10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                 TO                 

COMMISSION FILE NUMBER 333-75984

INSIGHT HEALTH SERVICES HOLDINGS CORP.

(Exact name of Registrant as specified in its charter)

DELAWARE	04-3570028
(State or other jurisdiction	(I.R.S. Employer
of incorporation or	Identification
organization)	No.)

26250 ENTERPRISE COURT, SUITE 100, LAKE FOREST,	CA 92630
(Address of principal executive offices)	(Zip code)

(949) 282-6000

(Registrant’s telephone number including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

(Title of Class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  o No  x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  o No  x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or informative statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer  o Accelerated filer  o Non-accelerated filer  x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o No  x

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant as of August 31, 2007 (based on the closing price for the common stock on the Over-The-Counter Bulletin Board on that date) was $35,500,818.

Indicate  by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes  x No  o

The number of shares outstanding of the Registrant’s common stock as of August 31, 2007 was 8,644,444.

INSIGHT HEALTH SERVICES HOLDINGS CORP.

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I
Item 1.	Business
Item 1A.	Risk Factors
Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.	Selected Financial Data
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.	Controls and Procedures
Item 9B.	Other Information
PART III
Item 10.	Directors, Executive Officers and Corporate Governance
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.	Certain Relationships and Related Transactions, and Director Independence
Item 14.	Principal Accounting Fees and Services
PART IV
Item 15.	Exhibits, Financial Statement Schedules
SIGNATURES

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PART I

ITEM 1.          BUSINESS

OVERVIEW

All references to “we,” “us,” “our”, “our company” or “the Company” in this annual report on Form 10-K, or Form 10-K, mean InSight Health Services Holdings Corp., a Delaware corporation, and all entities and subsidiaries owned or controlled by InSight Health Services Holdings Corp. All references to “Holdings” in this Form 10-K mean InSight Health Services Holdings Corp. by itself. All references to “InSight” in this Form 10-K mean InSight Health Services Corp., a Delaware corporation and a wholly owned subsidiary of Holdings, by itself.

We are a nationwide provider of diagnostic imaging services through our integrated network of fixed-site centers and mobile facilities which are focused in core markets throughout the United States. Our services include magnetic resonance imaging, or MRI, positron emission tomography, or PET, computed tomography, or CT, and other technologies. These services are noninvasive techniques that generate representations of internal anatomy on film or digital media, which are used by physicians for the diagnosis and assessment of diseases and disorders.

We serve a diverse portfolio of customers, including healthcare providers, such as hospitals and physicians, and payors, such as managed care organizations, Medicare, Medicaid and insurance companies. We operate in more than 30 states with a substantial presence in California, Arizona, New England, the Carolinas, Florida and the Mid-Atlantic states. While we generated approximately 69% of our total revenues from MRI services during the year ended June 30, 2007, we provide a comprehensive offering of diagnostic imaging and treatment services, including PET, PET/CT, CT, mammography, bone densitometry, ultrasound, lithotripsy and x-ray.

As of June 30, 2007, our network consists of 101 fixed-site centers and 112 mobile facilities. This combination allows us to provide a full continuum of imaging services to better meet the needs of our customers. Our fixed-site centers include freestanding centers and joint ventures with hospitals and radiology groups. Our mobile facilities provide hospitals and physician groups access to imaging technologies when they lack either the resources or patient volume to provide their own imaging services or require incremental capacity. We enter into agreements with radiologists to provide professional services, which include supervision and interpretation of radiological procedures and quality assurance. We do not engage in the practice of medicine. We have two reportable segments: mobile operations and fixed operations. Our mobile operations include 20 parked mobile facilities, each of which serves a single customer. Our fixed operations include five mobile facilities as part of our fixed operations in Maine. Certain financial information regarding our reportable segments is included in Note 17 to our consolidated financial statements, which are a part of this Form 10-K.

Historically, we pursued a strategy that was largely focused on growth through the acquisition of imaging businesses in various parts of the country. More recently, we began the process of implementing a strategy based on core markets. A core market strategy may allow us more operating efficiencies and synergies than are available in a nationwide strategy. A core market will be based on many factors and not just the number of fixed-site centers or mobile facilities in an area. Other factors would include, without limitation, the capabilities of our contracted radiologists, any hospital affiliations, the strength of returns on capital investment, the potential for growth and sustainability of our business in the area, the reimbursement environment for the area, the strength of competing providers in the area, population growth trends, and any regulatory restrictions. We expect that this strategy will result in us exiting some markets while increasing our presence in others, which may be accomplished through business or asset sales, swaps, purchases, closures and the development of new fixed-site centers. As discussed below, our board of directors was recently reconfigured with five new members. Our management is reviewing and analyzing with our board of directors our core market strategy. As a result, we may determine to continue with such strategy, modify such strategy or identify an alternate strategy.

Our principal executive offices are located at 26250 Enterprise Court, Suite 100, Lake Forest, California 92630, and our telephone number is (949) 282-6000. Our internet address is www.insighthealth.com. www.insighthealth.com is a textual reference only, meaning that the information contained on the website is not part of this Form 10-K and is not incorporated by reference in this Form 10-K or in any other filings we make with the Securities and Exchange Commission, or SEC.

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We file annual, quarterly and special reports and other information with the SEC. You may read and copy materials that we have filed with the SEC at the following SEC public reference room:

450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549

Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public on the SEC’s internet website at http://www.sec.gov.

Reorganization

In November 2006, we engaged Lazard Frères & Co. LLC as our financial advisor to assist us in exploring strategic alternatives. In March 2007, we announced an offer to exchange shares of Holdings’ common stock for up to $194.5 million aggregate principal amount of InSight’s 9.875% senior subordinated notes due 2011, or senior subordinated notes. The exchange offer initially provided for consummation on an out-of-court basis or in connection with the filing of a prepackaged plan of reorganization under chapter 11 of the Bankruptcy Code. On May 29, 2007, Holdings and InSight filed voluntary petitions to reorganize their business under chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware (Case No. 07-10700). The other subsidiaries of Holdings were not included in the bankruptcy filing and continued to operate their business. On July 10, 2007, the bankruptcy court confirmed Holdings’ and InSight’s Second Amended Joint Plan of Reorganization pursuant to chapter 11 of the Bankruptcy Code. The plan of reorganization became effective and Holdings and InSight emerged from bankruptcy protection on August 1, 2007, or the effective date.

On August 1, 2007, pursuant to the exchange offer and the plan of reorganization, all of Holdings’ common stock, all options for Holdings’ common stock and all of InSight’s senior subordinated notes were cancelled, and the following distributions were made (after giving effect to a 1 for 6.326392 reverse stock split of Holdings’ common stock):

·Holders of InSight’s senior subordinated notes received 7,780,000 shares of newly issued Holdings’ common stock, which represented 90% of all shares of Holdings’ common stock outstanding after consummation of the plan of reorganization.

·Holders of Holdings’ common stock prior to the effective date received 864,444 shares of newly issued Holdings’ common stock, which represented 10% of all shares of Holdings’ common stock after consummation of the plan of reorganization.

Holdings’ common stock is listed on the Over-The-Counter Bulletin Board under the symbol “ISGT”.

The plan of reorganization provided for the assumption of substantially all executory contracts and unexpired leases; provided, however, we did terminate (i) the management agreement with J.W. Childs Advisors II, L.P. and Halifax Genpar, L.P. and (ii) the stockholders agreement with holders of Holdings’ common stock and stock options. Pursuant to the plan of reorganization, the boards of directors of Holdings and InSight were reconfigured, and five of the directors of each board were designated by an ad hoc committee of holders of senior subordinated notes, one was designated by the holders of Holdings’ common stock prior to the effective date, and Bret W. Jorgensen, the President and Chief Executive Officer of Holdings and InSight, remained a director. Additional information regarding the new board of directors is set forth below in Part III of this Form 10-K.

This reorganization significantly deleveraged our balance sheet and improved our projected cash flow after debt service and long-term liquidity. As a result, we believe this reorganization has improved our ability to compete in our industry, although we continue to operate with significant leverage and face the industry challenges of overcapacity and reimbursement reductions by Medicare and other third-party payors.

On August 1, 2007, we implemented fresh-start reporting in accordance with American Institute of Certified Public Accountants’ Statement of Position 90-7 “Financial Reporting by Entities in Reorganization under the Bankruptcy Code”, or SOP 90-7. The provisions of fresh-start reporting require that we revalue our assets and liabilities to fair value, reestablish stockholders’ equity using the reorganized value established in connection with the plan of

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reorganization, and record any applicable reorganization value in excess of amounts allocable to identifiable assets as an intangible asset. As a result of the adoption of SOP 90-7, we are reviewing the fair value of our assets and liabilities and expect that we will be required to adjust the value of some of our assets and liabilities. We expect that the implementation of fresh-start reporting under SOP 90-7 will have a material effect on our consolidated financial statements. As a result, our consolidated financial statements published for periods following the effectiveness of the plan of reorganization on August 1, 2007, will not be comparable to our consolidated financial statements published before the effectiveness of the plan and included elsewhere in this Form 10-K. See Note 20 to our consolidated financial statements, which are a part of this Form 10-K.

