, or amend or agree to amend any existing compensation or Benefit
Plans covering any Business Employee, except (i) as may be required by Law,
(ii) pursuant to the normal severance policies or practices of the Company or a
Company Subsidiary as in effect on the date of this Agreement and previously
disclosed to Parent, (iii) pursuant to the performance enhancement initiative
as previously disclosed to Parent, or (iv) increases in salary or wages payable
or to become payable to employees who are not officers or directors of the Company
in the ordinary course of business consistent with past practice;

(h)           terminate
the employment of any officer employed by the Company or any executive officer
employed by any Company Subsidiary other than for willful misconduct or
malfeasance or other termination rights under a written employment agreement;

(i)            enter
into, amend in any material respect, breach, terminate or allow to lapse any
Material Contract, other than in the ordinary course of business consistent
with past practice;

(j)            amend,
breach, terminate or allow to lapse or become subject to default or termination
any Permit, other than amendments required by applicable Law;

(k)           make or
incur any capital expenditure or other financial commitment other than as set
forth in the Company’s 2007 capital budget previously provided to Parent or, if
not so set forth, in excess of $250,000 in the aggregate;

(l)            (i)
settle or compromise any material Tax liability or Tax claim, (ii) file any
amendments to any previously filed Tax Returns, (iii) make, amend or revoke any
material Tax election, (iv) make a request for a Tax ruling or enter into any
agreement with a Tax Authority, (v) surrender any right to claim a refund for
Taxes, (vi) file any Tax Return in a manner that is materially inconsistent
with past custom and practice, or (vii) consent to an extension or waiver of
the limitations period applicable to any claim or assessment in respect of
Taxes;

(m)          enter
into any compromise or settlement of any litigation, action, suit, claim,
proceeding or investigation other than the settlement of litigation, actions,
suits, claims, proceedings or investigations in the ordinary course of business
consistent with past practice;

 34
 

(n)           (i)
enter into, modify, extend or cancel any material third-party payor Contracts
relating to all or any portion of North Carolina or (ii) other than in the
ordinary course of business consistent with past practice, enter into, modify,
extend or cancel any material third-party payor Contracts relating to states
other than North Carolina;

(o)           make any
change in accounting policies or methods, except as required by any changes in
GAAP or applicable Law and promptly disclosed to Parent;

(p)           sell,
transfer, dispose of, license to any Person, or create any Lien on any Company
Intellectual Property; and

(q)           authorize,
or commit or agree to do, whether in writing or otherwise, any of the
foregoing.

Section 5.2             Non-Solicitation.

(a)           From and
after the date hereof and continuing through the Closing Date, the Company
shall not, and the Company shall cause the Company Subsidiaries not to,
directly or indirectly, authorize or permit any of their respective officers,
directors, employees, agents or representatives (including investment bankers,
financial advisors, attorneys, consultants and accountants retained by or on
behalf of the Company or any Company Subsidiary) (collectively, “Representatives”)
to, directly or indirectly, (i) initiate, solicit, knowingly encourage or take
any other action designed to facilitate any Takeover Proposals (as defined
below), (ii) enter into any agreement with respect to any Takeover Proposal or
(iii) engage or otherwise participate in discussions or negotiations regarding,
or provide any information with respect to, or otherwise cooperate with, any
proposal that constitutes, or could reasonably be expected to lead to, a
Takeover Proposal.  The Company shall,
and shall cause the Company Subsidiaries and its Representatives to,
immediately cease and terminate all existing discussions or negotiations with
any Person with respect to any proposal that constitutes, or could reasonably
be expected to lead to, a Takeover Proposal. 
Notwithstanding the foregoing, at any time prior to obtaining the
Company Stockholder Approval, in response to a bona fide written Takeover
Proposal that the board of directors of the Company determines (after
consultation with outside counsel and a financial advisor of nationally
recognized reputation) constitutes, or could reasonably be expected to lead to,
a Superior Proposal (as defined below), and which Takeover Proposal was not
solicited after the date hereof, was made after the date hereof and did not
otherwise result from a breach of this Section 5.2(a), the Company may, if the
board of directors of the Company determines (after receiving the advice of
outside counsel) that failure to take such actions would be inconsistent with
its fiduciary duties under applicable Law, and subject to compliance with this
Section 5.2(a) and Section 5.2(b) and after giving Parent written notice of
such determination, (x) furnish information with respect to the Company and the
Company Subsidiaries to the Person making such Takeover Proposal (and its
Representatives) pursuant to a customary confidentiality agreement (which
agreement shall include a customary “standstill” or similar covenant) not less
restrictive of such person than the Confidentiality Agreement (as defined in
Section 5.4(c) below); provided that (A) all such information has
previously been provided to Parent or is provided to Parent at the same time it
is provided to such Person and (B) such customary confidentiality agreement
expressly provides the right for the Company to comply with the terms of this
Agreement, including Section 5.2(b), and (y) participate in discussions or
negotiations with the Person making such Takeover Proposal (and its
Representatives) regarding such Takeover Proposal.  Without limiting the foregoing, it is agreed

 35
 

that any
violation of the restrictions set forth in this Section 5.2(a) by any
Representative or Affiliate of the Company or any Company Subsidiary shall be
deemed to be a breach of this Section 5.2(a) by the Company.

(b)           Except where the board of directors
of the Company determines (after receiving the advice of outside counsel) that
failure to do so would be inconsistent with its fiduciary duties under
applicable Law, the Company agrees not to, and to cause the Company
Subsidiaries not to, release any Person from, or waive any provision of, any
confidentiality or standstill agreement that relates to the Company or any
Company Subsidiary.  The Company shall
notify Parent as soon as practicable (and in any event within 24 hours) orally,
and promptly thereafter in writing, if any Person makes any Takeover Proposal
or any inquiry that could reasonably be expected to lead to any Takeover
Proposal and shall describe in reasonable detail the identity of any such
Person and the substance and material terms and conditions of any such Takeover
Proposal or inquiry.  The Company shall
(i) keep Parent fully and promptly informed of the status and material details
(including any change to any material term thereof) of any such Takeover
Proposal or inquiry and (ii) provide to Parent promptly after receipt or
delivery thereof with copies of all correspondence and other written material
sent or provided to the Company or any of the Company Subsidiaries from any
Person that describes any of the terms or conditions of any Takeover
Proposal.  

(c)           The
term “Takeover Proposal” means any inquiry, proposal or offer from any
Person relating to, or that could reasonably be expected to lead to, any direct
or indirect acquisition or purchase, in one transaction or a series of
transactions, of assets or businesses that constitute 15% or more of the
revenues, EBITDA (earnings before interest expense, taxes, depreciation and
amortization) or assets of the Company and the Company Subsidiaries, taken as a
whole, or 15% or more of any class of equity securities of the Company, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 15% or more of any class of equity securities of the
Company, or any merger, consolidation, business combination, recapitalization,
liquidation, dissolution, joint venture, binding share exchange or similar
transaction involving the Company pursuant to which any Person or the
stockholders of any person would own 15% or more of any class of equity
securities of the Company or of any resulting parent company of the Company,
other than the transactions contemplated by this Agreement.

(d)           The term “Superior Proposal”
means a bona fide Takeover Proposal (provided that for purposes of this
definition references to 15% in the definition of “Takeover Proposal” shall be
deemed to be references to 50%) which the board of directors of the Company
determines in good faith (after consultation with outside counsel and a
financial advisor of nationally recognized reputation) to be (i) more favorable
to the stockholders of the Company from a financial point of view than the
Merger, taking into account all relevant factors (including all the terms and
conditions of such proposal and this Agreement (including any changes to the
terms of this Agreement proposed by Parent in response to such offer or
otherwise)) and (ii) reasonably capable of being completed, taking into account
all financial, legal, regulatory and other aspects of such proposal.

 36

Section 5.3             Cancellation of Stock
Options and Warrants.

(a)           Effective not later than the
Effective Time, the Company shall use commercially reasonable efforts to
provide that, not later than the Effective Time, the Stock Option Plan shall be
terminated and the Stock Options shall be cancelled without the payment of any
consideration in respect thereof and that, from and after the Effective Time,
neither the Stock Option Plan nor the Stock Options shall be of any further
force or effect.

(b)           Effective not later than the
Effective Time, the Company shall have taken all actions necessary to provide
that, not later than the Effective Time, the warrant to purchase 3,000,000
shares of Common Stock issued to an affiliate of JPMP (the “Warrant”)
shall be cancelled without the payment of any consideration in respect thereof
and that, from and after the Effective Time, the Warrant shall be of no further
force or effect.

Section 5.4             Access to Information;
Confidentiality.

(a)           From and after the date
hereof and continuing through the Closing Date, the Company shall, and shall
cause the Company Subsidiaries to, cooperate with Parent and its
representatives during normal business hours and provide Parent and its
employees, accountants, attorneys and other representatives acting on behalf of
Parent with reasonable access during normal business hours to, and permit such
Persons to review, the Company’s Assets (including Real Property), books,
Contracts, accounts and records (including all studies, Phase I assessments,
analyses and test results in the possession, custody or control of the Company,
any Company Subsidiary or any of their respective Affiliates relating to the
environmental conditions of any real property now or previously owned or
operated by the Company or any Company Subsidiary), and shall provide as
promptly as practicable such other information to Parent and its
representatives as they may reasonably request; provided that (i) any
such access and review shall be granted and conducted in such a manner so as
not to interfere unreasonably with the conduct of the business of the Company
or any Company Subsidiary and (ii) the Company and the Company Subsidiaries
shall not be required to disclose any information the disclosure of which is
restricted by applicable Law or Contract or information directly relating to
the proposed sale of the Company.

(b)           From and after the date hereof and continuing through the
Closing Date, the Company shall deliver to Parent copies of the monthly
unaudited balance sheet of the Company as of the end of each month and the
related unaudited statements of operations and cash flows of the Company for
such months, in each case, prepared in the ordinary course of business
consistent with past practice.

(c)           Without limiting the terms
thereof, the Confidentiality and Non-Disclosure Agreement, dated as of January
31, 2007, as amended (the “Confidentiality Agreement”), between Parent
and the Company shall govern the obligations of Parent, the Company and their
respective representatives with respect to the non-public information furnished
or made available to them pursuant to this Section 5.4 or otherwise.

Section 5.5             HSR Act Filings;
Commercially Reasonable Efforts; Further Assurances.

(a)           Each of Parent and the
Company shall (i) make or cause to be made the filings required of such party
under the HSR Act with respect to the Merger and the other transactions
contemplated by this Agreement as promptly as practicable after the date of
this

 37
 

Agreement,
but in no event later than 13 Business Days after the date hereof (such
deadline being subject to the parties’ cooperation as required by this Section
5.5), (ii) comply at the earliest practicable date with any request under the
HSR Act for additional information, documents or other materials received by such
party from the United States Federal Trade Commission or the United States
Department of Justice or any other Governmental Authority in respect of such
filings or such transactions, and (iii) act in good faith and reasonably
cooperate with the other party in connection with any such filing (including,
if requested by the other party, to accept all reasonable additions, deletions
or changes suggested by the other party in connection therewith) and in
connection with resolving any investigation or other inquiry of any such agency
or other Governmental Authority under any Antitrust Laws (as defined in Section
5.5(b) below) with respect to any such filing or any such transaction.  To the extent not prohibited by applicable
Laws, each party to this Agreement shall use all commercially reasonable
efforts to furnish to each other all information required for any application
or other filing to be made pursuant to any applicable Laws in connection with
the Merger and the other transactions contemplated by this Agreement.  Each party to this Agreement shall give the
other party reasonable prior notice of any communication with, and any proposed
understanding, undertaking or agreement with, any Governmental Authority
regarding any such filings or any such transaction.  None of the parties to this Agreement shall
independently participate in any meeting, or engage in any substantive
conversation, with any Governmental Authority in respect of any such filings,
investigation or other inquiry without giving the other party prior notice of
the meeting or conversation and, unless prohibited by such Governmental
Authority, the opportunity to attend or participate.  The parties to this Agreement will consult
and cooperate with one another in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party to this Agreement in connection with
proceedings under or relating to the HSR Act or other Antitrust Laws.  Parent shall take the lead in coordinating
any filings and obtaining any necessary approvals under the HSR Act or any
other federal or state antitrust Laws.

(b)           Subject to Section 5.5(d),
each of Parent and the Company shall use its commercially reasonable efforts to
resolve such objections, if any, as may be asserted by any Governmental
Authority with respect to the Merger and the other transactions contemplated by
this Agreement under the HSR Act, the Sherman Antitrust Act of 1890, as
amended, the Clayton Act of 1914, as amended, the Federal Trade Commission Act,
as amended, and any other United States federal or state Laws that are designed
to prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, “Antitrust Laws”).  In connection therewith and subject to
Section 5.5(d), if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as inconsistent with or violative of any
Antitrust Law, each of Parent and the Company shall (by negotiation, litigation
or otherwise) cooperate and use its commercially reasonable efforts vigorously
to contest and resist any such action or proceeding, including any
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order whether temporary,
preliminary or permanent, that is in effect and that prohibits, prevents,
delays or restricts consummation of the Merger and the other transactions
contemplated by this Agreement, including by vigorously pursuing all available
avenues of administrative and judicial appeal, unless, by mutual agreement,
Parent and the Company decide that litigation is not in their respective best interests.  Notwithstanding the foregoing or any other
provision of this Agreement, nothing in this Section 5.5 shall limit the

 38
 

right of a
party to this Agreement to terminate this Agreement pursuant to Section 9.1(c),
so long as such party to this Agreement has until that time complied in all
material respects with its obligations under this  Section 5.5. 
Each of Parent and the Company shall use its commercially reasonable
efforts to take such action as may be required to cause the expiration of the
notice periods under the HSR Act or other Antitrust Laws with respect to the
Merger and the other transactions contemplated by this Agreement as promptly as
possible after the execution of this Agreement.

(c)           Subject to Section 5.5(d),
each of the parties to this Agreement agrees to use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties to this Agreement in
doing, all things necessary, proper or advisable to consummate, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (i) the obtaining of all other
necessary actions or nonactions, waivers, consents, licenses, permits,
authorizations, orders and approvals from Governmental Authorities and the
making of all other necessary registrations and filings (including filings with
Governmental Authorities, if any), (ii) the obtaining of all consents,
approvals or waivers from third parties related to or required in connection
with the Merger and the other transactions contemplated by this Agreement that
are necessary to consummate the Merger or other transactions contemplated by
this Agreement, (iii) the execution and delivery of any additional instruments
reasonably necessary to consummate the Merger and the other transactions
contemplated by, and to fully carry out the purposes of, this Agreement, and
(iv) the providing of all such information concerning such party, its
Subsidiaries, its Affiliates and its Subsidiaries’ and Affiliates’ officers,
directors, employees and partners as may be reasonably requested in connection
with any of the matters set forth in Section 5.5(a), Section 5.5(b) or this
Section 5.5(c).

