WARRANT AGREEMENT
BETWEEN
INSIGHT HEALTH SERVICES CORP.
AND
CERTAIN WARRANT HOLDERS DEFINED HEREIN
DATED AS OF OCTOBER 14, 1997
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (the "Agreement") is made as of October 14,
1997 (the "Effective Date"), between InSight Health Services Corp., a
Delaware corporation (the "Company"), and Carlyle Partners II, L.P., a
Delaware limited partnership ("XX XX"), Xxxxxxx Partners III, L.P., a
Delaware limited partnership ("CP III"), Carlyle International Partners II,
L.P., a Cayman Islands exempted limited partnership ("CIP II"), Carlyle
International Partners III, L.P., a Cayman Islands exempted limited
partnership ("CIP III"), C/S International Partners, a Cayman Islands general
partnership ("C/S"), the State Board of Administration of Florida ("SBAF"),
Carlyle Investment Group, L.P., a Delaware limited partnership("CIG"),
Carlyle-Insight International Partners, L.P., a Cayman Islands exempted
limited partnership ("C-IIP"), and Carlyle-Insight Partners, L.P., a Delaware
limited partnership ("C-IP") (XX XX, CP III, CIP II, CIP III, C/S, SBAF, CIG,
C-IIP and C-IP, collectively, the "Warrant Holders" and, individually, a
"Warrant Holder").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company has entered into (i) that certain Securities
Purchase Agreement with the Warrant Holders dated as of October 14, 1997 (the
"Purchase Agreement"), pursuant to which the Company agrees, among other
things, to issue to the Warrant Holders warrants (the "Warrants") to purchase
up to an aggregate of two hundred fifty thousand (250,000) shares of common
stock, $.001 par value per share, of the Company (the "Common Stock," and the
Common Stock issuable upon exercise of the Warrants being herein referred to
as the "Warrant Shares"), and (ii) that certain Securities Purchase Agreement
with General Electric Company ("GE") dated as of October 14, 1997, pursuant
to which the Company agrees, among other things, to issue to GE warrants (the
"GE Warrant") to purchase up to an aggregate of two hundred fifty hundred
thousand (250,000) shares of Common Stock of the Company. Each Warrant shall
be a warrant to purchase one (1) Warrant Share, unless and until adjusted
pursuant to Section 10 hereof. Certain terms used herein and not elsewhere
defined are defined in the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and for other good and lawful consideration, the
receipt, sufficiency and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. WARRANT CERTIFICATE.
The certificates evidencing the Warrants (the "Warrant
Certificates") to be delivered pursuant to this Agreement shall be in
registered form only and shall be substantially in the form set forth in
Exhibit A attached hereto.
SECTION 2. EXECUTION OF WARRANT CERTIFICATE.
(a) The Warrant Certificates shall be signed on behalf of the
Company by its Chairman of the Board of Directors (the "Board") or its
President or a Vice President, and by its Secretary or an Assistant Secretary
under its corporate seal. Each such signature upon the Warrant Certificates
may be in the form of a facsimile signature of the present or any future
Chairman of the Board, President, Vice President, Secretary or Assistant
Secretary, as the case may be, and may be imprinted or otherwise
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reproduced on the Warrant Certificates. The seal of the Company may be in
the form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Warrant Certificates.
(b) In case any officer of the Company who shall have signed any
Warrant Certificate shall cease to be such officer before the Warrant
Certificate so signed shall have been disposed of by the Company, such
Warrant Certificate nevertheless may be delivered or disposed of as though
such person had not ceased to be such officer of the Company; and any Warrant
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Warrant Certificate, shall be a proper
officer of the Company to sign such Warrant Certificate, although at the date
of the execution of this Agreement any such person was not such officer.
SECTION 3. REGISTRATION.
The Company shall register the Warrant Certificates in a Warrant
register to be maintained by the Company (the "Warrant Register") when
Warrants are issued. The Company may deem and treat the registered holders of
the Warrant Certificates as the absolute owners thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone) for all
purposes and shall not be affected by any notice to the contrary.
SECTION 4. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) The Company shall from time to time register the transfer of
any outstanding Warrant Certificate in the Warrant Register upon surrender
thereof accompanied by a written instrument or instruments of transfer in
form satisfactory to the Company, duly executed by the registered holder or
holders thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney. Upon any such registration of transfer, a new
Warrant Certificate shall be issued to the transferee and the surrendered
Warrant Certificate shall be canceled and disposed of by the Company.
(b) The Warrant Holders agree that prior to any proposed transfer
of the Warrants or of the Warrant Shares, which transfer shall not be to any
Person engaged in the Business, if such transfer is not made pursuant to an
effective Registration Statement under the Securities Act of 1933, as amended
(the "Securities Act"), the Warrant Holder(s) will, if requested by the
Company, deliver to the Company:
(1) an investment representation letter reasonably
satisfactory to the Company signed by the proposed transferee;
(2) an agreement by such transferee to the impression of the
restrictive investment legend set forth below in Section 4(c) on
the Warrants or the Warrant Shares;
(3) an agreement by such transferee that the Company may place
a notation in the stock books of the Company or a "stop transfer
order" with any transfer agent or registrar with respect to the
Warrant Shares;
(4) an agreement by such transferee to be bound by the
provisions of this Section 4 relating to the transfer of such
Warrants or Warrant Shares; and
(5) except in the case of a transfer pursuant to Rule 144
promulgated pursuant to the Securities Act, or any successor rule,
prior to consummating any private sale or transfer of such Warrants
or Warrant Shares, the written opinion of reputable legal counsel
in form reasonably
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acceptable to the Company that such sale or transfer is being made
in compliance with applicable federal securities laws.