Fixed-Site Business

Our fixed-site centers provide a full spectrum of diagnostic imaging services to patients, physicians, insurance payors and managed care organizations. Of our 101 fixed-site centers, 56 offer MRI services exclusively and two offer either PET or PET/CT exclusively. Our remaining 43 fixed-site centers are multi-modality sites typically offering MRI and one or more of PET, CT, x-ray, mammography, ultrasound, nuclear medicine, bone densitometry and nuclear cardiology. Diagnostic services are provided to a patient upon referral by a physician. Physicians refer patients to our fixed-site centers based on our service reputation, equipment, breadth of managed care contracts and convenient locations. Our fixed-site centers provide the equipment and technologists for the procedures, contract with radiologists to interpret the procedures, and bill payors directly. We have more than 1,000 managed care contracts with managed care organizations at our fixed-site centers. These managed care contracts often last for a period of multiple years because (1) they do not have specific terms or specific termination dates or (2) they contain annual “evergreen” provisions that provide for the contract to automatically renew unless either party terminates the contract.

In addition to our independent facilities, we enter into joint ventures with hospitals, pursuant to which the hospital outsources its radiology function (primarily MRI) to us and we then install the appropriate imaging equipment on the hospital campus. Joint ventures are attractive to hospitals that lack the resources, management expertise or patient volume to provide their own imaging services or require incremental capacity. Joint ventures with hospitals provide us with partners capable of generating significant inpatient procedure volumes through fixed-site centers. Furthermore, our joint ventures allow us to charge a management and billing fee for supporting the day-to-day operations of the jointly owned centers. Joint ventures with radiology groups provide us with partners that have established relationships in the fixed-site center’s surrounding community.

Mobile Business

Hospitals can access our diagnostic imaging technology through our network of 112 mobile facilities. We currently have contracts with more than 300 hospitals, physician groups and other healthcare providers. We enable hospitals, physician groups and other healthcare providers to benefit from our imaging equipment without investing their own capital directly. Interpretation services are generally provided by the hospital’s radiologists or physician groups and not by us.

After reviewing the needs of our customers, route patterns, travel times, fuel costs and equipment utilization, our field managers implement planning and route management to maximize the utilization of our mobile facilities while controlling the costs to transport the mobile facilities from one location to another. Our mobile facilities are scheduled for as little as one-half day and up to seven days per week at any particular site. We generally enter into one to five year-term contracts with our mobile customers under which they assume responsibility for billing and collections. We are paid directly by our mobile customers on a contracted amount for our services, regardless of whether they are reimbursed.

Our mobile business provides a significant advantage for establishing long-term arrangements with hospitals, physician groups and other healthcare providers and expanding our fixed-site business. We establish mobile routes in selected markets with the intent of growing with our customers. Our mobile facilities give us the flexibility to (1) supplement fixed-site centers operating at or near capacity until volume has grown sufficiently to warrant additional fixed-site centers, and (2) test new markets on a short-term basis prior to establishing new mobile routes or opening new fixed-site centers. Our goal is to enter into long-term joint venture relationships with our mobile customers once the local market matures and sufficient patient volume is achieved to support a fixed-site center.

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DIAGNOSTIC IMAGING TECHNOLOGY

Our diagnostic imaging systems consist of MRI systems, PET/CT systems, PET systems, CT systems, digital ultrasound systems, x-ray, mammography, radiography/fluoroscopy systems and bone densitometry. Each of these types of imaging systems (other than x-ray) represents the marriage of computer technology and various medical imaging modalities. The following highlights our primary imaging systems:

Magnetic Resonance Imaging or MRI

MRI is a technique that involves the use of high-strength magnetic fields to produce computer-processed, three-dimensional, cross-sectional images of the body. The resulting image reproduces soft tissue anatomy (as found in the brain, breast tissue, spinal cord and interior ligaments of body joints such as the knee) with superior clarity, not available by any other currently existing imaging modality, and without exposing patients to ionizing radiation. MRI systems are classified into two classes, conventional MRI systems and Open MRI systems. The structure of conventional MRI systems allows for higher magnet field strengths, better image quality and faster scanning times than Open MRI systems. However, Open MRI systems are able to service patients who have access difficulties with conventional MRI systems, including pediatric patients and patients suffering from post-traumatic stress, claustrophobia or significant obesity. A typical conventional MRI examination takes from 20 to 45 minutes. A typical Open MRI examination takes from 30 to 60 minutes. MRI generally reduces the cost and amount of care needed and often eliminates the need for invasive diagnostic procedures. MRI systems are typically priced in the range of $0.9 million to $2.5 million each.

Computed Tomography or CT

In CT imaging, a computer analyzes the information received from x-ray beams to produce multiple cross-sectional images of a particular organ or area of the body. CT imaging is used to detect tumors and other conditions affecting bones and internal organs. A typical CT examination takes from five to 20 minutes. CT systems are typically priced in the range of $0.7 million to $1.8 million each.

Positron Emission Tomography or PET

PET is a nuclear medicine procedure that produces pictures of the body’s metabolic and biological functions. PET can provide earlier detection as well as monitoring of certain cancers, coronary diseases or neurological problems than other diagnostic imaging systems. The information provided by PET technology often obviates the need to perform further highly invasive or diagnostic surgical procedures. Interest in PET has increased due to several factors including a growing recognition by clinicians that PET is a powerful diagnostic tool, increased third-party payor coverage and the availability of the isotopes used for PET scanning. PET/CT systems fuse together the results of a PET scan and CT scan, which makes it possible to collect both anatomical and biological information during a single procedure. A typical PET or PET/CT examination takes from 20 to 60 minutes. PET/CT systems are typically priced in the range of $1.8 million to $2.3 million each.

Other Imaging Technologies

·Ultrasound systems use, detect and process high frequency sound waves to generate images of soft tissues and internal body organs.

·X-ray is the most common energy source used in imaging the body and is now employed in conventional x-ray systems, CT and digital x-ray systems.

·Mammography is a low-level conventional examination of the breasts. Its primary purpose is to detect lesions in the breast that may be too small or deeply buried to be felt in a regular breast examination.

·Bone densitometry uses an advanced technology called dual-energy x-ray absorptiometry, or DEXA, which safely, accurately and painlessly measures bone density and the mineral content of bone for the diagnosis of osteoporosis.

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BUSINESS DEVELOPMENT

Our objective is to be a leading provider of diagnostic imaging services in our core markets. Our efforts are focused on two components.

First, we intend to maximize utilization of our existing facilities by:

·broadening our physician referral base and generating new sources of revenues through selective marketing activities;

·focusing our marketing efforts on attracting additional managed care customers;

·emphasizing quality of care and convenience to our customers; and

·expanding current imaging applications of existing modalities to increase overall procedure volume.

Second, we intend to implement our core market strategy by:

·developing new fixed-site centers, mobile routes, and joint ventures with hospitals or radiologists and making disciplined acquisitions where attractive returns on investment can be achieved and sustained; and

·selling or closing certain existing fixed-site centers, restructuring or terminating certain mobile routes and redeploying such capital to obtain more attractive returns.

Generally, these activities are aimed at increasing revenues and gross profit, maximizing utilization of existing capacity and increasing economies of scale. Incremental gross profit resulting from such activities will vary depending on geographic location, whether facilities are mobile or fixed, the range of services provided and the strength of our joint venture partners. We believe that implementing our core market strategy is a key factor in improving our operating results.

GOVERNMENT REGULATION

The healthcare industry is highly regulated and changes in laws and regulations can be significant. Changes in the law or new interpretation of existing laws can have a material effect on our permissible activities, the relative costs associated with doing business and the amount of reimbursement by government and other third-party payors. The federal government and all states in which we currently operate regulate various aspects of our business. Failure to comply with these laws could adversely affect our ability to receive reimbursement for our services and subject us and our officers and agents to civil and criminal penalties.

Federal False Claims Act: The federal False Claims Act and, in particular, the False Claims Act’s “qui tam” or “whistleblower” provisions allow a private individual to bring actions in the name of the government alleging that a defendant has made false claims for payment from federal funds. After the individual has initiated the lawsuit, the government must decide whether to intervene in the lawsuit and to become the primary prosecutor. Until the government makes a decision, the lawsuit is kept secret. If the government declines to join the lawsuit, the individual may choose to pursue the case alone, in which case the individual’s counsel will have primary control over the prosecution, although the government must be kept apprised of the progress of the lawsuit, and may intervene later. Whether or not the federal government intervenes in the case, it will receive the majority of any recovery. If the litigation is successful, the individual is entitled to no less than 15%, but no more than 30%, of whatever amount the government recovers that is related to the whistleblower’s allegations. The percentage of the individual’s recovery varies, depending on whether the government intervened in the case and other factors. In recent years the number of suits brought against healthcare providers by government regulators and private individuals has increased dramatically. In addition, various states are considering or have enacted laws modeled after the federal False Claims Act, penalizing false claims against state funds. If a whistleblower action is brought against us, even if it is dismissed with no judgment or settlement, we may incur substantial legal fees and other costs relating to an investigation. Actions brought under the False Claims Act may result in significant fines and legal

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fees and distract our management’s attention, which would adversely affect our financial condition and results of operations.

When an entity is determined to have violated the federal False Claims Act, it must pay three times the actual damages sustained by the government, plus mandatory civil penalties of between $5,500 to $11,000 for each separate false claim, as well as the government’s attorneys’ fees. Liability arises when an entity knowingly submits, or causes someone else to submit, a false claim for reimbursement to the federal government or submits a false claim with reckless disregard for, or in deliberate ignorance of, its truth or falsity. Simple negligence should not give rise to liability. Examples of the other actions which may lead to liability under the False Claims Act:

·Failure to comply with the many technical billing requirements applicable to our Medicare and Medicaid business.

