Document:

Exhibit
10.29

 

EXECUTION COPY

 

FOURTH
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

 

THIS FOURTH AMENDED
AND RESTATED STOCKHOLDERS AGREEMENT (this “Agreement”) is entered into as of July 1,
2005 by and among InSight Health Services Holdings Corp., a Delaware
corporation (the “Company”), the
JWC Holders (as defined below), the Halifax Holders (as defined below), the
Management Holders (as defined below) and the Additional Holders (as defined
below).

 

RECITALS

 

A.                                  As
a result of the consummation of the transactions contemplated by the Agreement
and Plan of Merger, dated as of June 29, 2001 (the “Merger Agreement”), and of certain related
transactions to be consummated concurrently therewith, the Stockholders (as
defined below) own (and may hereafter acquire) certain shares of Common Stock
(as defined below) and certain options, warrants, securities and other rights
to acquire from the Company, by exercise, conversion, exchange or otherwise,
shares of Common Stock or securities convertible into Common Stock.

 

B.                                    The
Stockholders entered into that certain Stockholders Agreement dated as of June 29,
2001, which was superceded by that certain Amended and Restated Stockholders
Agreement dated as of October 17, 2001, which was superceded by that
certain Second Amended and Restated Stockholders Agreement dated as of February 8,
2002, which was superceded by that certain Third Amended and Restated
Stockholders Agreement dated as of October 10, 2002 (the “Existing
Agreement”) for the purpose of regulating certain aspects of the Stockholders’
relationships with one another and with the Company.

 

C.                                    Certain
parties to the Existing Agreement desire to amend the Existing Agreement in the
manner set forth herein.

 

D.                                   Pursuant
to 6.2(c) of the Existing Agreement, the amendments to the Existing Agreement
set forth herein require the consent of the Company, the JWC Representative and
the Halifax Representative to become effective and binding on all of the
parties to the Existing Agreement.

 

AGREEMENT

 

In consideration of the premises and the
mutual promises, representations, warranties, covenants and conditions set
forth in this Agreement, the receipt and sufficiency of which are acknowledged
by all parties to this Agreement, the parties to this Agreement mutually agree
as follows:

 

 

ARTICLE I

 

Definitions

 

For the purposes of this
Agreement, the following terms shall be defined as follows:

 

“Active
Trading Market” shall mean the New York or American
Stock Exchange or the National Association of Securities Dealers, Inc.’s
National Market System or Small Capitalization System.

 

“Additional
Holders” shall mean those Persons listed as Additional
Holders on the signature pages hereof and all Persons that became Stockholders
as of the date hereof and are designated as Additional Holders pursuant to Section 2.13
hereof.

 

An “Affiliate” of a specified Person shall mean a Person who,
directly or indirectly, through one or more intermediaries, controls or is
controlled by or is under common control with the specified Person and, when
used with respect to the Company or any Subsidiary of the Company, shall
include any holder of capital stock holding greater than 5% of the total number
of outstanding shares of Common Stock of the Company on a fully-diluted basis
or any officer or director of the Company or any Subsidiary of the Company.

 

“Board
of Directors” shall mean the Board of Directors of the
Company.

 

“Business
Day” shall mean any day, other than a Saturday, Sunday
or legal holiday, on which banks in New York, New York and Boston, Massachusetts
are permitted to be open for business.

 

“Call
Event” shall have the meaning set forth in Section 2.5(a).

 

“Call
Group” shall have the meaning set forth in Section 2.5(a).

 

“Call
Option” shall have the meaning set forth in Section 2.5(a).

 

“Call
Price” shall mean, as of any date, with respect to any
Subject Securities, a per share price equal to (a) the quotient of (i) the
excess of (A) the product of 5.25 times EBITDA, over (B) the aggregate
amount of the Consolidated Indebtedness as of the end of the period for which
EBITDA is calculated, plus (C) the amount of cash and cash equivalents of
the Company and its Subsidiaries as of the end of the period for which EBITDA
is calculated which is not required to fund the day-to-day operations of the
Company and its Subsidiaries as reasonably determined by the Board of Directors
in good faith, divided by (ii) the aggregate number of Common Stock
Equivalents at the time of the relevant Call Event or Put Event, as applicable,
outstanding, minus, (b) in the case of Vested Options, the per share
exercise price payable in connection with such Vested Options; provided,
however, if the Board determines, in its sole and absolute discretion, that the
aforesaid formula yields a result that is materially less than the per share
fair market value of the Subject Securities, the Board shall make such
modifications to the

 

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aforesaid formula as the Board deems, in its
sole and absolute discretion, necessary and appropriate.

 

“Call
Securities” shall have the meaning set forth in Section 2.5(a).

 

“Cause,”
with respect to a Management Holder, shall have the
meaning attributed to it under the executed written employment agreement
between such Management Holder and the Company (or a Subsidiary thereof) or, in
the absence of such employment agreement, “Cause”
shall mean the occurrence of any of the following during the term of
such Management Holder’s employment with the Company (or a Subsidiary thereof):

 

(a)          such Management Holder
has performed his duties negligently;

 

(b)                                  such
Management Holder is guilty of misconduct in connection with the performance of
such Management Holder’s duties;

 

(c)                                   such
Management Holder has committed any serious crime or offense;

 

(d)                                  such
Management Holder has failed or refused to comply with the oral or written
policies or dirctives of the Board of Directors; or

 

(e)                                   such
Management Holder has breached any provision or covenant contained in this
Agreement.

 

“Common Stock”
shall mean shares of Common Stock, par value $0.001 per share, of the Company.

 

“Common Stock
Equivalents” shall mean, as of any date, (a) all
shares of Common Stock outstanding as of such date and (b) all Vested
Options, convertible securities, warrants and other securities convertible,
exchangeable into or redeemable for Common Stock, which securities are vested
and/or exercisable within 60 days of the date of measurement.  Solely for the purposes of Section 2.4,
Common Stock Equivalents shall mean all shares of Common Stock and all options,
convertible securities, warrants and other securities convertible, exchangeable
into or redeemable for Common Stock, whether or not vested and/or exercisable.

 

“Company Call Period”
shall have the meaning set forth in Section 2.5(a)(i).

 

“Company Exclusive
First Refusal Period” shall have the meaning set forth
in Section 2.2(a).

 

“Competitor”
shall mean any existing or new firm that competes with the Company in any
activity in which the Company is currently engaged, or has plans to be engaged
in the future as disclosed or discussed at the meetings of the Board of
Directors.

 

“Consolidated
Indebtedness” shall mean, as of any date, the
aggregate amount outstanding, on a consolidated basis, of (a) all
obligations of the Company or its Subsidiaries for

 

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borrowed money, (b) all obligations of the Company or its
Subsidiaries evidenced by bonds, debentures, notes or other similar instruments
or upon which interest charges are customarily paid, (c) all obligations
of the Company or its Subsidiaries for the deferred purchase price of property
or services, except current accounts payable arising in the ordinary course of
business and not overdue beyond such period as is commercially reasonable for
the Company or its Subsidiaries’ business, (d) all obligations of the
Company or its Subsidiaries under conditional sale or other title retention
agreements relating to property purchased by such Person and all capitalized
lease obligations, (e) all payment obligations of the Company or its
Subsidiaries on or for currency protection agreements, (f) all obligations
of the Company or its Subsidiaries as an account party under any letter of
credit (excluding those supporting trade payables), (g) all obligations of
any third party secured by property or assets of the Company or its
Subsidiaries (regardless of whether or not such Person is liable for repayment
of such obligations) and (h) all guarantees of the Company or its
Subsidiaries.

 

“Cost Price”
shall mean, with respect to any Subject Securities, the purchase price, if any,
per share of Common Stock or per Vested Option, as the case may be, paid to the
Company for such Subject Securities by the original holder thereof or, if no
shares were so purchased at the Closing (as defined in the Merger Agreement),
then the price per share paid by the JWC Holders; provided that the Cost Price
with respect to (i) Common Stock issued to the Management Holders pursuant to
an exercise of options granted under the Company’s 2001 Stock Option Plan shall
equal $18.00 per share and (ii) options granted to the Management Holders under
the Company’s 2001 Stock Option Plan shall equal to $9.63 per share.  If at any time the number of shares of Common
Stock outstanding is (a) increased by a stock dividend payable in shares
of Common Stock or by a subdivision or split-up of shares of Common Stock or
(b) decreased by a combination of shares of such Common Stock, the Cost
Price per share of Common Stock shall be adjusted upward or downward, as appropriate,
to reflect the decrease or increase in shares of Common Stock outstanding.

 

“Designated Employee”
shall have the meaning set forth in Section 2.5(c).

 

“Disabled,”
with respect to a Management Holder, shall have the meaning attributed to it
under the executed written employment agreement between such Management Holder
and the Company (or a Subsidiary thereof) or, in the absence of such employment
agreement, such Management Holder shall be deemed to have become “Disabled” if, during the term of such Management
Holder’s employment with the Company (or a Subsidiary thereof), such Management
Holder shall become physically or mentally disabled, whether totally or
partially, either permanently or so that such Management Holder, in the good
faith judgment of the Board of Directors, is unable substantially and
competently to perform his duties on behalf of the Company for a period of
90 consecutive days or for 90 days during any six month period during the
said term of employment.  In order to
assist the Board of Directors in making that determination, such Management
Holder shall, as reasonably requested by the Board of Directors, (i) make
himself available for medical examinations by one or more physicians chosen by
the Board and (ii) grant to the Board of Directors and any such physicians
access to all relevant medical information concerning him, arrange to furnish
copies of his medical records to the Board of Directors and use his best
efforts to cause his own physicians to be available to discuss his health with
the Board of Directors.

 

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“Dragalong Group”
shall have the meaning set forth in Section 2.4.

 

“EBITDA”
shall mean consolidated earnings of the Company and its Subsidiaries, including
equity in the earnings from non-consolidated subsidiaries, before interest,
taxes, depreciation, amortization and the management fee paid to JWC Inc.,
Halifax Capital Partners or any of their respective Affiliates and after
deduction of all operating expenses, minority interests expenses and incentive
compensation, all as calculated in accordance with GAAP consistently applied,
as reflected in the Company’s most recently available audited consolidated
financial statements for the immediately preceding fiscal year.

 

“Excluded Securities”
shall have the meaning set forth in Section 4.1(e).

 

“Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended, or any successor federal
statute thereto, and the rules and regulations of the SEC promulgated
thereunder, all as the same shall be in effect from time to time.

 

“GAAP”
shall mean the generally accepted accounting principles in the United States of
America, as such principles are changed from time to time, consistent with
those applied in the preparation of the financial statements of such Person.

 

“Good Reason,”
with respect to a Management Holder, shall have the meaning attributed to it
under the executed written employment agreement between such Management Holder
and the Company (or a Subsidiary thereof) or, in the absence of such employment
agreement, “Good Reason” shall be
deemed to have occurred if, other than for Cause, any of the following has
occurred during the term of such Management Holder’s employment with the
Company (or a Subsidiary thereof):

 

(a)                               such Management Holder’s
base salary has been reduced, other than in connection with a reduction of
executive compensation imposed by the Board of Directors in response to
negative financial results or other adverse circumstances affecting the Company
or its Subsidiaries; or

 

(b)                              the Company has reduced
or reassigned, in any material respect, the duties of such Management Holder as
an employee of the Company and such event has not been rescinded within 10
business days after such Management Holder notifies the Company in writing that
he objects thereto.

 

“Halifax Affirmative
Board Vote” shall have the meaning set forth in Section 4.2.

 

“Halifax Capital
Partners” shall mean Halifax Capital Partners, L.P., a
Delaware limited partnership.

 

“Halifax Director” shall
have the meaning set forth in Section 4.1(c).

 

5

 

“Halifax Holder” shall
mean each of those Persons listed as Halifax Holders on the signature pages
hereof and, after the date hereof, shall mean all such Persons and Permitted
Transferees of the Halifax Holders, other than those transferees who qualify as
JWC Holders or Management Holders immediately prior to or upon such Transfer.

 

“Halifax
Representative” shall have the meaning set forth in Section 6.9.

 

“Holder”
shall have the meaning set forth in Section 3.1.

 

“Initiating
Stockholder” shall have the meaning set forth in Section 2.3(a).

 

“Involuntary Transfer”
shall have the meaning set forth in Section 2.9.

 

“Involuntary Transfer
Notice” shall have the meaning set forth in Section 2.9.

 

“Involuntary
Transferee” shall have the meaning set forth in Section 2.8.

 

“Joinder Agreement”
shall mean a joinder agreement substantially in the form of Exhibit B
attached hereto which is entered into pursuant to Section 2.13 hereof.

 

“JWC Equity Partners
II” shall mean J.W. Childs Equity Partners II, L.P., a
Delaware limited partnership.

 

“JWC Holders” shall
mean each of those Persons listed as JWC Holders on the signature pages hereof
and, after the date hereof, shall mean all such Persons and Permitted
Transferees of the JWC Holders, other than those transferees who qualify as
Halifax Holders or Management Holders immediately prior to or upon such
Transfer.

 

“JWC Inc.” shall
mean J.W. Childs Associates, Inc., a Delaware corporation.

 

“JWC Representative” shall
have the meaning set forth in Section 6.8.

 

“Lien”
shall mean any lien, mortgage, pledge, security interest (as defined in the New
York Uniform Commercial Code), claim or other type of charge or encumbrance of
any kind, or any other type of preferential arrangement, including, without
limitation, the lien or retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real property and any
financing statement filed in respect of any of the foregoing.

 

“Management Holders” shall
mean any Person listed as a Management Holder on the signature pages hereof and
shall also include (a) any director, officer or employee of the Company or
any of its Subsidiaries who hereafter becomes a Stockholder and
(b) Permitted Transferees of the Management Holders, unless immediately
prior to such Transfer such transferee was a JWC Holder or a Halifax Holder.

 

“Material Transaction”
means any material transaction in which the Company or any of its Subsidiaries
proposes to engage or is engaged, including a purchase or sale of assets or

 

6

 

securities, financing, merger, consolidation, tender offer or any other
transaction that would require disclosure pursuant to the Exchange Act, and
with respect to which the Board of Directors reasonably has determined in good
faith that compliance with this Agreement may reasonably be expected to either
materially interfere with the Company’s or such Subsidiary’s ability to
consummate such transaction in a timely fashion or require the Company to
disclose material, non-public information prior to such time as it would
otherwise be required to be disclosed.

 

“Merger Agreement” shall
have the meaning set forth in Recital A.

 

“Offer Period”
shall have the meaning set forth in Section 2.2(a).

 

“Offered Securities”
shall have the meaning set forth in Section 5.1(a).

 

“Offeree Percentage”
shall mean, as to each offeree, the fraction, expressed as a percentage, the
numerator of which is the total number of shares of Common Stock Equivalents
held by such offeree, and the denominator of which is the total number of
shares of Common Stock Equivalents held by all of the offerees.

 

“Offeror”
shall have the meaning set forth in Section 2.2(a).

 

“Original Halifax
Holders” shall mean the Halifax Holders as of the date
of this Agreement.

 

“Original JWC Holders”
shall mean the JWC Holders as of the date of this
Agreement.

 

“Participating
Offerees” shall have the meaning set forth in Section 2.4(a).

 

“Participation Notice”
shall have the meaning set forth in Section 2.4(a).

 

“Participation
Securities” shall have the meaning set forth in Section 2.4(a).

 

“Permitted Transfer” shall
mean a Transfer that is not a Prohibited Transfer and is one of the following:

 

(a)                                  a Transfer of any
Subject Securities between any JWC Holder, Halifax Holder or Management Holder
and such Stockholder’s spouse, children (whether natural, step or by adoption),
grandchildren (whether natural, step or by adoption) or parents or to a trust,
partnership or limited liability company solely for the benefit of one or more
of any of such Persons;

 

(b)                                 a Transfer of Subject
Securities by a JWC Holder to JWC Inc. or JWC Equity Partners II or to the
limited partners, co-investors, officers, employees or consultants of JWC Inc.
or JWC Equity Partners II or to a corporation or corporations or to a
partnership or partnerships, limited liability company or companies (or other
entity for collective investment, such as a fund) which is (and continues to
be) an Affiliate of or controlled by, controlling or

 

7

 

under common control with JWC
Inc. or JWC Equity Partners II (other than the Company and its Subsidiaries);

 

(c)                                  a Transfer of Subject
Securities by a Halifax Holder to Halifax Capital Partners or to the limited
partners, co-investors, officers, employees or consultants of Halifax Capital
Partners or to a corporation or corporations or to a partnership or
partnerships, limited liability company or companies (or other entity for
collective investment, such as a fund) which is (and continues to be) an
Affiliate of or controlled by, controlling or under common control with Halifax
Capital Partners;

 

(d)                                 a Transfer of Subject
Securities between or among the JWC Holders or the Halifax Holders;

 

(e)                                  a Transfer of Subject
Securities between any Stockholder who is a natural person and such Stockholder’s
guardian or conservator;

 

(f)                                    a bona fide pledge
of Subject Securities by a JWC Holder or a Halifax Holder to a bank or
financial institution; and

 

(g)                                 Transfer of Subject
Securities by a JWC Holder or a Halifax Holder to a Management Holder who is
not an Affiliate (other than as an officer, employee, director or stockholder
of the Company and its direct or indirect Subsidiaries) of JWC Inc. or Halifax
Capital Partners.