(c) The Warrant Holders agree that each certificate
representing Warrants or Warrant Shares will bear the following
legend until such Warrants or Warrant Shares have been sold
pursuant to an effective registration statement under the
Securities Act:
"THE SECURITIES EVIDENCED OR CONSTITUTED HEREBY HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SUCH SECURITIES MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER
SAID ACT AND THE RULES AND REGULATIONS THEREUNDER
AND OF ALL APPLICABLE STATE SECURITIES OR "BLUE SKY"
LAWS OR AN EXEMPTION THEREFROM UNDER SAID ACT AND
ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.
IN THE CASE OF A SALE OF THE SECURITIES EVIDENCED OR
CONSTITUTED HEREBY, OTHER THAN A SALE PURSUANT TO A
VALID REGISTRATION STATEMENT UNDER SAID ACT OR A
SALE PURSUANT TO RULE 144 PROMULGATED UNDER SAID
ACT, THE HOLDER OF THE SECURITIES EVIDENCED OR
CONSTITUTED HEREBY SHALL PROVIDE TO THE CORPORATION
THE WRITTEN OPINION OF REPUTABLE LEGAL COUNSEL IN
FORM REASONABLY ACCEPTABLE TO THE CORPORATION THAT
SUCH SALE OR TRANSFER IS BEING MADE IN COMPLIANCE
WITH APPLICABLE FEDERAL SECURITIES LAWS."
(d) A Warrant Certificate may be exchanged at the option of the
holder(s) thereof, when surrendered to the Company at its office for another
Warrant Certificate or other Warrant Certificates of like tenor and
representing in the aggregate a like number of Warrants. A Warrant
Certificate surrendered for exchange shall be canceled and disposed of by the
Company
SECTION 5. WARRANTS; EXERCISE OF WARRANTS.
(a) Subject to the terms of this Agreement, the Warrant Holders
shall have the right, which may be exercised during the period commencing on
the Effective Date until 5:00 p.m., Washington, D.C. time, on the fifth
anniversary of the Effective Date (the "Exercise Period"), to receive from
the Company the number of fully paid and non-assessable Warrant Shares that
the Warrant Holder may at the time be entitled to receive on exercise of the
number of Warrants that the Warrant Holder elects to exercise and payment of
the Exercise Price (as defined below) then in effect for such Warrant Shares.
In the alternative, the Warrant Holder may exercise its right, during the
Exercise Period, to receive Warrant Shares on a net basis, such that, without
payment of any funds kind, the Warrant Holder receives that number of Warrant
Shares equal to the number of Warrants being exercised times the quotient of
(i) the "fair market value" of a Warrant Share (as defined below) minus the
Exercise Price, divided by (ii) the fair market value of a Warrant Share.
For purposes of the foregoing sentence, "fair market value" of a Warrant
Share shall mean the average of the closing prices of the Common Stock's
sales on all domestic
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securities exchanges on which such Common Stock may at the time be listed,
or, if there have been no sales on any such exchange on any day, the average
of the highest bid and lowest asked prices on all such exchanges at the end
of such day, or, if on any day such Common Stock is not so listed, the
average of the representative bid and asked prices quoted on Nasdaq as of
4:00 P.M., New York time, on such day, or, if on any day such Common Stock is
not quoted on Nasdaq, the average of the highest bid and lowest asked prices
on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor
organization, in each such case averaged over a period of twenty-one (21)
business days consisting of the day as of which the "fair market value" of
the Warrant Shares is being determined and the twenty (20) consecutive
business days prior to such day; provided that if such Common Stock is listed
on any domestic securities exchange the term "business days" as used in this
sentence means business days on which such exchange is open for trading. If
at any time such Common Stock is not listed on any domestic securities
exchange or quoted on Nasdaq or the domestic over-the-counter market, the
"fair market value" of the Warrant Shares shall be the fair value thereof
determined by the Company and approved by the Warrant Holder; provided that
if such parties are unable to reach agreement within a reasonable period of
time, such fair market value shall be determined by an appraiser reasonably
selected by the Company and reasonably approved by the Warrant Holder. The
determination of such appraiser shall be final and binding on the Company and
the Warrant Holder, and the fees and expenses of such appraiser shall be paid
by the Company, unless the fair market value determined by such appraiser is
less than five percent (5%) above the value proposed in writing by the
Company and rejected by the Warrant Holder prior to the selection of such
appraiser, in which event the fees and expenses of such appraiser shall be
for the Warrant Holder's account. Each Warrant not exercised prior to 5:00
p.m., Washington, D.C. time, on the fifth anniversary of the Effective Date
shall become void and all rights thereunder and all rights in respect thereof
under this agreement shall cease as of such time. No adjustments as to
dividends will be made upon exercise of the Warrants.