·Failure to comply with Medicare requirements concerning the circumstances in which a hospital, rather than we, must bill Medicare for diagnostic imaging services we provide to outpatients treated by the hospital.

·Failure of our hospital customers to accurately identify and report our reimbursable and allowable services to Medicare.

·Failure to comply with the prohibition against billing for services ordered or supervised by a physician who is excluded from any federal healthcare programs, or the prohibition against employing or contracting with any person or entity excluded from any federal healthcare programs.

·Failure to comply with the Medicare physician supervision requirements for the services we provide, or the Medicare documentation requirements concerning physician supervision.

·The past conduct of the businesses we have acquired.

We strive to ensure that we meet applicable billing requirements. However, the costs of defending claims under the False Claims Act, as well as sanctions imposed under the Act, could significantly affect our business, financial condition and results of operations.

Anti-kickback Statutes: We are subject to federal and state laws which govern financial and other arrangements between healthcare providers. These include the federal anti-kickback statute which, among other things, prohibits the knowing and willful solicitation, offer, payment or receipt of any remuneration, direct or indirect, in cash or in kind, in return for or to induce the referral of patients for items or services covered by Medicare, Medicaid and certain other governmental health programs. Violation of the anti-kickback statute may result in civil or criminal penalties and exclusion from the Medicare, Medicaid and other federal healthcare programs. In addition, it is possible that private parties may file “qui tam” actions based on claims resulting from relationships that violate this statute, seeking significant financial rewards. Many states have enacted similar statutes, which are not limited to items and services paid for under Medicare or a federally funded healthcare program. In recent years, there has been increasing scrutiny by law enforcement authorities, the Department of Health and Human Services, or HHS, the courts and Congress of financial arrangements between healthcare providers and potential sources of referrals to ensure that such arrangements do not violate the anti-kickback provisions. HHS and the federal courts interpret “remuneration” broadly to apply to a wide range of financial incentives, including, under certain circumstances, distributions of partnership and corporate profits to investors who refer federal healthcare program patients to a corporation or partnership in which they have an ownership interest and payments for service contracts and equipment leases that are designed, even if only in part, to provide direct or indirect remuneration for patient referrals or similar opportunities to furnish reimbursable items or services. HHS has issued “safe harbor” regulations that set forth certain provisions which, if met, will assure that healthcare providers and other parties who refer patients or other business opportunities, or who provide reimbursable items or services, will be deemed not to violate the anti-kickback statutes. The safe harbors are narrowly drawn and some of our relationships may not qualify for any “safe harbor”; however, failure to comply with a “safe harbor” does not create a presumption of liability. We believe that our operations materially comply with the anti-kickback statutes; however, because these

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provisions are interpreted broadly by regulatory authorities, we cannot be assured that law enforcement officials or others will not challenge our operations under these statutes.

Civil Money Penalty Law and Other Federal Statutes: The Civil Money Penalty, or CMP, law covers a variety of practices. It provides a means of administrative enforcement of the anti-kickback statute, and prohibits false claims, claims for medically unnecessary services, violations of Medicare participating provider or assignment agreements and other practices. The statute gives the Office of Inspector General of the HHS the power to seek substantial civil fines, exclusion and other sanctions against providers or others who violate the CMP prohibitions.

In addition, in 1996, Congress created a new federal crime: healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government sponsored programs such as the Medicare and Medicaid programs. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services, including those provided by private payors. A violation of this statute is a felony and may result in fines or imprisonment.

We believe that our operations materially comply with the CMP law and the healthcare fraud and false statements statutes. These prohibitions, however, are broadly worded and there is limited authority interpreting their parameters. Therefore, we can give no assurance that the government will not pursue a claim against us based on these statutes. Such a claim would divert the attention of management and could result in substantial penalties which could adversely affect our financial condition and results of operations.

Health Insurance Portability and Accountability Act: In 1996, Congress passed the Health Insurance Portability and Accountability Act, or HIPAA. Although the main focus of HIPAA was to make health insurance coverage portable, HIPAA has become a short-hand reference to new standards for electronic transactions and privacy and security obligations imposed on providers and others who handle personal health information. HIPAA requires healthcare providers to adopt standard formats for common electronic transactions with health plans, and to maintain the privacy and security of individual patients’ health information. The privacy standards went into effect on April 14, 2003, the electronic standards for transactions went into effect on October 16, 2003 and the security standards went into effect on April 20, 2005. A violation of HIPAA’s standard transactions, privacy and security provisions may result in criminal and civil penalties, which could adversely affect our financial condition and results of operations.

Stark and State Physician Self-referral Laws: The federal Physician Self-Referral or “Stark” Law prohibits a physician from referring Medicare patients for certain “designated health services” to an entity with which the physician (or an immediate family member of the physician) has a financial relationship unless an exception applies. In addition, the receiving entity is prohibited from billing for services provided pursuant to the prohibited referral.

Designated health services under Stark include radiology services (MRI, CT, x-ray, ultrasound and others), radiation therapy, inpatient and outpatient hospital services and several other services. A violation of the Stark Law does not require a showing of intent. If a physician has a financial relationship with an entity that does not qualify for an exception, the referral of Medicare patients to that entity for designated health services is prohibited and, if the entity bills for such services, the Stark sanctions apply.

Sanctions for violating Stark include denial of payment, mandatory refunds, civil money penalties and/or exclusion from the Medicare program. In addition, some courts have allowed federal False Claims Act lawsuits premised on Stark Law violations.

The federal Stark Law prohibition is expansive, and its statutory language and implementing regulations are ambiguous. Consequently, the statute has been difficult to interpret. In 1995, the Centers for Medicare and Medicaid Services, or CMS, published final regulations interpreting the Stark prohibition as applied to clinical laboratory services. In 2001, CMS published Phase I of the final Stark regulations relating to all designated health services (including clinical laboratory services) which went into effect in January 2002. On March 26, 2004, CMS published Phase II of the final Stark regulations which became effective in July 2004. Phase II included some additional regulatory exceptions and definitions providing more flexibility in some areas and more specificity in others, but did

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not extend designated health services to PET or nuclear medicine. In November 2005, CMS published final regulations that designated PET, PET/CT and nuclear medicine as designated health services under Stark Law but delayed implementation until January 1, 2007. On September 5, 2007, CMS published Phase III of the final Stark regulations to be effective on December 4, 2007. Phase III modified certain definitions under the regulations and amended certain existing exceptions in an effort to provide further clarification and respond to industry comments. In addition to the publication of Phase III, on July 2, 2007, as part of the Medicare Physician Fee Schedule Proposed Rule, CMS published additional proposed changes to the Stark regulations and solicited comments on a number of issues. The earliest these proposed rules could take effect is January 1, 2008; however, it is not certain that all or even some of these proposed changes to the Stark regulations will become final.

With each set of regulations, CMS’s interpretation of the statute has evolved. This has resulted in considerable confusion concerning the scope of the referral prohibition and the requirements of the various exceptions. It is noteworthy, however, that CMS has taken the position that the Stark Law is self-effectuating and does not require implementing regulations. Thus, the government believes that physicians and others must comply with the Stark Law prohibitions regardless of the state of the regulatory guidance.

The Stark Law does not directly prohibit referral of Medicaid patients, but rather denies federal financial participation to state Medicaid programs for services provided pursuant to a tainted referral. Thus, Medicaid referrals are subject to whatever sanctions the relevant state has adopted. Several states in which we operate have enacted or are considering legislation that prohibits “self-referral” arrangements or requires physicians or other healthcare providers to disclose to patients any financial interest they have in a healthcare provider to whom they refer patients. Possible sanctions for violating these state statutes include loss of participation, civil fines and criminal penalties. The laws vary from state to state and seldom have been interpreted by the courts or regulatory agencies. Nonetheless, strict enforcement of these requirements is likely.

We believe our operations materially comply with the federal and state physician self-referral laws. However, given the ambiguity of these statutes, the uncertainty of the regulations and the lack of judicial guidance on many key issues, we can give no assurance that the Stark Law or other physician self-referral regulations will not be interpreted in a manner that could adversely affect our financial condition and results of operations.

FDA: The U.S. Food and Drug Administration, or FDA, has issued the requisite premarket approval for all of our MRI, PET, PET/CT and CT systems. We do not believe that any further FDA approval is required in connection with equipment currently in operation or proposed to be operated; except under regulations issued by the FDA pursuant to the Mammography Quality Standards Act of 1992, all mammography facilities must have a certificate issued by the FDA. In order to obtain a certificate, a mammography facility is required to be accredited by an FDA approved accrediting body (a private, non-profit organization or state agency) or other entity designated by the FDA. Pursuant to the accreditation process, each facility providing mammography services must comply with certain standards including annual inspection.

Compliance with these standards is required to obtain payment for Medicare services and to avoid various sanctions, including monetary penalties, or suspension of certification. Although all of our facilities which provide mammography services are currently accredited by the Mammography Accreditation Program of the American College of Radiology and we anticipate continuing to meet the requirements for accreditation, the withdrawal of such accreditation could result in the revocation or suspension of certification by the FDA, ineligibility for Medicare reimbursement and sanctions, including monetary penalties. Congress has extended Medicare benefits to include coverage of screening mammography subject to the prescribed quality standards described above. The regulations apply to diagnostic mammography as well as screening mammography.