 

No Permitted Transfer shall be effective unless and until the
transferee of the Subject Securities so transferred executes and delivers to
the Company an executed Joinder Agreement in accordance with Section 2.13
hereof; provided, however, that the Permitted Transfer to a bank
or a financial institution pursuant to clause (e) above shall be effective
upon delivery of the Subject Securities and such entity shall not execute and
deliver an executed Joinder Agreement in accordance with Section 2.13
hereof unless and until foreclosure or similar action by any such pledgee.

 

“Permitted Transferee”
shall mean, with respect to any Stockholder, any Person who shall have directly
or indirectly acquired and who shall hold any Subject Securities pursuant to a
Permitted Transfer from that Stockholder. 
Notwithstanding the foregoing, a Permitted Transferee shall not include
any Person that is in receivership, bankruptcy, insolvency, dissolution,
liquidation or any similar proceeding or any Person whose incompetence has been
established pursuant to a judicial determination.

 

“Person” shall
mean an individual, corporation, partnership, limited liability company, trust,
unincorporated association, government or any agency or political subdivision
thereof, or any other entity.

 

“Preemptive Offer”
shall have the meaning set forth in Section 5.1(a).

 

8

 

“Preemptive Offer
Acceptance Notice” shall have the meaning set forth in
Section 5.1(b).

 

“Preemptive Offer
Period” shall have the meaning set forth in Section 5.1(a).

 

“Primary Shares”
shall mean at any time the authorized but unissued shares of Common Stock or
shares of Common Stock held by the Company in its treasury.

 

“Prohibited Transfer”
shall mean any Transfer of any Subject Security to a Person which (a) may not
be effected without registering the securities involved under the Securities
Act of 1933, as amended, (b) would result in the assets of the Company
constituting “Plan Assets” as such term is defined in the Department of Labor
regulations promulgated under the Employee Retirement Income Security Act of
1974, as amended, (c) would cause the Company to be, be controlled by, or be
under common control with an “investment company” for purposes of the
Investment Company Act of 1940, as amended, (d) would require any securities of
the Company to be registered under the Exchange Act, (e) is a Competitor of the
Company (other than Transfers in accordance with Section 2.4) or (f) is in
violation of this Agreement.

 

A “Public
Offering” shall mean the completion of a sale of shares of Common
Stock pursuant to a registration statement which has become effective under the
Securities Act, excluding a registration form relating solely to employee
benefit plans, or on a registration form which does not permit secondary sales
or does not include substantially the same information as would be required in
a Form S-1 or Form S-3 Registration Statement (or any successor forms)
covering the sale of Registrable Securities.

 

“Put Notice”
shall have the meaning set forth in Section 2.6(a).

 

“Put Option”
shall have the meaning set forth in Section 2.6(a).

 

“Put Period”
shall have the meaning set forth in Section 2.6(a).

 

“Put Price”
shall mean, as of any date, with respect to any Subject Securities, a per share
price equal to (a) the quotient of (i) the excess of (A) the product of
4.75 times EBITDA, over (B) the aggregate amount of the Consolidated
Indebtedness as of the end of the period for which EBITDA is calculated, plus
(C) the amount of cash and cash equivalents of the Company and its
Subsidiaries as of the end of the period for which EBITDA is calculated which
is not required to fund the day-to-day operations of the Company and its
Subsidiaries as reasonably determined by the Board of Directors in good faith,
divided by (ii) the aggregate number of Common Stock Equivalents at the
time of the relevant Call Event or Put Event, as applicable, outstanding,
minus, (b) in the case of Vested Options, the per share exercise price
payable in connection with such Vested Options.

 

“Put Securities”
shall have the meaning set forth in Section 2.6(a).

 

“Refused Securities”
shall have the meaning set forth in Section 5.1(c).

 

9

 

“Registrable
Securities” shall mean, as of any date, with respect
to any Stockholder, (a) all shares of Common Stock held by such
Stockholder as of such date and (b) all shares of Common Stock that may be
acquired as of such date by such Stockholder upon exercise of Vested Options; provided
that, as to any particular Registrable Security, such security shall cease to
be a Registrable Security when (i) a registration statement (other than a
registration statement on Form S-8) with respect to the sale or exchange of
such security shall have become effective under the Securities Act and such
security shall have been disposed of in accordance with such registration
statement, (ii) a registration statement on Form S-8 with respect to such
security shall have become effective under the Securities Act, (iii) such
security shall have been sold or acquired in a Rule 144 Transaction, or
(iv) such security (once issued) has ceased to be outstanding.

 

“Rule 144 Transaction”
means a transfer of Common Stock complying with
Rule 144 under the Securities Act as such rule or a successor thereto is
in effect on the date of such transfer.

 

“Sale Request”
shall have the meaning set forth in Section 2.4.

 

“Schedule of
Stockholders” shall refer to the Schedule of
Stockholders attached hereto as Exhibit A.

 

“SEC”
shall mean the Securities and Exchange Commission or successor agency or
commission of the United States federal government.

 

“Securities Act”
shall mean the Securities Act of 1933, as amended, or any successor federal
statute thereto, and the rules and regulations of the SEC promulgated
thereunder, all as the same shall be in effect from time to time.

 

“Stockholder”
shall mean any party hereto other than the Company, including any Person who
hereafter becomes a party to this Agreement pursuant to Section 2.13
hereof.

 

“Stockholder Group” shall
mean any of (a) the JWC Holders, taken as a group, (b) the Halifax
Holders, taken as a group, (c) the Management Holders, taken as a group,
and/or (d) the Additional Holders, taken as a group.  The Company shall not in any case be deemed
to be a member of any Stockholder Group (whether or not the Company holds or
repurchases any Common Stock Equivalents).

 

“Stock Option
Agreement” shall mean any stock option agreement
between the Company and an employee thereof.

 

“Subject Securities” shall
mean any Common Stock or Common Stock Equivalents now or hereafter held by any
Stockholder.

 

“Subsidiary” with
respect to any Person (the “parent”)
shall mean any Person of which such parent, at the time in respect of which
such term is used, (a) owns directly or indirectly more than 50% of the
equity or beneficial interest, on a consolidated basis, or (b) owns
directly

 

10

 

or controls with power to vote, indirectly through one or more
Subsidiaries, shares of capital stock or beneficial interest having the power
to cast at least a majority of the votes entitled to be cast for the election
of directors, trustees, managers or other officials having powers analogous to
those of directors of a corporation. 
Unless otherwise specifically indicated, when used herein, the term
Subsidiary shall refer to a direct or indirect Subsidiary of the Company.

 

“Third Party” shall
mean any Person other than the Company.

 

“Transfer”
shall mean to transfer, sell, assign, pledge, hypothecate, give, grant or
create a security interest in or Lien on, place in trust (voting or otherwise),
assign an interest in or in any other way encumber or dispose of, directly or
indirectly and whether or not by operation of law or for value, any of the
Subject Securities.

 

“Transfer Notice”
shall have the meaning set forth in Section 2.2(a).

 

“Transfer Offer”
shall have the meaning set forth in Section 2.2(a).

 

“Transfer Stock”
shall have the meaning set forth in Section 2.2(a).

 

“Transferred
Securities” shall have the meaning set forth in Section 2.8.

 

“Unmatured Shares”
shall have the meaning set forth in Section 2.5(f).

 

“Vested Options” shall
mean, as of any date, options, securities and other rights to acquire from the
Company, by exercise, conversion, exchange or otherwise, shares of Common Stock
or securities convertible into Common Stock, which are vested and exercisable
within 60 days of such date of measurement.

 

“Voting Stock” shall
mean the Common Stock, Common Stock Equivalents and any other securities of the
Company entitled to vote at a meeting of the Stockholders, including, but not
limited to, with respect to the election of the Board of Directors.

 

ARTICLE II

 

Rights With
Respect To The Subject Securities

 

2.1                                 Limited Rights of
Transfer.

 

(a)                                  Transfers.  Except for the JWC Holders, no Stockholder
shall Transfer all or any part of the Subject Securities at the time held by
such Stockholder.  Subject to Section 2.1(b),
no Transfer of or attempt to Transfer any Subject Securities in violation of
the preceding sentence shall be effective or valid for any purpose.  No Transfer of any Subject Securities shall
be effective or valid under this Section 2.1(a) if such Transfer
constitutes a Prohibited Transfer, or unless and until the transferee executes
and delivers to the Company a Joinder Agreement in accordance with Section 2.13
hereof;

 

11

 

(b)                                 Exceptions.  Notwithstanding Section 2.1(a), a
Transfer may be effectively and validly made hereunder if such Transfer is not
a Prohibited Transfer and is either (i) a Permitted Transfer,
(ii) made pursuant to the registration rights granted under Article III
hereof, (iii) made pursuant to and/or following a Public Offering,
(iv) made pursuant to Sections 2.2, 2.3 (as a Participating Offeree),
2.4 or 2.5 or (v) made with the written consent of the holders of a majority of
the Common Stock Equivalents at the time held by the JWC Holders (or the JWC
Representative) and the holders of a majority of the Common Stock Equivalents
at the time held by the Halifax Holders (or the Halifax Representative).  No Transfer of any Subject Securities shall
be effective or valid under this Section 2.1(b) if such Transfer
constitutes a Prohibited Transfer.  In
addition, no Transfer shall be effective or valid under this Section 2.l(b)
unless and until the transferee executes and delivers to the Company a Joinder
Agreement in accordance with Section 2.13 hereof.

 

2.2                                 Right of First
Refusal.

 

(a)                                  Notice of Offer.  If (i) at any time any Halifax Holder,
Management Holder, Additional Holder or any of their Permitted Transferees (the
“Offering Holder”) receives a bona
fide offer to purchase any or all of such Offering Holder’s Subject Securities
(the “Transfer Stock”) from any
Third Party (other than to a Permitted Transferee) (the “Offeror”) and (ii) such Offering
Holder wishes to accept such offer (a “Transfer
Offer”), then the Offering Holder shall cause the Transfer Offer to
be reduced to writing and shall provide a notice containing the offer to
purchase specified below (the “Transfer
Notice”) to the Company and all other Stockholders.  The Transfer Notice shall be accompanied by a
true and correct copy of the Transfer Offer (which shall identify in reasonable
detail all material terms, including, but not limited to, the Offeror, the
Transfer Stock, the price contained in the Transfer Offer and all the other
terms and conditions of the Transfer Offer). 
The Transfer Notice shall constitute an irrevocable offer to sell any or
all of the Transfer Stock to the Company and to all other Stockholders within
30 days of receipt by the Company of the Transfer Notice (the “Offer Period”).  During the Offer Period, subject to the
limitation in the next sentence, any combination of the Company and/or the
other Stockholders will have the right and option to purchase all of the
Transfer Stock at a price equal to the price contained in the Transfer Offer and
upon the same terms as contained in the Transfer Offer.  During the first 15 days of the Offer Period
(the “Company Exclusive First Refusal Period”),
the Company shall have the exclusive right and option to purchase all of the
Transfer Stock.  Following the expiration
of the Company Exclusive First Refusal Period, if the Company has not opted to
purchase all of the Transfer Stock, the Company and any combination of the
other Stockholders may purchase all of the Transfer Stock.  For the avoidance of doubt, unless the
Offering Holder shall have consented to the purchase of less than all of the
Transfer Stock by the Company and/or the other Stockholders, neither the
Company nor any Stockholder, nor any combination of the Company and any
Stockholder may purchase any Transfer Stock pursuant to the foregoing
provisions unless all of the Transfer Stock is to be so purchased (whether by
the Company, the other Stockholders, or any combination thereof).  Notwithstanding any other provision of this
Agreement, unless otherwise agreed to by at least 50% of the Subject Securities
held by the JWC Holders and 50% of the Subject Securities held by the Halifax
Holders, no Management Holder or Additional Holder may Transfer their Subject
Securities in exchange for consideration other than cash.

 

12

 

(b)                                 Closing of Transfer
Stock.  If, during the Offer Period,
the Company, or any combination of the Company and the other Stockholders, has
accepted the offer contained in the Transfer Notice, the closing of the
purchase of such Transfer Stock shall take place at the principal offices of
the Company within 10 days of such acceptance. 
At such closing, the Company and/or the other Stockholders, as
applicable, and/or its or their designees, as the case may be, shall deliver a
certified check or checks calculated at the price set forth in the Transfer
Notice to the Offering Holder against delivery of certificates and/or other
instruments representing the Transfer Stock, together with stock or other
appropriate powers duly endorsed with respect to the Transfer Stock, free and
clear of all Liens (other than pursuant to securities laws, this Agreement or a
Stock Option Agreement).  All of the
foregoing deliveries will be deemed to be made simultaneously and none shall be
deemed completed until all have been completed.

 

(c)                                  Completion of Sale
to Third Party.  If, during the Offer
Period, neither the Company nor any combination of the Company and the other
Stockholders has accepted the offer contained in the Transfer Notice in writing
as to all the Transfer Stock covered thereby, or within 15 days of acceptance
by any combination of the Company and any Stockholder the closing has not
occurred, and Section 2.4 does not apply to such Transfer, then during the
next 60 days, the Offering Holder may sell the Transfer Stock to the Offeror at
the price and on the other terms contained in the Transfer Notice.  No sale may be made by the Offering Holder to
any Offeror if such sale would constitute a Prohibited Transfer or unless and
until such Offeror executes and delivers to the Company a Joinder Agreement in
accordance with Section 2.13 hereof. 
Promptly after any sale pursuant to this Section 2.2, the Offering
Holder shall furnish such evidence of the completion (including time of
completion) of such sale and of the terms thereof as the Company may reasonably
request.  If the Offering Holder has not
completed the sale of the Transfer Stock during the applicable period referred
to above, such Offering Holder shall no longer be permitted to sell such shares
pursuant to this Section 2.2 without again fully complying with the
provisions of this Section 2.2 and all the restrictions on sale, transfer
or assignment contained in this Agreement shall again be in effect with respect
to the Transfer Stock.

 

2.3                                Tagalong.  No JWC Holder shall Transfer any shares of
Subject Securities to a Third Party (other than a Permitted Transferee) in one
or a series of related bona fide arm’s-length transactions without complying with
the terms and conditions set forth in this Section 2.3; provided, however,
that the JWC Holders shall be permitted to Transfer up to 5%, in the aggregate,
of the number of shares of Subject Securities held by the Original JWC Holders
as of the date of this Agreement without compliance with this Section 2.3;
provided  further, however, that this Section 2.3
shall not in any way limit or affect the restriction contained in the last
sentence of Section 2.1(a).

 

(a)                                  Any JWC Holder (the “Initiating Stockholder”) desiring to
Transfer shares of Subject Securities subject to the restriction in Section 2.3
shall give not less than 10 Business Days’ prior written notice of such
intended Transfer to each other Stockholder (“Participating
Offerees”) and to the Company. 
Such notice (the “Participation Notice”)
shall set forth general terms and conditions of such proposed Transfer,
including the name of the prospective transferee, the number of Subject
Securities proposed to be transferred to the extent

 

13

 

known (the “Participation Securities”)
by the Initiating Stockholder, the purchase price per share to the extent known
proposed to be paid therefor and the payment terms and type of Transfer to be
effectuated.  Within 10 Business Days
following the delivery of the Participation Notice by the Initiating
Stockholder to each Participating Offeree and to the Company, each
Participating Offeree shall, by notice in writing to the Initiating Stockholder
and to the Company, have the opportunity and right to sell to the purchasers in
such proposed Transfer (upon the same terms and conditions as the Initiating
Stockholder).  If the Halifax Holder is a
Participating Offeree, the Halifax Holder shall have the opportunity and right to
include in such proposed Transfer an amount of Subject Securities representing
the same proportion (i.e., in relation to the aggregate amount at the time held
by the Halifax Holders) of the Subject Securities being sold by the Initiating
Stockholder (i.e., in relation to the aggregate amount at the time held by the
JWC Holders).  Other Participating
Offerees shall have the opportunity and right to include in such proposed
Transfer an amount of Subject Securities up to that number of Subject
Securities representing Subject Securities at the time held by such
Participating Offeree as shall equal the product of (i) a fraction, the
numerator of which is the number of Subject Securities owned by such
Participating Offeree as of the date of such proposed Transfer and the
denominator of which is the aggregate number of Subject Securities owned as of
the date of such Participation Notice by each Initiating Stockholder and by all
Participating Offerees so electing to sell Subject Securities pursuant to this Section 2.3(a),
multiplied by (ii) the number of Subject Securities proposed to be
transferred.

 

(b)                                 At the closing of any
proposed Transfer in respect of which a Participation Notice has been
delivered, the Initiating Stockholder, together with all Participating Offerees
so electing to sell Subject Securities pursuant to Section 2.3(a) shall
execute and deliver such documents or instruments reasonably requested by the
proposed transferee and deliver to the proposed transferee certificates and/or
other instruments representing the Subject Securities to be sold, free and
clear of all Liens, together with stock or other appropriate powers duly
endorsed therefor, and shall receive in exchange therefor the consideration to
be paid or delivered by the proposed transferee in respect of such Subject
Securities as described in the Participation Notice.

 

(c)                                  The provisions of
this Section 2.3 shall not apply to (i) any Transfer pursuant to a
Public Offering or, following a Public Offering, pursuant to a Rule 144
Transaction or (ii) any Transfers pursuant to Section 2.4 hereof.