(d)           Notwithstanding anything to
the contrary in this Section 5.5, neither Parent nor the Company shall be
required in order to resolve any objections asserted under Antitrust Laws by
any Governmental Authority with respect to the Merger and the other
transactions contemplated by this Agreement to divest any of its businesses or
assets, or take or agree to take any other action or agree to any limitation or
restriction, that the Board of Trustees of Parent reasonably determines in good
faith, after considering the advice of its management and legal and financial
advisors, (i) to be materially adverse to Parent and its Subsidiaries taken as
a whole or (ii) would materially impair the overall benefits expected, as of
the date hereof, to be realized from the acquisition of the Company.

Section 5.6             Publicity.  The Company shall not, and shall not permit
the Company Subsidiaries to, and Parent and its Affiliates shall not, issue any
press release or public announcement concerning this Agreement, the Merger or
the other transactions contemplated hereby without obtaining the prior written
approval of the other party hereto, which approval will not be unreasonably
withheld, conditioned or delayed, unless, in the reasonable judgment of the
Company or Parent, as applicable, disclosure is otherwise required by
applicable Law; provided that to the extent required by applicable Law,
the party intending to make such release or announcement shall use its
commercially reasonable efforts consistent with such applicable Law to consult
with the other party with respect to the text thereof.

Section 5.7             Notification of Certain
Events.  From and after the date hereof and continuing
through the Closing Date:

 39
 

(a)           The Company shall give
prompt notice to Parent of (i) the occurrence or existence of (x) the breach in
any material respect of a representation, warranty or covenant made by the
Company in this Agreement, or any other fact, circumstance or event, in either
case, that would reasonably be expected to prevent or materially delay any
condition precedent to any party’s obligations from being satisfied, and/or (y)
a Company Material Adverse Effect; (ii) any notice or other communication
(other than routine notices or communications in the ordinary course of
business) from any Governmental Authority with respect to the Merger or the
other transactions contemplated hereby; or (iii) any written notice or other
written communication from any Person alleging that the consent of such Person
is or may be required in connection with the Merger or the other transactions contemplated
hereby; and

(b)           Parent shall give prompt notice to the Company of (i) the
occurrence or existence of the breach in any material respect of a
representation, warranty or covenant made by Parent and Merger Sub in this
Agreement, or any other fact, circumstance or event, in either case, that would
reasonably be expected to prevent or materially delay any condition precedent
to any party’s obligations from being satisfied; (ii) any notice or other
communication (other than routine notices or communications) from any
Governmental Authority with respect to the Merger or the other transactions
contemplated hereby; and (iii) any written notice or other written
communication from any Person alleging that the consent of such Person is or
may be required in connection with the Merger or the other transactions
contemplated hereby.

Section 5.8             Employee Matters.

(a)           Employees and Compensation.  For a period of at least twelve months
beginning on the Closing Date, Parent shall, or shall cause one of its
Affiliates to, provide each individual who is employed by the Company or a
Company Subsidiary on the Closing Date (each, a “Business Employee”) who
remains employed by the Company or any of the Company Subsidiaries following
the Closing Date (a “Continuing Employee”), with a position providing
base pay and bonus opportunity that is at least equal to the base pay provided
to each such Continuing Employee by the Company or the applicable Company
Subsidiary immediately prior to the Closing Date; provided, however,
that Parent may, or may cause one of its Affiliates to, reduce base pay and
bonus opportunity of a Continuing Employee pursuant to the performance
enhancement initiative disclosed to Parent by the Company prior to the date of
this Agreement.  Notwithstanding the
foregoing, nothing contained in this Section 5.8 will limit the right of Parent
or any of its Affiliates to terminate or suspend the employment of any
Continuing Employee after the Closing or, except as expressly provided in this
Section 5.8, to discontinue or modify the benefits provided to any such
employee.

(b)           Employee Benefits.  For a period of at least twelve months
beginning on the Closing Date, Parent shall, or shall cause one of its
Affiliates to, continue to provide the Continuing Employees for so long as the
Continuing Employee remains so employed, with employee benefit plans and
policies which are, in the aggregate, substantially similar to those provided
under the Benefit Plans immediately prior to the Closing Date, except that
Parent shall not be required to continue under any Benefit Plan any investment
fund intended to invest primarily or exclusively in capital stock of the
Company, or any equity-based compensation plans.  Parent agrees that for any employee benefit plan
of Parent or any of its Affiliates made available to the Continuing Employees
after the Closing, such employees will receive credit for the years of service
credited to them prior to the Closing by the Company or a Company Subsidiary
for the purpose of determining eligibility and vesting under such employee
benefit

 40
 

plan and,
with respect to any applicable vacation pay plan only, for the purpose of
determining the amount of accrued benefits under such plan; provided, however,
that such recognition of service shall not result in a duplication of benefits
for the same period of service. With respect to any welfare plan in which
employees of the Company and the Company Subsidiaries are eligible to
participate after the Closing Date, Parent shall, and shall cause its
Affiliates to, (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to such employees to the extent such conditions were
satisfied under the welfare plans of the Company and the Company Subsidiaries
prior to the Closing Date, and (ii) provide each such employee with credit for
any co-payments and deductibles paid prior to the Closing Date in satisfying
any analogous deductible or out-of-pocket requirements to the extent applicable
under any such plan.

(c)           No Third Party Beneficiaries.  The provisions of this Section 5.8 shall not
confer upon any person other than the parties to this Agreement any rights,
benefits or remedies, and no provision of this Section 5.8 is intended to be or
shall be deemed an amendment of any Benefit Plan.

(d)           Cooperation.  The Company and Parent shall reasonably
coordinate and cooperate with respect to employee communications relating to
the Merger and the other transactions contemplated by this Agreement from and
after the date hereof and through the Closing. 
Parent and the Company agree to reasonably cooperate in order to
facilitate all provisions of this Section 5.8.

Section 5.9             WARN Act.

(a)           On or before the Closing
Date, the Company shall provide Parent with a list of the name and site of
employment of any and all employees of the Company or the Company Subsidiaries
who have experienced, or will experience, an employment loss or layoff, as
defined by WARN, requiring notice to employees in the event of a closing or
layoff as required by WARN, within 90 days prior to the Closing Date.  The Company shall update this list up to, and
including, the Closing Date.

(b)           The Company shall not, and
shall cause the Company Subsidiaries not to, at any time within 90 days before
the Closing Date, without complying fully with the notice requirements and
other requirements of WARN, effectuate (i) a plant closing as defined in WARN
affecting any site of employment or one or more facilities or operating units within
any site of employment of the Company; (ii) a mass layoff as defined in WARN
affecting any site of employment of the Company; or (iii) any similar action
under WARN requiring notice to employees in the event of an employment loss or
layoff.

Section 5.10           Stockholder Litigation.  The Company shall give Parent the opportunity
to participate (at Parent’s expense) in the defense or settlement of any
stockholder litigation against the Company and its directors relating to the
Merger or the other transactions contemplated by this Agreement; provided,
however, that no such settlement shall be agreed to without Parent’s
prior written consent, which consent shall not be unreasonably withheld or
delayed, except that, to the extent Parent is also a party to the litigation,
Parent shall not be obligated to consent to any settlement which does not
include the full release of Parent and its Affiliates.

 41
 

Section
5.11           Non-Solicitation of Employees.  From and after the date hereof and through
the third anniversary of the Closing Date, JPMP shall not, and shall cause its
agents (including CCMP Capital Advisors, LLC (“CCMP”)) and controlled
Affiliates not to, without the prior written consent of Parent, directly or
indirectly, solicit or hire any employee of the Company or any Company
Subsidiary listed in Section 5.11 of the Company Disclosure Schedule; provided,
however, the foregoing shall not prohibit JPMP or any of its agents
(including CCMP) and controlled Affiliates from soliciting or hiring any such
employee who is no longer employed by the Company or a Company Subsidiary and
has not been an employee of the Company or a Company Subsidiary for at least
six months prior to such solicitation or employment by JPMP or any of its
agents (including CCMP) or controlled Affiliates.

Section
5.12           Nondisclosure of Proprietary Information.  From and after the date hereof and through
the third anniversary of the Closing Date, JPMP shall not, and shall cause its
agents (including CCMP) and controlled Affiliates not to, at any time, make use
of, divulge or otherwise disclose to Persons other than Parent, directly or
indirectly, any material trade secret or material proprietary or confidential
information concerning the business or policies of the Company and the Company
Subsidiaries that JPMP or its agents (including CCMP) or controlled Affiliates
may have learned in the course of its investment in the Company or in the
course of having representatives serve as directors of the Company or
otherwise.  Notwithstanding the
foregoing, neither JPMP nor its agents (including CCMP) or controlled
Affiliates shall have any obligation hereunder for that portion of such
material proprietary or confidential information which is independently
developed by or for JPMP or its agents (including CCMP) or controlled
Affiliates, which is rightfully received by JPMP or its agents (including CCMP)
or controlled Affiliates from a third party, is disclosed by the Company or
Company Subsidiaries to others without any restriction on use and disclosure,
is approved for release after the Closing by written consent of the Company or
is generally publicly available.

Section
5.13           Fees and Expenses.  Except as
otherwise expressly provided in this Agreement, Parent, on the one hand, and
the Company, on the other hand, shall each bear its own direct and indirect
fees and expenses in connection with the investigation, negotiations, and
consummation of the Merger and the other transactions contemplated hereby,
including all direct and indirect expenses, financial advisory, legal and
accounting fees.

Section 5.14           Indemnification; Director
and Officer Insurance.

(a)           From and after the Closing,
Parent agrees to, and to cause the Surviving Corporation to, indemnify and hold
harmless all past and present directors, officers and employees of the Company
or any of its Subsidiaries (the “D&O Indemnified Parties”) against
any and all losses, damages, liabilities, deficiencies, claims, interests,
awards, judgments, penalties, costs and expenses (including reasonable
attorneys’ fees, costs and other out-of-pocket expenses incurred in
investigating, preparing or defending the foregoing) arising out of or relating
to any threatened or actual Action, investigation or arbitration based in whole
or in part on or arising out of or relating in whole or in part to the fact
that such person is or was a director or officer of the Company or any of its
Subsidiaries, whether pertaining to any matter existing or occurring at or
prior to the Closing Date and whether asserted or claimed prior to, at or after,
the Closing Date (the “D&O Indemnified Liabilities”), including all
D&O Indemnified Liabilities based in whole or in part on, or arising in
whole or in part out of, or relating to this Agreement or

 42
 

the transactions contemplated
hereby, in each case to the full extent a corporation is permitted under
applicable Law and Organizational Documents in effect on the date hereof to
indemnify such person (and Parent shall, or shall cause the Surviving
Corporation and its Subsidiaries to pay expenses in advance of the final
disposition of any such Action, investigation or arbitration to each D&O
Indemnified Party); provided, however, that the person to whom
such expenses are advanced must provide an undertaking to the Surviving
Corporation to repay such advances if it is ultimately determined by a court of
competent jurisdiction (which determination shall have become final) that such
person is not entitled to indemnification.

(b)   Without limiting the foregoing, in the event any such
Action, investigation or arbitration is brought against any D&O Indemnified
Party (whether arising before or after the Closing Date), (i) the D&O
Indemnified Party may retain counsel satisfactory to it and reasonably
satisfactory to Parent, and Parent shall, or shall cause the Surviving
Corporation and its Subsidiaries to, pay all fees and expenses of such counsel
for the D&O Indemnified Party promptly as statements therefor are received
and (ii) Parent, the Surviving Corporation, its Subsidiaries and each D&O
Indemnified Party will use all reasonable efforts to assist in the vigorous
defense of any such matter; provided, that none of the Surviving Corporation,
any of its Subsidiaries or Parent shall be liable for any settlement effected
without its prior written consent.  Any
D&O Indemnified Party wishing to claim indemnification under this Section
5.14 shall notify Parent upon learning of any such Action, investigation or
arbitration (but the failure so to notify shall not relieve a party from any
liability which it may have under this Section 5.14, except to the extent such
failure materially prejudices such party). 
The parties hereto agree that all rights to indemnification hereunder,
including provisions relating to advances of expenses incurred in defense of
any such Action existing in favor of the D&O Indemnified Parties with
respect to matters occurring through the Closing Date, shall continue in full
force and effect for a period of six years from the Closing Date; provided,
however, that all rights to indemnification in respect of any D&O
Indemnified Liabilities asserted or made within such period shall continue
until the disposition of such D&O Indemnified Liabilities.

(c)           Parent shall cause the
Surviving Corporation to provide, for an aggregate period of not less than six
years from the Effective Time, the Company’s current directors and officers an
insurance and indemnification policy that provides coverage for events
occurring prior to the Effective Time (the “D&O Insurance”) that is
no less favorable than the Company’s existing policy or, if substantially
equivalent insurance coverage is unavailable, the best available coverage; provided,
however, that the Surviving Corporation shall not be required to pay an
annual premium for the D&O Insurance in excess of 200 percent of the last
annual premium paid prior to the date of this Agreement.

Section
5.15           Acknowledgement of Limitation of Warranties.  Parent and Merger Sub acknowledge that they
have conducted to their satisfaction an independent investigation of the
financial condition, results of operations, assets, liabilities, properties,
and prospects of the Company and, in making the determination to proceed with
the transactions contemplated by this Agreement, have relied solely on the
results of their own independent investigation and the representations and
warranties set forth in this Agreement (as qualified by the Company Disclosure
Schedule), the certificates contemplated by this Agreement and the covenants,
agreements and other obligations of the Company contained in this Agreement.  Such representations and warranties in the
Agreement constitute the sole and exclusive representations

 43
 

and
warranties of the Company to Parent and Merger Sub in connection with the
transactions contemplated hereby, and Parent and Merger Sub acknowledge and
agree that the Company is not making any representation or warranty whatsoever,
express or implied, beyond those expressly given in this Agreement (as
qualified by the Company Disclosure Schedule), including any implied warranty
as to condition, merchantability, or suitability as to any of the assets or
properties of the Company.  Parent and
Merger Sub further acknowledge and agree that, except for an Action based on
the representations and warranties expressly contained in this Agreement,
neither the Company nor any other Person will have or be subject to any
liability or indemnification obligation to Parent or any other Person, based on
any other representations and warranties not contained in Article III or
resulting from the distribution to Parent or Merger Sub, or Parent or Merger
Sub’s use of, any information, projections, documents or material made
available to Parent or Merger Sub at any time in certain “data rooms,”
management presentations, “break-out” discussions, responses to questions submitted
by or on behalf of Parent or Merger Sub, whether orally or in writing, or in
any other form in expectation or furtherance of the transactions contemplated
by this Agreement.

Section
5.16           Supplemental Disclosure.  The Company may,
subject to the provisions of this Section 5.16, from time to time, but no later
than three Business Days prior to the Closing Date, by notice in accordance
with this Agreement, supplement the Company Disclosure Schedule to reflect any
matter that (i) arises or new information that becomes known by the Company
after the date of this Agreement and (ii) would have been required or permitted
to be set forth or described in the Company Disclosure Schedule had such matter
existed or such information been known to the Company as of the date of this
Agreement.  The Company’s representations
and warranties in Article III of this Agreement shall be deemed to include such
supplemental disclosure as of the date of this Agreement and thereafter,
including the Closing Date; provided, however, that any matters
reflected in one or more of any such supplemental disclosures may be considered
for purposes of determining whether the condition contained in Section 6.2(e)
has been satisfied.  Notwithstanding the
foregoing or any provision of this Agreement to the contrary, no information
included in any supplemental disclosure as to which the Company had Knowledge
as of the date of this Agreement or that seeks to correct any error or omission
to the Company Disclosure Schedule relating to the period on or prior to the
date of this Agreement shall be considered to have been disclosed for purposes
of determining whether Parent may seek indemnification under Section 7.2(a) and
the Company Disclosure Schedule shall not be deemed to include or reflect any
such supplemental disclosure.