Radiologist and Facility Licensing: The radiologists with whom we contract to provide professional services are subject to licensing and related regulations by the states, including registrations to use radioactive materials. As a result, we require our radiologists to have and maintain appropriate licensure and registrations. In addition, some states also impose licensing or other requirements on us at our facilities and other states may impose similar requirements in the future. Some local authorities may also require us to obtain various licenses, permits and approvals. We believe that we have obtained all required licenses and permits; however, the criteria governing licensing or permitting may change or additional laws and licensing requirements governing our facilities may be enacted. These changes could adversely affect our financial condition and results of operations.

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Liability Insurance: The hospitals, physician groups and other healthcare providers who use our diagnostic imaging systems are involved in the delivery of healthcare services to the public and, therefore, are exposed to the risk of liability claims. Our position is that we do not engage in the practice of medicine. We provide only the equipment and technical components of diagnostic imaging, including certain limited nursing services, and we have not experienced any material losses due to claims for malpractice. Nevertheless, claims for malpractice have been asserted against us in the past and any future claims, if successful, could entail significant defense costs and could result in substantial damage awards to the claimants, which may exceed the limits of any applicable insurance coverage. We maintain professional liability insurance in amounts we believe are adequate for our business of providing diagnostic imaging, treatment and management services. In addition, the radiologists or other healthcare professionals with whom we contract are required by such contracts to carry adequate medical malpractice insurance. Successful malpractice claims asserted against us, to the extent not covered by our liability insurance, could adversely affect our financial condition and results of operations.

Independent Diagnostic Treatment Facilities: CMS has established a category of Medicare provider referred to as Independent Diagnostic Treatment Facilities, or IDTFs. Imaging centers have the option to participate in the Medicare program as either IDTFs or medical groups. Most of our fixed-site centers are IDTFs. In August 2006, CMS proposed new certification standards for IDTFs, which were effective on January 1, 2007 and must be implemented by October 1, 2007. Although we expect our IDTFs to meet these new certification standards, CMS may increase its oversight to ensure compliance with the new standards. Further, CMS proposed additional certification standards for IDTFs in the 2008 Medicare Physician Fee Schedule Proposed Rule. If these certification standards are deemed final, they could become effective January 1, 2008. In addition, IDTFs are being monitored by CMS, particularly with respect to physician supervision requirements. If CMS exercises increased oversight of IDTFs, our financial condition and results of operations could be adversely affected.

Certificates of Need: Some states require hospitals and certain other healthcare facilities and providers to obtain a certificate of need, or CON, or similar regulatory approval prior to establishing certain healthcare operations or services, incurring certain capital projects and/or the acquisition of major medical equipment including MRI, PET and PET/CT systems. We believe that we have complied or will comply with applicable CON requirements in those states where we operate. Nevertheless, this is an area of continuing legislative activity, and CON and licensing statutes may be modified in the future in a manner that may have a material adverse effect on our financial condition and results of operations.

Environmental, Health and Safety Laws: Our PET and PET/CT services and some of our other imaging services require the use of radioactive materials, which are subject to federal, state and local regulations governing the storage, use and disposal of materials and waste products. We could incur significant costs in order to comply with current or future environmental, health and safety laws and regulations. However, we believe that environmental, health and safety laws and regulations will not (1) cause us to incur any material capital expenditures in our current year or the succeeding year, including costs for environmental control facilities or (2) materially impact our revenues or our competitive position.

SALES AND MARKETING

We engage in sales and marketing activities to obtain new sources of revenues, expand business relationships, grow revenues at existing facilities, and maintain present business alliances and contractual relationships. Sales and marketing activities for our fixed operations include educating physicians on new applications and uses of the technology and customer service programs. In addition, we seek to leverage our core market concentration to develop contractual relationships with managed care payors to increase patient volume. Sales and marketing activities for our mobile business include direct marketing to hospitals and developing leads through current customers, equipment manufacturers, and other vendors. In addition, marketing activities for our mobile operations include contacting referring physicians associated with hospital customers and educating physicians.

COMPETITION

The healthcare industry in general, and the market for diagnostic imaging services in particular, is highly competitive and fragmented, with only a few national providers. We compete principally on the basis of our service reputation, equipment, breadth of managed care contracts and convenient locations. Our operations must compete

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with groups of radiologists, established hospitals and certain other independent organizations, including equipment manufacturers and leasing companies that own and operate imaging equipment. We will continue to encounter substantial competition from hospitals and independent organizations, including Alliance Imaging, Inc., Radnet, Inc., Diagnostic Health Corporation, MedQuest, Inc., Shared Imaging and Otter Tail Corporation doing business as DMS Imaging. Some of our direct competitors may have access to greater financial resources than we do.

Certain hospitals, particularly the larger or more financially stable hospitals, have and may be expected to directly acquire and operate imaging equipment on-site as part of their overall inpatient servicing capability, assume the associated financial risk, employ the necessary technologists and satisfy applicable CON and licensure requirements, if any. Historically, smaller hospitals have been reluctant to purchase imaging equipment, but some have chosen to do so with attractive financing offered by equipment manufacturers. Some physician practices have also established diagnostic imaging centers or purchased imaging equipment for their own offices, and we anticipate that others will as well.

CUSTOMERS AND CONTRACTS

Our revenues are primarily generated from patient services and contract services. Patient services revenues are generally earned from services billed directly to patients or third-party payors (such as managed care organizations, Medicare, Medicaid, commercial insurance carriers and workers’ compensation funds) on a fee-for-service basis. Patient services revenues and management fees are primarily earned through fixed-site centers. Contract services revenues are generally earned from services billed to a hospital, physician group or other healthcare provider, which include fee-for-service arrangements in which revenues are based upon a contractual rate per procedure and fixed fee contracts. Contract services revenues are primarily earned through mobile facilities pursuant to contracts with a term from one to five years. A significant number of our mobile contracts will expire each year. Our mobile facility contract renewal rate was 83% for the year ended June 30, 2007. However, we expect that some high volume customer accounts will elect not to renew their contracts and instead will purchase or lease their own diagnostic imaging equipment and some customers may choose an alternative services provider.

During the year ended June 30, 2007, approximately 55% of our revenues were generated from patient services and approximately 45% were generated from contract services.

DIAGNOSTIC IMAGING AND OTHER EQUIPMENT

As of June 30, 2007, we owned or leased 260 diagnostic imaging and treatment systems, with the following classifications: 3.0 Tesla MRI, 1.5 Tesla MRI, 1.0 Tesla MRI, Open MRI, PET, PET/CT, CT and other technology. Magnetic field strength is the measurement of the magnet used inside an MRI system. If the magnetic field strength is increased the image quality of the scan is improved and the time required to complete scans is decreased. Magnetic field strength on our MRI systems currently ranges from 0.2 to 3.0 Tesla. Of our 169 conventional MRI systems, 159 have a magnet field strength of 1.5 Tesla, which is the industry standard magnet strength for conventional fixed and mobile MRI systems. Other than ultra-high field MRI systems and 256-slice CT systems, we are aware of no substantial technological changes; however, should such changes occur, we may not be able to acquire the new or improved systems.

We continue to evaluate the mix of our diagnostic imaging equipment in response to changes in technology and to any overcapacity in the marketplace. We improve our equipment through upgrades, disposal and/or trade-in of older equipment and the purchase or execution of leases for new equipment in response to market demands.

Several large companies presently manufacture MRI (including Open MRI), PET, PET/CT, CT and other diagnostic imaging equipment, including General Electric Health Care, Hitachi Medical Systems, Siemens Medical Systems, Toshiba American Medical Systems and Phillips Medical Systems. We have acquired MRI and CT systems that were manufactured by each of the foregoing companies. We have acquired PET or PET/CT systems that were manufactured by General Electric Health Care and Siemens Medical Systems. We enter into individual purchase orders for each system that we acquire, and we do not have long-term purchase arrangements with any equipment manufacturer. We maintain good working relationships with many of the major manufacturers to better ensure adequate supply as well as access to those types of diagnostic imaging systems which appear most appropriate for the specific imaging facility to be established.

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INFORMATION SYSTEMS

Our internal information technology systems allow us to manage our operations, accounting and finance, human resources, payroll, document imaging, and data warehousing. Our primary operating system is the InSight Radiology Information System, or IRIS, our proprietary information system. IRIS provides front-office support for scheduling and administration of imaging procedures and back office support for billing and collections. Additional functionality includes workflow, transcription, and image management.  In addition, we are installing new picture archiving and communication systems, or PACS, in our fixed-site centers for the digital management of diagnostic images.

COMPLIANCE PROGRAM

We have voluntarily implemented a program to monitor compliance with federal and state laws and regulations applicable to healthcare organizations.  We have appointed a compliance officer who is charged with implementing and supervising our compliance program, which includes a code of ethical conduct for our employees and affiliates and a process for reporting regulatory or ethical concerns to our compliance officer, including a toll-free telephone hotline. We believe that our compliance program meets the relevant standards provided by the Office of Inspector General of the HHS. An important part of our compliance program consists of conducting periodic reviews of various aspects of our operations. Our compliance program also contemplates mandatory education programs designed to familiarize our employees with the regulatory requirements and specific elements of our compliance program.