 

2.4.                              Dragalong.

 

(a)                                  If the JWC Holders
(the “Dragalong Group”) determine
to sell or exchange (in a sale or exchange of securities of the Company or in a
merger, consolidation or other business combination or any similar transaction)
in one or a series of related bona fide arms-length transactions to an
unaffiliated Third Party and not pursuant to a Permitted Transfer, at least 50%
of the Subject Securities (which defined term shall, for purposes of this Section 2.4
only, include all Subject Securities regardless of vesting or exercisability)
at the time held by the JWC Holders, then upon 10 days’ written notice from the
Dragalong Group to the other Stockholders, which notice shall include
reasonable details and all material terms of the proposed sale or exchange,
including the proposed time and place of closing and the form and amount of
consideration to be received by the Stockholders (such notice being referred to
as the “Sale

 

14

 

Request”), each
other Stockholder shall be obligated to, and shall, (i) sell, transfer and
deliver, or cause to be sold, transferred and delivered, to such Third Party
the proportion of such Stockholder’s Subject Securities as is being sold by the
JWC Holders in the same transaction at the closing thereof (and shall
(A) execute and deliver such agreements for the purchase of such Subject
Securities and other agreements, instruments and certificates as the members of
the Dragalong Group shall execute and deliver in connection with such proposed
transaction and (B) deliver certificates and/or other instruments
representing the proportion of such Stockholder’s Subject Securities being
sold, together with stock or other appropriate powers therefore duly executed,
at the closing, free and clear of all Liens), and each Stockholder shall
receive upon the closing of such transaction the pro  rata portion
(as defined below) of the consideration to be paid or delivered by the proposed
transferee in respect of such Stockholder’s Subject Securities as shall be
payable to the members of the Dragalong Group in respect of their Subject
Securities (in the case of Options, warrants or other Common Stock Equivalents,
subject to subtraction of the exercise price) and (ii) if stockholder
approval of the transaction is required, vote such Stockholder’s Common Stock
in favor thereof.  The “pro rata portion” of each Stockholder shall
be the number of Subject Securities issued to and owned by such Stockholder
multiplied by a fraction, the numerator of which shall be the number of Subject
Securities the JWC Holders wish to Transfer, and the denominator of which shall
be the aggregate number of Subject Securities issued to or beneficially owned
by the JWC Holders participating in the sale.

 

(b)                                 Each Stockholder shall
be severally obligated to join on a pro rata basis (based on such Stockholder’s
pro rata share of the net proceeds paid by such Third Party) in an
indemnification that is to be provided in connection with such Sale, other than
any such indemnification that relates specifically to a particular Stockholder;
provided that no Stockholder shall be obligated in connection with such
Sale to agree to indemnify or hold harmless the Third Party with respect to an
amount in excess of the net cash proceeds paid to such Stockholder in
connection with such Sale.  All
Stockholders will bear their pro rata share of the costs and expenses incurred
in connection with such Sale to the extent such costs are incurred for the
benefit of all Stockholders and are not otherwise paid by the Company to the
Third Party.

 

(c)                                  Each Stockholder
agrees that, in such Stockholder’s capacity as a stockholder of the Company,
such Stockholder shall, including pursuant to Section 2.4(a) hereof, vote,
or grant proxies relating to the Common Stock at the time held by such
Stockholder to vote, all of such Stockholder’s Common Stock in favor of any
sale or exchange of securities of the Company or any merger, consolidation,
recapitalization, reorganization or other business combination or any similar
transaction, including pursuant to Section 2.4(a) hereof, if, and to the
extent that, approval of the Company’s stockholders is required in order to
effect such transaction.

 

(d)                                 If, at the end of 90
days following the receipt by the Stockholders of a Sale Request, the Dragalong
Group has not completed the sale, (i) each Stockholder shall be released from
its obligation under the Sale Request, (ii) the Dragalong Group shall return to
each Stockholder all certificates evidencing unsold Subject Securities and all
related powers of attorney and instruments of transfer, if any, and (iii) it
shall be necessary for a new and separate Sale Request to be furnished and the
terms and provisions of this Section 2.4 to be separately complied with in
order to consummate such sale pursuant to this Section 2.4, unless the
failure to

 

15

 

complete such sale resulted from any failure by any Stockholder to
comply in any material respect with the terms of this Section 2.4.

 

2.5                                 Call by the Company.

 

(a)                                  (i)                                     If
the employment of a Management Holder (other than Bret W. Jorgensen) with the
Company and any of its Subsidiaries shall terminate (a ”Call Event”) for any reason, then, subject
to Section 2.5(a)(ii), the Company shall have the right to purchase (the “Call Option”), by delivery of a written
notice (the “Call Notice”) to such
terminated Management Holder (with a copy thereof to the JWC Representative) no
later than 30 days after the date of the Call Event (the “Company Call Period”), and such Management
Holder and such Management Holder’s direct and indirect Permitted Transferees
(a “Call Group”) shall be required
to sell any and all of the Subject Securities that are owned by such Call Group
on the date of the Call Event (such Subject Securities to be purchased
hereunder being referred to collectively as the “Call Securities”) at, except as otherwise provided in Section 2.5(a)(ii)
hereof, a price per share equal to the greater of (I) the Call Price of
such Call Securities as of the date of the Call Event and (II) the Cost
Price of such Call Securities.

 

(ii)                                  Notwithstanding
anything set forth in this Section 2.5 to the contrary, in the event a
Management Holder (other than Bret W. Jorgensen) resigns, other than upon death
or disability, without Good Reason from his employment with the Company and its
Subsidiaries, or his employment is terminated for Cause by the Company and its
Subsidiaries, then the purchase price per share payable for the Call Securities
shall be an amount equal to the Cost Price of such Call Securities; provided,
however, that if a Management Holder (other than Bret W. Jorgensen)
resigns six or more years from the issuance of the Call Securities (or Common Stock
Equivalents that were converted or exercised into such Call Securities), then
the purchase price per share payable for the Call Securities shall equal the
greater of (I) the Call Price of such Call Securities as of the date of
the Call Event and (II) the Cost Price of such Call Securities.

 

(b)                                 The closing of any
purchase of Call Securities by the Company from a Call Group pursuant to this Section 2.5
shall take place at the principal office of the Company on such date within 15
days after the expiration of the Company Call Period with respect to such Call
Group as the Company shall specify to the members of such Call Group in
writing.  At such closing, the members of
the Call Group shall deliver to the Company, against payment by the Company of
the purchase price for the Call Securities in cash (by delivery of a certified
check or checks payable to the respective members of the Call Group, as the
case may be), certificates and/or other instruments representing, together with
stock or other appropriate powers duly endorsed with respect to, the Call
Securities, free and clear of all Liens (other than pursuant to securities
laws, this Agreement or a Stock Option Agreement).  All of the foregoing deliveries will be deemed
to be made simultaneously and none shall be deemed completed until all have
been completed.

 

(c)                                  Notwithstanding
anything set forth in this Section 2.5 to the contrary, prior to the
exercise by the Company of its Call Option to purchase Call Securities pursuant
to this Section 2.5, one or more prospective or existing employees of the
Company or any Subsidiary

 

16

 

may be designated by the Board of Directors (individually, a “Designated Employee” and, collectively, “Designated Employees”) who shall have the
right, but not the obligation, to exercise the Call Option and to acquire, in
lieu of the Company, some or all (as determined by the Company) of the Call
Securities that the Company is entitled to purchase from the Call Group
hereunder, for cash and otherwise on the same terms and conditions as set forth
in Section 2.5(b) which apply to the repurchase of Call Securities by the
Company.  Concurrently with any such
purchase of Call Securities by any such Designated Employee, such Designated
Employee shall execute a counterpart of this Agreement whereupon such
Designated Employee shall be deemed a “Management Holder” and shall have the
same rights and be bound by the same obligations as the other Management
Holders hereunder.  Payment under this Section 2.5(c)
and under Section 2.5(d) below shall be made by a certified check or
checks payable to the respective members of the Call Group, in an amount equal
to the purchase price for such Call Securities under Section 2.5(a) hereof
against delivery of certificates and/or other instruments representing,
together with stock or other appropriate powers duly endorsed with respect to
such Call Securities, free and clear of all Liens (other than pursuant to
securities laws, this Agreement or a Stock Option Agreement).  All of the foregoing deliveries will be
deemed to be made simultaneously and none shall be deemed completed until all
have been completed.

 

(d)                                 If and to the extent
neither the Company nor any Designated Employee elects to exercise the Call
Option and deliver a Call Notice prior to the expiration of the Company Call
Period with respect to such Management Holder, then the JWC Holders and the
Halifax Holders, pro rata in accordance with the respective Common Stock
Equivalents at the time held by the JWC Holders and the Halifax Holders so
exercising their rights under this Section 2.5(d), may exercise the Call
Option in lieu of the Company and such Designated Employee by delivery of a
Call Notice to such terminated Management Holder within the Company Call
Period.  The closing of any purchase of
Call Securities by such JWC Holders and the Halifax Holders shall take place at
the principal offices of the Company on such date within 15 days after the
expiration of the Company Call Period with respect to such Management Holder as
the holders of a majority of the Common Stock Equivalents at the time held by
the JWC Holders and the Halifax Holders so exercising their rights under this Section 2.5(d)
shall specify to the members of such Call Group in writing, provided
that if any such JWC Holder or Halifax Holder fails to purchase all or a
portion of the number of Call Securities which such JWC Holder or Halifax
Holder may purchase pursuant to this Section 2.5(d), then the other JWC
Holders and the Halifax Holders so exercising their rights under this Section 2.5(d)
shall be entitled to purchase such Call Securities (pro rata based upon their
respective Common Stock Equivalents at the time held, or as otherwise agreed,
by such JWC Holders and the Halifax Holders).

 

(e)                                  If and to the extent
none of the Company, any Designated Employees, any JWC Holders or any Halifax
Holder elects to exercise the Call Option and deliver a Call Notice within the
Company Call Period or if the closing of the purchase of all Call Securities
does not occur within 15 days after the expiration of the Company Call Period,
then the Call Option provided for in this Section 2.5 shall terminate with
respect to such Subject Securities not so purchased under this Section, but the
parties hereto shall continue to be bound by the remaining provisions of this
Agreement.

 

17

 

(f)                                    Notwithstanding the
foregoing with respect to any shares of Common Stock which, as of the date of
the purchase and sale pursuant to this Call Option, (i) were purchased as
the result of the exercise of a stock option and (ii) have not been owned
by the Call Group for at least 180 days (“Unmatured
Shares”), the closing with respect to such Unmatured Shares shall be
delayed until a date no later than the 10th day after the 180th day following
the acquisition by the Call Group of such Unmatured Shares and the purchase
price for such Unmatured Shares will be determined at the time of such delayed
closing.

 

2.6                                 Put by the
Management Holders.

 

(a)                                  If a Call Event
occurs by reason of a Management Holder (other than Bret W. Jorgensen)
terminating his employment with the Company and any of its Subsidiaries for
Good Reason or his employment being terminated without Cause by the Company and
any of its Subsidiaries, then such Management Holder shall have the right to
require the Company to purchase (the “Put
Option”), by delivery of a written notice (the “Put Notice”) to the Company during the
30-day period after the expiration of the Company Call Period pertaining to
such Management Holder (the “Put Period”),
and the Company shall be required to purchase all of the Subject Securities
described in the Put Notice (other than Subject Securities purchased under Section 2.5)
(such Subject Securities to be purchased hereunder being referred to
collectively as the “Put Securities”)
at a price per share equal to the Put Price; provided that if such
Management Holder exercises a Put Option within 18 months of the date hereof
the Company shall be required to purchase all of the Subject Securities
described in the Put Notice at a price per share equal to the Call Price.

 

(b)                                 The closing of any
purchase of Put Securities by the Company from a Management Holder pursuant to
this Section 2.6 shall take place at the principal office of the Company
on such date within 15 days after the expiration of the Put Period with respect
to such Management Holder as the Company shall specify to such Management
Holder in writing.  At such closing, the
Management Holder shall deliver to the Company, against payment by the Company
of the purchase price for the Put Securities in cash (by delivery of a
certified check payable to the Management Holder) or, if the Company is
required by its senior lenders, by subordinated promissory note with a ten year
maturity and interest paid at the prime rate announced from time to time by the
Company’s senior lenders (such interest payable in kind), certificates and/or
other instruments representing, together with stock or other appropriate powers
duly endorsed with respect to, the Put Securities, free and clear of all Liens
(other than pursuant to securities laws, this Agreement or a Stock Option
Agreement).  All of the foregoing
deliveries will be deemed to be made simultaneously and none shall be deemed
completed until all have been completed.

 

(c)                                  If and to the extent
a Management Holder elects not to exercise the Put Option and deliver a Put
Notice within the Put Period or if the closing of the purchase of all Put
Securities does not occur within 15 days after the expiration of the Put Period
through the fault of such Management Holder, then the Put Option provided for
in this Section 2.6 shall terminate with respect to such Subject
Securities not so purchased under this Section, but the parties hereto shall
continue to be bound by the remaining provisions of this Agreement.

 

18

 

(d)                                 Notwithstanding the
foregoing with respect to any shares of Common Stock which, as of the date of
the purchase and sale pursuant to this Put Option, were Unmatured Shares, the
closing with respect to such Unmatured Shares shall be delayed until a date no
later than the 10th day after the 180th day following the acquisition by such
Management Holder of such Unmatured Shares and the purchase price for such
Unmatured Shares will be determined at the time of such delayed closing.

 

2.7.                              Restrictions on Other
Agreements.  No Stockholder shall
grant any proxy or enter into or agree to be bound by any voting trust with
respect to any Subject Securities other than as set forth in this Agreement nor
shall any Stockholder enter into any stockholders agreements or arrangements of
any kind with any Person with respect to any of the Subject Securities on terms
which conflict with the provisions of this Agreement (whether or not such
agreements and arrangements are with other Stockholders or holders of Common
Stock Equivalents that are not parties to this Agreement), including but not
limited to, agreements or arrangements with respect to the acquisition,
disposition or voting of Subject Securities inconsistent herewith.

 

2.8                                 Transfer Subject
Hereto.  Except as otherwise provided
in this Agreement, in the event of an Involuntary Transfer (as defined in the
following sentence) of any Subject Securities (the “Transferred Securities”) of any JWC Holder, Halifax Holder,
Management Holder or Additional Holder to any Person, the transferee,
including, without limitation, any and all transferees and subsequent
transferees of the initial transferee (the “Involuntary
Transferee”), shall take and hold the Transferred Securities subject
to this Agreement and to all of the obligations of, and restrictions imposed
hereby upon, the transferor holder and shall comply with this Agreement.  As used in this Agreement, the term “Involuntary
Transfer” shall mean any transaction, proceeding or action by or in which the
JWC Holder, Halifax Holder, Management Holder or Additional Holder is
involuntarily deprived or divested of any right, title or interest in or to any
of such holder’s Subject Securities (including, without limitation, a seizure
under levy of attachment or execution, a foreclosure under a pledge of Subject
Securities, a transfer to a trustee in bankruptcy or receiver or other officer
or agency, or a transfer to a state or to a public officer or agency pursuant
to a statute pertaining to escheat or abandoned property but specifically
excluding death, incapacity, divorce and similar events).

 

2.9                                 Provisions in the
Event of Involuntary Transfers.  In
the event of an Involuntary Transfer, the Stockholders and the Company shall
not take any action to approve any such involuntary transfer not in accordance
with this Section, and the transferor Stockholder (or, if it fails to do so,
the Involuntary Transferee) shall forthwith give notice (the “Involuntary Transfer Notice”) to the
Company stating (i) when the involuntary transfer occurred or is to occur,
(ii) the circumstances alleged to require such involuntary transfer,
(iii) the number and type of securities involved and (iv) the name,
address and capacity of the Involuntary Transferee.

 

2.10                           Option.  If an Involuntary Transfer of the Subject
Securities of any Stockholder occurs, the Company and its designees shall have
the same rights of first refusal with respect to the Transferred Shares as if
the involuntary transfer had been a proposed voluntary transfer by the
transferor Stockholder governed by Section 2.2 except that:  (i) the periods within which such right
must be exercised shall run from the date the Involuntary Transfer Notice is
given in accordance with this Agreement; and (ii) such rights shall be
exercised by notice to the

 

19

 

Involuntary Transferee rather than to the
transferor Stockholder.  The closing of any purchase of Transferred
Shares pursuant to this Section shall be in accordance with the procedures
set forth in Section 2.2.

 

2.11                           (a)                                  Purchase
for Investment; Legend on Certificate.  Each Stockholder acknowledges that all of the
securities of the Company held by such Stockholder are being (or have been)
acquired for investment and not with a view to the distribution thereof and
that no Transfer, hypothecation or assignment of any such securities (including
the Common Stock for which such securities may be exercisable or exchangeable
or into which such securities may be convertible) may be made except in
compliance with applicable federal and state securities laws.  All the certificates or other instruments
representing any of such securities (including the Common Stock for which such
securities may be exercisable or exchangeable or into which such securities may
be convertible) which are now or hereafter held by any Stockholder shall be
subject to the terms of this Agreement and shall have endorsed in writing,
stamped or printed, thereon the following legends:

 

“THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF AN AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT DATED AS OF OCTOBER 17, 2001, AS AMENDED FROM TIME
TO TIME, A COPY OF WHICH IS ON FILE WITH AND AVAILABLE FROM THE SECRETARY OF
THE COMPANY.”