(b) A Warrant may be exercised upon surrender to the Company at its
office designated for such purpose (the address of which is set forth in
Section 14 hereof) of the certificate or certificates evidencing the Warrants
to be exercised with the form of election to purchase on the reverse thereof
duly filled in and signed, and upon (i) payment to the Company of the
exercise price of ten dollars ($10.00) per Warrant Share, as adjusted as
herein provided (as so adjusted, the "Exercise Price"), for the number of
Warrant Shares in respect of which such Warrants are then exercised, or (ii)
the Warrant Holder's exercise of its right to receive Warrant Shares on a net
basis, as more fully described in Section 5(a). Payment of the aggregate
Exercise Price shall be made (i) in cash or by certified or official bank
check payable to the order of the Company or (ii) in the manner provided in
subsection (a) of this Section 5.
(c) Subject to the provisions of Section 6 hereof, upon such
surrender of Warrants and payment of the Exercise Price, the Company shall
issue and cause to be delivered with all reasonable dispatch to or upon the
written order of the Warrant Holder and in such name or names as the Warrant
Holder may designate, a certificate or certificates for the number of full
Warrant Shares issuable upon the exercise of such Warrants together with cash
as provided in Section 11; PROVIDED, HOWEVER, that if any consolidation,
merger, or sale or other transfer of all or substantially all of the assets
of the Company is proposed to be effected by the Company, or a tender offer
or an exchange offer for shares of Common Stock of the Company shall be made,
upon such surrender of Warrants and payment of the Exercise Price as
aforesaid, the Company shall, as soon as practicable, but in any event not
later than five business days thereafter, issue and cause to be delivered the
full number of Warrant Shares issuable upon the exercise of such Warrants in
the manner described in this sentence together with cash as provided in
Section 11. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to
have become a holder of record of such Warrant Shares as of the date of the
surrender of such Warrants and payment of the Exercise Price.
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(d) The Warrants shall be exercisable, at the election of the
holder thereof, either in full or from time to time in part and, in the event
that a Warrant Certificate evidencing Warrants is exercised in respect of
fewer than all of the Warrant Shares issuable on such exercise at any time
prior to the date of expiration of the Warrants, a new Warrant Certificate
evidencing the remaining Warrant or Warrants will be issued and delivered by
the Company and at its expense pursuant to the provisions of this Section and
of Section 2 hereof.
(e) All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled and disposed of by the Company. The Company shall keep
copies of this Agreement and any notices given or received hereunder
available for inspection by the Warrant Holder during normal business hours
at its office.
SECTION 6. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes or other similar
taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; PROVIDED, HOWEVER, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issue of any Warrant Certificate or any certificates
for Warrant Shares in a name other than that of the registered holder of a
Warrant Certificate surrendered upon the exercise of a Warrant, and the
Company shall not be required to issue or deliver such Warrant Certificates
unless or until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
SECTION 7. MUTILATED OR MISSING WARRANT CERTIFICATES.
In case any of the Warrant Certificates shall be mutilated, lost,
stolen or destroyed, the Company may issue, in exchange and substitution for,
and upon cancellation of, the mutilated Warrant Certificate, or in lieu of
and substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant Certificate and
indemnity, if requested, also reasonably satisfactory to it. Applicants for
such substitute Warrant Certificates shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Company
may prescribe.
SECTION 8. RESERVATION OF WARRANT SHARES.
(a) The Company will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock or its authorized and issued Common Stock held in its treasury,
for the purpose of enabling it to satisfy any obligation to issue Warrant
Shares upon exercise of Warrants, the maximum number of shares of Common
Stock which may then be deliverable upon the exercise of all outstanding
Warrants.
(b) The Company or, if appointed, the transfer agent for the Common
Stock (the "Transfer Agent") and every subsequent Transfer Agent for any
shares of the Company's capital stock issuable upon the exercise of any of
the rights of purchase aforesaid will be irrevocably authorized and directed
at all times to reserve such number of authorized shares as shall be required
for such purpose. The Company will keep a copy of this Agreement on file with
the Transfer Agent and with every subsequent transfer agent for any shares of
the Company's capital stock issuable upon the exercise of the rights of
purchase
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represented by the Warrants. The Company will furnish such Transfer
Agent a copy of all notices of adjustments and certificates related thereto
transmitted to each holder pursuant to Section 13 hereof.
(c) Before taking any action which would cause an adjustment
pursuant to Section 10 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take any corporate
action which may, in the opinion of its counsel (which may be counsel
employed by the Company), be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.
(d) The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants will, upon issue, be fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens,
charges and security interests with respect to the issue thereof
SECTION 9. STOCK EXCHANGE LISTINGS.