Section
5.17           Change of Control Payment.  Parent agrees that
it will, or will cause the Company to, discharge the obligations of the Company
and the Company Subsidiaries with respect to the Change of Control Payment
required pursuant to the 121⁄4% Notes Indenture and the 117⁄8% Notes
Indenture.

Section
5.18           Company Stockholder Approval.  No later than 5:00 pm. (Eastern time) on
September 14, 2007, unless the Voting Agreement is terminated pursuant to the
terms thereof, the Company shall obtain an executed action by written consent
constituting the Company Stockholder Approval and shall provide a copy of such
written consent to Parent.

Section
5.19           Retention Bonuses.  The Company shall
be permitted to pay retention bonuses to certain non-executive employees of the
Company pursuant to a retention

 44
 

bonus
program to be developed by the Company prior to the Closing Date (the “Retention
Bonus Program”), which shall provide for fifty percent of each bonus award
thereunder to be paid immediately prior to the Closing to award recipients
employed by the Company at such time and fifty percent of each bonus award to
be paid on the six month anniversary of the Closing Date to award recipients
who remain employed by the Company at such time.  The aggregate amount of retention bonuses
under the Retention Bonus Program shall not exceed $400,000.  The Company shall consider the input of
Parent into the design and terms of the Retention Bonus Program, in light of
the Retention Bonus Program’s purposes, it being understood and agreed that
Parent’s right to provide input shall not constitute a right to approve the
final terms of the Retention Bonus Program as decided by the Company.

ARTICLE VI

CONDITIONS TO CLOSING

Section 6.1             Mutual Conditions.  The respective obligations of Parent, Merger
Sub and the Company to effect the Merger are subject to the satisfaction or
waiver, at or before the Closing, of each of the following conditions:

(a)           No Legal Prohibition, etc.  There shall not be in effect any decree,
judgment, preliminary or permanent injunction or other order or Law issued by
any Governmental Authority of competent jurisdiction that prohibits or enjoins
the consummation of the Merger or the other transactions contemplated hereby; provided
that the parties shall use commercially reasonable efforts to cause any such
decree, judgment, injunction or order to be vacated or lifted.

(b)           HSR Act Waiting Period.  The waiting period, and any extensions
thereof, applicable to the Merger and the other  transactions contemplated hereby under
the HSR Act shall have expired or been terminated.

(c)           Government Approvals.  All of the approvals of the Governmental
Authorities listed in Section 6.1 of the Company Disclosure Schedule shall have
been obtained.

(d)           Stockholder Approval.  The Company Stockholder Approval shall have
been obtained.

Section 6.2             Conditions to the
Obligations of Parent and Merger Sub to Effect the Merger.  The obligations of Parent and Merger Sub to
effect the Merger are further subject to the satisfaction or waiver, at or
before the Closing, of each of the following conditions:

(a)           Truth of Representations and
Warranties.  The representations and warranties of the
Company set forth in this Agreement and in any certificate delivered by the
Company pursuant hereto (disregarding any Company Material Adverse Effect or
materiality qualifiers therein) shall be true and correct in all respects, on
and as of the date hereof and on and as of the Closing Date as though made on
and as of the Closing Date (except to the extent any such representation and
warranty speaks as of a specific date, in which event such representation and
warranty shall be true and correct as of such specific date), except where the
failure of such representations and warranties in the aggregate to be true and
correct has not had or resulted in and would not reasonably be expected to have
or result in a Company Material Adverse Effect.

 45
 

(b)           Performance of Agreements.  The Company shall have performed and complied
in all material respects with each agreement, covenant and obligation required
by this Agreement to be performed or complied with by the Company on or prior
to the Closing Date.

(c)           Officer’s Certificate.  Parent shall have received a certificate of
an executive officer of the Company that the conditions set forth in Section
6.2(a) and Section 6.2(b) have been satisfied.

(d)           No Threatened or Pending
Litigation.  There shall not be threatened or pending any
action by any Governmental Authority seeking to prohibit or impose any material
limitations on Parent’s ownership of the Company or the operation of all or a
material portion of Parent’s or the Company’s or any of their respective
Subsidiaries’ businesses or assets, or to compel Parent or the Company or any
of their respective Subsidiaries to dispose of or hold separate any material
portion of the business or assets of Parent, the Company or any of their
respective Subsidiaries.

(e)           No Material Adverse Effect.  Since the date hereof, no event, occurrence,
fact, condition, change, development or effect shall have occurred that,
individually or in the aggregate, has had or resulted in or would reasonably be
expected to have or result in a Company Material Adverse Effect.

(f)            Consents.  All of the approvals, consents and licenses
listed in Section 6.2 of the Company Disclosure Schedule shall have been
obtained in form and substance reasonably satisfactory to Parent.

(g)           Stock Options and Warrant.  The Stock Options and the Warrant shall have
been cancelled, effective not later than the Effective Time, without
consideration having been paid in respect thereof.

(h)           Certified Resolutions.  Parent shall have received a certificate of
the Secretary or an Assistant Secretary of the Company, dated the Closing Date,
setting forth the resolutions adopted by the Company’s Board of Directors
authorizing of the execution and delivery of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby, and
certifying that such resolutions have not been amended or rescinded and are in
full force and effect.

(i)            FIRPTA Certificate.  Parent shall have received a certificate,
dated as of the Closing Date, under Section 1445(b)(3) of the Code, complying
with applicable Treasury Regulations, certifying that the Company is not and
has not been a United States real property holding corporation (as defined in
Section 897(c)(2) of the Code).

(j)            Incentive Structure.  JPMP shall have caused its ownership
interests in the Company to be contributed to a newly-formed limited liability
company and the management incentive structure set forth on the term sheet
attached hereto as Exhibit 6.2(j) shall have been implemented in all material
respects.

Section 6.3             Conditions to the
Obligations of Company to Effect the Merger.  The obligations of
the Company to effect the Merger are further subject to the satisfaction or
waiver, at or before the Closing, of each of the following conditions:

 46
 

(a)           Truth of Representations and
Warranties.  The representations and warranties of Parent
and the Merger Sub set forth in this Agreement and in any certificate delivered
by Parent or Merger Sub pursuant hereto (disregarding any materiality
qualifiers therein) shall be true and correct in all respects, on and as of the
date hereof and on and as of the Closing Date as though made on and as of the
Closing Date (except to the extent any such representation and warranty speaks
as of a specific date, in which event such representation and warranty shall be
true and correct as of such specific date), except where the failure of such
representations and warranties in the aggregate to be true and correct has not
had or resulted in a material adverse effect on the ability of Parent and
Merger Sub to perform its obligations under this Agreement or to consummate the
Merger and the other transactions contemplated hereby.

(b)           Performance of Agreements.  Parent shall have performed and complied in
all material respects with each agreement, covenant and obligation required by
this Agreement to be performed or complied with by Parent and Merger Sub on or
prior to the Closing Date.

(c)           Officer’s Certificate.  The Company shall have received a certificate
of an executive officer of Parent that the conditions set forth in Section
6.3(a) and Section 6.3(b) have been satisfied.

ARTICLE VII

SURVIVAL AND INDEMNIFICATION

Section 7.1             Survival of Representations,
Warranties and Covenants.  The representations and warranties of the
parties contained in this Agreement shall survive the Closing until March 31,
2009; provided, however, that notwithstanding the foregoing, the
representations and warranties of the Company set forth in Section 3.16 (Taxes)
shall survive the Closing until March 31, 2010. 
All covenants and agreements contained in this Agreement which are to
have effect or be performed prior to the Closing shall survive the Closing
until March 31, 2009 and all covenants and agreements contained in this
Agreement which are to have effect or be performed after the Closing shall
survive the Closing in accordance with their terms; provided, however,
that notwithstanding the foregoing, the covenants set forth in Section 5.1(l)
and Article VIII shall survive the Closing until March 31, 2010.  Any right of indemnification pursuant to this
Article VII with respect to a claimed breach of a representation, warranty or
covenant shall expire at the date of termination of the survival period for
such representation, warranty or covenant claimed to be breached (the “Termination
Date”), unless on or prior to the Termination Date a written claim for indemnification
has been made to the Stockholders’ Representative or Parent, as the case may
be.  Provided that an indemnification
claim is timely made, it may continue to be asserted beyond the Termination
Date of the representation and warranty to which such claim relates until the
final disposition of such claim.

Section 7.2             Indemnification of Parent
Indemnified Parties.

(a)           From and after the Closing,
Parent and its Affiliates (including the Surviving Corporation) and their
respective directors, officers, employees, agents and representatives and their
successors and assigns (collectively, the “Parent Indemnified Parties”),
as the case may be, shall be indemnified, protected, defended and held harmless
from and against all liabilities, demands, claims, actions or causes of action,
assessments, losses, damages, Taxes, costs and expenses (including interest,
penalties and attorneys’ fees, disbursements and expenses)

 47
 

(collectively,
“Damages”) asserted against, resulting to, imposed upon or incurred by
any Parent Indemnified Party, directly or indirectly (whether in respect of
Third Party Claims (as defined in Section 7.4 below) or claims between the
parties hereto), arising out of or relating to any of the following:  (i) a breach of any representation or
warranty of the Company set forth in this Agreement (other than representations
in Section 3.16 relating to Taxes which are addressed under clause (iii) of
this Section 7.2(a)) or in any certificate delivered pursuant to this
Agreement, (ii) a breach of any covenant, agreement or other obligation of the
Company contained in this Agreement (other than covenants with respect to Taxes
which are addressed under clause (iii) of this Section 7.2(a)), (iii) (A)
Taxes of the Company and the Company Subsidiaries with respect to any
Pre-Closing Period (as defined in Section 8.1 below) (including Taxes imposed
by U.S. Treasury Regulation Section 1.1502-6 or any comparable provision of
state, local or foreign law as a result of the Company or any Company
Subsidiaries being included in an affiliated group that files consolidated or
combined returns), (B) with respect to any Straddle Period (as defined in
Section 8.1 below), Taxes imposed on or required to be withheld by the Company
or any of the Company Subsidiaries which are allocable to the portion of such
taxable year or period ending on the Closing Date, and (C) any Damages
resulting from or attributable to a breach of any representation, warranty or
covenant contained in Section 3.16, Section 5.1(l) or Article VIII, (iv)
matters set forth in Section 7.2 of the Company Disclosure Schedule and (v)
claims brought by any holder of Company equity securities or Stock Options in
connection with the Merger and the other transactions contemplated by this
Agreement (including claims, if any, with respect to appraisal rights under
Section 262 of the DGCL); provided, however, that,
notwithstanding anything to the contrary herein, in no event will the aggregate
indemnification obligation under this Section 7.2 exceed the Contingent Consideration
and, with respect to claims for indemnification made by a Parent Indemnified
Party under Section 7.2(a)(iii) after March 31, 2009, the aggregate
indemnification obligation under this Section 7.2 shall not exceed the Escrow
Amount; and provided, further that (A) no claims for
indemnification may be made by a Parent Indemnified Party under Section
7.2(a)(i) and (iv) unless and until the aggregate amount of such Damages for
which the Parent Indemnified Parties are entitled to indemnity under the terms
hereof exceeds $1,500,000 (the “Indemnity Basket”) and (B) no
claims for indemnification may be made by a Parent Indemnified Party under
Section 7.2(a)(iii) unless and until the aggregate amount of such Damages for
which the Parent Indemnified Parties are entitled to indemnity under the terms
hereof exceeds $400,000 (the “Tax Basket”).  In the event the aggregate amount of the
Damages sustained by the Parent Indemnified Parties under Section 7.2(a)(i) and
(iv) exceeds the Indemnity Basket, the indemnification obligations hereunder
shall apply only to those Damages sustained by the Parent Indemnified Parties
in excess of the Indemnity Basket.  In
the event the aggregate amount of the Damages sustained by the Parent Indemnified
Parties under Section 7.2(a)(iii) exceeds the Tax Basket, the indemnification
obligations hereunder shall apply only to those Damages sustained by the Parent
Indemnified Parties in excess of the Tax Basket.  Notwithstanding the foregoing, the Indemnity
Basket shall not apply to Damages resulting from breaches by the Company with
respect to the representations and warranties set forth in Section 3.2 and
Section 3.5 of this Agreement, for all of which Damages the Parent Indemnified
Parties shall be indemnified hereunder whether or not the Basket has been
exceeded.  For the avoidance of doubt,
the Indemnity Basket shall not apply to Damages for which Parent Indemnified
Parties are entitled to indemnification under Section 7.2(a)(ii),
(iii) (subject to the Tax Basket), or (v).

 48
 

(b)           If during any period prior
to March 31, 2010, Parent determines, acting in good faith, that applicable Law
requires the Company to take a position on a Tax Return that is not consistent
with any of the representations and warranties in Section 3.16(o), (p), (q) or
(r) (the “NOL Reps”), Parent may, at its own expense, have the Tax
Arbitrator (as defined below) determine whether a breach of the NOL Reps has
occurred, and if so, the extent of such breach. 
If the Tax Arbitrator determines that a breach of the NOL Reps has
occurred, the Company shall be considered to have breached an NOL Rep for
purposes of Section 7.2(a) and the Damages from such breach shall be the amount
determined by the Tax Arbitrator, subject to Section 7.2(c).  As used in this Agreement, “Tax Arbitrator”
shall mean a Tax lawyer at a nationally recognized accounting firm or law firm
appointed by mutual agreement of Parent and the Stockholders’
Representative.  Any presentation to the
Tax Arbitrator shall be made by both the Company and the Stockholders’
Representative, acting reasonably, on mutually agreed terms.

(c)           For purposes of Section
7.2(a) and notwithstanding Section 7.2(b), the Parent Indemnified Parties shall
not be entitled to any indemnification for breach of the representations and
warranties in the NOL Reps unless, and solely to the extent that, (i) prior to
March 31, 2010 the Surviving Corporation consummates one or more asset
dispositions other than in the ordinary course of business (the “Divestiture
Transactions”), (ii) such Divestiture Transactions generate taxable gain or
income to the Surviving Corporation (not taking into account, for purposes of
such calculation, deductions or losses generated by the Surviving Corporation
from and after the Closing) and (iii) the net operating losses related to the
NOL Reps would have been utilized by the Surviving Corporation or its
Affiliates during tax periods (or portions thereof) prior to March 31, 2010, in
connection with such Divestiture Transactions (not taking into account, for
purposes of such calculation, deductions and losses generated by the Surviving
Corporation from and after the Closing). 
The indemnifiable amount shall be determined by the Tax Arbitrator and
shall be (i) the actual tax liability incurred by the Parent Indemnified Parties
as a result of the breach plus (ii) to the extent any such income or gain (or
portion thereof) incurred after the Closing Date, after reduction by the amount
of the actual NOL available as determined by the Tax Arbitrator, is actually
offset by any losses or deductions incurred after the Closing Date, the present
value of the Tax savings that would have been utilized with respect to such
deductions or losses incurred after the Closing Date if there had not been a
breach of the NOL Reps (such amount discounted from the taxable period in which
it is reasonably anticipated that the Surviving Company will have sufficient
net income to fully utilize such deductions or losses, as determined by the Tax
Arbitrator after presentations by Parent and the Stockholder’s Representative).