EMPLOYEES

As of August 31, 2007, we had approximately 1,579 full-time, 105 part-time and 464 per diem employees.  None of our employees is covered by a collective bargaining agreement. Management believes its employee relations to be satisfactory.

FORWARD-LOOKING STATEMENTS DISCLOSURE

This Form 10-K includes “forward-looking statements.”  Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital projects, financing needs, debt repurchases, plans or intentions relating to acquisitions and new fixed-site developments, competitive strengths and weaknesses, business strategy and the trends that we anticipate in the industry and economies in which we operate and other information that is not historical information.  When used in this Form 10-K the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” and variations of such words or similar expressions are intended to identify forward-looking statements.  All forward-looking statements, including, without limitation, our examination of historical operating trends, are based upon our current expectations and various assumptions.  Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them, but we can give no assurance that our expectations, beliefs and projections will be realized.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-K.  Important factors that could cause our actual results to differ materially from the forward-looking statements made in this Form 10-K are set forth in this Form 10-K, including the factors described in Item 1A. “Risk Factors” below and the following:

·overcapacity and competition in our markets;

·reductions, limitations and delays in reimbursement by third-party payors;

·contract renewals and financial stability of customers;

·conditions within the healthcare environment;

·the potential for rapid and significant changes in technology and their effect on our operations;

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·operating, legal, governmental and regulatory risks;

·economic, political and competitive forces affecting our business; and

·our ability to successfully integrate acquisitions.

If any of these risks or uncertainties materializes, or if any of our underlying assumptions is incorrect, our actual results may differ significantly from the results that we express in or imply by any of our forward-looking statements.    We disclaim any intention or obligation to update or revise forward-looking statements to reflect future events or circumstances.

ITEM 1A.       RISK FACTORS

In addition to the other information contained in this Form 10-K, the following risk factors should be carefully considered.  If any of these risks actually occur, our financial condition and results of operations could be adversely affected.

RISKS RELATING TO OUR INDEBTEDNESS

Our substantial indebtedness could adversely affect our financial condition.

Notwithstanding the consummation of our exchange offer and plan of reorganization, we still have a substantial amount of debt, which requires significant interest and principal payments.  As of August 2, 2007, we had total indebtedness of approximately $321.4 million.  In addition, subject to the limits contained in the indenture governing our floating rate notes and our other debt instruments, we may be able to incur additional indebtedness from time to time to finance working capital, capital projects, investments or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could intensify.   Specifically, our high level of debt could have important consequences, including the following:

·making it more difficult for us to satisfy our obligations with respect to the floating rate notes and our other debt;

·limiting our ability to obtain additional financing to fund future working capital, capital projects, acquisitions or other general corporate requirements;

·requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes;

·increasing our vulnerability to general adverse economic and industry conditions;

·limiting our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate;

·placing us at a competitive disadvantage compared to our competitors that have less debt; and

·increasing our cost of borrowing.

We may be unable to service our debt.

Our ability to make scheduled payments on or to refinance our obligations with respect to our debt, including, but not limited to, the floating rate notes, will depend on our financial and operating performance, which will be affected by general economic, financial, competitive, business and other factors beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to service our debt, including, but not limited to, the floating rate notes, or to fund our other liquidity needs.

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If we are unable to meet our debt obligations or fund our other liquidity needs, we may need to restructure or refinance all or a portion of our debt on or before maturity, including, but not limited to, the floating rate notes, or sell certain of our assets. We cannot assure you that we will be able to restructure or refinance any of our debt on commercially reasonable terms, if at all, which could cause us to default on our debt obligations and impair our liquidity. Any restructuring or refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

Our operations may be restricted by the terms of our debt, which could adversely affect us and increase our credit risk.

The agreements governing our material indebtedness include a number of significant restrictive covenants.  These covenants could adversely affect us, and adversely affect investors, by limiting our ability to plan for or react to market conditions or to meet our capital needs. These covenants, among other things, restrict our ability to:

·incur more debt;

·create liens;

·pay dividends and make distributions or repurchase stock;

·make investments;

·merge or consolidate or transfer or sell assets; and

·engage in transactions with affiliates.

A breach of a covenant or other provision in any debt instrument governing our current or future indebtedness could result in a default under that instrument and, due to cross-default and cross-acceleration provisions, could result in a default under our other debt instruments. Upon the occurrence of an event of default under our debt instruments, the lenders may be able to elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit. If we are unable to repay those amounts, the lenders could proceed against the collateral granted to them, if any, to secure the indebtedness.  If the lenders under our current or future indebtedness accelerate the payment of the indebtedness, we cannot assure you that our assets or cash flow would be sufficient to repay in full our outstanding indebtedness.  Substantially all of our assets, other than those assets consisting of accounts receivables and related assets or cash accounts related to receivables, which secure our credit facility, and a portion of InSight’s stock and the stock of its subsidiaries, are subject to the liens in favor of the holders of our floating rate notes. This may further limit our flexibility in obtaining secured or unsecured financing in the future.

We may not have sufficient funds to purchase all outstanding floating rate notes and our other debt upon a change of control.

Upon a change of control, we will be required to make an offer to purchase all outstanding floating rate notes at a price equal to 101% of their principal amount plus accrued and unpaid interest. Any future credit arrangements or other debt agreements to which we become party may contain similar agreements. However, we cannot assure you that we will have or will be able to borrow sufficient funds at the time of any change of control to make any required repurchases of such notes or our other debt. If we failed to make a change of control offer and to purchase all of the tendered notes, it would constitute an event of default under the indenture for the floating rate notes, and potentially, other debt.

If there is a default under the agreements governing our material indebtedness, the value of our assets may not be sufficient to repay our creditors.

Our property and equipment (other than land, building and leasehold improvements and assets securing our capital lease obligations), which make up a significant portion of our tangible assets, had a net book value as of June 30, 2007 of approximately $115.5 million.  The book value of these assets should not be relied on as a measure of

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realizable value for such assets.  The realizable value of our assets may be greater or lower than such net book value.  The value of our assets in the event of liquidation will depend upon market and economic conditions, the availability of buyers and similar factors.  A sale of these assets in a bankruptcy or similar proceeding would likely be made under duress, which would reduce the amounts that could be recovered.  Furthermore, such a sale could occur when other companies in our industry also are distressed, which might increase the supply of similar assets and therefore reduce the amounts that could be recovered.  Our intangible assets had a net book value as of June 30, 2007 of approximately $95.1 million.  These assets primarily consist of the excess of the acquisition cost over the fair market value of the net assets acquired in purchase transactions.  However, as a result of our adoption of fresh-start reporting on August 1, 2007 all of our assets, including goodwill and other intangible assets will be remeasured using current fair value.  As a result, in the event of a default under the agreements governing our material indebtedness or any bankruptcy or dissolution of our company, the realizable value of these assets will likely be substantially lower and may be insufficient to satisfy the claims of our creditors.

The condition of our assets will likely deteriorate during any period of financial distress preceding a sale of our assets.  In addition, much of our assets consist of illiquid assets that may have to be sold at a substantial discount in an insolvency situation.  Accordingly, the proceeds of any such sale of our assets may not be sufficient to satisfy, and may be substantially less than, amounts due to our creditors.

Increases in interest rates could adversely affect our financial condition and results of operations.

An increase in prevailing interest rates would have an immediate effect on the interest rates charged on our variable rate indebtedness, which rise and fall upon changes in interest rates.  At August 31, 2007, approximately 97.7% of our indebtedness was variable rate indebtedness.  In January 2006, we entered into a two-year interest rate cap contract with a notional amount of $100 million.  During the two-year term of this contract our exposure on variable rate indebtedness is reduced by $100 million, or to approximately 66.4% as of August 31, 2007.  Increases in interest rates would also impact the refinancing of our fixed rate indebtedness.  If interest rates are higher when our fixed rate indebtedness becomes due, we may be forced to borrow at the higher rates.  If prevailing interest rates or other factors result in higher interest rates, the increased interest expense would adversely affect our cash flow and our ability to service our indebtedness.  As a protection against rising interest rates, we may enter into agreements such as interest rate swaps, caps, floors and other interest rate exchange contracts.  These agreements, however, subject us to the risk that the other parties to the agreements may not perform their obligations thereunder or that the agreements could be unenforceable.

RISKS RELATING TO OUR BUSINESS

Changes in the rates or methods of third-party reimbursements for our services could result in reduced demand for our services or create downward pricing pressure, which would result in a decline in our revenues and adversely affect our financial condition and results of operations.

For the year ended June 30, 2007, we derived approximately 55% of our revenues from direct billings to patients and third-party payors such as Medicare, Medicaid, managed care and private health insurance companies. Changes in the rates or methods of reimbursement for the services we provide could have a significant negative impact on those revenues. Moreover, our healthcare provider customers, which provided approximately 45% of our revenues during the year ended June 30, 2007, generally rely on reimbursement from third-party payors. To the extent our provider customers’ reimbursement from third-party payors is reduced, it will likely have an adverse impact on our financial condition and results of operations since our provider customers will seek to offset decreased reimbursement rates. In addition, the Medicare Payment Advisory Commission, in its March 2005 report to Congress, recommended that the government adopt standards for physicians and providers who bill Medicare for interpreting diagnostic imaging studies and adopt utilization management techniques used by third-party private payors, such as the credentialing of physicians, in an attempt to control the rise of imaging costs.