The Company will from time to time take all commercially reasonable
action, at its expense, which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed
and maintained on the principal securities exchanges and markets within the
United States of America, if any, on which other shares of Common Stock are
then listed and registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or authorized for quotation on Nasdaq,
provided, however, that the payment of any required listing or other fee
shall always be deemed to be "commercially reasonable" for purposes of this
Section 9.
SECTION 10. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES
ISSUABLE.
(a) In order to prevent the dilution of the rights granted under
this Agreement, the Exercise Price shall be subject to adjustment from time
to time as provided in this Section 10, and the number of shares of Common
Stock obtainable upon exercise of the Warrants shall be subject to adjustment
from time to time as provided in this Section 10. For purposes of this
Section 10, "Trigger Price" shall be $6.75 per share of Common Equity;
"Convertible Security" means any stock or securities, directly or indirectly,
convertible into or exchangeable for Common Equity, including without
limitation any exchangeable debt securities; "Option" shall mean any rights
or options to subscribe for or purchase Common Equity or Convertible
Securities.
(b) If and whenever the Company issues or sells or, in accordance
with Section 10(c), is deemed to have issued or sold, any share of Common
Equity without consideration or for a net consideration per share less than
the Trigger Price, then immediately upon such issuance or sale, the Exercise
Price, which shall equal $10 per share until the first such issuance or sale
below the Trigger Price, shall be reduced to the price per share determined
by dividing (i) an amount equal to the sum of (A) the number of shares of
Common Equity outstanding immediately prior to such issuance multiplied by
the Exercise Price in effect immediately prior to such issuance, and (B) the
consideration, if any, received by the Company upon such issuance, by (ii)
the total number of shares of Common Equity outstanding immediately after
such issuance.
Notwithstanding the foregoing, there shall be no adjustment to the
Exercise Price with respect to the granting of, or issuance of Common Equity
upon exercise of, stock options to employees of the Company authorized but
not granted as of the Effective Date for an aggregate of up to 300,000 shares
of Common Equity (as such shares are equitably adjusted for subsequent stock
splits, stock combinations, stock dividends and recapitalizations). For
purposes of this Section 10, "Common Equity" means all
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shares now or hereafter authorized of any class of common stock of the
Company (including the Common Stock) and any other stock of the Company,
however designated, authorized on or after the date hereof, which has the
right (subject always to prior rights of any class or series of preferred
stock) to participate in any distribution of the assets or earnings of the
Company without limit as to per share amount, and "Fully Diluted Equity"
means, with respect to the Company at any given time, (A) the number of
shares of Common Equity actually outstanding at such time, plus (B) the
maximum number of shares of Common Equity that are issuable upon the
exercise, exchange or conversion of any unexpired right or unexpired option
(including the Warrants) to subscribe for, to purchase or to receive Common
Equity or other securities convertible into or exchangeable for Common
Equity, including without limitation any exchangeable debt securities,
regardless of whether any of the foregoing are actually exercisable at such
time; provided, however, the number of shares of Common Equity outstanding at
any given time shall not include shares, directly or indirectly, owned or
held by or for the account of the Company.
(c) For purposes of determining the adjusted Exercise Price under
Section 10(b) above, the following shall be applicable:
(1) CONSIDERATION. If any Common Equity, Options or Convertible
Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be
(i) in the case of any public offering of such securities for cash,
the gross proceeds of such offering (without deduction for any
underwriters discount) and (ii) in the case of any other issuance,
sale or deemed issuance or sale for cash, the gross amount received
by the Company therefor. In case any Common Equity, Options or
Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received
by the Company shall be the fair market value of such consideration.
In case any Common Equity, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with
any merger in which the Company is the surviving corporation, the
amount of consideration therefor shall be deemed to be the fair
market value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Equity,
Options or Convertible Securities, as the case may be. The fair
market value of any consideration other than cash shall be
determined jointly by the Company and a majority in interest of the
Warrant Holders. If such parties are unable to reach agreement
within a reasonable period of time, such fair market value shall be
determined by an appraiser reasonably selected by the Company and
reasonably approved by such Warrant Holders. The determination of
such appraiser shall be final and binding on the Company and the
Warrant Holders, and the fees and expenses of such appraiser shall
be paid by the Company, unless the fair market value determined by
such appraiser is less than five percent (5%) above the value
proposed in writing by the Company and rejected by such Warrant
Holders prior to the selection of such appraiser, in which event the
fees and expenses of such appraiser shall be for such Warrant
Holders' account.