(d)           For the avoidance of doubt,
the sole source of indemnification of the Parent Indemnified Parties pursuant
to this Agreement shall be the Contingent Consideration, if any (and subject to
the other limitations set forth herein), and no Parent Indemnified Party shall
have a direct right of indemnification against any Seller Indemnified Party
hereunder.

Section 7.3             Indemnification of Seller
Indemnified Parties.  From and after the Closing, the former
stockholders of the Company (in proportion to their percentage interest in the
Merger Consideration) and their respective Affiliates and their respective
directors, officers, employees, agents and representatives and their successors
and assigns (collectively, the “Seller Indemnified Parties”), as the
case may be, shall be indemnified, protected, defended and held harmless by
Parent from and against all Damages asserted against, resulting to, imposed
upon or

 49
 

incurred by
any Seller Indemnified Party, directly or indirectly (whether in respect of
Third Party Claims or claims between the parties hereto), arising out of or
relating to any of the following: 
(i) a breach of any representation or warranty of Parent and Merger
Sub set forth in this Agreement or in any certificate delivered pursuant to
this Agreement and (ii) a breach of any covenant, agreement or other obligation
of Parent and Merger Sub contained in this Agreement; provided, however,
that in no event will the aggregate indemnification obligation under this
Section 7.3 exceed the lesser of (x) the amount of the Contingent Consideration
and (y) $10,000,000, except that, with respect to any breach of Parent’s
obligation to pay the Contingent Cash Amount pursuant to Article II and Parent’s
covenants in Section 2.2(h) regarding the operation of the Surviving
Corporation during the Earn-Out Period, in no event will the aggregate
indemnification obligation exceed (x) $35,000,000 minus (y) the sum
of (A) any amounts paid to or on behalf of Parent Indemnified Parties in
connection with undisputed and/or resolved claims for indemnification pursuant
to Article VII of this Agreement, (B) Parent’s good faith estimate of the
dollar amount of any unresolved claims for indemnification actually made by
Parent Indemnified Parties pursuant to Article VII of this Agreement and
(C) the Contingent Cash Amount previously paid by Parent; and provided,
further that no claims for indemnification may be made by a Seller
Indemnified Party under Section 7.3(i) unless and until the aggregate
amount of such Damages for which the Seller Indemnified Parties are entitled to
indemnity under the terms hereof exceeds $400,000 (the “Parent Basket”).  In the event the aggregate amount of the
Damages sustained by the Seller Indemnified Parties under Section 7.3(i)
exceeds the Parent Basket, the indemnification obligations hereunder shall
apply only to those Damages sustained by the Seller Indemnified Parties in
excess of the Parent Basket. 
Notwithstanding the foregoing, the Parent Basket shall not apply to
Damages resulting from breaches by Parent and Merger Sub with respect to the
representations and warranties set forth in Section 4.2 of this Agreement, for
all of which Damages the Seller Indemnified Parties shall be indemnified
hereunder whether or not the Parent Basket has been exceeded.  For the avoidance of doubt, the Parent Basket
shall not apply to Damages for which Seller Indemnified Parties are entitled to
indemnification under Section 7.3(ii).

Section 7.4             Third Party Claims.  Promptly upon the receipt by a Parent Indemnified
Party or a Seller Indemnified Party, as applicable (the “Indemnified Party”),
of any notice of the commencement of any action or Tax Proceeding brought by a
Person not a party hereto (a “Third Party Claim”), such Parent
Indemnified Party shall give notice of such Third Party Claim to the
Stockholders’ Representative (and, if after March 31, 2009, to the Escrow
Agent), and such Seller Indemnified Party shall give notice of such Third Party
Claim to Parent, as applicable (such party receiving such notice, the “Indemnifying
Party”), but the failure to give such notice shall not relieve the
indemnification obligation under this Article VII, except to the extent such
Indemnifying Party is actually and materially prejudiced thereby.  If an Indemnified Party gives such notice,
the Indemnifying Party, upon giving notice to such Indemnified Party, will be
entitled to assume the defense of such Third Party Claim with counsel
reasonably satisfactory to the Indemnified Party at the Indemnifying Party’s
sole cost and expense and the Indemnifying Party will be entitled to prosecute,
appeal, negotiate, resolve, settle, compromise, arbitrate or otherwise pursue
such Third Party Claim, in whole or in part, subject to and in accordance with
the provisions of this Agreement.  If the
Indemnifying Party exercises its rights to assume the defense of such Third
Party Claim, the Indemnifying Party shall have no obligation to indemnify or
pay for or reimburse any Indemnified Party for any attorneys’ fees or

 50
 

expenses
incurred by the Indemnified Party after the assumption of the defense of such
Third Party Claim; provided, however, that the reasonable fees
and expenses of one counsel to the Indemnified Party will be indemnifiable
hereunder if, in the reasonable view of counsel to the Indemnified Party, (i) a
conflict of interest exists between the Indemnifying Party and any Indemnified
Party or (ii) there may be legal defenses available to the Indemnified Party
which are different from or additional to those available to the Indemnifying
Party.  The Parent Indemnified Party
shall be permitted to participate in the defense of any Third Party Claim
relating to Taxes.  The Indemnifying
Party agrees that it will not, without the prior written consent of the
Indemnified Party, settle, compromise or consent to the entry of any judgment
in any pending or threatened Third Party Claim relating to matters contemplated
hereby if any Indemnified Party is a party thereto or has been threatened to be
made a party thereto unless such settlement, compromise or consent includes an
unconditional release of each such Indemnified Party from all Liability arising
or that may arise out of such Third Party Claim and provides solely for
monetary relief satisfied or to be satisfied by the Indemnifying Party.  If the Indemnifying Party does not exercise
such right to assume the defense within ten days of its receipt of notice of a
Third Party Claim, the Indemnified Party may assume the defense thereof by
counsel of the Indemnified Party’s choosing and if the Indemnified Party is
determined to be entitled to indemnification with respect to such Third Party
Claim the Indemnified Party will be permitted, subject to the limitations set
forth in this Article VII, to recover all Damages incurred or sustained as a
result of such Third Party Claim. 
Notwithstanding the foregoing, no Third Party Claim relating to Taxes
may be settled, compromised or otherwise resolved without the consent of the
Surviving Corporation to the extent that such settlement, compromise or other
resolution would adversely affect the Parent or its Subsidiaries, including the
Surviving Corporation.  There will be no
indemnification liability for any Damages in connection with any settlement of
any Third Party Claim by the Indemnified Party without the Indemnifying Party’s
prior written consent (which shall not be unreasonably withheld, delayed or
conditioned).

Section 7.5             Other Indemnification
Procedures.

(a)           In the event any Indemnified
Party should have an indemnification claim under this Article VII that does not
involve a Third Party Claim, the Indemnified Party shall deliver notice of such
claim (a “Pending Claim”) to the Indemnifying Party promptly following
the Indemnified Party becoming aware of the same.  The failure by any Indemnified Party to so
notify the Indemnifying Party shall not relieve the indemnification obligation
under this Article VII, except to the extent that the Indemnifying Party has
been actually and materially prejudiced by such failure.

(b)           The Indemnifying Party shall
have 30 calendar days after delivery to the Indemnifying Party of a notice of a
Pending Claim (the “Pending Claim Review Period”) in which to notify the
Indemnified Party in writing (the “Pending Claim Objection Notice”) of
any good faith disagreement regarding the right to indemnification thereof,
setting forth in reasonable detail the Indemnifying Party’s objections.  If the Indemnifying Party does not deliver a
Pending Claim Objection Notice within the Pending Claim Review Period, the
Indemnifying Party shall be deemed to agree in all respects with the claim for
indemnification.

(c)           If a Pending Claim Objection
Notice is properly and timely delivered, Parent and the Stockholders’
Representative shall use good faith efforts to resolve their

 51
 

differences
with respect to the Pending Claim within 30 calendar days after the
Indemnifying Party’s receipt of the Pending Claim Objection Notice.  Any differences with respect to the Pending
Claim not resolved by Parent and the Stockholders’ Representative within such
30-day period shall be resolved by litigation in the Court of Chancery of the
State of Delaware or any court of the United States located in the State of
Delaware.

Section 7.6             Punitive Damages.  Notwithstanding any other provision of this
Agreement, in no event shall an Indemnified Party be indemnified for punitive,
exemplary, special or consequential damages, regardless of the form of action
through which such damages are sought, unless such damages are recovered by a
third party in a Third Party Claim.

Section 7.7             No Duplications.  Any liability for indemnification hereunder
shall be determined without duplication of recovery by reason of the state of
facts giving rise to such liability constituting a breach of more than one
representation, warranty, covenant or agreement.

Section 7.8             Tax Benefits.  All indemnity payments hereunder shall be net
of all Tax benefits actually realized (through a reduction in current Tax
liability) prior to March 31, 2010 by the Indemnified Party with respect to the
events that cause such payments to become due. To the extent that the receipt
of an indemnity payment hereunder causes the Indemnified Party to realize
taxable income, the indemnity payment by the Indemnifying Party shall be
increased to the extent necessary to yield to the Indemnified Party the amount
payable to the Indemnified Party under the preceding sentence (after taking
into account the Indemnified Party’s current or future Tax cost from the
receipt of such payment).

Section 7.9             Exclusive Remedy.  From and after the Effective Time, the rights
and remedies under this Article VII shall be exclusive and in lieu of any and
all other rights and remedies that the Indemnified Parties may have for
monetary relief with respect to breaches of representatives, warranties,
covenants and agreements set forth in this Agreement; provided, however,
that such limitation on the rights and remedies of any Indemnified Party shall
not limit any recourse or remedy that may be available to them at law or in
equity against any party for intentional fraud.

ARTICLE VIII

TAX MATTERS

Section 8.1             Preparation and Filing of
Tax Returns and Payment of Taxes.

(a)           Parent shall prepare or
cause to be prepared and file or cause to be filed all Tax Returns for the
Company and the Company Subsidiaries for any taxable period ending on or before
the Closing Date (“Pre-Closing Period”) that are due after the Closing
Date and for any taxable period beginning on or before and ending after the
Closing Date (“Straddle Period”). 
An amount equal to the Taxes shown as due and payable on such Tax Return
to the extent such Taxes are due with respect to the Tax liability of the
Company for taxable periods ending on or before the Closing Date and the
portion of any Straddle Period ending on the Closing Date shall be deducted
when calculating the Contingent Cash Amount. 
In the case of any Straddle Period, (i) Taxes that are not based on
income or receipts (e.g.,
property taxes) shall be apportioned between the Pre-Closing Period and the
Post-Closing Period (as defined in this Section 8.2) on a

 52
 

daily
pro-rata basis, and (ii) all Taxes other than Taxes described in Section 8.1(i)
shall be apportioned between the Pre-Closing Period and the Post-Closing Period
on a closing of the books basis as if such taxable period ended as of the close
of business on the Closing Date.  “Post-Closing
Period” means any taxable period beginning after the Closing Date.

(b)           Any material Tax Return for
a Pre-Closing Period or for a Straddle Period shall be submitted to the
Stockholders’ Representative (including supporting documentation) at least
twenty-one (21) days prior to the due date (including extensions) of such Tax
Return.  If the Stockholders’
Representative objects to any item on any such Tax Return, it shall, within ten
(10) days after delivery of such Tax Return, notify Parent in writing that it
so objects.  If a notice of objection
shall be duly delivered, Parent and the Stockholders’ Representative shall
negotiate in good faith and use their best efforts to resolve such items.  If Parent and the Stockholders’ Representative
are unable to reach such agreement within five (5) days after receipt by Parent
of such notice, the disputed items shall be resolved by a final determination
of the Accountants; provided, however, that if the dispute is not
resolved by the due date of such Tax Return (taking into account any extension
of time within which to file), Parent shall file the Tax Return, as originally
prepared by Parent, to the relevant Tax Authority and if necessary, an amended
return shall be filed after the final determination of the Accountants.

Section 8.2             Cooperation.  Parent and the Stockholders’ Representative
shall cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns and any audit, examination,
litigation or other proceeding with respect to Taxes.  Such cooperation shall include the retention
and (upon the other party’s request) the provision of records and information
which are reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.

Section 8.3             Purchaser Tax Covenants.

(a)           Parent shall not (and shall
not cause or permit the Company or any Company Subsidiary), to make or change
any material Tax election, amend any Tax Return, agree to the waiver or
extension of the statute of limitations relating to any Tax of the Company or
any Company Subsidiary, take any Tax position on any Tax Return, or compromise
or settle any Tax liability, in each case if such action could have the effect
of materially increasing the Tax liability or materially decreasing any Tax
asset of the Company or any Company Subsidiary in respect of any Pre-Closing
Period without the prior consent of Stockholders’ Representative, which consent
shall not be unreasonably withheld.  If
Parent breaches the foregoing covenant, the Stockholders shall not be liable
for any Taxes that are a direct or indirect result of such breach.

(b)           Parent shall promptly pay
Stockholders’ Representative all refunds of Taxes and interest thereon received
by, or credited against the Tax liability of Parent, any Affiliate of Parent or
the Company or any Company Subsidiary attributable to Taxes actually paid or
borne by any Stockholder, the Company, any Company Subsidiary or any Affiliate
of the Company with respect to any Pre-Closing Period; provided, however,
that any erroneous refund shall be promptly repaid to Parent.  For the avoidance of doubt, a refund of Taxes
for which Parent is entitled to indemnification under Article VII shall not be
attributable to Taxes paid by

 53
 

any
Stockholder, the Company or any Company Subsidiary with respect to any
Pre-Closing Period to the extent that such Taxes do not exceed the Tax Basket
or to the extent that such refunds were for Taxes that were in excess of the
Contingent Consideration or the Escrow Amount, and for the avoidance of doubt,
to the extent that such refunds of Taxes were for amounts subject to the Tax
Basket, for purposes of computing the aggregate amount of Damages sustained by
the Parent Indemnified Parties in the Tax Basket, the Damages shall be
correspondingly reduced for such Tax refund amounts.

Section 8.4             Purchase Price Adjustment.  Unless otherwise required by Law, the Parties
agree to treat any indemnity payments made under this Agreement as an
adjustment to the purchase price for all Tax purposes.