 

“THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
REQUIREMENTS OF SUCH ACT.”

 

(b)                                 Removal of Legends,
Etc.  Notwithstanding the provisions
of Section 2.11(a) upon the transferability of any Subject Securities, the
restrictions thereunder shall cease and terminate when (i) such Subject
Securities are sold or otherwise disposed of in accordance with the intended
method of disposition by the seller or sellers thereof set forth in a
registration statement or are sold or otherwise disposed of in a transaction
which does not require that the securities transferred bear the legend set
forth in Section 2.11 or (ii) the holder of such Subject Securities
has met the requirement of transfer of such Subject Securities pursuant to
subparagraph (k) of Rule 144. 
Whenever the restrictions imposed by Section 2.11(a) shall
terminate, as herein provided, the holder of any Subject Securities shall be
entitled to receive from the Company, without expense, a new certificate not
bearing the restrictive legend set forth in Section 2.11(a) and not
containing any other reference to the restrictions imposed by Section 2.11(a).

 

2.12                             Effectiveness of
Transfers.  Any Subject Securities
transferred by a Stockholder (other than pursuant to an effective registration
statement under the Securities Act or a Rule 144 Transaction if the
Subject Securities are listed or admitted to trading on an Active Trading
Market) shall be held by the transferee thereof pursuant to this
Agreement.  Such transferee shall, except
as otherwise expressly stated herein, have all the rights and be subject to all
of the

 

20

 

obligations of a
Stockholder under this Agreement automatically and without requiring any
further act by such transferee or by any parties to this Agreement.  Without affecting the preceding sentence, if
such transferee is not a Stockholder on the dates of such transfer, then such
transferee, as a condition to such transfer, shall confirm such transferee’s
obligations hereunder in accordance with Section 2.13 hereof.  No Subject Securities shall be transferred on
the Company’s books and records, and no transfer thereof shall be otherwise
effective, unless any such transfer is made in accordance with the terms and
conditions of this Agreement, and the Company is hereby authorized by all of
the Stockholders to enter appropriate stop transfer notations on its transfer
records to give effect to this Agreement.

 

2.13                           Additional Stockholders.  Any Person that is not already a party to
this Agreement in the same Stockholder capacity as such Person would be
following the Transfer and who is acquiring any Subject Securities (except for
any acquisition thereof (a) in an offering registered under the Securities
Act or (b) in a Rule 144 Transaction if the Subject Securities are
listed or admitted to trading on an Active Trading Market) shall on or before
the transfer or issuance to it of such Subject Securities, sign and deliver to
the Company a Joinder Agreement and shall thereby become a party to this
Agreement.  If such Person meets the
definition of a JWC Holder, then such Person shall be treated as a JWC Holder
hereunder, if such Person meets the definition of a Halifax Holder, such Person
shall be treated as a Halifax Holder hereunder, if such Person meets the
definition of a Management Holder, such Person shall be treated as a Management
Holder hereunder, and if such Person meets none of the foregoing definitions,
such Person shall be treated as an Additional Holder hereunder.  The Company shall require each Person
acquiring an option, warrant or other right to purchase shares of Common Stock
under any option or other equity participation plan to execute a Joinder
Agreement.

 

2.14                           Notice of Transfer.  Each JWC Holder, Halifax Holder, Management
Holder or Additional Holder agrees, prior to any Transfer of any Subject
Securities (except pursuant to an effective registration statement), to give
written notice to the Company of such holder’s intent to effect such Transfer
and agrees to comply in all other respects with the provisions of this
Agreement.  Each such notice shall
describe the manner and circumstances of the proposed Transfer and, unless the
proposed Transfer is a Permitted Transfer or unless waived by the Company,
shall be accompanied by the written opinion, addressed to the Company, of
counsel for the holder of such Subject Securities (which counsel shall be
reasonably satisfactory to the Company), stating that in the opinion of such
counsel (which opinion shall be reasonably satisfactory to the Company) such
proposed Transfer does not involve a transaction requiring registration or
qualification of such Subject Securities under the Securities Act or the
securities laws of any state of the United States or of any foreign
jurisdiction.  Subject to complying with
the other applicable provisions of this Agreement, such holder of Subject
Securities shall be entitled to consummate such Transfer in accordance with the
terms of the notice delivered by it to the Company if the Company does not
object (on the basis that such Transfer violates this Section 2.14) to
such Transfer within 5 Business Days after the delivery of such notice.

 

21

 

ARTICLE III

 

Registration
Rights

 

3.1                                 General.  For purposes of this Article III, (a)
the terms “register”, “registered” and “registration” refer to a registration effected by preparing
and filing a registration statement on Form S-1, S-2 or S-3 in compliance with
the Securities Act and the declaration or ordering of effectiveness of such
registration statement and (b) the term “Holder”
means any Stockholder electing to register any Registrable Securities pursuant
to Section 3.2 or 3.3.  The
registration rights granted pursuant to Sections 3.2 and 3.3  shall terminate
and expire on the fourth anniversary of the occurrence of a Public Offering.

 

3.2                                 Required
Registration.  If the Company shall
be requested, in writing, by the holders of a majority of the Common Stock
Equivalents then held by the JWC Holders (or the JWC Representative) to effect
a registration statement under the Securities Act of Registrable Securities,
the Company shall promptly (i) give written notice of the proposed
registration to all other Stockholders and (ii) use its best efforts to
effect the registration under the Securities Act of the Registrable Securities
which the Company has been so requested to register by the JWC Holders and by
other Stockholders in a written request received by the Company within 10
Business Days after the giving of the written notice specified in
clause (i) above; provided, however, that the Company shall not be
obligated to effect any registration under the Securities Act except in
accordance with the following provisions:

 

(a)                                  The Company shall not
be obligated to use its best efforts to file and cause to become effective any
registration statement during any period in which any other registration
statement (other than on Forms S-4, F-4 or S-8 promulgated under the Securities
Act or any successor forms thereto) pursuant to which Primary Shares are to be
or were sold has been filed and not withdrawn or has been declared effective
within the prior 90 days.

 

(b)                                 he Company may delay
the filing or effectiveness of any registration statement for a period of up to
90 days after the date of a request for registration pursuant to this Section 3.2
if at the time of such request (i) the Company is engaged, or has fixed plans to
engage within 90 days after the date of such request, in a firm commitment
underwritten public offering of Primary Shares in which the holders of
Registrable Securities may include Registrable Securities pursuant to Section 3.3
or (ii) a Material Transaction exists, provided that the Company may
only so delay the filing or effectiveness of its registration statements (if
any) once pursuant to this Section 3.2(b).

 

(c)                                   With respect to any
registration pursuant to this Section 3.2, the Company may include in such
registration any Primary Shares; provided, however, that, if the
managing underwriter advises the Company that the inclusion of all Registrable
Securities and Primary Shares proposed to be included in such registration
would interfere with the successful marketing (including pricing) of the
Registrable Securities proposed to be included in such registration, then the
number of Registrable Securities and Primary Shares proposed to be included in
such registration shall be included in the following order:

 

(i)                                     first, the Registrable Securities requested to be
included in such registration (or, if necessary, such Registrable Securities
pro rata among the Holders of

 

22

 

such
Registrable Securities based upon the number of Registrable Securities
requested to be included in such registration); and

 

(ii)                                  second,
the Primary Shares.

 

(d)                                 If the method of disposition requested
by the holders pursuant to this Section 3.2 is an underwritten public
offering, Stockholders holding a majority of the Registrable Securities
requested to be registered shall have the right to designate the managing
underwriter of such offering, subject to the consent of the Company, which
consent shall not be unreasonably withheld.

 

(e)                                  At any time before
the registration statement covering Registrable Securities becomes effective,
the Stockholders holding a majority of the Registrable Securities requested to
be registered may request the Company to withdraw or not to file the
registration statement.

 

3.3                                 Piggyback
Registration.

 

(a)                                  If, at any time, the Company determines
to register any Common Stock under the Securities Act in connection with a
Public Offering of such securities, the Company shall, at each such time,
promptly give each Stockholder written notice of such determination no later
than 30 days before its intended filing with the SEC.  Upon the written request of any Stockholder
received by the Company within 10 Business Days after the giving of any such
notice by the Company, the Company shall use its best efforts to cause to be
registered under the Securities Act all of the Registrable Securities of such
Stockholder that such Holder has requested be registered for disposition in
accordance with the Company’s intended method of disposition as stated in such
notice and with the underwriter selected by the Company.  If the total amount of Registrable Securities
that are to be included by the Company in such registration exceeds the amount
of securities that the managing underwriters reasonably believe can be sold in
an orderly manner in such offering within a price range acceptable to the
Company, then the Company will include in such registration only the number of
securities which in the opinion of such underwriters can be sold in the manner
described above, in the following order:

 

(i)                                     first, all securities of the Company to be offered for the
account of the Company; and

 

(ii)                                  second, the Registrable Securities requested to be included
in such registration, (or if necessary, such Registrable Securities pro  rata
among the Holders of such securities based on the number of Registrable
Securities requested to be included in such registration).

 

Notwithstanding the foregoing, the Company shall not be obligated to
include in an initial Public Offering any Registrable Securities of any Holder
if the JWC Holders do not elect to include their Registrable Securities in such
a registration.  If any of the Holders
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company

 

23

 

and the
underwriter prior to the date of pricing such offer.  Any Registrable Securities or other
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.

 

3.4                                 Obligations of the
Company.

 

(a)                                   Whenever required
under Section 3.2 or 3.3 to use its best efforts to effect
the registration of any Registrable Securities, the Company shall (provided,
that the Company may at any time delay or abandon the underlying registration
without any liability to the Holders):

 

(i)                                     prepare
and file with the SEC a registration statement (or an amendment to a
registration statement) with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become and remain
effective, including, without limitation, filing of post-effective amendments
and supplements to any registration statement or prospectus necessary to keep
the registration statement current;

 

(ii)                                  as
expeditiously as reasonably possible, prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement and to
keep each registration and qualification under this Agreement effective (and in
compliance with the Securities Act) by such actions as may be necessary or
appropriate for a period of 120 days after the effective date of such
registration statement (unless all securities covered by such registration
statement are sooner disposed of), all as requested by such Holder or Holders;

 

(iii)                               as
expeditiously as reasonably possible furnish to the Holders such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them in accordance with the plan of distribution provided
for in such registration statement;

 

(iv)                              as
expeditiously as reasonably possible use its best efforts to register and
qualify the securities covered by such registration statement under such
securities or “blue sky” laws of such jurisdictions as shall be reasonably
appropriate for the distribution of the securities covered by the registration
statement, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business in any
jurisdiction it would not otherwise be required to qualify but for this subsection (iv),
to file a general consent to service of process in any such jurisdiction or
subject itself to taxation in any such jurisdiction, and further provided
that (anything in this Agreement to the contrary notwithstanding with respect
to the bearing of expenses) if any jurisdiction in which the securities shall
be qualified shall require by law or regulation that expenses incurred in
connection with the qualification of the securities in

 

24

 

that
jurisdiction be borne by selling stockholders, then such expenses shall be
payable by selling stockholders pro rata, to the extent required by such
jurisdiction;

 

(v)                                 notify
each Holder of Registrable Securities covered by such registration statement,
at any time when a prospectus relating thereto is required to be delivered
under the Securities Act, upon discovery that, or upon the happening of any
event as a result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
under which they were made (provided that upon such notification, each
Holder agrees not to sell or otherwise transfer or dispose of any Common Stock
(or other securities) of the Company at the time held by such Holder or any
interest or future interest therein until such statement or omission has been
corrected, and there shall be added to the period during which the Company is
obligated to keep such registration effective the number of days for which such
sales or other transfers or dispositions were suspended), and at the request of
any such Holder promptly prepare and furnish, without charge, to such seller or
Holder a reasonable number of copies of a supplement to such prospectus or an
amendment of such registration statement as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made;

 

(vi)                              otherwise
use its best efforts to comply with all applicable rules and regulations of the
SEC, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least 12 months
but not more than 18 months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act or
Rule 158 thereunder; and

 

(vii)                           use its best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange on which any
class of similar Securities is then listed.

 

(b)                                 If the Company at any
time proposes to register any of its securities under the Securities Act
subject to the registration rights of the Holders under Section 3.2 or
3.3, and such securities are to be distributed by or through one or more
underwriters selected by the Company, then the Company will make reasonable
efforts, if requested by any Holder of Registrable Securities who requests such
registration, to arrange for such underwriters to include such Registrable
Securities among the securities to be distributed by or through such
underwriters.

 

(c)                                  In connection with
the preparation and filing of each registration statement registering
Registrable Securities under this Agreement, the Company will give the Holders
of Registrable Securities on whose behalf such Registrable Securities are to be
so registered and their underwriters, if any, and their respective counsel and
accountants the opportunity to

 

25

 

participate in the preparation of such registration statement, each
prospectus included therein or filed with the SEC, and each amendment thereof
or supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers, its counsel and the independent public accountants who have certified
its financial statements, as shall be reasonably necessary, in the opinion of
such Holders or such underwriters or their respective counsel, in order to
conduct a reasonable and diligent investigation within the meaning of the
Securities Act.

 

3.5                                   Furnish
Information.  It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Article III that each Holder shall furnish to the Company such information
regarding such Holder, the Registrable Securities held by such Holder, and the
intended method of disposition of such securities as the Company shall
reasonably request and as shall be required in connection with the action to be
taken by the Company.

 

3.6                                 Expenses of
Registration.  Registration, filing
and qualification fees, printers’ and accounting fees, fees and expenses of
compliance with securities or blue sky laws, fees and expenses relating to
filings with the National Association of Securities Dealers, Inc. or any
applicable securities exchange, fees of underwriters (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers or
similar securities industry professionals attributable to the Registrable
Securities being registered), and fees and disbursements of counsel for the
Company incurred in connection with a registration pursuant to Section 3.2
or 3.3 shall be borne by the Company. 
Each Holder whose shares are being sold will bear, pro rata,
underwriters’ discounts and brokerage and other commissions, fees and
disbursements of its own counsel and all of its other expenses of such
registration, offering and sale.

 

3.7                                 Underwriting
Requirements.  In connection with any
registration of Registrable Securities under this Agreement, the Holders whose
shares are being sold shall, if requested by the Company or the underwriters,
enter into an underwriting agreement with such underwriters for such offering,
such agreement to contain such terms and provisions as are customarily
contained in underwriting agreements with respect to secondary distributions,
including, without limitation, provisions relating to indemnification and
contribution.  The Holders on whose
behalf Registrable Securities are to be distributed shall also complete and
execute all questionnaires, powers of attorney and/or other documents required
under the terms of such underwriting agreement.

 

3.8                                 Indemnification.  In the event any Registrable Securities are
included in a registration statement pursuant to this Article III:

 

(a)                                  To the fullest extent
permitted by law, the Company will indemnify and hold harmless each Holder
joining in a registration and its directors and officers, any underwriter (as
defined in the Securities Act) for it, and each Person, if any, who controls
such Holder or such underwriter within the meaning of the Securities Act, from
and against any losses, claims, damages, expenses (including reasonable
attorneys’ fees and expenses and reasonable costs of investigation) or
liabilities, joint or several, to which they or any of them may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages,
expenses or

 

26

 

liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based on any untrue or
alleged untrue statement of any material fact contained in such registration
statement including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements made therein not
misleading in light of the circumstances under which they were made, provided
that the indemnity agreement contained in this Section 3.8(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable for any such loss, claim, damage, liability or action to the extent that
it arises out of or is based upon (i) an untrue statement or omission made
in connection with such registration statement, preliminary prospectus, final
prospectus or amendments or supplements thereto in reliance upon and in conformity
with written information furnished by such Holder, underwriter or control
person to the Company specifically for inclusion in the Registration Statement
in connection with such registration, or (ii) such Holder’s failure to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such Holder with a
sufficient number of copies of the same. 
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder, underwriter or control
person and shall survive the transfer of such securities by such Holder.

 

(b)                                 To the fullest extent
permitted by law, each Holder joining in a registration shall indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each Person, if any, who controls the
Company within the meaning of the Securities Act, and each agent and any
underwriter for the Company and any Person who controls any such agent or
underwriter and each other Holder and any Person who controls such Holder
(within the meaning of the Securities Act) against any losses, claims, damages,
expenses (including reasonable attorney’s fees and expenses and reasonable
costs of investigation) or liabilities to which the Company or any such
director, officer, control person, agent, underwriter or other Holder may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon an untrue
statement of any material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, or arise out of or are based upon the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent that such untrue statement or omission was made in such registration
statement, preliminary or final prospectus, or amendments or supplements
thereto, in reliance upon and in conformity with written information furnished
by such Holder in connection with such registration, provided that the
indemnity agreement contained in this Section 3.8(b) shall not apply to
amounts paid in settlements effected without the consent of such Holder (which
consent shall not be unreasonably withheld). 
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer, Holder, underwriter or control person and shall survive the transfer
of such securities by such Holder.