Certain third-party payors have proposed and implemented initiatives which have the effect of substantially decreasing reimbursement rates for diagnostic imaging services provided at non-hospital facilities, and third-party payors are continuing to monitor reimbursement for diagnostic imaging services.  A third-party payor has instituted a requirement of participation that freestanding imaging center providers offer multi-modality imaging services and not simply offer one type of diagnostic imaging service. Similar initiatives enacted in the future by numerous

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additional third-party payors would have a material adverse impact on our financial condition and results of operations.

Under Medicare’s prospective payment system for hospital outpatient services, or OPPS, a hospital is paid for outpatient services on a rate per service basis that varies according to the ambulatory payment classification, or APC, to which the service is assigned rather than on a hospital’s costs.  Each year CMS publishes new APC rates that are determined in accordance with the promulgated methodology.  Multi-modality and certain fixed-site centers which are freestanding and not hospital-based facilities are not directly affected by OPPS.

Under the final rule for OPPS effective January 1, 2007, technical fees for PET and PET/CT were reduced.  The national rate for PET changed from $1,150 to $850 per scan plus reimbursement for the necessary radiopharmaceutical and the national rate for PET/CT changed from $1,250 to $950 per scan plus reimbursement for the necessary radiopharmaceutical.  CMS posted the review copy of its notice of proposed rule-making for OPPS on July 16, 2007.  As part of the proposal, among other things, CMS seeks to package many radiology and radiation oncology services and drugs into procedural codes, thereby paying one consolidated payment for a service that commonly involves several coding components.  In addition, CMS is proposing to reassign the current procedural terminology codes for PET/CT scans to a new APC, with a proposed increased median of $1,093.52; however, this new payment rate includes the reimbursement for both the technical service and the necessary radiopharmaceutical. Because unfavorable reimbursement policies constrict the profit margins of the mobile customers we bill directly, we have and may continue to lower our fees to retain existing PET and PET/CT customers and attract new ones.  Although CMS continues to expand reimbursement for new applications of PET and PET/CT, expanded application is unlikely to significantly offset the anticipated overall reductions in PET and PET/CT reimbursement.  Any modifications under OPPS further reducing reimbursement to hospitals may adversely impact our financial condition and results of operations since hospitals will seek to offset such modifications.

In addition, in August 2005, CMS published proposed regulations that apply to hospital outpatient services that significantly decrease the reimbursement for diagnostic procedures performed together on the same day.  Under the proposed new methodology, CMS has identified families of imaging procedures by imaging modality and contiguous body area. Medicare would pay 100% of the technical component of the higher priced procedure and 50% for the technical component of each additional procedure for procedures involving contiguous body parts within a family of codes when performed in the same session.  Under the current methodology, Medicare pays 100% of the technical component of each procedure.  In November 2006, CMS published final regulations that delay the implementation of this reimbursement methodology.  Implementation of this reimbursement method would adversely impact our financial condition and results of operations since our hospital customers would seek to offset their reduced reimbursement through lower rates with us.  If third-party payors reduce the amount of their payments to our customers, our customers will likely seek to reduce their payments to us or seek an alternate supplier of diagnostic imaging services. Because unfavorable reimbursement policies have constricted and may continue to constrict the profit margins of the hospitals, physician groups and other healthcare providers that we bill directly, we have lowered and may continue to need to lower our fees to retain existing customers and attract new ones.  These reductions would have a significant adverse effect on our financial condition and results of operations by decreasing demand for our services or creating downward pricing pressure.

Services provided in non-hospital based freestanding facilities, including independent diagnostic treatment facilities, are paid under the Medicare Part B fee schedule.  In November 2005, CMS published final regulations, which would implement the same multi-procedure methodology rate reduction proposed for hospital outpatient services, for procedures reimbursed under the Part B fee schedule.  CMS proposed phasing this rate reduction over two years, 25% in 2006, and another 25% in 2007.  The first phase of the rate reduction was effective January 1, 2006; however, under final regulations released in November 2006, CMS will not implement the second phase of the rate reduction in 2007.

The Deficit Reduction Act of 2005, or DRA, was signed into law by President Bush in February 2006.  The DRA will result in significant reductions in reimbursement for radiology services for Medicare beneficiaries, with anticipated savings to the federal government.  The DRA provides, among other things, that reimbursement for the technical component for imaging services (excluding diagnostic and screening mammography) in non-hospital based freestanding facilities will be the lesser of OPPS or the Medicare Part B fee schedule. These reductions became effective on January 1, 2007.  We believe that the implementation of the reimbursement reductions in the

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DRA will have a material adverse effect on our financial condition and results of operations. For our fiscal year ended June 30, 2007, Medicare revenues represented approximately $32 million, or approximately 11% of our total revenues.  We believe that the DRA reimbursement reduction decreased our patient services revenues by approximately $3.1 million during the six months ended June 30, 2007.  We expect to experience a comparable decrease in our Medicare revenues for the six remaining months of calendar 2007.  While there are active and ongoing efforts to modify or otherwise mitigate the financial impact of the DRA on radiology services, we currently do not anticipate that these efforts will be materially successful.  If these negative trends continue, our financial condition and results of operations could be adversely affected.

We do not know to what extent other third-party payors may propose reimbursement reductions similar to the DRA.  Several significant third-party payors implemented the reduction for multiple images on contiguous body parts (as currently in effect under CMS regulations) and additional payors may implement this reduction as well.   If CMS implements the second phase of the rate reduction for multiple images on contiguous body parts, third-party payors may follow CMS practice and implement a similar reduction.  Such reduction would further negatively affect our financial condition and results of operations.

Finally, Medicare reimbursement rates under the Medicare Part B fee schedule are calculated in accordance with a statutory formula.  As a result, for calendar years 2005, 2006 and 2007, CMS published regulations decreasing the Part B reimbursement rates by 3.3%, 4.3% and 5.0% respectively.  In each instance, Congress enacted legislation preventing the decreases from taking effect.  This legislation increased the Part B reimbursement rates by 1.5% in 2005 and 2006.  No specific increase was included in the 2007 legislation.  We anticipate that CMS will continue to release regulations for decreases in reimbursement rates under the Medicare Part B fee schedule until the statutory formula is changed through enactment of new legislation.  In fact, the proposed decrease under the Medicare Part B fee schedule is 5.1% for calendar 2008.

All of the congressional and regulatory actions described above reflect industry-wide cost-containment pressures that we believe will continue to affect healthcare providers for the foreseeable future.

Negative trends could continue to adversely affect our financial condition and results of operations.

As a result of the various factors that affect our industry generally and our business specifically, we have experienced significant declines in Adjusted EBITDA as compared to prior year periods for the past three fiscal years (see our reconciliation of net cash provided by operating activities to Adjusted EBITDA in Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition, Liquidity and Capital Resources).  We define Adjusted EBITDA as our earnings before interest expense, income taxes, depreciation and amortization, excluding the gain on repurchase of notes payable, the loss on dissolution of partnership, the impairment of goodwill and other intangible assets and reorganization items.  For the year ended June 30, 2007, our Adjusted EBITDA decreased approximately 24.2% as compared to the year ended June 30, 2006.  This 24.2% decline in Adjusted EBITDA was preceded by an approximate 19.3% decline in Adjusted EBITDA for the year ended June 30, 2006 compared to the year ended June 30, 2005.  The decline in Adjusted EBITDA as compared to prior years has become a historical trend based on our performance during the past three fiscal years.  This negative trend in Adjusted EBITDA may continue and may be exacerbated by the adverse effects of the Medicare reimbursement reductions with respect to PET and PET/CT rates and the DRA, as discussed in the immediately preceding risk factor.  If this negative trend does continue it would adversely affect our financial condition and results of operations.

If we are unable to renew our existing customer contracts on favorable terms or at all, our financial condition and results of operations would be adversely affected.

Our financial condition and results of operations depends on our ability to sustain and grow our revenues from existing customers.  Our revenues would decline if we are unable to renew our existing customer contracts on favorable terms.  For our mobile facilities, we generally enter into contracts with hospitals having one to five year terms.  A significant number of our mobile contracts will expire each year.  Our mobile facility contract renewal rate was 83% for the year ended June 30, 2007.  We may not, however, achieve these renewal rates in the future.  To the extent we do not renew a customer contract, it is not always possible to immediately obtain replacement customers.  Historically, many replacement customers have been smaller, which have lower procedure volumes.  In addition, attractive financing from equipment manufacturers, as well as attractive gross margins have caused hospitals and

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physician groups who have utilized shared mobile services from our company and our competitors to purchase and operate their own equipment.  Although the reductions in reimbursement under the Medicare Part B fee schedule may dissuade physician groups from operating their own equipment, we expect that some high volume customer accounts will continue to elect not to renew their contracts with us and instead acquire their own diagnostic imaging equipment.  This would adversely affect our financial condition and results of operations.  Although the non-renewal of a single customer contract would not have a material impact on our revenues, non-renewal of several contracts on favorable terms, or at all, or the non-renewal of a long-term contract with a certain governmental entity, could have a significant negative impact on our financial condition and results of operations.

We have experienced, and will continue to experience, competition from hospitals, physician groups and other diagnostic imaging companies and this competition could adversely affect our financial condition and results of operations.