ARTICLE IX

TERMINATION

Section 9.1             Termination.  This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time as follows:

(a)           by mutual written consent of
the Company and Parent;

(b)           by the Company or Parent, if
the Merger shall not have been consummated on or before February 29, 2008; provided
that if, as of such date, (i) any of the approvals of the Governmental
Authorities listed in Section 6.1 of the Company Disclosure Schedule shall not
have been obtained and (ii) all other conditions to the consummation of the
transactions contemplated by this Agreement are satisfied or then capable of
being satisfied, then either Parent or the Company may elect to extend such
date to March 31, 2008; provided, further, that the right to
terminate this Agreement under this Section 9.1(b) and the right to elect to
extend such date shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted in, the
failure of the Merger to be consummated by such date;

(c)           by the Company or Parent, if
any Governmental Authority of competent jurisdiction shall have issued an
order, decree or ruling or taken other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable;

(d)           by Parent, if there shall
have been a breach in any material respect of any of the covenants or
agreements on the part of the Company set forth in this Agreement or a breach
of any of the representations and warranties of the Company that would cause
the conditions precedent set forth in Section 6.2(a) not to be satisfied, in
each case which has not been cured within 30 days after receipt of written
notice of such breach;

(e)           by the Company, if there
shall have been a breach in any material respect of any of the covenants or
agreements on the part of Parent or Merger Sub set forth in this Agreement or a
breach of any of the representations and warranties of Parent and Merger Sub
that would cause the conditions precedent set forth in Section 6.3(a) not to be
satisfied, in each case which has not been cured within 30 days after receipt
of written notice of such breach;

(f)            By Parent, if the Company
Stockholder Approval has not been obtained by 5:00 p.m. (Eastern time) on September
14, 2007;

 54

(g)           By Parent, if the Company shall have
materially breached any of the provisions of Section 5.2 and such breach has
not been cured within 48 hours after receipt of written notice of such breach;
and

(h)           By the Company, at any time prior to
obtaining the Company Stockholder Approval, to accept and enter into a binding
agreement with respect to a Superior Proposal; provided that (i) at
least five days prior to terminating this Agreement pursuant to this Section
9.1(h) the Company has provided Parent with written notice advising Parent that
the board of directors of the Company has received a Superior Proposal that it
intends to accept, specifying the material terms and conditions of such
Superior Proposal and identifying the Person making such Superior Proposal and
(ii) the Company shall, and shall have caused its financial and legal advisors
to, negotiate in good faith with Parent during such five day period to make
adjustments in the terms of a revised Agreement between the Company and Parent
that are equal or superior to the terms of such Superior Proposal; provided,
further, that simultaneously with any termination of this Agreement
pursuant to this Section 9.1(h), the Company shall pay to Parent the
Termination Fee (as defined in Section 9.2 
below); and provided, further, that the Company may not
terminate this Agreement pursuant to this Section 9.1(h) if it has materially
breached any of the provisions of Section 5.2.

Section 9.2             Effect of Termination.

(a)           In the event of termination of this
Agreement pursuant to Section 9.1, this Agreement (other than Section 5.4(c),
Section 5.13, this Section 9.2 and Article X) shall become void and of no
effect with no liability on the part of any party hereto (or any of its
Affiliates or representatives); provided, however, that no such
termination shall relieve any party hereto from any Liability for damages
resulting from fraud or any willful and intentional breach of this Agreement.

(b)           In the event that (i) (x) after the
date of this Agreement, a Takeover Proposal shall have been made to the
Company, (y) this Agreement is terminated by Parent pursuant to Section 9.1(g),
and (z) within nine months after such termination, the Company enters into a
definitive agreement to consummate a Takeover Proposal or consummates a
Takeover Proposal (solely for purposes of this Section 9.2(b) (i) (z), the term
Takeover Proposal shall have the meaning set forth in the definition of
Takeover Proposal contained in Section 5.2(c) except that all references to “15%”
shall be deemed references to “50%”); (ii) this Agreement is terminated by
Parent pursuant to Section 9.1(f); or (iii) this Agreement is terminated by the
Company pursuant to Section 9.1(h), then the Company shall pay Parent a fee
equal to $10,000,000 ( the “Termination Fee”) by wire transfer of
same-day funds on the date of termination of this Agreement (except that in the
case of termination described in clause (i) above, the Company shall pay Parent
the Termination Fee on the date of consummation of such transaction).

(c)           The Company acknowledges that the
agreements contained in Section 9.2(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent
would not enter into this Agreement; accordingly, if the Company fails promptly
to pay the amount due pursuant to Section 9.2(b) and, to obtain such payment,
Parent commences a suit which results in a judgment against the Company for the
amount due pursuant to Section 9.2(b), the Company shall pay Parent its
out-of-pocket costs and expenses (including attorneys’ fees and expenses) in
connection with such suit.

 55
 

ARTICLE X          

MISCELLANEOUS PROVISIONS

Section
10.1           Stockholders’
Representative.

(a)           In the event the Merger is approved,
effective upon such vote, and without any further action by the Company or any
of the Company’s stockholders (the “Stockholders”), the Company hereby
appoints JPMP as the Stockholders’ Representative (the “Stockholders’
Representative”) for each of the Stockholders (except such Stockholders, if
any, who do not vote in favor of the Merger), as each of such Stockholder’s
agent, to act in each of such Stockholder’s name, place and stead, as such
Stockholder’s attorney-in-fact, to execute and deliver all documents necessary
or desirable to carry out the intent of this Agreement and any other documents
and agreements contemplated by this Agreement with respect to such Stockholders
(including any amendments or waivers of this Agreement and such other documents
and agreements), to make all elections or decisions contemplated by this
Agreement and any other agreements contemplated by this Agreement including,
the initiation or defense of claims for indemnification or other litigation or
proceedings, to give and receive on behalf of such Stockholders any and all
notices from or to any such Stockholder or Stockholders hereunder and to engage
such third parties and obtain such insurance and other similar coverage on
behalf of such Stockholders (including the execution of agreements on behalf of
the Stockholders in connection therewith) as the Stockholders’ Representative
determines to be appropriate and in the best interests of such Stockholders,
and does hereby give and grant unto the Stockholders’ Representative the power
and authority to do and perform each such act and thing whatsoever, that such
Stockholders may or are required to do pursuant to this Agreement and all other
documents and agreements executed and delivered by such Stockholders in
connection with this Agreement, and to amend, modify or supplement any of the
foregoing in each such Stockholders’ name, place and stead, as if such
Stockholder had personally done such act, and JPMP as Stockholders’
Representative hereby accepts such appointment. 
Any proceeds received by the Stockholders’ Representative from Parent or
the Surviving Corporation on behalf of such Stockholders shall be turned over
to such Stockholders as promptly as practicable by the Stockholders’
Representative, in accordance with the terms and provisions of this
Agreement.  The death, incapacity,
dissolution, liquidation, insolvency or bankruptcy of any such Stockholder
shall not terminate such appointment or the authority and agency of the
Stockholders’ Representative.  The
power-of-attorney granted in this Section 10.1 is coupled with an interest and
is irrevocable.  Parent and the Surviving
Corporation may conclusively rely upon, without independent verification or
investigation, all decisions made by the Stockholders’ Representative on behalf
of the Stockholders that approve the Merger in connection with this Agreement.

(b)           The Stockholders’ Representative
shall not be liable for any act done or omitted under this Agreement in its
capacity as Stockholders’ Representative. 
The Stockholders’ Representative shall be entitled to rely, and shall be
fully protected in relying, upon any statements furnished to it by any person
or any other evidence deemed by the Stockholders’ Representative to be
reliable, and the Stockholders’ Representative shall be entitled to act on the
advice of counsel selected by it.  The
Stockholders’ Representative shall be fully justified in failing or refusing to
take any action under this Agreement or any related document or agreement
unless it shall have received such advice or concurrence of such Stockholders
as it deems 

 56
 

appropriate
or it shall have been expressly indemnified to its satisfaction by the
Stockholders appointing it, severally according to their respective ownership
percentages, against any and all liability and expense that the Stockholders’
Representative may incur by reason of taking or continuing to take any such
action.

(c)           The Stockholders’ Representative
shall be entitled to retain counsel and to incur such expenses as the
Stockholders’ Representative deems to be necessary or appropriate in connection
with its performance of its obligations under this Agreement (including
engaging an affiliated or third party trust or escrow service to assist in the
administrative tasks required to be performed by the Stockholders’
Representative hereunder), and all such fees and expenses (including reasonable
attorneys’ fees and expenses and reasonable fees and expenses of any trust or
escrow service) incurred by the Stockholders’ Representative shall be borne by
such Stockholders pro rata according to their respective ownership percentages.

(d)           By approving this Agreement, the
Stockholders hereby agree to indemnify the Stockholders’ Representative (in its
capacity as such) and its agents and other representatives ratably according to
their respective ownership percentages, and to hold the Stockholders’
Representative (in its capacity as such) and its agents and other
representatives harmless from, any and all Losses of whatever kind which may at
any time be imposed upon, incurred by or asserted against the Stockholders’
Representative and its agents and other representatives in such capacity in any
way relating to or arising out of its action or failures to take action
pursuant to this Agreement or any related document or agreement or in
connection herewith or therewith in such capacity.  The agreements in this Section 10.1 shall
survive termination of this Agreement.

(e)           JPMP shall be the initial
Stockholders’ Representative and shall serve as the Stockholders’
Representative until its resignation. Upon the resignation of JPMP,
Stockholders representing a majority of the aggregate ownership percentages of
all Stockholders, shall select a new Stockholders’ Representative.  Each time a new Stockholders’ Representative
is appointed pursuant to this Agreement, such Person, as a condition precedent
to the effectiveness of such appointment, shall accept such position in
writing.

Section
10.2           Representations and
Warranties.  JPMP, for purposes of
Section 5.11 and 5.12 and Article X and in its capacity as the Stockholders’ Representative,
hereby represents and warrants to Parent as of the date of this Agreement and
as of the Closing Date as follows: 
(i) it is a limited partnership duly organized, validly existing
and in good standing under the laws of Delaware, (ii) it has all necessary
power and authority to execute and deliver this Agreement and each other
agreement, document, instrument, certificate or notice contemplated by this
Agreement to be executed by it in connection with the transactions contemplated
by this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby; (iii) the execution, delivery and
performance by it of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by its Board of
Directors or other governing body and no other proceedings on its part are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby; and (iv) this Agreement has been duly and validly
executed and delivered by it and, assuming the due authorization, execution and
delivery thereof by the other parties hereto, constitutes a legally valid and
binding obligation of it, enforceable against it in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally or by general equitable principles.

 57
 

Section
10.3           Amendment; Waiver.  This Agreement may not be amended, altered or
modified except by written instrument executed by Parent and the Company prior
to the Effective Time or executed by Parent and the Stockholders’
Representative following the Effective Time. 
Any waiver of rights hereunder must be set forth in writing.  The failure by any party hereto to enforce at
any time any of the provisions of this Agreement shall in no way be construed
to be a waiver of any such provision nor in any way to affect the validity of
this Agreement or any part hereof or the right of such party thereafter to
enforce each and every such provision. 
No waiver of any breach of or non-compliance with this Agreement shall
be held to be a waiver of any other or subsequent breach or non-compliance.

Section
10.4           Entire Agreement.  This Agreement (including the Company
Disclosure Schedule and Exhibits), the Voting Agreement and the Confidentiality
Agreement constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and supersede all prior agreements and understandings,
written and oral, among the parties with respect to the subject matter hereof.

Section
10.5           Knowledge Convention.  Whenever any statement herein or in any
Schedule, Exhibit, certificate or other document delivered to any party
pursuant to this Agreement is made “to [its] knowledge” or words of similar
intent or effect (including without limitation “Knowledge”) of any party or its
representative, the Person making such statement shall be accountable only for
those facts, circumstances or events, which as of the date the representation
is given, are actually known to the Person making such statement, which with
respect to the Company, means the persons identified in Section 10.5 of the
Company Disclosure Schedule, and with respect to Parent, means the knowledge of
its executive officers.

Section
10.6           Company Disclosure
Schedule.  The inclusion of an item
in the Company Disclosure Schedule as an exception to a representation or
warranty shall not be deemed an admission by the Company that such item
represents an exception or material fact, event or circumstance or that such
item is reasonably likely to have a Company Material Adverse Effect.  The information set forth in the Company
Disclosure Schedule shall be organized to correspond to the applicable sections
and subsections of Article III, provided that any information set forth
in one section of the Company Disclosure Schedule shall be deemed to be
disclosed in such other sections of the Company Disclosure Schedule where the
relevance of such information is reasonably apparent, notwithstanding the
omission of a reference or cross-reference thereto.

Section
10.7           Interpretation.  In this Agreement, unless otherwise expressly
specified, the following rules of interpretation apply:

(a)           references
to Articles, Sections, Company Disclosure Schedules and Exhibits are references
to articles, sections or sub-sections, schedules and exhibits of this
Agreement;

(b)           the section and other headings
contained in this Agreement are for reference purposes only and do not affect
the meaning or interpretation of this Agreement;

(c)           words importing the singular include
the plural and vice versa;

(d)           references to the word “including” do
not imply any limitation;

 58
 

(e)           the words “hereof,” “herein” and “hereunder”
and words of similar import, when used in this Agreement, refer to this
Agreement as a whole and not to any particular provision of this Agreement;

(f)            the words “date hereof” and words of
similar import refer to August 10, 2007;

(g)           references to “$” or “dollars” refer
to U.S. dollars; and

(h)           nothing in any representation,
warranty, covenant or condition in this Agreement shall in any way limit or
restrict the scope, applicability or meaning of any other representation,
warranty, covenant or condition set forth in this Agreement, and each
representation, warranty, covenant and condition in this Agreement shall be
given full, separate and independent effect.

Section
10.8           Severability.  Any term or provision of this Agreement that
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.  If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.

Section
10.9           Notices.  All notices and other communications
hereunder shall be in writing and shall be addressed as follows (or at such
other address for a party as shall be specified by like notice):

If to
Parent or Merger Sub:

Novant Health, Inc.

2085 Frontis Plaza Blvd.

Winston-Salem, North Carolina 27103

Facsimile:  (336) 277-9440

Attention:  Lawrence U. McGee

 

With a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

1440 New York Avenue, N.W. 

Washington, D.C. 20005

Facsimile: (202) 661-8280

Attention: Marc S. Gerber

If to the Company:

MQ Associates,
Inc.

3480
Preston Ridge Road

Suite 600

Alpharetta, Georgia 30005

 59
 

Facsimile:  (678) 992-7538

Attention:  Todd Latz

With a copy to:

O’Melveny & Myers LLP

Times Square Tower

Seven Times Square

New York, New York 10036

Facsimile:  (212) 326-2061

Attention:  Gregory P. Patti, Jr.

If to JPMP or the Stockholders’ Representative:

J.P. Morgan Partners (BHCA), L.P.

c/o CCMP Capital 

245 Park Avenue

16th Floor

New York, New York 10167

Facsimile:  (212) 599-3481

Attention:   Benjamin Edmands

With a copy to:

O’Melveny & Myers LLP

Times Square Tower

Seven Times Square

New York, New York 10036

Facsimile:  (212) 326-2061

Attention:  Gregory P. Patti, Jr.

All such
notices or communications shall be deemed to have been delivered and
received:  (i) if delivered in person,
on the day of such delivery, (ii) if by facsimile, on the day on which such
facsimile was sent, provided that receipt is personally confirmed by
telephone, or (iii) if by a recognized next day courier service, on the first
Business Day following the date of dispatch. 
Each notice, written communication, certificate, instrument and other
document required to be delivered under this Agreement shall be in the English
language, except to the extent that such notice, written communication,
certificate, instrument and other document is required by applicable Law to be
in a language other than English.