 

27

 

(c)                                  Any Person seeking
indemnification under this Section 3.8 will (i) give prompt written
notice to the indemnifying party of any claim with respect to which it seeks
indemnification, but the failure to give such notice will not affect the right
to indemnification hereunder, except to the extent the indemnifying party is
actually prejudiced by such failure and (ii) unless in such indemnified
party’s reasonable judgment a conflict of interest may exist between such
indemnified and indemnifying parties with respect to such claim, permit such
indemnifying party, and other indemnifying parties similarly situated, jointly
to assume the defense of such claim with counsel reasonably satisfactory to the
parties.  In the event that the
indemnifying parties cannot mutually agree as to the selection of counsel, each
indemnifying party may retain separate counsel to act on its behalf and at its
expense.  The indemnified party shall in
all events be entitled to participate in such defense at its expense through
its own counsel.  If such defense is not
assumed by the indemnifying party, the indemnifying party will not be subject
to any liability for any settlement made without its consent (but such consent
will not be unreasonably withheld).  No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation.  An indemnifying party who is not entitled to,
or elects not to, assume the defense of a claim will not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim.

 

(d)                                 If for any reason the
foregoing indemnification is unavailable to any party or insufficient to hold
it harmless as and to the extent contemplated by the preceding paragraphs of
this Section 3.8, then each indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such loss,
claim, damage expense or liability in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party, on the one
hand, and the applicable indemnified party, as the case may be, on the other
hand, and also the relative fault of the indemnifying party and any applicable
indemnified party, as the case may be, as well as any other relevant equitable
considerations.  No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.

 

3.9                                 Market Stand-Off
Agreement.  If requested by the managing
underwriter of the initial Public Offering on behalf of the Company of its
Common Stock, or by the managing underwriter of a Public Offering for which
Registrable Securities of any Holders have been registered, all Holders (in the
case of such initial Public Offering) or such participating Holders (in the
case of such other Public Offering) shall not sell or otherwise transfer or
dispose of any Registrable Securities held by such Holders (other than pursuant
to Permitted Transfers, pursuant to Section 2.3 and other than those
Registrable Securities included in the registration) during such period
following the effective date of such registration as is usual and customary at
such time in similar public offerings of similar securities.

 

28

 

ARTICLE IV

 

Corporate
Governance

 

4.1                                 Board of Directors.

 

(a)                                   The Company and each
of the Stockholders shall take all action, including, but not limited to, such
Stockholder’s voting, or executing proxies or written consents with respect to,
the Voting Stock at the time held by such Stockholder as may be from time to
time requested by holders of a majority of the Common Stock Equivalents at the
time held by the JWC Holders (or the JWC Representative) so that the Board of Directors
shall consist of such number of directors, no less than seven and up to a
maximum of ten directors, as may be from time to time designated by the holders
of a majority of the Common Stock Equivalents at the time held by the JWC
Holders (or the JWC Representative).

 

(b)                                  he Company and each
of the Stockholders shall take all action, including, but not limited to, such
Stockholder’s voting, or executing proxies or written consents with respect to,
the Voting Stock at the time held by such Stockholder as may be from time to
time requested by holders of a majority of the Common Stock Equivalents at the
time held by the JWC Holders (or the JWC Representative) so that the Board of
Directors shall include such directors as may be from time to time designated
by the holders of a majority of the Common Stock Equivalents at the time held
by the JWC Holders (or the JWC Representative). 
The holders of a majority of the Common Stock Equivalents at the time
held by the JWC Holders (or the JWC Representative) shall also be entitled to
require that any member of the Board of Directors so designated pursuant to
this Section 4.1(b) be removed or replaced by another designee of the
holders of a majority of the Common Stock Equivalents at the time held by the
JWC Holders (or the JWC Representative), in which event the Company and each
Stockholder shall take all action, including, but not limited to, such
Stockholder’s voting, or executing proxies or written consents with respect to,
the Voting Stock at the time held by such Stockholder as may be necessary to
effect such removal or replacement.

 

(c)                                   Notwithstanding the
provisions of Section 4.1(b), the Company and each Stockholder shall take
all action, including, but not limited to, such Stockholder’s voting, or
executing proxies or written consents with respect to, the Voting Stock at the
time held by such Stockholder as may be from time to time requested by the
holders of a majority of the Common Stock Equivalents at the time held by the
Original Halifax Holders and their Permitted Transferees (other than the JWC
Holders and Management Holders) or on their behalf by the Halifax
Representative, so that the Board of Directors shall include two directors
designated by the holders of a majority of the Common Stock Equivalents held by
the Original Halifax Holders and their Permitted Transferees (other than the
JWC Holders and Management Holders) or on their behalf by the Halifax
Representative which directors (the “Halifax Directors”) shall initially be
David Dupree and Kenneth Doyle; provided that the number of Halifax
Directors that the Original Halifax Holders and their Permitted Transferees
(other than the JWC Holders and Management Holders) shall be entitled to
designate pursuant to this Section 4.1(c) shall be permanently reduced
from two to one director at such time as the Original Halifax Holders and their
Permitted Transferees (other than the JWC Holders and Management Holders) hold
less than 50% of the Common Stock Equivalents held by the Original Halifax
Holders as of the date of this Agreement; provided  further, that
the number of Halifax Directors designated pursuant to this Section 4.1(c)
shall be permanently reduced to zero directors at such time as the Original
Halifax Holders and their Permitted Transferees (other than the JWC Holders and
Management Holders) hold less than 5% of the Common Stock Equivalents
outstanding.  The holders of a majority
of the Common Stock Equivalents at the time held by the Original Halifax
Holders and

 

29

 

their Permitted Transferees (other than the JWC Holders and Management
Holders) or on their behalf by the Halifax Representative shall also be
entitled to require that any director so designated pursuant to this Section 4.1(c)
be removed or replaced by another designee of the holders of the majority of
the Common Stock Equivalents at the time held by the Original Halifax Holders
and their Permitted Transferees (other than the JWC Holders and Management
Holders) or on their behalf by the Halifax Representative, in which event the
Company and each Stockholder shall take all action, including, but not limited
to, such Stockholder’s voting, or executing proxies or written consents with
respect to, the Voting Stock at the time held by such Stockholder as may be
necessary to effect such removal or replacement.

 

4.2                                 Rights of the
Halifax Directors.

 

(a)                                  Notwithstanding that
no vote may be required, or that a lesser percentage vote may be specified in
the certificate of incorporation or by-laws of the Company, the Company shall
not take, and no Stockholder shall cause the Company to take, any of the
following actions without the affirmative vote of a majority of the Board of
Directors, which majority vote shall include the affirmative vote of the directors,
if any, designated pursuant to Section 4.1(c) (the “Halifax Affirmative Board Vote”):

 

(i)                                     the redemption,
purchase or other acquisition of any Common Stock Equivalents other than those
redemptions, purchases or acquisitions made (A) pursuant to this
Agreement, (B) on a pro rata basis among the holders of a particular class or
series of securities of the Company or (C) pursuant to the terms of
securities of the Company created after the date hereof which require such
redemption, purchase or acquisition;

 

(ii)                                  the declaration or
payment of any dividend or other distribution by the Company with respect to
any Common Stock Equivalents other than those declarations or payments of
dividends or other distributions that are made (A) on pro rata basis among
the holders of a particular class or series of securities of the Company or
(B) pursuant to the terms of securities of the Company created after the
date hereof which require such declaration, payment or other distribution;

 

(iii)                               the
termination of the Chief Executive Officer of the Company without Cause (as
defined in such individual’s then current employment agreement with the Company
or one of its subsidiaries);

 

(iv)                              any issuance of Common
Stock Equivalents in connection with a transaction or series of related
transactions involving an acquisition of the equity or assets of a Third Party
which results in an aggregate issuance of greater than 20% of the total
outstanding Common Stock Equivalents,

 

(v)                                 the entering into of
any transaction or agreement, directly or indirectly, by the Company with JWC
Inc. or any director, officer or Affiliate of JWC Inc., including any of the
portfolio companies held or managed by any such entity (which affirmative vote
of the Halifax Directors shall not be unreasonably withheld); or

 

30

 

(vi)                              any
significant change in the nature of the Company’s business as of the date
hereof.

 

Notwithstanding anything to the contrary herein, (x) the Halifax
Affirmative Board Vote shall no longer be necessary with respect to the matters
set forth in clauses (iii) and (iv) above at such time as the Original Halifax
Holders and their Permitted Transferees (other than the JWC Holders and
Management Holders) hold less than 50% of the Common Stock Equivalents held by
the Original Halifax Holders as of the date of this Agreement and (y) the
provisions of this Section 4.2 shall terminate at such time as the
Original Halifax Holders and their Permitted Transferees (other than the JWC
Holders and Management Holders) hold less than 5% of the Common Stock
Equivalents.

 

(b)                                 As long as at least
one Halifax Director is a member of the Board of Directors pursuant to Section 4.1(c),
there shall be at least one Halifax Director on each committee, if any,
established by the Board of Directors

 

ARTICLE V

 

Preemptive
Rights

 

5.1                                 Rights to Subscribe
for Securities.

 

(a)                                  Except in the case of
Excluded Securities (as defined in Section 5.1(e)), the Company shall not,
and shall cause its Subsidiaries not to, issue or sell any Common Stock
Equivalent, unless the Company shall have first offered or caused such
Subsidiary to offer (the “Preemptive Offer”)
to sell such Common Stock Equivalents to the JWC Holders and Halifax Holders
(the “Offered Securities”) by
delivery to such JWC Holders and Halifax Holders of written notice of such
offer stating that the Company or such Subsidiary proposes to sell such Offered
Securities, the number or amount of the Offered Securities proposed to be sold,
the proposed purchase price therefor and any other terms and conditions of such
offer.  The Preemptive Offer shall by its
terms remain open and irrevocable for a period of 10 Business Days from the
date it is received from the Company (the “Preemptive
Offer Period”).

 

(b)                                 Each JWC Holder and Halifax
Holder shall have the option, exercisable at any time during the Preemptive
Offer Period by delivering written notice to the Company or such Subsidiary (a “Preemptive Offer Acceptance Notice”), to
subscribe for the number or amount of such Offered Securities that would permit
such JWC Holders and Halifax Holders to maintain its Offeree Percentage as it
existed immediately prior to such issuance, sale or exchange.  The Company or such Subsidiary shall notify
each JWC Holder and Halifax Holder within five days following the expiration of
the Preemptive Offer Period of the number or amount of Offered Securities which
such JWC Holder and Halifax Holder has subscribed to
purchase.

 

(c)                                  If Preemptive Offer Acceptance Notices
are not given by the JWC Holders and Halifax Holders for all of the Offered
Securities, the Company or such Subsidiary making such Preemptive Offer shall
have 60 days from the expiration of the Preemptive Offer Period to

 

31

 

sell all or any part of such Offered Securities as to which Preemptive
Offer Acceptances Notices have not been given by the JWC Holders and Halifax
Holders (the “Refused Securities”)
to any other Persons upon the terms and conditions including price, which are
no more favorable, in the aggregate, to such other Persons or less favorable to
the Company or such Subsidiary than those set forth in the Preemptive Offer.

 

(d)                                 Upon the closing,
which shall include full payment to the Company or such Subsidiary, of the sale
to such other Persons of all the Refused Securities, such JWC Holders and
Halifax Holders shall purchase from the Company or such Subsidiary, and the
Company or such Subsidiary shall sell to such JWC Holders and Halifax Holders,
the Offered Securities with respect to which Preemptive Offer Acceptance
Notices were delivered by such JWC Holders and Halifax Holders, at the terms
specified in the Preemptive Offer.

 

(e)                                  The rights of the JWC
Holders and Halifax Holders under this Section 5.1 shall not apply to the
following securities (the “Excluded
Securities”):

 

(i)                                     any Common Stock
Equivalents issued or granted pursuant to a stock option or other similar
equity incentive plan providing for issuance to employees or consultants of the
Company or its Subsidiaries or upon the exercise or conversion of options or
other Common Stock Equivalents issued to employees and consultants of the
Company or its Subsidiaries;

 

(ii)                                  any
Common Stock Equivalents and other derivative securities issued upon the
exercise or conversion of outstanding Common Stock Equivalents;

 

(iii)                               any
Common Stock Equivalents issued to any individual or entity which, in
connection with the issuance of Common Stock Equivalents to such entity,
simultaneously enters into a significant business transaction with the Company
which is directly related to the Company’s business;

 

(iv)                              any
Common Stock Equivalents issued as part of a Public Offering or any effective
registration statement under the Securities Act; and

 

(v)                                 any
Common Stock Equivalents issued to the Company or a Subsidiary.

 

ARTICLE VI

 

Certain
Miscellaneous Other Provisions

 

6.1                                 Remedies.  Each of the parties hereto acknowledges and
agrees that no remedy at law would be adequate in the event of any breach of
this Agreement.  Accordingly, if any dispute
arises concerning the sale or other disposition of any of the securities of the
Company subject to this Agreement or concerning any other provisions hereof or
the obligations of the parties hereunder, each party hereto agrees that, in
addition to any other remedy to which they may be entitled at law or in equity,
the other parties hereto shall be entitled to a decree of specific

 

32

 

performance to enforce this Agreement (without bond or other security being
required unless the party seeking such remedy fails to demonstrate to an
appropriate court having jurisdiction that such party has a likelihood of
success on the merits), and each party hereto waives the defense in any action
or proceeding brought to enforce this Agreement that there exists an adequate
remedy at law.  Such remedies shall be
cumulative and non-exclusive and shall be in addition to any other rights and
remedies the parties may have under this Agreement or otherwise.

 

6.2                                 Entire Agreement;
Amendment; Termination.

 

(a)                                  This Agreement sets
forth the entire understanding of the parties, and supersedes all prior
agreements and all other arrangements and communications, whether oral or
written, with respect to the subject matter hereof.

 

(b)                                 The Schedule of
Stockholders may be amended in writing by the Company to reflect changes in the
composition of the Stockholders and changes in their addresses or telecopy
numbers that may occur from time to time as a result of Permitted Transfers,
Transfers permitted under Article II hereof or any new issuance by the
Company of Common Stock or Common Stock Equivalents; provided, however,
that no new issuance of Common Stock or Common Stock Equivalents shall be
effective unless and until the Person receiving such securities (if not already
a party hereto in such capacity) executes and delivers to the Company an
executed Joinder Agreement in accordance with Section 2.13 hereof.  Amendments to the Schedule of
Stockholders reflecting Permitted Transfers or Transfers permitted under Article II
hereof shall become effective when the amended Schedule of Stockholders,
and a copy of a Joinder Agreement as executed by any new transferee in
accordance with Section 2.13, are filed with the Company.

 

(c)                                  Any other amendment
to this Agreement shall be in writing and shall require the written consent of
(a) the Company, (b) either the JWC Representative or the holders of
a majority of Common Stock Equivalents at the time held by the JWC Holders,
and, (c) if adverse to the interests of a particular Stockholder or
Stockholder Group, then the consent of each particular Stockholder or the
holders of a majority of the Common Stock Equivalents at the time held by such
particular Stockholder Group, as the case may be, to whose interest such
amendment is adverse.

 

(d)                                 Notwithstanding the
foregoing provisions of this Section 6.2, this Agreement may be terminated
at any time upon the written consent of (i) the Company and (ii) the
holders of a majority of the Common Stock Equivalents at the time held by the
Management Holders and (iii) the holders of a majority of the Common Stock
Equivalents at the time held by the Halifax Holders and (iv) the holders
of a majority of the Common Stock Equivalents at the time held by the JWC Holders
(or the JWC Representative), each voting separately as a group.

 

6.3                                   Severability.  Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.  If the final judgment of a court of

 

33

 

competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties agree that the body making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.

 

6.4                                   Notices.  All notices, consents and other
communications required, or contemplated under this Agreement shall be in
writing and shall be delivered in the manner specified herein or, in the
absence of such specification, shall be deemed to have been duly given
(i) 3 Business Days after mailing by first class certified mail, postage
prepaid, (ii) when delivered by hand, (iii) upon confirmation of
receipt by telecopy, or (iv) 1 day after sending by overnight delivery
service, to the respective addresses or telecopy numbers of the parties set
forth below:

 

(a)          For notices and
communications to the Company:

 

c/o
J.W. Childs Associates, L.P.

111 Huntington Avenue

Suite 2900

Boston, MA  02199

Attention: Edward D. Yun

Telecopy:  617-753-1101

 

and

 

InSight Health Services Holdings Corp.

c/o J.W. Childs Associates, L.P.

111 Huntington Avenue

Suite 2900

Boston, MA  02199

Attention: Edward D. Yun

Telecopy:  617-753-1101

 

(b)                                 For notices and
communications to the Stockholders, to the respective addresses or telecopy
numbers set forth in the Schedule of Stockholders.

 

(c)                                  With a copy in the
case of the JWC Holders and the Company to:

 

Kaye Scholer LLP

425 Park Avenue

New York, NY 
10022

Attention: 
Stephen C. Koval, Esq.

Telecopy: 
212-836-8689

 

34

 

(d)                                 With a copy in the
case of the Halifax Holders to:

 

The Halifax Group, L.L.C.

1133 Connecticut Avenue, N.W.

Suite 700

Washington, D.C.  20036

Attention:  David W. Dupree and
Kenneth M. Doyle

Telecopy:  202-296-7133

 

(e)                                  With a copy in the
case of the Management Holders to:

 

InSight Health Services Corp.

4400 MacArthur Blvd., Suite 800

Newport Beach, CA 92660

Attention:  General Counsel and President

Telecopy:   (949) 476-0137

 

By notice complying with the foregoing provisions of this Section 6.4,
each party shall have the right to change the mailing address or telecopy
numbers for future notices and communications to such Party.