The healthcare industry in general, and the market for diagnostic imaging services in particular, is highly competitive and fragmented, with only a few national providers.  We compete principally on the basis of our service reputation, equipment, breadth of managed care contracts and convenient locations.  Our operations must compete with physician groups, established hospitals and certain other independent organizations, including equipment manufacturers and leasing companies that own and operate imaging equipment.  We have encountered and we will continue to encounter competition from hospitals and physician groups that purchase their own diagnostic imaging equipment.  Some of our direct competitors may have access to greater financial resources than we do.  If we are unable to successfully compete, our customer base would decline and our financial condition and results of operations would be adversely affected.

Our efforts to implement initiatives to enhance revenues and reduce costs may not be adequate or successful.

We have attempted to implement, and will continue to develop and implement, various revenue enhancing and cost reduction initiatives.  While we have experienced some improvements through our cost reduction initiatives, our revenue enhancing initiatives have produced minimal improvements to date.  Moreover, future revenue enhancement initiatives will face significant challenges because of the continued overcapacity in the diagnostic imaging industry and reimbursement reductions by Medicare and other third-party payors.  The adequacy and ultimate success of our initiatives to enhance revenues and reduce costs cannot be assured.

Consolidation in the imaging industry could adversely affect our financial condition and results of operations.

We compete with several national and regional providers of diagnostic imaging services, as well as local providers.  As a result of the reimbursement reductions by Medicare and other third-party payors, some of these competitors may consolidate their operations in order to obtain certain cost structure advantages and improve equipment utilization.  In calendar 2006, two fixed-site competitors consolidated and formed a combined business that is the largest national provider of fixed-site imaging services.  Recently, a fixed-site competitor agreed to be acquired by a large not-for-profit integrated group of hospitals and physicians clinics.  These companies could achieve certain advantages over us including increased financial and business resources, economies of scale, breadth of service offerings, and favored relationships with equipment vendors, hospital systems, leading radiologists and third-party payors.  We may be forced to reduce our prices or provide state-of-the-art equipment in order to retain and attract customers.  These pressures could adversely affect our financial condition and results of operations.

Managed care organizations may limit healthcare providers from using our services, causing us to lose procedure volume.

Our fixed-site centers are dependent on our ability to attract referrals from physicians and other healthcare providers representing a variety of specialties.  Our eligibility to provide services in response to a referral is often dependent on the existence of a contractual arrangement with the referred patient’s managed care organization.  Despite having a large number of contracts with managed care organizations, healthcare providers may be inhibited from referring patients to us in cases where the patient is not associated with one of the managed care organizations with which we have contracted.  The loss of patient referrals causes us to lose procedure volume which adversely impacts our revenues.  A significant decline in referrals would have a material adverse effect on our financial condition and results of operations.

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Technological change in our industry could reduce the demand for our services and require us to incur significant costs to upgrade our equipment.

We operate in a competitive, capital intensive, high fixed-cost industry. The development of new technologies or refinements of existing ones might make our existing systems technologically or economically obsolete, or reduce the need for our systems.   MRI and other diagnostic imaging systems are currently manufactured by numerous companies.   Competition among manufacturers for a greater share of the MRI and other diagnostic imaging systems market has resulted in and likely will continue to result in technological advances in the speed and imaging capacity of these new systems.  Consequently, the obsolescence of our systems may be accelerated.  Other than ultra-high field MRI systems and 256-slice CT systems, we are aware of no substantial technological changes; however, should such changes occur, we may not be able to acquire the new or improved systems.   In the future, to the extent we are unable to generate sufficient cash from our operations or obtain additional funds through bank financing, the issuance of equity or debt securities, and operating leases, we may be unable to maintain a competitive equipment base.  In addition, advancing technology may enable hospitals, physicians or other diagnostic imaging service providers to perform procedures without the assistance of diagnostic imaging service providers such as ourselves.  As a result, we may not be able to maintain our competitive position in our core markets or expand our business.

Our ability to maximize the utilization of our diagnostic imaging equipment may be adversely impacted by harsh weather conditions.

Harsh weather conditions can adversely impact our financial condition and results of operations.  To the extent severe weather patterns affect the regions in which we operate, potential patients may find it difficult to travel to our centers and we may have difficulty moving our mobile facilities along their scheduled routes.   As a result, we would experience a decrease in procedure volume during that period.   Our equipment utilization, procedure volume or revenues could be adversely affected by such conditions in the future.

Because a high percentage of our operating expenses are fixed, a relatively small decrease in revenues could have a significant negative impact on our financial condition and results of operations.

A high percentage of our expenses are fixed, meaning they do not vary significantly with the increase or decrease in revenues.  Such expenses include, but are not limited to, debt service and capital lease payments, rent and operating lease payments, salaries, maintenance, insurance and vehicle operation costs.  As a result, a relatively small reduction in the prices we charge for our services or procedure volume could have a disproportionate negative effect on our financial condition and results of operations.

We may be subject to professional liability risks which could be costly and negatively impact our financial condition and results of operations.

We have not experienced any material losses due to claims for malpractice.  However, claims for malpractice have been asserted against us in the past and any future claims, if successful, could entail significant defense costs and could result in substantial damage awards to the claimants, which may exceed the limits of any applicable insurance coverage.  Successful malpractice claims asserted against us, to the extent not covered by our liability insurance, could have a material adverse effect on our financial condition and results of operations.  In addition to claims for malpractice, there are other professional liability risks to which we are exposed through our operation of diagnostic imaging systems, including liabilities associated with the improper use or malfunction of our diagnostic imaging equipment.

To protect against possible professional liability from malpractice claims, we maintain professional liability insurance in amounts that we believe are appropriate in light of the risks and industry practice.  However, if we are unable to maintain insurance in the future at an acceptable cost or at all or if our insurance does not fully cover us in the event a successful claim was made against us, we could incur substantial losses.  Any successful malpractice or other professional liability claim made against us not fully covered by insurance could be costly to defend against, result in a substantial damage award against us and divert the attention of our management from our operations, which could have a material adverse effect on our financial condition and results of operations.

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Our failure to effectively integrate acquisitions and establish joint venture arrangements through partnerships with hospitals and other healthcare providers could impair our business.

As part of our core market strategy, we have pursued, and may continue to pursue, selective acquisitions and arrangements through partnerships and joint ventures with hospitals and other healthcare providers.  Our acquisition and joint venture strategies require substantial capital which may exceed the funds available to us from internally generated funds and our available financing arrangements.  We may not be able to raise any necessary additional funds through bank financing or through the issuance of equity or debt securities on terms acceptable to us, if at all.

Additionally, acquisitions involve the integration of acquired operations with our operations.  Integration involves a number of risks, including:

·demands on management related to the increase in our size after an acquisition;

·the diversion of our management’s attention from the management of daily operations to the integration of operations;

·integration of information systems;

·risks associated with unanticipated events or liabilities;

·difficulties in the assimilation and retention of employees;

·potential adverse effects on operating results;

·challenges in retaining customers and referral sources; and

·amortization or write-offs of acquired intangible assets.

If we do not successfully integrate our acquisitions, we may not realize anticipated operating advantages, economies of scale and cost savings.   Also, we may not be able to maintain the levels of operating efficiency that the acquired companies would have achieved or might have achieved separately.  Successful integration of acquisitions will depend upon our ability to manage their operations and to eliminate excess costs.

Loss of, and failure to attract, qualified employees, particularly technologists, could limit our growth and negatively impact our financial condition and results of operations.

Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization.  Competition in our industry for qualified employees is intense.   In particular, there is a very high demand for qualified technologists who are necessary to operate our systems, particularly MRI and PET technologists.  We may not be able to hire and retain a sufficient number of technologists, and we expect that our costs for the salaries and benefits of technologists will continue to increase for the foreseeable future because of the industry’s competitive demand for their services. 

Our PET and PET/CT service and some of our other imaging services require the use of radioactive materials, which could subject us to regulation, related costs and delays and potential liabilities for injuries or violations of environmental, health and safety laws.

Our PET and PET/CT services and some of our other imaging services require the use of radioactive materials to produce the images.   While this radioactive material has a short half-life, meaning it quickly breaks down into non-radioactive substances, storage, use and disposal of these materials present the risk of accidental environmental contamination and physical injury.  We are subject to federal, state and local regulations governing storage, handling and disposal of these materials and waste products.  Although we believe that our safety procedures for storing, handling and disposing of these hazardous materials comply with the standards prescribed by law and regulation, we cannot completely eliminate the risk of accidental contamination or injury from those hazardous materials.  In the

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event of an accident, we would be held liable for any resulting damages, and any liability could exceed the limits of or fall outside the coverage of our insurance.  In addition, we may not be able to maintain insurance on acceptable terms, or at all.   We could incur significant costs in order to comply with current or future environmental, health and safety laws and regulations.

We may be unable to generate revenue when our equipment is not operational.

Timely, effective service is essential to maintaining our reputation and high utilization rates on our imaging equipment.  Our warranties and maintenance contracts do not compensate us for the loss of revenue when our systems are not fully operational.  Equipment manufacturers may not be able to perform repairs or supply needed parts in a timely manner.  Thus, if we experience more equipment malfunctions than anticipated or if we are unable to promptly obtain the service necessary to keep our equipment functioning effectively, our financial condition and results of operations would be adversely affected.

An earthquake could adversely affect our business and operations.