Section
10.10         Binding Effect; Persons
Benefiting; No Assignment.  This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns.  Nothing in this Agreement is intended or
shall be construed to confer upon any entity or person other than the parties
hereto and their respective successors and permitted assigns any right, remedy
or claim under or by reason of this Agreement or any part hereof.  This Agreement may not be assigned by any of
the parties hereto without the prior written consent of the other parties
hereto and any purported assignment or

 60
 

other
transfer without such consent shall be void and unenforceable, provided,
however, that without such prior consent, Parent shall have the right to
assign all or any part of its right, title, interest or obligations hereunder
to any wholly-owned Subsidiary of Parent or to any Person that may hereafter
acquire one or more Facilities, provided in each case that Parent remains
liable for its obligations hereunder notwithstanding a permitted assignment.

Section
10.11         Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same agreement, it being understood that
all of the parties need not sign the same counterpart.

Section
10.12         Governing Law.  THIS AGREEMENT, THE LEGAL RELATIONS BETWEEN
THE PARTIES AND THE ADJUDICATION AND THE ENFORCEMENT THEREOF, SHALL BE GOVERNED
BY AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WHOLLY
WITHIN THAT JURISDICTION.

Section
10.13         Consent to Jurisdiction.  Each party to this Agreement, by its
execution hereof, hereby:

(a)           irrevocably
submits to the exclusive jurisdiction in the Court of Chancery of the State of
Delaware or any court of the United States located in the State of Delaware,
for the purpose of any and all actions, suits or proceedings arising in whole
or in part out of, related to, based upon or in connection with this Agreement
or the subject matter hereof,

(b)           waives to the extent not prohibited
by applicable Law, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that any such action brought in one of the
above-named courts should be dismissed on grounds of forum non conveniens,
should be transferred to any court other than one of the above-named courts, or
should be stayed by reason of the pendency of some other proceeding in any
other court other than one of the above-named courts, or that this Agreement or
the subject matter hereof may not be enforced in or by such court, and

(c)           agrees not to commence any such
action other than before one of the above-named courts nor to make any motion
or take any other action seeking or intending to cause the transfer or removal
of any such action to any court other than one of the above-named courts
whether on the grounds of forum non conveniens or otherwise.

Section
10.14         Specific Performance.  The parties agree that irreparable damage
would occur and that the parties would not have any adequate remedy at law in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement in any federal court located in the State of Delaware or in Delaware
state court, this being in addition to any other remedy to which they are
entitled at law or in equity.

[Remainder of page intentionally left blank.]

 61
 

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

	
  

  	
  NOVANT HEALTH, INC.

  
	
   

  	
  By:

  	
  /s/ Paul M. Wiles

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Paul M. Wiles

  
	
   

  	
   

  	
  Title:

  	
  President & Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  STONES MERGER CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul M. Wiles

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Paul M. Wiles

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  MQ ASSOCIATES, INC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C. Christian Winkle

  	
   

  
	
   

  	
   

  	
  Name:

  	
  C. Christian Winkle

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  J.P. MORGAN PARTNERS (BHCA), L.P.

  
	
   

  	
  solely for purposes of Sections 5.11 and

  5.12 and Article X and in its capacity as

  
	
   

  	
  the Stockholders’ Representative

  
	
   

  	
   

  
	
   

  	
  By:

  	
  CCMP Capital Advisors, LLC,

  
	
   

  	
   

  	
  as Attorney-In-Fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Benjamin B. Edmands

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Benjamin B. Edmands

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
							

 

 62Exhibit
4.01

PUBLIC
SERVICE COMPANY

OF COLORADO

TO

U.S. BANK TRUST NATIONAL
ASSOCIATION,

as
Trustee

Supplemental Indenture No.
17

Dated as of August
1, 2007

Supplemental
to the Indenture

dated as of October 1, 1993

Establishing the Securities of Series No. 17

designated 6.25% First Mortgage Bonds, Series No. 17 due 2037

SUPPLEMENTAL INDENTURE NO. 17,
dated as of August 1, 2007, between PUBLIC
SERVICE COMPANY OF COLORADO, a corporation duly organized and
existing under the laws of the State of Colorado (hereinafter sometimes called
the “Company”), and U.S. BANK TRUST NATIONAL
ASSOCIATION (formerly First Trust of New York, National Association),
a national banking association, as successor trustee (hereinafter sometimes
called the “Trustee”) to Morgan Guaranty Trust Company of New York under the
Indenture, dated as of October 1, 1993 (hereinafter called the “Original
Indenture”), as previously supplemented and as further supplemented by this
Supplemental Indenture No. 17.  The
Original Indenture and any and all indentures and all other instruments
supplemental thereto are hereinafter sometimes collectively called the “Indenture”.

Recitals
of the Company

The Original Indenture was authorized, executed and
delivered by the Company to provide for the issuance from time to time of its
Securities (such term and all other capitalized terms used herein without
definition having the meanings assigned to them in the Original Indenture), to
be issued in one or more series as contemplated therein, and to provide
security for the payment of the principal of and premium, if any, and interest,
if any, on the Securities.

The Company has heretofore executed and delivered to
the Trustee the Supplemental Indentures referred to in Schedule A hereto for
the purpose of establishing a series of bonds and appointing the successor
Trustee.

The Company desires to establish a new series of
Securities to be designated “6.25% First Mortgage Bonds, Series No. 17 due 2037”
such series of Securities to be hereinafter sometimes called “Series
No. 17”.

The Company has duly authorized the execution and
delivery of this Supplemental Indenture No. 17 to establish the Securities of
Series No. 17 and has duly authorized the issuance of such Securities; and all
acts necessary to make this Supplemental Indenture No. 17 a valid agreement of
the Company, and to make the Securities of Series No. 17 valid obligations of
the Company, have been performed.

Granting
Clauses

NOW, THEREFORE, THIS SUPPLEMENTAL
INDENTURE NO. 17 WITNESSETH, that, in consideration of the
premises and of the purchase of the Securities by the Holders thereof, and in
order to secure the payment of the principal of and premium, if any, and
interest, if any, on all Securities from time to time Outstanding and the
performance of the covenants contained therein and in the Indenture and to
declare the terms and conditions on which such Securities are secured, the
Company hereby grants, bargains, sells, releases, conveys, assigns, transfers,
mortgages, pledges, sets over and confirms to the Trustee, and grants to the
Trustee a security interest in, the following:

Granting
Clause First

All right, title and
interest of the Company, as of the date of the execution and delivery of this
Supplemental Indenture No. 17, in and to property (other than Excepted
Property), real, personal and mixed and wherever situated, in any case used or
to be used in or in connection with the Electric Utility Business (whether or
not such use is the sole use of such property), including without limitation
(a) all lands and interest in land described or referred to in Schedule B
hereto; (b) all other lands, easements, servitudes, licenses, permits, rights
of way and other rights and interests in or relating to real property used or
to be used in or in connection with the Electric Utility Business or relating
to the occupancy or use of such real property, subject however, to the
exceptions

and exclusions set forth
in clause (a) of Granting Clause First of the Original Indenture; (c) all
plants, generators, turbines, engines, boilers, fuel handling and
transportation facilities, air and water pollution control and sewage and solid
waste disposal facilities and other machinery and facilities for the generation
of electric energy; (d) all switchyards, lines, towers, substations,
transformers and other machinery and facilities for the transmission of
electric energy; (e) all lines, poles, conduits, conductors, meters, regulators
and other machinery and facilities for the distribution of electric energy; (f)
all buildings, offices, warehouses and other structures used or to be used in
or in connection with the Electric Utility Business; (g) all pipes, cables,
insulators, ducts, tools, computers and other data processing and/or storage
equipment and other equipment, apparatus and facilities used or to be used in
or in connection with the Electric Utility Business; (h) any or all of the
foregoing properties in the process of construction; and (i) all other
property, of whatever kind and nature, ancillary to or otherwise used or to be
used in conjunction with any or all of the foregoing or otherwise, directly or
indirectly, in furtherance of the Electric Utility Business;

Granting
Clause Second

Subject to the applicable
exceptions permitted by Section 810(c), Section 1303 and Section 1305 of the
Original Indenture, all property (other than Excepted Property) of the kind and
nature described in Granting Clause First which may be hereafter acquired by
the Company, it being the intention of the Company that all such property
acquired by the Company after the date of the execution and delivery of this
Supplemental Indenture No. 17 shall be as fully embraced within and subjected
to the Lien hereof as if such property were owned by the Company as of the date
of the execution and delivery of this Supplemental Indenture No. 17;

Granting
Clause Fourth

All other property of
whatever kind and nature subjected or required to be subjected to the Lien of
the Indenture by any of the provisions thereof;

This Instrument shall
constitute a financing statement under the Colorado Uniform Commercial Code
(the “UCC”) to be filed in the real estate records, and is filed as a fixture
filing under the UCC covering goods which are, or are to become, fixtures on
the real property described herein, in the Original Indenture and all
supplements to the Original Indenture;

Excepted
Property

Expressly excepting and
excluding, however, from the Lien and operation of the Indenture all Excepted
Property of the Company, whether now owned or hereafter acquired;

TO HAVE AND TO HOLD
all such property, real, personal and mixed, unto the Trustee, its successors
in trust and their assigns forever;

SUBJECT, HOWEVER,
to (a) Liens existing at the date of the execution and delivery of the Original
Indenture, (b) as to property acquired by the Company after the date of the
execution and delivery of the Original Indenture, Liens existing or placed
thereon at the time of the acquisition thereof (including, but not limited to,
the Lien of any Class A Mortgage and purchase money Liens), (c) Retained

 2
 

Interests and (d) any
other Permitted Liens, it being understood that, with respect to any property
which was at the date of execution and delivery of the Original Indenture or
thereafter became or hereafter becomes subject to the Lien of any Class A
Mortgage, the Lien of the Indenture shall at all times be junior, subject and
subordinate to the Lien of such Class A Mortgage;

IN TRUST, NEVERTHELESS,
for the equal and proportionate benefit and security of the Holders from time
to time of all Outstanding Securities without any priority of any such Security
over any other such Security;

PROVIDED, HOWEVER,
that the right, title and interest of the Trustee in and to the Mortgaged
Property shall cease, terminate and become void in accordance with, and subject
to the conditions set forth in, Article Nine of the Original Indenture, and if,
thereafter, the principal of and premium, if any, and interest, if any, on the
Securities shall have been paid to the Holders thereof, or shall have been paid
to the Company pursuant to Section 603 of the Original Indenture, then and in
that case the Indenture shall terminate, and the Trustee shall execute and
deliver to the Company such instruments as the Company shall require to
evidence such termination; otherwise the Indenture, and the estate and rights
thereby granted shall be and remain in full force and effect; and

THE PARTIES HEREBY FURTHER COVENANT
AND AGREE as follows:

ARTICLE
ONE

Securities
of Series No. 17

There are hereby established the Securities of Series
No. 17, which shall have the terms and characteristics set forth below (the
lettered subdivisions set forth below corresponding to the lettered
subdivisions of Section 301 of the Original Indenture):

(a)                                  the
title of the Securities of Series No. 17 shall be “6.25% First Mortgage Bonds,
Series No. 17 due 2037”;

(b)                                 
the Securities of Series No. 17 shall be limited to the aggregate principal
amount of $350,000,000;

(c)                                  interest
on the Securities of Series No. 17 shall be payable to the Persons in whose
names such Securities are registered at the close of business on the Regular Record
Date for such interest, except as otherwise expressly provided in the form of
such Securities attached as Exhibit A hereto;

(d)                                 the
principal of the Securities of Series No. 17 shall be payable on September 1,
2037, the Stated Maturity for Series No. 17;

(e)                                  the
Securities of Series No. 17 shall bear interest at a rate of 6.25% per annum;
interest shall accrue on the Securities of Series No. 17 from August 15, 2007,
or the most recent date to which interest has been paid or duly provided for;
the Interest Payment Dates for such Securities shall be March 1 and September 1
in each year, commencing March 1, 2008, and the Regular Record Dates with
respect to the Interest Payment Dates for such Securities shall be February 15
and August 15 in each year, respectively (whether or not a Business Day);

 3
 

(f)                                    the
Corporate Trust Office of U.S. Bank Trust National Association in New York, New
York shall be the place at which (i) the principal of, premium, if any, and
interest, if any, on the Securities of Series No. 17 shall be payable,
(ii) registration of transfer of such Securities may be effected, (iii)
exchanges of such Securities may be effected and (iv) notices and demands to or
upon the Company in respect of such Securities and the Indenture may be served;
and U.S. Bank Trust National Association shall be the Security Registrar for
such Securities; provided, however, that the Company reserves the right to
change, by one or more Officer’s Certificates, any such place or the Security
Registrar; and provided, further, that the Company reserves the right to
designate, by one or more Officer’s Certificates, its principal office in
Denver, Colorado as any such place or itself as the Security Registrar;

(g)                                 the
Securities of Series No. 17 shall be redeemable at the option of the Company at
any time prior to their Maturity, in whole or in part, at a redemption price
equal to the greater of (i) 100% of the principal amount thereof to be
redeemed, or (ii) the sum of the present values of the remaining scheduled
payments of principal and interest on such Securities to be redeemed (excluding
the portion of any such interest accrued to the Redemption Date), discounted to
the Redemption Date on a semi-annual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Treasury Yield plus 25 basis points, plus in
each case, accrued and unpaid interest to the Redemption Date.  For purposes hereof, the following defined
terms shall have the meaning ascribed to them:

“Treasury Yield”
means, for any Redemption Date (1) the yield, under the heading which
represents the average for the immediately preceding week, appearing in the
most recently published statistical release designated “H.15(519)” or any
successor publication which is published weekly by the Board of Governors of
the Federal Reserve System and which establishes yields on actively traded U.S.
Treasury securities adjusted to constant maturity under the caption “Treasury
Constant Maturities”, for the maturity corresponding to the Comparable Treasury
Issue (if no maturity is within three months before or after such maturity,
yields for the two published maturities most closely corresponding to the
Comparable Treasury Issue will be determined and the Treasury Yield will be
interpolated or extrapolated from such yields on a straight line basis,
rounding to the nearest month); or (2) if such release (or any successor
release) is not published during the week preceding the calculation date or
does not contain such yields, the rate per annum equal to the semiannual equivalent
yield to maturity of the Comparable Treasury Issue, calculated using a price
for the Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for such Redemption Date.  The Treasury Yield for any Redemption Date
shall be calculated on the third Business Day preceding such Redemption Date.

“Comparable
Treasury Issue” means the United States Treasury security selected by the
Independent Investment Banker as having a maturity comparable to the remaining
term of the Securities of Series No. 17 that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining
term of the Securities of Series No. 17.

“Comparable
Treasury Price” means (i) the average of the Reference Treasury Dealer
Quotations for the Redemption Date, after excluding the highest and lowest
Reference Treasury Dealer Quotations for such Redemption Date or (ii) if the
Trustee obtains fewer than four Reference Treasury Dealer Quotations for the
Redemption Date, the average of all of the Reference Treasury Dealer Quotations
for such Redemption Date.

 4
 

“Independent
Investment Banker” means J.P.Morgan
Securities Inc. or its successor or, if such firm or its successor is
unwilling or unable to select the Comparable Treasury Issue, an independent
investment banking institution of national standing appointed by the Trustee
after consultation with the Company.