(2) OPTIONS AND CONVERTIBLE SECURITIES. In the case of the
granting or sale of any Option or Convertible Security (whether or
not at the time convertible, exercisable or exchangeable):
(A) the aggregate maximum number of shares of Common Equity
deliverable, directly or indirectly, upon exercise of any
Option shall be deemed to have been issued at the time such
Option was granted and for a consideration equal to the
consideration (determined in the manner provided in subsection
(1) above), if any, received by the Company upon the issuance
of
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such Option plus the minimum purchase price provided in such
Option for the Common Equity covered thereby;
(B) the aggregate maximum number of shares of Common Equity
deliverable upon conversion of or in exchange for any such
Convertible Security, or upon the exercise of any Option to
purchase or acquire any Convertible Security and the subsequent
conversion or exchange thereof, shall be deemed to have been
issued at the time such Convertible Security was issued or such
Option was issued and for a consideration equal to the
consideration, if any, received by the Company for any such
Convertible Security and any related Option (excluding any cash
received on account of accrued interest or accrued dividends),
plus the additional consideration (determined in the manner
provided in subsection (1) above), if any, to be received by
the Company upon the conversion or exchange of such Convertible
Security, or upon the exercise of any related Option to purchase
or acquire any Convertible Security and the subsequent
conversion or exchange thereof;
(C) on any change in the number of shares of Common Equity
deliverable, directly or indirectly, upon conversion, exercise
or exchange of any such Option or Convertible Security or any
change in the consideration to be received by the Company upon
such exercise, conversion or exchange, including, but not
limited to, a change resulting from the anti-dilution provisions
thereof, the Exercise Price as then in effect shall forthwith
be readjusted to such Exercise Price as would have been obtained
had an adjustment been made upon the issuance of such Option or
Convertible Security upon the basis of such change;and
(D) if the Exercise Price shall have been adjusted upon the
issuance of any such Option or Convertible Security, no further
adjustment of the Exercise Price shall be made for the actual
issuance of Common Equity upon any exercise, conversion, or
exchange thereof;
provided, however, that none of the events set forth in Section 10(c)(2)(A)
through 10(c)(2)(D), inclusive, shall result in any increase in the Exercise
Price.
(3) INTEGRATED TRANSACTION. In case any Option is issued in connection
with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options shall be deemed
to have been issued without consideration.
(4) TREASURY SHARES. The number of shares of Common Equity outstanding
at any given time does not include shares owned or held by or for the account
of the Company, and the disposition of any shares so owned or held shall be
considered an issuance or sale of Common Equity.
(5) RECORD DATE. If the Company takes a record of the holders of
Common Equity for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Equity, Options or in Convertible
Securities or (B) to subscribe for or purchase
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Common Equity, Options or Convertible Securities, then such record
date shall be deemed to be the date of the issuance or sale of the
shares of Common Equity deemed to have been issued or sold upon the
declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(d) If the Company at any time subdivides (by any stock split,
stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Equity into a greater number of shares, the
Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced and the number of shares of Common Stock obtainable
upon exercise of the Warrant shall be proportionately increased. If the
Company at any time combines (by reverse stock split or otherwise) one or
more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased and the number of shares of Common Stock
obtainable upon exercise of this Warrant shall be proportionately decreased.
(e) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets or other transaction, in each case which is effected in such a way
that the holders of Common Equity are entitled to receive (either directly or
upon subsequent liquidation) stock, securities or assets with respect to or
in exchange for Common Equity is referred to herein as a "Corporate Change."
Prior to the consummation of any Corporate Change, the Company shall make
appropriate provision (in form and substance satisfactory to the Warrant
Holder) to insure that the Warrant Holder shall thereafter have the right to
acquire and receive, in lieu of or in addition to (as the case may be) the
Warrant Shares acquirable and receivable upon the exercise of such holder's
Warrants, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for the number of Warrant Shares
acquirable and receivable upon exercise of such holder's Warrant had such
Corporate Change not taken place. In any such case, the Company shall make
appropriate provision (in form and substance reasonably satisfactory to the
Warrant Holder) with respect to such holder's rights and interests to insure
that the provisions of this Agreement shall thereafter be applicable to the
Warrants (including, in the case of any such consolidation, merger or sale in
which the successor entity or purchasing entity is other than the Company,
any adjustment of the Exercise Price based on Section 10 hereof). The
Company shall not effect any such consolidation, merger or sale, unless prior
to the consummation thereof, the successor entity (if other than the Company)
resulting from consolidation or merger or the entity purchasing such assets
assumes by written instrument (in form and substance reasonably satisfactory
to the Warrant Holder), the obligation to deliver to the Warrant Holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
(f) If any event occurs of the type contemplated by the provisions
of this Section 10 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the
Company's Board shall make an appropriate adjustment in the Exercise Price
and the number of shares of Common Stock obtainable upon exercise of this
Warrant so as to protect the rights of the Warrant Holder; provided that no
such adjustment shall increase the Exercise Price or decrease the number of
shares of Common Stock obtainable as otherwise determined pursuant to this
Section 10.
(g) If the Company declares or pays a dividend upon the Common Equity
payable otherwise than in cash out of earnings or earned surplus (determined
in accordance with generally accepted accounting principles, consistently
applied) except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Company shall pay to the Warrant Holder at
the time of
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payment thereof the Liquidating Dividend which would have been paid to such
Warrant Holder on the Common Stock had the Warrants been fully exercised
immediately prior to the date on which a record is taken for such Liquidating
Dividend, or, if no record is taken, the date as of which the record holders of
Common Equity entitled to such dividends are to be determined.
SECTION 11. FRACTIONAL INTERESTS.