 

6.5                                 Binding Effect;
Assignment.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and to their
respective transferees, successors, assigns, heirs and administrators, provided
that the rights under this Agreement may not be assigned except as expressly
provided herein.  No such assignment
shall relieve an assignor of its obligations hereunder.

 

6.6                                 Termination.  Without affecting any other provision of this
Agreement requiring termination of any rights in favor of any Stockholder,
Permitted Transferee or any other transferee of Common Stock Equivalents, the
provisions of Articles II and III (other than the indemnity and contribution
provisions set forth therein) of this Agreement shall terminate as to such
Stockholder, Permitted Transferee or other transferee, when, pursuant to and in
accordance with this Agreement, such Stockholder, Permitted Transferee or other
transferee, as the case may be, no longer owns any Common Stock Equivalents.

 

6.7                                 Recapitalizations,
Exchanges, etc.  The provisions of
this Agreement shall apply, to the full extent set forth herein with respect to
Common Stock Equivalents, to any and all shares of capital stock of the Company
or any successor or assign of the Company (whether by merger, consolidation,
sale of assets or otherwise) which may be issued in respect of, in exchange
for, or in substitution of the Common Stock Equivalents, by reason of a stock
dividend, stock split, stock issuance, reverse stock split, combination,
recapitalization, reclassification, merger, consolidation or otherwise.  Upon the occurrence of any such events,
amounts (including the Cost Price) hereunder shall be appropriately adjusted.

 

35

 

6.8                                 JWC Representative.  Each JWC Holder hereby designates and
appoints (and each Permitted Transferee of each such JWC Holder shall be deemed
to have so designated and appointed) Steven G. Segal and Edward D. Yun (so long
as they are employees of J.W. Childs Associates, Inc. or its Affiliates or
successor entities), or either of them, with full power of substitution (the “JWC Representative”) the representative of
each such Person to perform all such acts as are required, authorized or
contemplated by this Agreement to be performed by any such Person and hereby
acknowledges that the JWC Representative shall be the only Person authorized to
take any action so required, authorized or contemplated by this Agreement by
each such Person.  Each such Person
further acknowledges that the foregoing appointment and designation shall be
deemed to be coupled with an interest and shall survive the death or incapacity
of such Person.  Each such Person hereby
authorizes (and each Permitted Transferee shall be deemed to have authorized)
the other parties hereto to disregard any notice or other action taken by such
Person pursuant to this Agreement except for the JWC Representative.  The other parties hereto are and will be
entitled to rely on any action so taken or any notice given by the JWC
Representative and are and will be entitled and authorized to give notices only
to the JWC Representative for any notice contemplated by this Agreement to be
given to any such Person.  A successor to
the JWC Representative may be chosen by the holders of a majority of the Common
Stock Equivalents at the time held by the JWC Holders, provided that
written notice thereof is given by the successor JWC Representative to the
Company, the Halifax Holders, the Management Holders, the Additional Holders and
the other JWC Holders.

 

6.9                                 Halifax
Representative.  Each Halifax Holder
hereby designates and appoints (and each Permitted Transferee of each such
Halifax Holder shall be deemed to have so designated and appointed) David W.
Dupree and Kenneth M. Doyle (so long as they are employees of Halifax Capital
Partners or its Affiliates or successor entities), or either of them, with full
power of substitution (the “Halifax
Representative”) the representative of each such Person to perform
all such acts as are required, authorized or contemplated by this Agreement to
be performed by any such Person and hereby acknowledges that the Halifax
Representative shall be the only Person authorized to take any action so
required, authorized or contemplated by this Agreement by each such
Person.  Each such Person further
acknowledges that the foregoing appointment and designation shall be deemed to
be coupled with an interest and shall survive the death or incapacity of such
Person.  Each such Person hereby
authorizes (and each Permitted Transferee shall be deemed to have authorized)
the other parties hereto to disregard any notice or other action taken by such
Person pursuant to this Agreement except for the Halifax Representative.  The other parties hereto are and will be entitled
to rely on any action so taken or any notice given by the Halifax
Representative and are and will be entitled and authorized to give notices only
to the Halifax Representative for any notice contemplated by this Agreement to
be given to any such Person.  A successor
to the Halifax Representative may be chosen by the holders of a majority of the
Common Stock Equivalents at the time held by the Halifax Holders, provided
that written notice thereof is given by the successor Halifax Representative to
the Company, the JWC Holders, the Management Holders, the Additional Holders
and the other Halifax Holders.

 

6.10                           Action Necessary to
Effectuate the Agreement.  The
parties hereto agree to take or cause to be taken all such corporate and other
action as may be necessary to effect the intent and
purposes of this Agreement.

 

36

 

6.11                           No Waiver.  No course of dealing and no delay on the part
of any party hereto in exercising any right, power or remedy conferred by this
Agreement shall operate as waiver thereof or otherwise prejudice such party’s
rights, powers and remedies.  No single
or partial exercise of any rights, powers or remedies conferred by this
Agreement shall preclude any other or further exercise thereof or the exercise
of any other right, power or remedy.

 

6.12                           Counterparts.  This Agreement may be executed in two or more
counterparts (including Joinder Agreements as counterparts), each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument, and all signatures need not appear on any one counterpart.

 

6.13                           Headings, etc.  All headings and captions in this Agreement
are for purposes of references only and shall not be construed to limit or
affect the substance of this Agreement. 
Words used in this Agreement, regardless of the gender and number used,
will be deemed and construed to include any other gender, masculine, feminine,
or neuter, and any other number, singular or plural, as the context
requires.  As used in this Agreement, the
word “including” is not limiting,
and the word “or” is not
exclusive.  The words “this Agreement”, “hereto”, “herein”,
“hereunder”, “hereof”, and words or phrases of similar
import refer to this Agreement as a whole, together with any and all Schedules
and Exhibits hereto, and not to any particular article, section, subsection,
paragraph, clause or other portion of this Agreement.

 

6.14                           Governing Law;
Jurisdiction; Service of Process. 
This Agreement shall, in accordance with section 5-1401 of the
General Obligations Law of the State of New York, be governed by the laws of
the State of New York, without regard to any conflicts of laws principles
thereof that would call for the application of the laws of any other
jurisdiction.  Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against either of the parties in the courts of the
State of New York, or if it has or can acquire jurisdiction, in the United
States District Court for the Southern District of New York, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein.  Process
in any action or proceeding referred to in the preceding sentence may be served
on any party anywhere in the world, whether within or without the State of New
York.

 

6.15                           Confidentiality; Public
Announcements.  No JWC Holder,
Halifax Holder, Management Holder or Additional Holder shall disclose or use in
any manner whatsoever, in whole or in part, any information concerning the
Company or any of its direct or indirect shareholders, or any of their
respective employees, directors or Subsidiaries or Affiliates (including,
without limitation, the JWC Holders) received on a confidential basis from the
Company or any other Person under or pursuant to this Agreement or any other
agreement with the Company including without limitation financial terms and
financial and organizational information contained in any documents,
statements, certificates, materials or information furnished, or to be
furnished, by or on behalf of the Company or any other Person in connection
with the purchase or ownership of any Common Stock Equivalent; provided,
however, that the foregoing shall not be construed, now or in the
future, to apply to any information reflected in any recorded document,
information which is independently developed by such Stockholder, information
obtained from sources other than the Company or any of its direct or indirect

 

37

 

shareholders, or any of their respective employees, directors,
Subsidiaries or Affiliates (including without limitation the JWC Holders) or
any of their respective agents or representatives (including without limitation
attorneys, accountants, financial advisors, engineers and insurance brokers) or
information that is or becomes in the public domain, nor shall it be construed
to prevent such Stockholder from (i) making any disclosure of any
information (A) if required to do so by any statute, law, treaty, rule,
regulation, order, decree, writ, injunction or determination of any court or
other governmental authority, in each case applicable to or binding upon such
Stockholder, (B) to any governmental authority having or claiming
authority to regulate or oversee any aspect of such Stockholder business or
that of the corporate parent or affiliates of such Stockholder in connection
with the exercise of such authority or claimed authority, or (C) pursuant
to subpoena; or (ii) making, on a confidential basis, such disclosures as
such Stockholder deem necessary or appropriate to such Stockholder’s legal
counsel, accountants (including outside auditors) or general or managing
partner; (iii) making such disclosures as such Stockholder reasonably deem
necessary or appropriate to any Transferee and/or counsel to or other
representatives of such bank or financial institution or other entity, to which
such Stockholder in good faith desires to Transfer all or a portion of its
interest in any Common Stock Equivalents; provided, however, that
such Transferee or counsel to or representative thereof , agree maintain the
confidentiality of such disclosures on the terms stated herein; or
(iv) making, on a confidential basis, disclosures of such information to
current Stockholders.

 

[Signatures on Following Pages]

 

38

 

Fourth
Amended and Restated Stockholders Agreement

 

IN WITNESS WHEREOF, the parties have executed
this Agreement as an instrument under SEAL as of the date first set forth
above.

 

	
   

  	
  THE COMPANY:

  
	
   

  	
   

  
	
   

  	
  INSIGHT HEALTH SERVICES HOLDINGS CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael N. Cannizzaro

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael N. Cannizzaro

  
	
   

  	
   

  	
  Title:

  	
  President and Chief Executive

  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE JWC HOLDERS:

  
	
   

  	
   

  
	
   

  	
  J.W. CHILDS EQUITY PARTNERS II, L.P.

  
	
   

  	
  JWC-INSIGHT CO-INVEST LLC

  
	
   

  	
   

  
	
   

  	
   

  	
  By: JWC REPRESENTATIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Edward D. Yun

  	
   

  
	
   

  	
   

  	
  Edward D. Yun

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE HALIFAX HOLDERS:

  
	
   

  	
   

  
	
   

  	
  HALIFAX CAPITAL PARTNERS, L.P.

  
	
   

  	
  DAVID W. DUPREE

  
	
   

  	
   

  
	
   

  	
   

  	
  By: HALIFAX REPRESENTATIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Kenneth M. Doyle

  	
   

  
	
   

  	
   

  	
  Kenneth M. Doyle

  
							

 

39

 

EXHIBIT
A

 

SCHEDULE OF
STOCKHOLDERS

 

JWC HOLDERS:

 

J.W. Childs Equity
Partners II, L.P.

c/o
J.W. Childs Associates, L.P.

111 Huntington Avenue

Suite 2900

Boston, MA 
02199

Attention: Edward D. Yun

Telecopy: 
617-753-1101

 

JWC-InSight Co-Invest
LLC

c/o
J.W. Childs Associates, L.P.

111 Huntington Avenue

Suite 2900

Boston, MA 
02199

Attention: Edward D. Yun

Telecopy: 
617-753-1101

 

HALIFAX HOLDERS:

 

Halifax
Capital Partners, L.P.

c/o
The Halifax Group, L.L.C.

1133 Connecticut Avenue, N.W.

Suite 700

Washington, D.C.  20036

Attention: 
David W. Dupree and Kenneth M. Doyle

Telecopy: 
202-296-7133

 

David W. Dupree

 

c/o
The Halifax Group, L.L.C.

1133 Connecticut Avenue, N.W.

Suite 700

Washington, D.C.  20036

Telecopy: 
202-296-7133

 

40

 

MANAGEMENT HOLDERS:

 

Roy Assael

 

Robert J. Armstrong

 

Michelle Barrett

 

Darrin Best

 

Patricia R. Blank

 

Melinda K. Bowers

 

Michael A. Boylan

 

William Brewer

 

Michael W. Brown

 

Shawn M. Callahan

 

Michael N. Cannizzarro

 

John P. Crow

 

Gregg Daversa

 

41

 

Gary Debley

 

Joseph F. Denninger

 

Brian G. Drazba

 

Christine Duarte

 

Judy Erbstein

 

Sharon M. Fandel

 

Tracy L. Galloway

 

Patrick Githens

 

Mitch Hill

 

Michael Holmes

 

Bret W. Jorgensen

 

42

 

Robert Keethler

 

Charles A. Leo

 

Marilyn U. MacNiven-Young

 

Michael S. Madler

 

Tim Mahanna

 

Doug Marcotte

 

Suzanne Martin

 

Robert Mentzer

 

Jeff Morrin

 

Norman Nie

 

Chris O’Brien

 

Libby O’Dell

 

43

 

Bernard O’Rourke

 

Steven T. Plochocki

 

Stephen
Randall

 

Reginald B. Reynolds

 

Bryce Robinson

 

Jim Ruby

 

Donald Salyer

 

Lou
Schnierer

 

Mike
Sepe

 

Kent
E. Tuholsky

 

James M. Varcarolis

 

Sylvia A. Wester

 

44

 

Brian W. Woodbury

 

Dirk Zerbel

 

45

 

EXHIBIT B

 

JOINDER
AGREEMENT

 

The undersigned is executing and delivering this
Joinder Agreement pursuant to the Fourth Amended and Restated Stockholders’
Agreement, dated as of July 1, 2005 (the “Fourth Amended and Restated
Stockholders’ Agreement”), among InSight Health Services Holdings Corp., a
Delaware corporation (the “Company”), the JWC Holders, Halifax Holders,
Management Holders and Additional Holders named therein.

 

By executing and delivering this Joinder Agreement
to the Company, the undersigned hereby agrees to become a party to, to be bound
by, and to comply with the provisions of the Fourth Amended and Restated
Stockholders’ Agreement in the same manner as if the undersigned were an
original signatory to such agreement as a                               Holder.  In connection therewith, effective as of the
date hereof the undersigned hereby makes the representations and warranties
contained in the Fourth Amended and Restated Stockholders’ Agreement.

 

Accordingly, the undersigned has executed and
delivered this Joinder Agreement as of the     day of                       ,
20   .

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature of Stockholder

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name of Stockholder

  

 

46Exhibit 10.1

 

CINERGY CORP.

SEPARATION AGREEMENT

 

This Separation Agreement (the “Agreement”), which is
effective as of the 30th day of June, 2005, is entered into by and between R.
Foster Duncan (the “Executive”) and Cinergy Services, Inc. (the “Company”),
with the mutual exchange of promises as consideration.

 

Recitals

 

WHEREAS, the Executive has
resigned from the Company effective as of June 30, 2005 (the “Termination
Date”);

 

WHEREAS, in connection with the Executive’s termination
of employment, the Company is willing to provide certain benefits to the
Executive, provided that the Executive (i) executes and does not timely
revoke this Agreement and a waiver and release, in the form attached to this
Agreement as Exhibit A (the “Waiver and
Release”) of all claims that the Executive might assert against
the Company, its parent company, any of their subsidiaries and/or affiliated
entities, and any successors or assigns to the foregoing (collectively, “Cinergy”) and certain
related entities and individuals as set forth therein and (ii) complies
with his obligations hereunder; and

 

WHEREAS, the parties have agreed
to enter into this Agreement, which has been specifically negotiated between
the Executive and Cinergy.

 

NOW, THEREFORE, the Company and
the Executive enter into the following Agreement:

 

Agreement

 

1.                                       Termination of Employment.

 

a.                                       Termination of Employment.  The Executive will terminate employment with
Cinergy effective as of the close of business on the Termination Date.

 

b.                                      Effect on Other Agreements.  Subject to Section 22, effective as of
the Termination Date, this Agreement will replace and supersede any and all
prior employment, separation and retirement agreements between Cinergy and the
Executive, including but not limited to the Employment Agreement between the
Executive and Cinergy dated as of January 1, 2002, as amended (the “Employment
Agreement”).

 

2.                                       Consideration.  In exchange for entering into this Agreement
and satisfying the conditions set forth herein, the Executive will receive the
consideration described below in this Section. 
The Executive acknowledges and agrees that he shall be entitled to no
other benefits or compensation from Cinergy or any of its benefit plans or
arrangements, other than the vested benefits, if any, to which he is entitled
under the terms of the Cinergy Corp. Non-Union Employees’ 401(k) Plan and the
Cinergy Corp. 401(k) Excess Plan.  Each
of the benefits described below in this Section only shall be provided to
the Executive if, upon presentation to the Executive, the Executive timely
executes and does not timely revoke the Waiver and Release.  Notwithstanding anything herein to the
contrary, Cinergy may withhold

 

 

from any amounts payable under this Agreement such federal, state,
local or other taxes as it reasonably determines are required to be withheld
pursuant to any applicable law or regulation.

 

a.                                       Severance Payment.  Cinergy agrees to pay the Executive a lump
sum cash payment equal to $3,550,193.

 

b.                                      Retiree Welfare Benefits.  The Executive and his spouse and eligible
dependents will be entitled to continue their medical and dental coverage
under the Cinergy Corp. Welfare Benefits Plan on the same basis as an
active non-union employee of Cinergy Services, Inc. for the 36-month
period following the Termination Date; provided, however, that the Executive
and his spouse and eligible dependents will be required to pay the same premiums
for such coverage as are applicable under COBRA, as such premiums may
change from time to time; provided, further, that this continuation coverage
will run concurrently with the rights of the Executive and his spouse and
eligible dependents under COBRA.  After the 36-month
period following the Termination Date, the Executive will be eligible
for access to post-retirement medical and dental coverage for the
Executive and his spouse and eligible dependents under the terms of the Cinergy
Corp. Welfare Benefits Program, as amended from time to time.  If the Executive elects to receive such coverage, he shall
be required to pay 100% of the unsubsidized premiums applicable to such
coverage, as such premiums may change from time to time.  Notwithstanding the foregoing, in the event
that the Executive and/or his spouse and eligible dependents shall be entitled
to coverage under another employer’s welfare benefit plan (for active or
retired employee benefits), the benefits to which they are entitled under the
Cinergy Corp. Welfare Benefits Program shall be secondary to the benefits to
which they are entitled under such other plan, and the Executive agrees that he
shall notify Cinergy as soon as practicable after he and/or his spouse and
eligible dependents become eligible for coverage under such other employer’s plan.