“Reference Treasury
Dealer” means (1) each of BNP
Paribas Securities Corp., Credit
Suisse Securities (USA) LLC and J.P.
Morgan Securities Inc. and any other Primary Treasury Dealer designated
by, and not affiliated with, BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC and J.P. Morgan
Securities Inc. or their respective successors, provided, however, that
if BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc. or any of
their respective designees ceases to be a Primary Treasury Dealer, the Company
will appoint another Primary Treasury Dealer as a substitute and (2) any other Primary Treasury Dealer
selected by the Company after consultation with an Independent Investment
Banker.

“Primary Treasury
Dealer” means any primary U.S. Government securities dealer in the United
States.

“Reference
Treasury Dealer Quotations” means, for each Reference Treasury Dealer and any
Redemption Date, the average, as determined by the Independent Investment
Banker, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Independent Investment Banker by the Reference Treasury Dealer
at 5:00 p.m. New York City time on the third Business Day preceding the
Redemption Date.

(h)                                 not
applicable;

(i)                                     not
applicable;

(j)                                     not
applicable;

(k)                                  not
applicable;

(l)                                     not
applicable;

(m)                               not
applicable;

(n)                                 not
applicable;

(o)                                 not
applicable;

(p)                                 not
applicable;

(q)                                 the
Securities of Series No. 17 are to be initially registered in the name of Cede
& Co., as nominee for The Depository Trust Company (the “Depositary”).  Such Securities shall not be transferable or
exchangeable, nor shall any purported transfer be registered, except as
follows:

(i)                                     such
Securities may be transferred in whole, and appropriate registration of
transfer effected, if such transfer is by such nominee to the Depositary, or by
the Depositary to another nominee thereof, or by any nominee of the Depositary

 5
 

to any other
nominee thereof, or by the Depositary or any nominee thereof to any successor
securities depositary or any nominee thereof; and

(ii)                                  such
Securities may be exchanged for definitive Securities registered in the
respective names of the beneficial holders thereof, and thereafter shall be
transferable without restriction, if:

(A)                              the
Depositary, or any successor securities depositary, shall have notified the
Company and the Trustee that it is unwilling or unable to continue to act as
securities depositary with respect to such Securities or the Depositary has
ceased to be a clearing agency registered under the Securities Exchange Act of
1934, as amended, and the Trustee shall not have been notified by the Company
within ninety (90) days of the identity of a successor securities depositary
with respect to such Securities; or

(B)                                the
Company shall have delivered to the Trustee a Company Order to the effect that
such Securities shall be so exchangeable on and after a date specified therein;
or

(C)        (1) an Event of Default
shall have occurred and be continuing, (2) the Trustee shall have given
notice of such Event of Default pursuant to Section 1102 of the Original
Indenture and (3) there shall have been delivered to the Company and the
Trustee an Opinion of Counsel to the effect that the interests of the
beneficial owners of such Securities in respect thereof will be materially
impaired unless such owners become Holders of definitive Securities;

(r)                                    not
applicable;

(s)                                  no
service charge shall be made for the registration of transfer or exchange of
the Securities of Series No. 17; provided, however, that the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection with the exchange or transfer;

(t)                                    not
applicable;

(u)                                 (i)                                     If
the Company shall have caused the Company’s indebtedness in respect of any
Securities of Series No. 17 to have been satisfied and discharged prior to the
Maturity of such Securities, as provided in Section 901 of the Original
Indenture, the Company shall, promptly after the date of such satisfaction and
discharge, give a notice to each Person who was a Holder of any of such
Securities on such date stating (A)(1) the aggregate principal amount of such
Securities and (2) the aggregate amount of any money (other than amounts, if
any, deposited in respect of accrued interest on such Securities) and the
aggregate principal amount of, the rate or rates of interest on, and the
aggregate fair market value of, any Eligible Obligations deposited pursuant to
Section 901 of the Original Indenture with respect to such Securities and (B)
that the Company will provide (and the Company shall promptly so provide) to
such Person, or any beneficial owner of such Securities holding through such
Person (upon written request to the Company sent to an address specified in
such notice), such other

 6
 

information as
such Person or beneficial owner, as the case may be, reasonably may request in
order to enable it to determine the federal income tax consequences to it
resulting from the satisfaction and discharge of the Company’s indebtedness in
respect of such Securities.  Thereafter,
the Company shall, within forty-five (45) days after the end of each calendar
year, give to each Person who at any time during such calendar year was a Holder
of such Securities a notice containing (X) such information as may be necessary
to enable such Person to report its income, gain or loss for federal income tax
purposes with respect to such Securities or the assets held on deposit in
respect thereof during such calendar year or the portion thereof during which
such Person was a Holder of such Securities, as the case may be (such
information to be set forth for such calendar year as a whole and for each
month during such year) and (Y) a statement to the effect that the Company will
provide (and the Company shall promptly so provide) to such Person, or any
beneficial owner of such Securities holding through such Person (upon written
request to the Company sent to an address specified in such notice), such other
information as such Person or beneficial owner, as the case may be, reasonably
may request in order to enable it to determine its income, gain or loss for
federal income tax purposes with respect to such Securities or such assets for
such year or portion thereof, as the case may be.  The obligation of the Company to provide or
cause to be provided information for purposes of income tax reporting by any
Person as described in the first two sentences of this paragraph shall be
deemed to have been satisfied to the extent that the Company has provided or
caused to be provided substantially comparable information pursuant to any
requirements of the Internal Revenue Code of 1986, as amended from time to time
(the “Code”) and United States Treasury regulations thereunder.

(ii)                                  Notwithstanding
the provisions of subparagraph (i) above, the Company shall not be required to
give any notice specified in such subparagraph or to otherwise furnish any of
the information contemplated therein if the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of such Securities
will not recognize income, gain or loss for federal income tax purposes as a
result of the satisfaction and discharge of the Company’s indebtedness in
respect of such Securities and such Holders will be subject to federal income
taxation on the same amounts and in the same manner and at the same times as if
such satisfaction and discharge had not occurred.

(iii)                               Anything
in this clause (u) to the contrary notwithstanding, the Company shall not be
required to give any notice specified in subparagraph (i) or to otherwise
furnish the information contemplated therein or to deliver any Opinion of
Counsel contemplated by subparagraph (ii) if the Company shall have caused Securities
of Series No. 17 to be deemed to have been paid for purposes of the Indenture,
as provided in Section 901 of the Original Indenture, but shall not have
effected the satisfaction and discharge of its indebtedness in respect of such
Securities pursuant to such Section.

(v)                                 The
Securities of Series No. 17 shall be substantially in the form attached hereto
as Exhibit A and shall have such further terms as are set forth in such form.

 7
 

ARTICLE
TWO

Miscellaneous
Provisions

This Supplemental Indenture No. 17 is a supplement to
the Original Indenture.  As previously
supplemented and further supplemented by this Supplemental Indenture No. 17,
the Original Indenture is in all respects ratified, approved and confirmed, and
the Original Indenture, all previous supplements thereto and this Supplemental
Indenture No. 17 shall together constitute one and the same instrument.

 8
 

IN
WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture No. 17 to be duly executed as of the day and year first
above written.

	
  

  	
  PUBLIC SERVICE COMPANY OF COLORADO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ George E. Tyson II

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  George E. Tyson II

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Treasurer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
					

 

	
   

  	
   

  
	
  STATE OF MINNESOTA

  	
  )

  
	
   

  	
  ) ss:

  
	
  COUNTY OF HENNEPIN

  	
  )

  

 

On the 6th day of August, 2007, before me personally
came George E. Tyson II to me known, who, being by me duly sworn, did depose
and say that he is a Vice President and Treasurer of Public Service Company of
Colorado, one of the corporations described in and which executed the foregoing
instrument; and that he signed his name thereto by authority of the Board of
Directors of said corporation.

	
   

  	
  /s/ Sharon M. Quellhorst

  	
   

  
	
   

  	
  Name: Sharon M.
  Quellhorst

  
	
   

  	
  Notary Public,
  State of Minnesota

  
	
   

  	
  Commission
  Expires: January 31, 2010

  

 9
 

 

	
   

  	
  U.S. BANK TRUST NATIONAL
  ASSOCIATION,

  
	
   

  	
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ K. Wendy
  Kumar

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  K. Wendy Kumar

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
					

 

	
  STATE OF NEW YORK

  	
  )

  
	
   

  	
  ) ss:

  
	
  CITY AND COUNTY
  OF NEW YORK

  	
  )

  

 

On the 7th day of August, 2007, before me personally
came K. Wendy Kumar, to me known, who, being by me duly sworn, did depose and
say that she is a Vice President of U.S. Bank Trust National Association, the
banking association described in and which executed the foregoing instrument;
and that she signed her name thereto by authority of the Board of Directors of
said banking association.

	
  

  	
  /s/ Peter J. Lopez

  	
   

  
	
   

  	
  Name

  
	
   

  	
  Notary Public,
  State of New York

  
	
   

  	
  Commission
  Expires: November 1, 2008

  

 

 10

EXHIBIT A

FORM OF SECURITY

(See legend at the
end of this Security for

restrictions on transfer)

PUBLIC SERVICE
COMPANY OF COLORADO

First Mortgage Bond, Series No. 17

	
  Original Interest Accrual
  Date

  	
   

  	
  August 15, 2007 

  
	
  Interest Rate:

  	
   

  	
  6.25% per annum 

  
	
  Stated Maturity:

  	
   

  	
  September 1, 2037 

  
	
  Interest Payment Dates:
  

  	
   

  	
  March 1 and September 1 

  
	
  Regular Record Dates:

  	
   

  	
  February 15 and August 15

  

 

This Security is not a
Discount Security

within the meaning
of the within-mentioned Indenture

Principal Amount                                                                                                                                                   Registered
No.

$

PUBLIC SERVICE COMPANY OF COLORADO, a corporation duly
organized and existing under the laws of the State of Colorado (herein called
the “Company,” which term includes any successor corporation under the
Indenture referred to below), for value received, hereby promises to pay to

, or registered assigns,
the principal sum of

Dollars on the Stated
Maturity specified above, and to pay interest thereon from the Original
Interest Accrual Date specified above or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, semi-annually
in arrears on the Interest Payment Dates specified above in each year,
commencing March 1, 2008, and at Maturity, at the Interest Rate per annum
specified above, until the principal hereof is paid or duly provided for.  The interest so payable, and paid or duly
provided for, on any Interest Payment Date shall, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date specified above (whether or not a Business Day) next preceding such
Interest Payment Date.  Notwithstanding
the foregoing, interest payable at Maturity shall be paid to the Person to whom
principal shall be paid. Except as otherwise provided in said Indenture, any
such interest not so paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice of which shall be
given to Holders of Securities of this series not less than 15 days prior to
such Special Record Date, or be paid in such other manner as permitted by the
Indenture.

 A-1
 

Payment of the principal of this Security and interest
hereon at Maturity shall be made upon presentation of this Security at the
Corporate Trust Office of U.S. Bank Trust National Association, in New York,
New York or at such other office or agency as may be designated for such
purpose by the Company from time to time. Payment of interest on this Security
(other than interest at Maturity) shall be made by check mailed to the address
of the Person entitled thereto as such address shall appear in the Security
Register, except that if such Person shall be a securities depositary, such
payment may be made by such other means in lieu of check as shall be agreed
upon by the Company, the Trustee and such Person. Payment of the principal of
and interest on this Security, as aforesaid, shall be made in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts.

This Security is one of a duly authorized issue of
securities of the Company (herein called the “Securities”), issued and issuable
in one or more series under and equally secured by an Indenture, dated as of
October 1, 1993 (such Indenture as originally executed and delivered and as
supplemented or amended from time to time thereafter, together with any
constituent instruments establishing the terms of particular Securities, being
herein called the “Indenture”), between the Company and U.S. Bank Trust
National Association (formerly First Trust of New York, National Association)
as successor trustee (herein called the “Trustee,” which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the property
mortgaged, pledged and held in trust, the nature and extent of the security and
the respective rights, limitations of rights, duties and immunities of the
Company, the Trustee and the Holders of the Securities thereunder and of the
terms and conditions upon which the Securities are, and are to be,
authenticated and delivered and secured. The acceptance of this Security shall
be deemed to constitute the consent and agreement by the Holder hereof to all
of the terms and provisions of the Indenture. This Security is one of the
series designated above.

If any Interest Payment Date or the Stated Maturity
shall not be a Business Day (as hereinafter defined), payment of the amounts
due on this Security on such date may be made on the next succeeding Business
Day; and, if such payment is made or duly provided for on such Business Day, no
interest shall accrue on such amounts for the period from and after such
Interest Payment Date or Stated Maturity, as the case may be, to such Business
Day.

This Security shall be redeemable at the option of the
Company at any time prior to Maturity, in whole or in part, at a redemption
price equal to the greater of (i) 100% of the principal amount hereof to be
redeemed, or (ii) the sum of the present values of the remaining scheduled
payments of principal and interest on this Security to be redeemed (excluding
the portion of any such interest accrued to the Redemption Date), discounted to
the Redemption Date on a semi-annual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Treasury Yield plus 25 basis points, plus in
each case, accrued and unpaid interest to the Redemption Date.  For purposes hereof, the following defined
terms shall have the meaning ascribed to them:

“Treasury Yield” means, for any Redemption Date
(1) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated “H.15(519)” or any successor publication which
is published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded U.S. Treasury securities adjusted
to constant maturity under the caption “Treasury Constant Maturities”, for the
maturity corresponding to the Comparable Treasury Issue (if no maturity is
within three months before or after such maturity, yields for the two published
maturities most closely corresponding to the Comparable Treasury Issue will be
determined and the Treasury Yield will be interpolated or extrapolated from
such yields on a straight line basis, rounding to the nearest month); or
(2) if such release (or any successor release) is not published during the
week preceding the calculation date or does not contain

 A-2
 

such yields, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date. The Treasury Yield for any Redemption
Date shall be calculated on the third Business Day preceding such Redemption
Date.

“Comparable Treasury Issue” means the United States
Treasury security selected by the Independent Investment Banker as having a
maturity comparable to the remaining term of the Securities of Series No. 17
that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to the remaining term of the Securities of
Series No. 17.

“Comparable Treasury Price” means (i) the average of
the Reference Treasury Dealer Quotations for the Redemption Date, after
excluding the highest and lowest Reference Treasury Dealer Quotations for such
Redemption Date or (ii) if the Trustee obtains fewer than four Reference
Treasury Dealer Quotations for the Redemption Date, the average of all of the
Reference Treasury Dealer Quotations for such Redemption Date.

 “Independent
Investment Banker” means J. P. Morgan Securities Inc. or its successor or, if
such firm or its successor is unwilling or unable to select the Comparable
Treasury Issue, an independent investment banking institution of national
standing appointed by the Trustee after consultation with the Company.

 “Reference
Treasury Dealer” means (1) each of BNP Paribas Securities Corp., Credit Suisse
Securities (USA) LLC and J.P. Morgan Securities Inc. and any other Primary
Treasury Dealer designated by, and not affiliated with, BNP Paribas Securities
Corp., Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc. or
their respective successors, provided, however, that if BNP Paribas Securities
Corp., Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc. or
any of their respective designees ceases to be a Primary Treasury Dealer, the
Company will appoint another Primary Treasury Dealer as a substitute and (2)
any other Primary Treasury Dealer selected by the Company after consultation
with an Independent Investment Banker.