The Company shall not be required to issue fractional Warrant
Shares upon the exercise of Warrants. If more than one Warrant shall be
presented for exercise in full at the same time by the Warrant Holder, the
number of full Warrant Shares which shall be issuable upon the exercise
thereof shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of the Warrants so presented. If any fraction
of a Warrant Share would, except for the provisions of this Section 11, be
issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the "fair market value"
(determined as provided in Section 5(a) above) of the Common Stock on the day
immediately preceding the date the Warrant is presented for exercise,
multiplied by such fraction.
SECTION 12. FINANCIAL STATEMENTS.
(a) Whether or not required by the rules and regulations of
the Securities and Exchange Commission (the "Commission"), so long as any of
the Warrants remain outstanding, the Company shall furnish to the Warrant
Holders (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company were required to file such Forms, including "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report thereon by the
Company's certified independent accountants and (ii) all current reports that
would be required to be filed with the Commission on Form 8-K if the Company
were required to file such reports. In addition, whether or not required by
the rules and regulations of the Commission, the Company shall file a copy of
all such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing).
(b) The Company shall, so long as any of the Warrants are
outstanding, deliver to the Warrant Holders, forthwith upon any Executive
Officer of the Corporation becoming aware of any default under this
Agreement, an Officers' Certificate specifying such default and what action
the Company is taking or proposes to take with respect thereto.
SECTION 13. NOTICES TO WARRANT HOLDERS.
(a) Upon any adjustment of the Exercise Price or exercise
privileges pursuant to Section 10, the Company shall promptly thereafter (i)
cause to be filed with the Company a certificate of a firm of independent
public accountants of recognized standing, selected by the Board (who may be
the regular auditors of the Company) and acceptable to the Warrant Holders,
setting forth the Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and setting forth the number of Warrant Shares (or
portion thereof) issuable after such adjustment in the Exercise Price, which
certificate shall be conclusive evidence of the correctness of the matters
set forth therein, upon exercise of a Warrant and payment of the adjusted
Exercise Price, and (ii) cause to be given to each of the registered holders
of the Warrant Certificate(s), at his or her address appearing on the Warrant
register, written notice of such adjustments by first-class
10
mail, postage prepaid. Where appropriate, such notice may be given in
advance and included as a part of the notice required to be mailed under the
other provisions of this Section 13.
(b) In case:
(1) the Company shall authorize the issuance to all holders
of shares of Common Stock of the Company rights to subscribe for,
or to purchase shares of, Common Stock or of any other
subscription rights or warrants; or
(2) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its
indebtedness or assets; or
(3) of any consolidation or merger to which the Company is
a party and for which approval of any shareholders of the Company
is required, or of the conveyance or transfer of the properties
and assets of the Company substantially as an entirety, or of
any reclassification or change of Common Stock issuable upon
exercise of the Warrants, or a tender offer or exchange offer
for shares of Common Stock; or
(4) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company or a Liquidating
Dividend; or
(5) the Company proposes to take any action which would
require an adjustment of the Exercise Price or the Warrant
Shares pursuant to Section 10;
then the Company shall cause to be given to each of the registered holders of
the Warrant Certificates at his or her address appearing on the Warrant
register, at least twenty (20) days prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is
no record date, by first-class mail, postage prepaid, a written notice
stating (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such rights or distribution are to be
determined, or (ii) the initial expiration date set forth in any tender offer
or exchange offer for shares of Common Stock, or (iii) the date on which any
such consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock shall
be entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the
notice required by this Section 13 or any defect therein shall not affect the
legality or validity of any distribution, right, option, warrant,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up, or the vote upon any action.
(c) Nothing contained in this Agreement or in the Warrant
Certificate shall be construed as conferring upon the holders thereof the
right to vote or to consent or to receive notice as shareholders in respect
of the meetings of shareholders or the election of Directors of the Company
or any other matter, or any rights whatsoever as shareholders of the Company.
SECTION 14. NOTICES TO THE COMPANY AND THE WARRANT HOLDERS.
(a) Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to the other
shall be in writing and delivered by hand-delivery, registered first-class
mail, return receipt requested, facsimile or air courier guaranteeing
overnight delivery, as follows:
11
If to the Company: InSight Health Services Corp.
0000 XxxXxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Facsimile: 714.851.4488
Attn: Chief Financial Officer
With a copy to: XxXxxxxxx, Will & Xxxxx
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Facsimile: 310.277.4730
Attn: Xxxx X. Xxxxxxxxx, Esq.
and
Arent, Fox, Kintner, Xxxxxxx & Xxxx
0000 Xxxxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Facsimile: 202.857.6395
Attn: Xxxxxx X. XxXxxxxx, Esq.
If to the Purchaser: c/o The Carlyle Group
0000 Xxxxxxxxxxxx Xxxxxx, X X
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Facsimile: 202.347.9250
Attn: Xxxxx X. Xxxxxx
With a copy to: Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Facsimile: 202.467.0539
Attn: Xxxx X. Xxxxx, Esq.
or to such other place and with such other copies as either party may
designate as to itself by written notice to the other. All such notices,
requests, instructions or other documents shall be deemed to have been duly
given at the time delivered by hand, if personally delivered, four (4)
business days after being deposited in the mail, postage prepaid, if mailed,
when receipt is acknowledged by addressee, if by facsimile, or on the next
business day, if timely delivered to an air courier guaranteeing overnight
delivery.