 

c.                                       Vacation Pay.  Pursuant to its vacation policy, the Company
agrees to pay Executive accrued vacation pay equal to $62,734.

 

d.                                      Stock Options.  Any rights the Executive may have with
respect to the stock options granted to the Executive pursuant to the Cinergy
Corp. 1996 Long-Term Incentive Compensation Plan (“LTIP”) will be determined
under the LTIP, the relevant administrative guidelines and any applicable stock
option agreement.  Notwithstanding the
foregoing, however, all stock options granted to the Executive under the LTIP
that are outstanding immediately prior to the Termination Date shall vest (to
the extent not already vested) on the Termination Date and shall remain
exercisable following the Termination Date in accordance with the terms of the
applicable stock option agreements as if the Executive were deemed to have “retired”
from Cinergy.

 

e.                                       Restricted Stock.  Any rights the Executive may have with
respect to the restricted stock granted to the Executive pursuant to the LTIP
will be determined under the LTIP, the relevant administrative guidelines and
any applicable restricted stock agreement. 
Notwithstanding the foregoing, however, all awards of restricted stock
granted to the Executive under the LTIP that are outstanding immediately prior
to the Termination Date shall vest (to the extent not already vested) on the
Termination Date and shall include all dividends that have accrued but that
have not yet been paid to the Executive with respect to such restricted stock.

 

2

 

f.                                         Performance Shares – Long Term
Incentive Plan.  In lieu of any amounts to which Executive may
otherwise be entitled under the three outstanding cycles of the Value Creation
Plan for performance shares granted under the LTIP, the Company agrees to pay
the Executive a lump sum cash payment equal to $1,150,585.

 

g.                                      Annual Incentive Plan.  In lieu of any amounts to which Executive may
otherwise be entitled under the Cinergy Corp. Annual Incentive Plan for the
2005 performance period, the Company agrees to pay the Executive a lump sum
cash payment equal to $195,729, which represents a prorated payout, assuming
target performance, of the Executive’s rights under the Cinergy Corp. Annual
Incentive Plan for the 2005 performance period.

 

h.                                      Supplemental Retirement Benefit.  The Company shall pay the following
supplemental retirement benefits to the Executive.  Notwithstanding any other provision of this
Agreement, such supplemental retirement benefits shall be administered and
distributed in a manner that complies with the provisions of Section 409A
of the Internal Revenue Code of 1986, as amended, so as to prevent the
inclusion in gross income of any amount in a taxable year that is prior to the
taxable year or years in which such amount would otherwise actually be
distributed or made available to the Executive or his beneficiaries.

 

(i)                                     Pursuant to the election of the
Executive, effective on March 1, 2009 Cinergy shall pay to the Executive
(or, in the event of his earlier death, to his estate) a lump sum cash payment
equal to $2,244,874.

 

(ii)                                  Effective on March 1, 2009,
Cinergy shall pay or commence paying one of the following, whichever is
applicable.

 

(A)     In the event that a Change in Control (as
defined in the LTIP) has not occurred prior to March 1, 2009, an annual
annuity (payable in equal monthly installments) equal to $155,020 during the
life of the Executive and, commencing upon the death of the Executive, an
annual annuity (payable in equal monthly installments) equal to $77,510 during
the life of the Executive’s surviving spouse, if any.

 

(B)     In
the event that a Change in Control (as defined in the LTIP) has occurred prior
to March 1, 2009, Cinergy shall pay to the Executive (or, in the event of
his earlier death, to his estate) a lump sum cash payment equal to $2,244,874.

 

i.                                          Office Space.  Cinergy shall provide
the Executive, at no charge, with suitable office space
and secretarial and other administrative support, and parking, at its
Cincinnati, Ohio offices during the one-year period commencing on the
Termination Date.

 

j.                                          Timing.  Unless otherwise specifically provided
herein, each of the payments described herein will be made no later than the
later of (i) ten (10) business days after the expiration of the
revocation period described in the Waiver and Release, (ii) the first
business day following the date this Agreement is approved by an authorized
officer of Duke Energy Corporation, as required by Section 22, or (iii) the
first business day following the date this Agreement is approved by the
Compensation Committee of the Board of Directors of Cinergy Corp., as required
by Section 22.

 

3

 

3.                                       Basis for Entitlement.  The Executive acknowledges that he would not
be entitled to certain benefits described in Section 2 of this Agreement
absent his termination of employment and his execution of this Agreement and
the Waiver and Release.

 

4.                                       Adequate Consideration.  The Executive agrees that the benefits
described in this Agreement constitute good, valuable and sufficient
consideration for the obligations the Executive assumes herein and in the
Waiver and Release.  The benefits offered
in exchange for the Executive’s execution of this Agreement and the Waiver and
Release exceed in kind and scope that to which the Executive would have
otherwise been legally entitled.

 

5.                                       Future Employment.  The Executive waives any right to assert any
claim or demand for reemployment with Cinergy. 
The Executive, however, may accept an offer of reemployment with Cinergy
in the event such an offer is made.

 

6.                                       Acknowledgement.  The Executive acknowledges and agrees that it
is the policy of Cinergy to comply with all applicable federal, state and local
laws and regulations.  The Executive
affirms that he has reported all compliance issues and violations of federal,
state and local law or regulation or Cinergy policy of which he had knowledge
during the term of his employment, if any. 
The Executive represents and acknowledges that he has no further or
additional knowledge or information regarding compliance issues or possible
violations of federal, state or local law or regulations or Cinergy policy
other than what the Executive may have previously raised, if any.

 

7.                                       Nondisclosure of Confidential
Information.  The Executive acknowledges that the
information, observations and data obtained by him while employed by Cinergy
concerning the business or affairs of Cinergy (unless and except to the extent
the foregoing become generally known to and available for use by the public
other than as a result of the Executive’s acts or omissions to act, and except
for Executive’s know-how and any information known to him prior to his
employment) (hereinafter defined as “Confidential Information”) are the property of Cinergy and he was and is required to
hold in a fiduciary capacity all Confidential Information obtained by him while
employed by Cinergy for the benefit of Cinergy as well as the successors and
assigns thereof.  Therefore, the
Executive agrees that he shall not disclose any Confidential Information
without the prior written consent of the Chief Legal Officer or the Chief
Executive Officer of Cinergy Corp. (which may be withheld for any reason or no
reason) unless and except to the extent that such disclosure is required by any
subpoena or other legal process (in which event the Executive will give the
Chief Legal Officer of Cinergy Corp. prompt notice of such subpoena or other
legal process in order to permit Cinergy to seek appropriate protective
orders), and that he shall not use any Confidential Information for his own
account without the prior written consent of the Chief Executive Officer of
Cinergy Corp. (which may be withheld for any reason or no reason).  As soon as possible after his execution of
this Agreement, the Executive shall deliver to the Company to the attention of
the Vice President, Human Resources, Cinergy Corp., 221 East Fourth Street, 30
AT II, Cincinnati, Ohio 45202, all memoranda, notes, plans, records, reports,
computer tapes and software and other documents and data (and copies thereof)
relating to the Confidential Information, or to the work product or the
business of Cinergy which he may possess or have under his control.  The Executive’s obligations under this Section are
in addition to, and not in limitation of or preemption of, all other
obligations of confidentiality which the Executive may have to Cinergy under
general legal or equitable principles, and federal, state or local law.

 

4

 

8.                                       Non-Solicitation,
Non-Competition.

 

a.                                       In General.  The Executive acknowledges that in the course
of his employment with Cinergy he may have become familiar with trade secrets
and customer lists of, and other confidential information concerning, Cinergy
and that his services have been of special, unique and extraordinary value to
Cinergy.

 

b.                                      Non-Solicitation
and Non-Competition.  The Executive agrees that for a
period of three (3) years beginning on the Termination Date he will not in
any manner, directly or indirectly, induce or attempt to induce any employee of
Cinergy to quit or abandon his or her employ. 
The Executive agrees that at no time during the one-year period
commencing on the Termination Date will he become employed in a position in
which he directly competes with Cinergy by personally purchasing or selling energy
commodities and/or other energy-related products, excluding senior executive
positions similar to the positions he held at Cinergy (e.g.,
Executive Vice President of Cinergy Corp., Chief Financial Officer of Cinergy
Corp., Chief Executive Officer of the Commercial Business Unit).

 

c.                                       Certain
Statements.  Except as
required by subpoena or other legal process (in which event the Executive will
give the Chief Legal Officer of Cinergy Corp. prompt notice of such subpoena or
other legal process in order to permit Cinergy or any affected individual to
seek appropriate protective orders), the Executive further agrees that he will refrain from
publishing or providing any oral or written statements about Cinergy, any of
its current or former officers, executives, directors, employees, agents or
representatives or any initiative, program or policy of Cinergy relating to any
matter whatsoever that are slanderous, libelous or defamatory, or that place
them in a false light before the public, or that constitute a misappropriation
of their name or likeness.  Except as
required by subpoena or other legal process (in which event Cinergy will give
Executive prompt notice of such subpoena or other legal process in order to
permit the Executive to seek appropriate protective orders), Cinergy further
agrees to refrain from publishing or providing any oral or written statements
about the Executive that are slanderous, libelous or defamatory, or that place
him in a false light before the public, or that constitute a misappropriation
of his name or likeness.

 

d.                                      Revision.  If, at the time of enforcement of this
Section, a court holds that the restrictions stated herein are unreasonable
under circumstances then existing, the parties hereto agree that the maximum
period or scope reasonable under such circumstances will be substituted for the
stated period or scope and that the court will be allowed to revise the
restrictions contained herein to cover the maximum period or scope permitted by
law.  The parties acknowledge that any alleged
breach of this Section could result in a claim for legal and/or equitable
damages by the aggrieved party.

 

9.                                       Cooperation With Litigation.  Upon the Company’s request, the Executive
agrees to render reasonable assistance to Cinergy in connection with any
litigation or investigation relating to Cinergy’s business, provided that
Executive is reasonably compensated for his time and reimbursed for reasonable
expenses, including attorney’s fees, incurred in connection with rendering such
assistance, and such assistance does not impose an unreasonable burden on the
Executive or interfere in any significant respect with Executive’s employment
or other business pursuits following the Termination Date.  Such assistance shall include, but not be
limited to, providing truthful information, attending meetings, assisting with
interrogatories, giving depositions and making court appearances.  The Executive agrees to promptly notify the
Chief Legal Officer of Cinergy Corp. of any

 

5

 

requests for information or testimony that the Executive receives in
connection with any litigation or investigation relating to Cinergy’s business.
 Cinergy
acknowledges that the Executive is entitled to those rights of indemnification
that are provided to similarly-situated former officers and employees pursuant
to its bylaws.

 

10.                                 Breach of this Agreement.  Because the Executive’s services are unique
and because the Executive has access to Confidential Information, the parties
agree that Cinergy would be damaged irreparably in the event any of the
provisions of Sections 7, 8, 9 and 11 were not performed in accordance with
their specific terms or were otherwise breached and that money damages would be
an inadequate remedy for any such non-performance or breach.  In the event that either party breaches or
threatens to breach any such provision of this Agreement or the Waiver and
Release, the parties agree that each shall be entitled to seek any and all
equitable and legal relief provided by law, specifically including immediate
and permanent injunctive relief to prevent any breach or threatened breach of
any of such provisions and to enforce such provisions specifically (without
posting a bond or other security).  Each
party hereby waives any claim that the other party has an adequate remedy at
law.  In addition, and to the extent not
prohibited by law, the parties agree that either party shall be entitled to an
award of all costs and attorneys’ fees reasonably incurred by it in any
successful effort to enforce the terms of this Agreement.  The parties agree that the foregoing relief
shall not be construed to limit or otherwise restrict either party’s ability to
pursue any other remedy provided by law, including the recovery of any actual,
compensatory or punitive damages. 
Moreover, if the Executive pursues any claims that he has waived in the
Waiver and Release or otherwise breaches this Agreement, (i) the Executive
agrees to immediately reimburse the Company for all amounts received by the
Executive pursuant to this Agreement to the fullest extent permitted by law,
and (ii) the Company will be relieved of any and all obligations to make
future payments to the Executive pursuant to this Agreement.

 

11.                                 Return of Corporate Property.  Except as otherwise provided in this
Agreement, the Executive agrees to return to Cinergy all keys, identification
badges, electronic passes, credit cards, computer programs, and other property
belonging to Cinergy when requested to do so by Cinergy’s representative.

 

12.                                 Continuing
Obligations.  The Executive
hereby affirms and acknowledges the Executive’s continuing obligations to
comply with the post-termination covenants contained in this Agreement,
including, but not limited to, the provisions of Sections 7, 8, 9, 10 and 11 of
this Agreement and the Waiver and Release. 
The Executive acknowledges that the restrictions contained therein are
valid and reasonable in every respect, are necessary to protect Cinergy’s
legitimate business interests and hereby affirmatively waives any claim or
defense to the contrary.

 

13.                                 No Admission of Liability.  The parties acknowledge that this Agreement
is entered into solely for the purpose of ending their employment relationship
on an amicable basis and shall not be construed as an admission of liability or
wrongdoing by any Party and that each Party expressly denies any such liability
or wrongdoing.

 

14.                                 No Reliance.                             The Executive does not rely, and
has not relied, upon any representation or statement made by Cinergy or by any
of Cinergy’s employees, officers, agents, stockholders, directors or attorneys
with regard to the subject matter, basis or effect of this Agreement other than
those specifically contained herein.  The
Executive expressly agrees to defend, indemnify and hold harmless Cinergy and
its directors, officers, employees,

 

6

 

agents, representatives and insurers from and against any and all tax
assessments, tax liens, penalties or interest assessed by the Internal Revenue
Service, or any other federal, state or local taxing authority on account of,
arising out of or in any way connected with this Agreement.  Notwithstanding the foregoing, in the event
that any benefits paid or payable to the Executive or for his benefit pursuant
to the terms of this Agreement or any other plan or arrangement in connection
with, or arising out of, his employment with Cinergy or a change in ownership
or effective control of Cinergy or of a substantial portion of its assets (“Payments”)
would be subject to any excise tax pursuant to Section 4999 of the
Internal Revenue Code of 1986, as amended, then the Executive will be
entitled to receive an additional payment (a “Gross-Up Payment”) in an amount
such that after payment by the Executive of all taxes (including any interest,
penalties, additional tax, or similar items imposed with respect thereto and
the excise tax), including any excise tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the excise tax
imposed upon or assessable against the Executive due to the Payments.  The Executive agrees to report any amounts
paid or benefits provided under this Agreement for purposes of federal, state
and local income, employment and excise taxes in a manner consistent with the
manner in which Cinergy reports any such amounts or benefits for purposes of
federal, state and local income, employment and excise taxes and the Executive
shall cooperate with Cinergy in good faith in connection with any valuation of
the restrictions and obligations under this Agreement.

 

15.                                 Severability.  The parties agree that each and every
paragraph, sentence, clause, term and provision of this Agreement is severable
and that, if any portion of this Agreement should be deemed not enforceable for
any reason, such portion shall be stricken and the remaining portion or
portions thereof should continue to be enforced to the fullest extent permitted
by applicable law.

 

16.                                 Consultation With Attorney
Advised.  The Executive is advised to consult with an
attorney prior to executing this Agreement. 
The Executive acknowledges being given that advice.  The Executive represents that he has read and
fully understands all of the provisions of this Agreement.  The Executive represents that he is
voluntarily signing this Agreement.

 

17.                                 Binding Effect of Agreement.   Subject to Section 22 of this
Agreement, this Agreement, once signed by each of the Executive and the Chief
Executive Officer of Cinergy Corp., will be binding upon and will operate for the benefit of
the heirs, executors, administrators, assigns, and successors in interest of
the Executive and Cinergy.  Cinergy
agrees that in the event of a sale, merger, acquisition, or other change in
structure (including the cessation or restructuring of any part of Cinergy’s
business) and/or ownership, Cinergy will ensure that the contract language
pertaining to the transaction confirms the continuing liability of Cinergy (and
its assigns and successors in interest) to the Executive under this Agreement.  The Executive agrees that Cinergy Services, Inc.
(and/or any of its authorized employees) is authorized to act for Cinergy with
respect to all aspects pertaining to this Agreement.

 

18.                                 Complete Agreement.  Except as otherwise expressly provided in
this Agreement, the terms of this Agreement constitute the entire Agreement
between the parties and supersede all previous communications, representations,
and agreements, oral or written, between the parties with respect to the
subject matter of this Agreement.  No
agreement or understanding modifying this Agreement will be binding on either
party unless it is in writing and signed by an authorized representative of the
party sought to be bound.  If any part of
this

 

7

 

Agreement is adjudged by a court of competent jurisdiction (or the
arbitrator(s) pursuant to Section 19) to be contrary to law, then this
Agreement will, in all other respects, remain effective and binding to the full
extent permitted by law.