“Primary Treasury Dealer”
means any primary U.S. Government securities dealer in the United States.

“Reference Treasury Dealer Quotations” means, for each
Reference Treasury Dealer and any Redemption Date, the average, as determined
by the Independent Investment Banker, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker by the
Reference Treasury Dealer at 5:00 p.m. New York City time on the third Business
Day preceding the Redemption Date.

If an Event of Default shall occur and be continuing,
the principal of this Security may be declared due and payable in the manner
and with the effect provided in the Indenture.

The Indenture permits, with certain exceptions as
therein provided, the Trustee to enter into one or more supplemental indentures
for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, the Indenture with the consent of the
Holders of not less than a majority in aggregate principal amount of the
Securities of all series then Outstanding under the Indenture, considered as one
class; provided, however, that if there shall be Securities of more than one
series Outstanding under the Indenture and if a proposed supplemental indenture
shall directly affect the rights of the Holders of Securities of one or more,
but less than all, of such series, then the consent only of

 A-3
 

the Holders of a majority
in aggregate principal amount of the Outstanding Securities of all series so
directly affected, considered as one class, shall be required; and provided,
further, that if the Securities of any series shall have been issued in more
than one Tranche and if the proposed supplemental indenture shall directly
affect the rights of the Holders of Securities of one or more, but less than
all, of such Tranches, then the consent only of the Holders of a majority in
aggregate principal amount of the Outstanding Securities of all Tranches so
directly affected, considered as one class, shall be required; and provided,
further, that the Indenture permits the Trustee to enter into one or more
supplemental indentures for limited purposes without the consent of any Holders
of Securities. The Indenture also contains provisions permitting the Holders of
a majority in principal amount of the Securities then Outstanding, on behalf of
the Holders of all Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange therefor or in lieu hereof, whether or not notation of
such consent or waiver is made upon this Security.

As provided in the Indenture and subject to certain
limitations therein set forth, this Security or any portion of the principal
amount hereof will be deemed to have been paid for all purposes of the
Indenture and to be no longer Outstanding thereunder, and, at the election of the
Company, the Company’s entire indebtedness in respect thereof will be satisfied
and discharged, if there has been irrevocably deposited with the Trustee or any
Paying Agent (other than the Company), in trust, money in an amount which will
be sufficient and/or Eligible Obligations, the principal of and interest on
which when due, without regard to any reinvestment thereof, will provide moneys
which, together with moneys so deposited, will be sufficient, to pay when due
the principal of and interest on this Security when due.

As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registrable in
the Security Register, upon surrender of this Security for registration of
transfer at the office of U.S. Bank Trust National Association, in New York,
New York or such other office or agency as may be designated by the Company
from time to time, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of this series of authorized denominations
and of like tenor and aggregate principal amount, will be issued to the designated
transferee or transferees.

The Securities of this series are issuable only as
registered Securities, without coupons, and in denominations of $1,000 and
integral multiples thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Securities of this series are exchangeable for a
like aggregate principal amount of Securities of the same series, of any
authorized denominations, as requested by the Holder surrendering the same, and
of like tenor upon surrender of the Security or Securities to be exchanged at
the office of U.S. Bank Trust National Association, in New York, New York or
such other office or agency as may be designated by the Company from time to
time.

No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.

Prior to due presentment of this Security for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Security is registered
as the absolute owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.

 A-4
 

The Indenture and the Securities shall be governed by
and construed in accordance with the laws of the State of New York (including
without limitation Section 5-1401 of the New York General Obligations Law or
any successor to such statute), except to the extent that the Trust Indenture
Act of 1939, as then in effect or any successor statute shall be applicable and
except to the extent that the law of any jurisdiction wherein any portion of
the property mortgaged pursuant to the Indenture or any indenture supplemental
thereto is located shall mandatorily govern the perfection, priority or
enforcement of the lien of the Indenture and all indentures supplemental
thereto with respect to such portion of the mortgaged property.

As used herein “Business Day” means any day, other
than a Saturday or Sunday, which is not a day on which banking institutions or
trust companies in The City of New York, New York or other city in which is
located any office or agency maintained for the payment of principal or
interest on this Security, are authorized or required by law, regulation or
executive order to remain closed. All other terms used in this Security which
are defined in the Indenture shall have the meanings assigned to them in the
Indenture.

As provided in the Indenture, no recourse shall be had
for the payment of the principal of or interest on any Securities, or any part
thereof, or for any claim based thereon or otherwise in respect thereof, or of
the indebtedness represented thereby, or upon any obligation, covenant or
agreement under the Indenture, against, and no personal liability whatsoever
shall attach to, or be incurred by, any incorporator, shareholder, officer or
director, as such, past, present or future of the Company or of any predecessor
or successor corporation (either directly or through the Company or a
predecessor or successor corporation), whether by virtue of any constitutional
provision, statute or rule of law, or by the enforcement of any assessment or penalty
or otherwise; it being expressly agreed and understood that the Indenture and
all the Securities are solely corporate obligations and that any such personal
liability is hereby expressly waived and released as a condition of, and as
part of the consideration for, the execution of the Indenture and the issuance
of the Securities.

Unless the certificate of authentication hereon has
been executed by the Trustee or an Authenticating Agent by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.

 A-5
 

IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed and its corporate seal to be hereunto affixed
and attested.

	
  

  	
  PUBLIC SERVICE COMPANY OF COLORADO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Vice President and
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  

 

	
  Attest:

  	
   

  	
   

  	
   

  
	
  Assistant
  Secretary

  	
   

  

 

CERTIFICATE
OF AUTHENTICATION

This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  U.S. BANK TRUST

  NATIONAL ASSOCIATION,

  as Trustee

  	
   

  	
  OR

  	
   

  	
  U.S.
  BANK TRUST

  NATIONAL ASSOCIATION,

  as Trustee

  

 

	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
  Authorized
  Officer

  	
   

  	
   

  	
   

  	
    as Authenticating Agent

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Authorized
  Officer

  

 

Unless this
certificate is presented by an authorized representative of The Depository
Trust Company, a New York Corporation (“DTC”), to the Company or its agent for
registration of transfer, exchange, or payment, and any certificate issued is
registered in the name of Cede & Co. or in such other name as is requested
by an authorized representative of DTC (and any payment is made to Cede &
Co. or to such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co.,
has an interest herein.

This Security may not be transferred or exchanged, nor may any
purported transfer be registered, except (i) this Security may be transferred
in whole, and appropriate registration of transfer effected, if such transfer
is by Cede & Co., as nominee for The Depository Trust Company (the “Depositary”),
to the Depositary, or by the Depositary to another nominee thereof, or by any
nominee of the Depositary to any other nominee thereof, or by the Depositary or
any nominee thereof to any successor securities depositary or any nominee thereof;
and (ii) this Security may be exchanged for definitive Securities registered in
the respective names of the beneficial holders hereof, and thereafter shall be
transferable without restrictions if: 
(A) the Depositary, or any successor securities depositary, shall have
notified the Company and the Trustee that it is unwilling or unable to continue
to act as securities depositary with respect to the

 A-6
 

Securities and
the Trustee shall not have been notified by the Company within ninety (90) days
of the identity of a successor securities depositary with respect to the
Securities; or (B) the Company shall have delivered to the Trustee a Company
Order to the effect that the Securities shall be so exchangeable on and after a
date specified therein or (C) (1) an Event of Default shall have occurred and
be continuing, (2) the Trustee shall have given notice of such Event of
Default pursuant to Section 1102 of the Original Indenture and (3) there shall
have been delivered to the Company and the Trustee an Opinion of Counsel to the
effect that the interests of the beneficial owners of such Securities in
respect thereof will be materially impaired unless such owners become Holders
of definitive Securities.

 A-7
 

FOR VALUE RECEIVED the
undersigned hereby sells, assigns and transfers unto

 

	
  

  
	
  [please insert
  social security or other identifying number of assignee]

  
	
   

  
	
   

  
	
  [please print or
  typewrite name and address of assignee]

  
	
   

  
	
   

  

 

the within
Security of PUBLIC SERVICE COMPANY OF COLORADO and does hereby irrevocably
constitute and appoint                                                                       ,
Attorney, to transfer said Security on the books of the within-mentioned
Company, with full power of substitution in the premises.

	
  Dated:

  	
   

  	
   

  

 

Notice: The signature to
this assignment must correspond with the name as written upon the face of the
Security in every particular without alteration or enlargement or any change
whatsoever.

 A-8

SCHEDULE A

SUPPLEMENTAL INDENTURES

	
  Date of

  Supplemental

  Indenture

  	
   

  	
  Series of Bonds

  	
   

  	
  Principal

  Amount Issued

  	
   

  	
  Principal

  Amount

  Outstanding

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  November 1, 1993

  	
   

  	
  Series
  No. 1

  	
   

  	
  $

  	
  134,500,000

  	
   

  	
  None

  	
   

  
	
  January 1, 1994

  	
   

  	
  Series
  No. 2 due 2001 and 

  	
   

  	
  $ 

  	
  102,667,000 

  	
   

  	
  None 

  	
   

  
	
   

  	
   

  	
  Series
  No. 2 due 2024

  	
   

  	
  $

  	
  110,000,000

  	
   

  	
  None

  	
   

  
	
  September 2, 1994 (Appointment
  of Successor Trustee)

  	
   

  	
  None

  	
   

  	
  None

  	
   

  	
  None

  	
   

  
	
  May 1, 1996

  	
   

  	
  Series
  No. 3

  	
   

  	
  $

  	
  125,000,000

  	
   

  	
  None

  	
   

  
	
  November 1, 1996

  	
   

  	
  Series
  No. 4

  	
   

  	
  $

  	
  250,000,000

  	
   

  	
  None

  	
   

  
	
  February 1, 1997

  	
   

  	
  Series
  No. 5

  	
   

  	
  $

  	
  150,000,000

  	
   

  	
  None

  	
   

  
	
  April 1, 1998

  	
   

  	
  Series
  No. 6

  	
   

  	
  $

  	
  250,000,000

  	
   

  	
  None

  	
   

  
	
  August 15, 2002

  	
   

  	
  Series
  No. 7

  	
   

  	
  $

  	
  48,750,000

  	
   

  	
  $

  	
  48,750,000

  	
   

  
	
  September 1, 2002

  	
   

  	
  Series
  No. 8

  	
   

  	
  $

  	
  600,000,000

  	
   

  	
  None

  	
   

  
	
  September 15, 2002

  	
   

  	
  Series
  No. 9

  	
   

  	
  $

  	
  530,000,000

  	
   

  	
  None

  	
   

  
	
  April 1, 2003

  	
   

  	
  Series
  No. 10

  	
   

  	
  $

  	
  600,000,000

  	
   

  	
  $

  	
  600,000,000

  	
   

  
	
  March 1, 2003

  	
   

  	
  Series
  No. 11

  	
   

  	
  $

  	
  250,000,000

  	
   

  	
  None

  	
   

  
	
  September 15, 2003

  	
   

  	
  Series
  No. 12

  	
   

  	
  $

  	
  250,000,000

  	
   

  	
  $

  	
  250,000,000

  	
   

  
	
  May 1, 2003

  	
   

  	
  Series
  No. 13

  	
   

  	
  $

  	
  350,000,000

  	
   

  	
  None

  	
   

  
	
  September 1, 2003

  	
   

  	
  Series
  No. 14

  	
   

  	
  $

  	
  300,000,000

  	
   

  	
  $

  	
  300,000,000

  	
   

  
	
  September 1, 2003

  	
   

  	
  Series
  No. 15

  	
   

  	
  $

  	
  275,000,000

  	
   

  	
  $

  	
  275,000,000

  	
   

  
	
  August 1, 2005

  	
   

  	
  Series No. 16

  	
   

  	
  $

  	
  129,500,000

  	
   

  	
  $

  	
  129,500,000

  	
   

  

 

SCHEDULE
B

ROUTT
COUNTY

Williams Tract

Those certain tracts or
parcels of land situated in Routt County, Colorado as follows:

A
tract of land located in the N1/2 of Section 16, T6N, R87W of the 6th P.M., Routt County, Colorado, more
particularly described as follows: 
Beginning at the Northwest Corner of said Section 16, thence along the
north line of said Section 16, North 86 degrees 31 minutes 00 seconds East,
2148.91 feet to the northwest corner of a tract of land conveyed in Book 612 at
Page 1362, thence South 57 degrees 20 minutes 11 seconds East, 822.49 feet
along the Southwesterly boundary of said tract, thence South 51 degrees 37
minutes 32 seconds East, 332.94 feet along the Southwesterly boundary of said
tract, thence South 24 degrees 02 minutes 53 seconds East, 218.83 feet along
the Westerly boundary of said tract, thence South 57 degrees 14 minutes 42
seconds West, 279.13 feet along the Westerly boundary of said tract, thence
South 53 degrees 05 minutes 01 seconds West, 114.85 feet, thence South 43
degrees 10 minutes 04 seconds West, 785.03 feet, thence South 25 degrees 21
minutes 04 seconds West, 414.97 feet, thence South 49 degrees 21 minutes 00
seconds West, 798.09 feet, thence South 17 degrees 25 minutes 35 seconds West,
165.17 feet, thence South 87 degrees 11 minutes 07 seconds West, 1494.84 feet
to the West 1⁄4 Corner of said Section 16, thence North 00 degrees 02 minutes 19
seconds East, 2638.33 feet to the Point of Beginning.  The North line of Section 16 is considered to
bear North 86 degrees 31 minutes 00 seconds East.

AND

The SE1/4NE1/4 of Section
17, T6N, R87W of the 6th P.M., Routt County, Colorado.

AND

Easement for
access as reserved in that certain deed from Land Resources Investment, Inc. to
Colorado Ute Electric Association dated December 20, 1983 recorded in Book 594
at Page 957 of the Routt County Records.

TOGETHER WITH all
oil, gas and other mineral rights or interests, if owned by Grantor, and all
water rights or similar rights of Grantor in and to the property described
herein.

ADAMS
COUNTY

Silver Saddle
Substation

Lot 2, United
Power Subdivision, County of Adams, State of Colorado

LOGAN
COUNTY

The Spring
Canyon 230KV Substation Site

A parcel of land
in the Southwest Quarter of Section 35, Township 12 North, Range 51 West of the
Sixth Principal Meridian, in the County of Logan, State of Colorado, described
as follows:

Beginning at the
Southwest corner of the Southwest Quarter of said Section 35;

Thence North 01
degrees 21 minutes 55 seconds West, along the West line of the Southwest
Quarter of said Section 35, a distance of 547.50 feet;

Thence North 88
degrees 38 minutes 05 seconds East, a distance of 619.57 feet;

Thence South 01
degrees 21 minutes 55 seconds East to the South line of the Southwest Quarter
of said Section 35, a distance of 541. 59 feet,

Thence South 88 degrees 05 minutes 18 seconds West,
along the South line of the Southwest Quarter of said Section 35, a distance of
619.60 feet to the Point of Beginning.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00128-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00128-of-00352.parquet"}]]