SECTION 15. SUPPLEMENTS AND AMENDMENTS.
The Company may from time to time supplement or amend this
Agreement with the express written approval of the holder(s) of the Warrant
Certificate(s) in order to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions in regard to matters
or questions arising hereunder which the Company may deem necessary or
desirable and which shall not in any way adversely affect the interests of
the holder(s) of Warrant Certificate(s).
12
SECTION 16. SUCCESSORS.
All the covenants and provisions of this Agreement by or for
the benefit of the Company shall bind and inure to the benefit of its
respective successors and assigns hereunder. All the covenants and
provisions by or for the benefit of the Warrant Holders shall bind and inure
to the benefit of their respective successors and assigns hereunder.
SECTION 17. TERMINATION.
This Agreement shall terminate at 5:00 p.m., Eastern Standard
Time on the fifth anniversary of the Effective Date. Notwithstanding the
foregoing, this Agreement will terminate on any earlier date if all Warrants
have been exercised.
SECTION 18. GOVERNING LAW.
This Agreement and each Warrant Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of New York
and for all purposes shall be construed in accordance with the internal laws
of said State.
SECTION 19. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any
person or corporation other than the Company and the registered holder(s) of
the Warrant Certificate(s) any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company and the registered holder(s) of the Warrant
Certificate(s).
SECTION 20. HSR ACT.
The Company shall cooperate with any Warrant Holder, promptly
after receipt of notice from any such Warrant Holder of its intention to
exercise any Warrants, in making all filings required to be made under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act") in connection with such exercise; provided, however, that in no event
shall such cooperation include payment of any fee which may be required to be
paid. The applicable waiting period, including any extension thereof, under
the HSR Act shall have expired or been terminated prior to the issuance of
any Warrant Shares upon exercise of Warrants.
SECTION 21. COUNTERPARTS.
This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but
one and the same instrument.
13
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written
INSIGHT HEALTH SERVICES CORP.,
a Delaware corporation
By: ___________________________________
Name: ___________________________________
Title:___________________________________
CARLYLE PARTNERS II, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., its General Partner
By: ___________________________________
Name: ___________________________________
Title:___________________________________
CARLYLE PARTNERS III, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., its General Partner
By: ___________________________________
Name: ___________________________________
Title:___________________________________
CARLYLE INTERNATIONAL PARTNERS II, L.P.,
a Cayman Islands exempted limited partnership
By: TC Group, L.L.C., its General Partner
By: ___________________________________
Name: ___________________________________
Title:___________________________________
1
CARLYLE INTERNATIONAL PARTNERS III, L.P.,
a Cayman Islands exempted limited partnership
By: TC Group, L.L.C., its General Partner
By: ___________________________________
Name: ___________________________________
Title:___________________________________
C/S INTERNATIONAL PARTNERS,
a Cayman Islands general partnership
By: TC Group, L.L.C., its General Partner
By: ___________________________________
Name: ___________________________________
Title:___________________________________
STATE BOARD OF ADMINISTRATION OF FLORIDA,
a separate account maintained pursuant to an
Investment Management Agreement dated as of
September 6, 1996 between the State Board of
Administration of Florida, Carlyle Investment
Group, L.P. and Carlyle Investment
Management, L.L.C.
By: Carlyle Investment Management, L.L.C.,
as Investment Manager
By: ___________________________________
Name: ___________________________________
Title:___________________________________
CARLYLE INVESTMENT GROUP, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., its General Partner
By: ___________________________________
Name: ___________________________________
Title:___________________________________
2
CARLYLE-INSIGHT INTERNATIONAL
PARTNERS, L.P.,
a Cayman Islands exempted limited partnership
By: TC Group, L.L.C., its General Partner
By: ___________________________________
Name: ___________________________________
Title:___________________________________
CARLYLE-INSIGHT PARTNERS, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., its General Partner
By: ___________________________________
Name: ___________________________________
Title:___________________________________
3
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
"THE SECURITIES EVIDENCED OR CONSTITUTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SAID ACT AND
THE RULES AND REGULATIONS THEREUNDER AND OF ALL APPLICABLE STATE SECURITIES
OR "BLUE SKY" LAWS OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ALL
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. IN THE CASE OF A SALE OF THE
SECURITIES EVIDENCED OR CONSTITUTED HEREBY, OTHER THAN A SALE PURSUANT TO A
VALID REGISTRATION STATEMENT UNDER SAID ACT OR A SALE PURSUANT TO RULE 144
PROMULGATED UNDER SAID ACT, THE HOLDER OF THE SECURITIES EVIDENCED OR
CONSTITUTED HEREBY SHALL PROVIDE TO THE CORPORATION THE WRITTEN OPINION OF
REPUTABLE LEGAL COUNSEL IN FORM REASONABLY ACCEPTABLE TO THE CORPORATION THAT
SUCH SALE OR TRANSFER IS BEING MADE IN COMPLIANCE WITH APPLICABLE FEDERAL
SECURITIES LAWS."