 

19.                                 Arbitration.

 

a.                                       Any dispute between the parties under this
Agreement, the breach thereof, the Executive’s employment with Cinergy, or the
termination thereof, shall be resolved (except as provided below) through
informal arbitration by an arbitrator selected under the rules of the
American Arbitration Association (located in Cincinnati, Ohio) and the
arbitration shall be conducted in that location under the rules of said
Association, to the extent they do not conflict with this Agreement.

 

b.                                      Within thirty days of the notice of a demand
for arbitration, both parties shall exchange with one another documents in
their respective possession that are relevant to the dispute.  There shall be no interrogatories or depositions
taken in preparation for the arbitration; provided, however, that
the arbitrator may permit limited deposition discovery in extraordinary
circumstances and if necessary to avoid manifest injustice.  The grieving party shall file a written
statement explaining his or its claim, including relevant documentation, within
forty-five days of the notice for arbitration; the opposing party shall respond
within thirty days thereafter; and the grieving party may reply within fifteen
days of the response.   After this period
of limited discovery, a live hearing before the arbitrator will occur.  The arbitrator shall have the right only to
interpret and apply the provisions of this Agreement and may not change any of
its provisions.  The determination of the
arbitrator shall be conclusive and binding upon the parties and judgment upon
the same may be entered in any court having jurisdiction thereof.  The arbitrator shall give written notice to
the parties stating his or their determination and give written reasons for
his/their decision, and shall furnish to each party a signed copy of such
determination.

 

c.                                       The expenses of arbitration will be borne
equally by Executive and the Company, and each party will bear its own costs,
including attorneys’ fees; provided, however, that the arbitrator shall have the
power to award such expenses and costs, including attorneys’ fees, to the
prevailing party in accordance with applicable law and to require Cinergy at
the beginning of the proceedings to fully or partially reimburse (or provide an
advance to) Executive for expenses (but not for costs, including attorneys’
fees) in the event Executive can demonstrate that the amount of the expenses is
an unreasonable impediment to adjudication of his claims in arbitration.  If the arbitrator awards a monetary amount to
either party in excess of $1,000,000, the party against whom the award was made
may seek judicial resolution of the dispute under a de novo standard before any
court with appropriate jurisdiction over the matter.

 

d.                                      Notwithstanding
the foregoing, neither party shall be required to seek or participate in
arbitration regarding any breach by the other party of Sections 2, 7, 8, 9 and
11 of the Agreement, but may pursue its
remedies for such breach in a court of competent jurisdiction in Cincinnati,
Ohio.  Any arbitration or action pursuant
to this Section will be governed by and construed in accordance with the
substantive laws of the State of Ohio, without giving effect to the principles
of conflict of laws of such State.

 

8

 

20.                                 Governing Law and Venue.  This Agreement will be interpreted, enforced,
and governed under the laws of the State of Ohio, without regard to any principles
of conflicts of laws, and, subject to Section 19, venue shall be proper in
any court in Ohio having jurisdiction.

 

21.                                 Letter
of Reference; Inquiries. 
Cinergy shall provide the Executive, and any prospective employer that
so requests, with a mutually acceptable positive letter of reference including
written confirmation of the dates the Executive was employed by Cinergy and the
positions the Executive held during the period. 
Executive and Cinergy agree that all requests for a reference regarding
the Executive shall be directed to Cinergy’s Vice President, Human Resources,
for response.

 

22.                                 Required Approvals.  Notwithstanding anything in this Agreement to
the contrary, the parties acknowledge and agree that this Agreement shall not
become effective unless and until it is approved by the Compensation Committee
of the Board of Directors of Cinergy Corp. and by an authorized officer of Duke
Energy Corporation.

 

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

 

 

	
  CINERGY SERVICES, INC.

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ JAMES E. ROGERS

  	
   

  	
   

  	
  /s/ R. FOSTER DUNCAN

  	
   

  
	
   

  	
  James E. Rogers

  	
   

  	
  R. Foster Duncan

  
	
   

  	
  Chairman and Chief Executive Officer

  	
   

  
						

 

9

 

EXHIBIT A

 

*****

 

WAIVER AND RELEASE AGREEMENT

 

THIS WAIVER AND RELEASE AGREEMENT (this “Waiver and Release”) is entered into by and between
R. Foster Duncan (the “Executive”) and Cinergy Services, Inc. (the “Company”)
(collectively, the “Parties”).

 

WHEREAS, the Parties have entered into the Separation Agreement
dated June 30, 2005 (the “Agreement”);

 

WHEREAS, the Executive’s employment has been terminated in
accordance with the terms of the Agreement;

 

WHEREAS, the Executive is required to sign this Waiver and Release
in order to receive the payment of certain compensation under the Agreement
following termination of employment; and

 

WHEREAS, the Company has agreed to sign this Waiver and Release.

 

NOW, THEREFORE, in consideration of the promises and agreements contained
herein and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, and intending to be legally bound, the
Parties agree as follows:

 

1.                                       This Waiver and Release is
effective on the date hereof and will continue in effect as provided herein.

 

2.                                       In
consideration of the payments to be made and the benefits to be received by the
Executive pursuant to the Agreement (the “Benefits”), which the Executive
acknowledges are in addition to payment and benefits to which the Executive
would be entitled to but for the Agreement, the Executive, on behalf of himself,
his heirs, representatives, agents and assigns by dower or otherwise hereby
COVENANTS NOT TO SUE OR OTHERWISE VOLUNTARILY PARTICIPATE IN ANY LAWSUIT
AGAINST, FULLY RELEASES, INDEMNIFIES, HOLDS HARMLESS and OTHERWISE FOREVER
DISCHARGES (i) Cinergy, (ii) its compensation, benefit, incentive
(including, but not limited to, individual incentive, annual incentive,
long-term incentive and annual bonus), pension, welfare and other plans and
arrangements, and any predecessor or successor to any such plans and
arrangements and (iii) any of its current or former officers, directors,
agents, executives, employees, attorneys, insurers, shareholders, predecessors,
successors or assigns, from any and all actions, charges, claims, demands,
damages or liabilities of any kind or character whatsoever, known or unknown,
which the Executive now has or may have had whether or not based on or arising
out of the Executive’s employment relationship with Cinergy or the termination
of that employment relationship through the date of execution of this Waiver
and Release, other than workers’ compensation claims filed prior to the date of
execution of this Waiver and Release, and other than such claim as might arise
under the Agreement executed by the parties in connection with this Waiver and
Release and/or under the Waiver and Release. 
The Executive acknowledges and understands that in the event the
Executive files a charge or 

 

A-1

 

complaint with the Equal Employment
Opportunity Commission (“EEOC”), the Ohio Civil Rights Commission (“OCRC”), the
Indiana Civil Rights Commission (“ICRC”), the Texas Workforce Commission Civil
Rights Division (“TWCCRD”), the Occupational Safety and Health Administration (“OSHA”)
or the Secretary of Labor, the Executive shall be entitled to no relief,
reinstatement, remuneration, damages, back pay, front pay, or compensation
whatsoever from Cinergy as a result of such charge or complaint.  The Executive understands and agrees that
subject to the foregoing preservation of rights with regard to the Agreement
and the Waiver and Release, he is waiving and releasing any and all actions and
causes of action, suits, debts, claims, complaints and demands of any kind
whatsoever, in law or in equity, including, but not limited to, the following:

 

a.                                       Those
arising under any federal, state or local statute, ordinance or common law
governing or relating to the Parties’ employment relationship including, but
not limited to, (i) any claims on account of, arising out of or in any way
connected with the Executive’s hiring by Cinergy, employment with Cinergy or
the termination of that employment; (ii) any claims alleged or which could
have been alleged in any charge or complaint against Cinergy, including, but
not limited to, those with the EEOC, OCRC, ICRC, TWCCRD, OSHA and the Secretary
of Labor; (iii) any claims relating to the conduct, including action or
inaction, of any executive, employee, officer, director, agent or other
representative of Cinergy; (iv) any claims of discrimination, harassment
or retaliation on any basis; (v) any claims arising from any legal
restrictions on an employer’s right to separate its employees; (vi) any
claims for personal injury, compensatory or punitive damages, front pay, back
pay, liquidated damages, treble damages, legal and/or attorneys’ fees, expenses
and litigation costs or other forms of relief; (vii) any claims for
compensation and benefits; (viii) any cause of action or claim that could
have been asserted in any litigation or other dispute resolution process,
regardless of forum (judicial, arbitral or other), against any employee,
officer, director, agent or other representative of Cinergy; (ix) any
claim for, or right to, arbitration, and any claim alleged or which could have
been alleged in any charge, complaint or request for arbitration against
Cinergy; (x) any claim on account of, arising out of or in any way connected
with any employment agreement between the Executive and Cinergy; (xi) any claim
on account of, arising out of or in any way connected with the alleged
termination of the Executive’s employment for “good reason”;
(xii) any claim on account of, arising out of or in any way connected with
medical, dental, life insurance or other welfare benefit plan coverage; and (xiii)
all other causes of action sounding in contract, tort or other common law
basis, including, but not limited to: (a) the breach of any alleged oral
or written contract; (b) negligent or intentional misrepresentations; (c) wrongful
discharge; (d) just cause dismissal; (e) defamation; (f) interference
with contract or business relationship; (g) negligent or intentional
infliction of emotional distress; (h) promissory estoppel; (i) claims
in equity or public policy; (j) assault; (k) battery; (l) breach of employee
handbooks, manuals or other policies; (m) breach of fiduciary duty; (n) false
imprisonment; (o) fraud; (p) invasion of privacy; (q) whistleblower claims; and
(r) negligence, negligent hiring, retention or supervision; and

 

A-2

 

b.                                      Those
arising under any law relating to sex, age, race, color, religion, handicap or
disability, harassment, veteran status, sexual orientation, retaliation, or
national origin or Appalachian origin discrimination including, without
limitation, any rights or claims arising under Title VII of the Civil Rights
Act of 1866 and 1964, as amended, 42 U.S.C. §§ 1981 and 2000(e) et
seq.; the Civil Rights Act of 1991; the Age Discrimination in Employment
Act of 1967, as amended, 29 U.S.C. §§ 621 et  seq., as
amended by the Older Workers Benefit Protection Act; the Americans with
Disabilities Act of 1990, as amended, 42 U.S.C. §§ 12,101 et  seq.;
Sections 806 and 1107 of the Sarbanes-Oxley Act of 2002; the Fair Labor
Standards Act of 1938, 29 U.S.C. §§ 201 et  seq.; the
National Labor Relations Act, 29 U.S.C. §§ 151 et  seq.; the
Occupational Safety and Health Act, 29 U.S.C. §§ 651 et  seq.;
the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101, et
seq.; Ohio Civil Rights Statutes, Ohio Revised Code Chapter 4112 et
seq.; the Ohio Whistleblower Act, Ohio Revised Code § 4113.51, et
seq.; Ohio Workers’ Compensation Retaliation Statute, Ohio Revised Code § 4123.90;
the Indiana Civil Rights Act, IC § 22-9-1-12.1 et
seq.; Indiana Equal Pay Statute, IC § 20-8.1-6.1 et
seq.; Indiana Workers’ Compensation Statute, IC § 22-3-1-1
et  seq.; Indiana Whistleblower Statute, IC § 22-5-3-3
et  seq.; the Texas Commission on Human Rights Act, Tex. Lab.
Code. Ann. §§21.001 et seq.; Tex. Lab. Code. Ann. §§21.051; Tex. Lab.
Code. Ann. §§21.055, Texas Workers’ Compensation Act; Texas Whistleblower Act,
as such statutes may be amended from time to time; and

 

c.                                       Those
arising out of the Employee Retirement Income Security Act of 1974; and

 

d.                                      Those
arising out of the Family and Medical Leave Act, 29 U.S.C. §§ 2601 et
seq.; and

 

e.                                       Those
arising under the civil rights, labor and employment laws of any state,
municipality or local ordinance; and

 

f.                                         Any
claim for reinstatement, compensatory damages, back pay, front pay, interest,
punitive damages, special damages, legal and/or attorneys’ fees, expenses and
litigation costs including expert fees; and

 

g.                                      Any
other federal or state statute that affords employees or individuals protection
of any kind whatsoever.

 

3.                                       The Parties acknowledge that it
is their mutual and specific intent that this Waiver and Release fully complies
with the requirements of the Older Workers Benefit Protection Act (29 U.S.C. § 626)
and any similar law governing the release of claims.  Accordingly, the Executive hereby acknowledges
that:

 

a.                                       The
Executive has consulted with an attorney prior to executing this Waiver and
Release and acknowledges being given the advice to do so.  The Executive
represents that the Executive has read and fully understands all of the
provisions of this Waiver and Release.  The Executive represents that the
Executive is voluntarily signing this Waiver and Release.

 

A-3

 

b.                                      The
Executive has been offered at least twenty-one (21) days in which to review and
consider this Waiver and Release.

 

c.                                       The
Executive waives any right to assert any claim or demand for reemployment with
Cinergy.

 

4.                                       The Parties agree that this
Waiver and Release shall not become effective and enforceable until the date
this Waiver and Release is signed by both Parties or seven (7) calendar
days after its execution by Executive, whichever is later.  Executive may revoke this Waiver and Release
for any reason by providing written notice of such intent to the Company within
seven (7) days after he has signed this Waiver and Release, thereby
forfeiting Executive’s right to receive any Benefits and rendering this Waiver
and Release null and void in its entirety.

 

5.                                       In the event that either party
breaches or threatens to breach any provision of this Waiver and Release, it
agrees that the other party shall be entitled to seek any and all equitable and
legal relief provided by law, specifically including immediate and permanent
injunctive relief.  Each party hereby
waives any claim that the other party has an adequate remedy at law.  In addition, and to the extent not prohibited
by law, each party agrees that the other party shall be entitled to an award of
all costs and attorneys’ fees incurred by it in any successful effort to
enforce the terms of this Waiver and Release. 
Each party agrees that the foregoing relief shall not be construed to
limit or otherwise restrict either party’s ability to pursue any other remedy
provided by law, including the recovery of any actual, compensatory or punitive
damages.  Moreover, if Executive pursues
any claims against the Company subject to the foregoing Waiver and Release, other
than a claim to enforce the Waiver and Release itself, Executive agrees to
immediately reimburse the Company for the value of all Benefits received to the
fullest extent permitted by law.

 

6.                                       Cinergy hereby releases the
Executive, his heirs, representatives, agents and assigns from any and all
known claims, causes of action, grievances, damages and demands of any kind or
nature based on acts or omissions committed by the Executive during and in the
course of his employment with the Company provided such act or omission was
committed in good faith and occurred within the scope of his normal duties and
responsibilities.  Cinergy acknowledges that the
Executive is entitled to those rights of indemnification that are provided to
similarly-situated former officers and employees pursuant to its bylaws.

 

7.                                       The Parties acknowledge that
this Waiver and Release is entered into solely for the purpose of ending their
employment relationship on an amicable basis and shall not be construed as an
admission of liability or wrongdoing by either Party and that both Cinergy and
Executive have expressly denied any such liability or wrongdoing.

 

8.                                       Each of the promises and
obligations shall be binding upon and shall inure to the benefit of the heirs,
executors, administrators, assigns and successors in interest of each of the
Parties.

 

A-4

 

9.                                       The Parties agree that each and
every paragraph, sentence, clause, term and provision of this Waiver and
Release is severable and that, if any portion of this Waiver and Release should
be deemed not enforceable for any reason, such portion shall be stricken and
the remaining portion or portions thereof should continue to be enforced to the
fullest extent permitted by applicable law.

 

10.                                 This Waiver and Release shall be
governed by and interpreted in accordance with the laws of the State of Ohio
without regard to any applicable state’s choice of law provisions, and, subject
to the arbitration provisions in the Agreement, venue shall be proper in any
court in Ohio having jurisdiction.

 

11.                                 Executive represents and
acknowledges that in signing this Waiver and Release he does not rely, and has
not relied, upon any representation or statement made by Cinergy or by any of
Cinergy’s employees, officers, agents, stockholders, directors or attorneys
with regard to the subject matter, basis or effect of this Waiver and Release
other than those specifically contained herein.

 

12.                                 This Waiver and Release
represents the entire agreement between the Parties concerning the subject
matter hereof, shall supersede any and all prior agreements which may otherwise
exist between them concerning the subject matter hereof (specifically
excluding, however, the post-termination obligations contained in the
Agreement), and shall not be altered, amended, modified or otherwise changed
except by a writing executed by both Parties.

 

13.                                 Capitalized words and terms used
throughout this Waiver and Release that are not defined in this Waiver and
Release shall have the meaning given to such word or term in the Agreement.

 

A-5

 

PLEASE READ CAREFULLY.  WITH RESPECT TO THE EMPLOYEE, THIS

 

WAIVER AND RELEASE INCLUDES A
COMPLETE RELEASE OF ALL KNOWN

 

AND UNKNOWN CLAIMS.

 

IN WITNESS WHEREOF, the Parties have themselves
signed, or caused a duly authorized agent thereof to sign, this Waiver and
Release on their behalf and thereby acknowledge their intent to be bound by its
terms and conditions.

 

 

	
  EMPLOYEE

  	
  CINERGY SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signed:  

  	
   

  	
   

  	
  Signed:  

  	
   

  	
   

  
	
   

  	
   

  
	
  Printed:  

  	
  R. Foster Duncan

  	
  Title:  Chairman and
  Chief Executive Officer

  
	
   

  	
   

  
	
  Dated:   

  	
   

  	
   

  	
  Dated:  

  
								

 

A-6

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