EXERCISABLE ON OR BEFORE OCTOBER 14, 2002
No. Warrants
------- ------
WARRANT CERTIFICATE
INSIGHT HEALTH SERVICES CORP.
This Warrant Certificate certifies that ______________ or registered
assigns, is the registered holder of ______ warrants (the "Warrants")
expiring October 14, 2002 (the "Expiration Date") to purchase Common Stock,
$.001 par value (the "Common Stock"), of InSight Health Services Corp., a
Delaware corporation (the "Company"). Each Warrant entitles the holder upon
exercise to receive from the Company on or before 5:00 p.m., Washington, D.C.
time, on the Expiration Date, one fully paid and non-assessable share of
Common Stock (a "Warrant Share") at the initial exercise price of $10.00 per
Warrant Share, subject to adjustment (as adjusted, the exercise price is the
"Exercise Price") upon the occurrence of certain events set forth in the
Warrant Agreement, upon surrender of this Warrant Certificate and payment of
the Exercise Price, or as otherwise provided in the Warrant Agreement, at the
office of the Company designated for such purpose, but only subject to the
conditions set forth herein and in the Warrant Agreement dated as of October
14, 1997 (the "Warrant Agreement"). The number and kind of Warrant Shares
issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., Washington, D.C. time, on the
Expiration Date, and to the extent not exercised by such time such Warrants
shall become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
i
This Warrant Certificate shall not be valid unless countersigned by the
Company, as such term is used in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
signed by its President and by its Secretary and has caused its corporate seal
to be affixed hereunto or imprinted hereon.
Date:
---------------------
INSIGHT HEALTH SERVICES CORP.
By:
----------------------------------
President
By:
----------------------------------
Secretary
ii
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the Expiration Date, entitling the
holder on exercise to receive shares of Common Stock, $.001 par value, of the
Company (the "Common Stock"), and are issued or to be issued pursuant to the
Warrant Agreement, duly executed and delivered by the Company, which Warrant
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants (the "Warrant
Holders"). A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company.
Warrants may be exercised at any time on or before the Expiration Date.
The holder of Warrants evidenced by this Warrant Certificate may exercise
them by surrendering this Warrant Certificate, with the form of election to
purchase set forth herein properly completed and executed, together with
payment of the Exercise Price in cash at the office of the Company designated
for such purpose. In the alternative, each Warrant Holder may exercise its
right, during the Exercise Period, as defined in the Warrant Agreement, to
receive Warrant Shares on a net basis, such that, without the exchange of any
funds, the Warrant Holder receives that number of Warrant Shares otherwise
issuable (or payable) upon exercise of its Warrants less that number of
Warrant Shares having an aggregate fair market value (as defined below) at
the time of exercise equal to the aggregate Exercise Price that would
otherwise have been paid by the Warrant Holder of the Warrant Shares. For
purposes of the foregoing sentence, "fair market value" of the Warrant Shares
will be determined in the manner set forth in the Warrant Agreement. In the
event that upon any exercise of Warrants evidenced hereby the number of
Warrants exercised shall be less than the total number of Warrants evidenced
hereby, there shall be issued to the holder hereof or his assignee a new
Warrant Certificate evidencing the number of Warrants not exercised. Except
as provided in Section 10 of the Warrant Agreement, no adjustment shall be
made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
The Warrant Agreement provides that, upon the occurrence of certain
events, the Exercise Price and the number of Warrant Shares set forth on the
face hereof may, subject to certain conditions, be adjusted. No fractions of
a share of Common Stock will be issued upon the exercise of any Warrant, but
the Company will pay the cash value thereof determined as provided in the
Warrant Agreement.
The holders of the Warrants are entitled to certain registration rights
with respect to the Common Stock purchasable upon exercise thereof. Said
registration rights are set forth in full in a Registration Rights Agreement
dated as of October 14, 1997, between the Company and the Warrant Holder. A
copy of the Registration Rights may be obtained by the holder hereof upon
written request to the Company.
Warrant Certificates, when surrendered at the office of the Company by
the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, but without
payment of any service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
iii
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary. Neither the Warrants nor this Warrant Certificate entitles any
holder hereof to any rights of a stockholder of the Company.
iv
[FORM OF ELECTION TO PURCHASE]
(TO BE EXECUTED UPON EXERCISE OF WARRANT)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive ___________ shares of
Common Stock and herewith tenders payment for such shares to the order of
InSight Health Services Corp. in the amount of $_______ or by delivery of
____ Warrants or in accordance with the terms hereof. The undersigned
requests that a certificate for such shares be registered in the name of
___________________ whose address is __________________________________ and
that such shares be delivered to _________________ whose address is
__________________________________. If said number of shares is less than all
of the shares of Common Stock purchasable hereunder after giving effect to
any delivery of Warrants in payment of the Exercise Price, the undersigned
requests that a new Warrant Certificate representing the remaining balance of
such shares be registered in the name of _______________, whose address is
________________________, and that such Warrant Certificate be delivered to
_________________ whose address is _____________________.
Signature:
------------------------
Date:
--------------------
v