Our corporate headquarters, including our information technology center, and a material number of our fixed-site centers are located in California, which has a high risk for earthquakes.  Depending upon its magnitude, an earthquake could severely damage our facilities or our information technology system or prevent potential patients from traveling to our centers.  Damage to our equipment or our information technology system or any interruption in our business would adversely affect our financial condition and results of operations.  We currently do not maintain a secondary disaster recovery facility for our information technology operations.  While we presently carry earthquake insurance in amounts we believe are appropriate in light of the risks, the amount of our earthquake insurance coverage may not be sufficient to cover losses from earthquakes.  In addition, we may discontinue earthquake insurance on some or all of our centers in the future if the cost of premiums for earthquake insurance exceeds the value of the coverage discounted for the risk of loss.  If we experience a loss which is uninsured or which exceeds policy limits, we could lose the capital invested in the damaged centers as well as the anticipated future cash flows from those centers.

High fuel costs would adversely affect our financial condition and results of operations.

Fuel costs constitute a significant portion of our mobile operating expenses. Historically, fuel costs have been subject to wide price fluctuations based on geopolitical issues and supply and demand.  Fuel availability is also affected by demand for home heating oil, diesel, gasoline and other petroleum products.  Because of the effect of these events on the price and availability of fuel, the cost and future availability of fuel cannot be predicted with any degree of certainty.  In the event of a fuel supply shortage or further increases in fuel prices, a curtailment of scheduled mobile service could result. There have been significant fluctuations in fuel costs and any further increases to already high fuel costs would adversely affect our financial condition and results of operations.

If we fail to comply with various licensure, certification and accreditation standards we may be subject to loss of licensure, certification or accreditation which would adversely affect our financial condition and results of operations.

All of the states in which we operate require that technologists who operate our CT, PET/CT and PET systems be licensed or certified.  Also, each of our fixed-site centers must continue to meet various requirements in order to receive payments from Medicare.  In addition, our mobile facilities and our fixed-site center in Chattanooga, Tennessee are currently accredited by The Joint Commission, formerly Joint Commission on Accreditation of Healthcare Organizations, an independent, non-profit organization that accredits various types of healthcare providers, such as hospitals, nursing homes, outpatient ambulatory care centers and diagnostic imaging providers.  If we were to lose such accreditation for our mobile facilities, it could adversely affect our mobile operations because some of our mobile customer contracts require accreditation by The Joint Commission and one of our primary competitors is accredited by The Joint Commission.

Managed care providers prefer to contract with accredited organizations.  Any lapse in our licenses, certifications or accreditations, or those of our technologists, or the failure of any of our fixed-site centers to satisfy the necessary requirements under Medicare could adversely affect our financial condition and results of operations.

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RISKS RELATING TO GOVERNMENT REGULATION OF OUR BUSINESS

Complying with federal and state regulations pertaining to our business is an expensive and time-consuming process, and any failure to comply could result in substantial penalties and adversely affect our ability to operate our business and our financial condition and results of operations.

We are directly or indirectly through our customers subject to extensive regulation by both the federal government and the states in which we conduct our business, including:

·the federal False Claims Act;

·the federal Medicare and Medicaid Anti-kickback Law, and state anti-kickback prohibitions;

·the federal Civil Money Penalty Law;

·the federal Health Insurance Portability and Accountability Act of 1996;

·the federal physician self-referral prohibition commonly known as the Stark Law and the state law equivalents of the Stark Law;

·state laws that prohibit the practice of medicine by non-physicians, and prohibit fee-splitting arrangements involving physicians;

·U.S. Food and Drug Administration requirements;

·state licensing and certification requirements, including certificates of need; and

·federal and state laws governing the diagnostic imaging equipment used in our business concerning patient safety, equipment operating specifications and radiation exposure levels.

If our operations are found to be in violation of any of the laws and regulations to which we or our customers are subject, we may be subject to the applicable penalty associated with the violation, including civil and criminal penalties, damages, fines, exclusion from Medicare, Medicaid or other governmental programs and the curtailment of our operations.  Any penalties, damages, fines or curtailment of our operations, individually or in the aggregate, could adversely affect our ability to operate our business and our financial condition and results of operations.  The risks of our being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations.  Any action brought against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.  Moreover, if we are unsuccessful in defending against such action, the imposition of certain penalties would adversely affect our financial condition and results of operations.  If we were excluded from Medicare, Medicaid or other governmental programs, not only would we lose the revenues associated with such payors, but we anticipate that our other customers and partners would terminate their contracts or relationships with us.

The regulatory framework is uncertain and evolving.

Healthcare laws and regulations may change significantly in the future.  We continuously monitor these developments and modify our operations from time to time as the regulatory environment changes.  However, we may not be able to adapt our operations to address new regulations, which could adversely affect our financial condition and results of operations.  In addition, although we believe that we are operating in compliance with applicable federal and state laws, neither our current or anticipated business operations nor the operations of our contracted radiology groups have been the subject of judicial or regulatory interpretation.  A review of our business by courts or regulatory authorities may result in a determination that could adversely affect our operations or the healthcare regulatory environment may change in a way that restricts our operations.

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RISKS RELATED TO RELATIONSHIPS WITH STOCKHOLDERS, AFFILIATES AND RELATED PARTIES

A small number of stockholders may control a significant portion of Holdings’ common stock.

As a result of the consummation of the exchange offer and plan of reorganization, a significant portion of Holdings’ outstanding common stock is held by a small number of holders. As a result, these stockholders will have significant voting power with respect to the ability to:

·authorize additional shares of Holdings’ capital stock;

·amend Holdings’ certificate of incorporation or bylaws;

·elect Holdings’ directors; or

·effect or reject a merger, sale of assets or other fundamental transaction.

The extent of ownership by these stockholders may also discourage a potential acquirer from making an offer to acquire us. This could reduce the value of Holdings’ common stock.

ITEM 2.          PROPERTIES

We lease approximately 48,400 square feet of office space for our corporate headquarters and a billing office at 26250 Enterprise Court, Lake Forest, California 92630. The lease for this location expires in 2008.

ITEM 3.          LEGAL PROCEEDINGS

We are engaged from time to time in the defense of lawsuits arising out of the ordinary course and conduct of our business and have insurance policies covering such potential insurable losses where such coverage is cost-effective.  We believe that the outcome of any such lawsuits will not have a material adverse impact on our financial condition and results of operations.

On May 29, 2007, Holdings and InSight filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code, in the U.S. Bankruptcy Court for the District of Delaware (Case No. 07-10700).  On July 10, 2007, the bankruptcy court confirmed Holdings’ and InSight’s Second Amended Joint Plan of Reorganization pursuant to chapter 11 of the Bankruptcy Code. The plan of reorganization became effective and Holdings and InSight emerged from bankruptcy protection on August 1, 2007.  For additional information regarding the reorganization, please see Item 1. “Business-Reorganization” in this Form 10-K.

On February 3, 2004, Southwest Outpatient Radiology, PC, or SWOR, filed a Summons and Complaint against InSight Health Corp., one of InSight’s subsidiaries, or IHC, in the Superior Court, Maricopa County, Arizona, for Declaratory Relief seeking a declaration as to the meaning and effect of a certain provision of the professional services agreement, or PSA, pursuant to which SWOR provided professional services at IHC’s facilities in Phoenix, Arizona.  SWOR claimed the PSA provided a right of first refusal to provide professional services at any center IHC acquired in Maricopa County.  IHC believes that the provision related only to “de novo” centers which IHC developed.  In April 2004, IHC acquired the stock of Comprehensive Medical Imaging, Inc., which owned and operated 21 fixed-site centers, six of which were located in Maricopa County, pursuant to a stock purchase agreement.

Prior to signing the stock purchase agreement, IHC gave SWOR 180 days notice to terminate the PSA in accordance with the PSA.  SWOR claimed that the PSA had already terminated due to IHC’s breach of the right of first refusal provision.  IHC answered the Summons and Complaint and was cooperating with SWOR in expediting discovery and an early trial when SWOR decided to abandon the Declaratory Relief action and on April 20, 2004, SWOR filed a First Amended Complaint claiming breach of contract, anticipatory breach of contract, negligent misrepresentation, breach of the covenant of good faith and fair dealing, intentional interference with contract,

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breach of fiduciary duty, declaratory relief and unspecified compensatory and punitive damages, prejudgment interest, and attorneys fees. We have answered the First Amended Complaint and discovery has commenced and is on-going. We are vigorously defending this lawsuit and believe that SWOR’s claims are without merit.  We are unable to predict the outcome of this lawsuit.

In August 2003, IHC entered into a series of agreements and acquired a joint venture interest through a limited liability company it formed called Kessler Imaging Associates, LLC, or KIA, in a CT fixed-site center in Hammonton, New Jersey.  KIA is owned 55% by IHC and 45% by Bernard Neff, M.D., or Dr. Neff.  KIA managed Kessler CAT Scan Associates, LLC, which provided CT, and mobile MRI and PET (using IHC mobile facilities) services to inpatients of William B. Kessler Memorial Hospital, or the Hospital, and community outpatients.

Dr. Neff provided radiology services at the Hospital and to the outpatients.  IHC did not control billing and collections to the Hospital for inpatients or to third-party payors for outpatients.  Dr. Neff performed that function.

Management at the Hospital changed in 2005, and in late 2005 the Hospital notified the parties that it was “voiding” all the agreements because the prior management had no authority to execute the agreements and stopped paying for the inpatient services.  Immediately after the agreements were allegedly “voided,” Dr. Neff filed an arbitration claim against the Hospital, for among other things, collection of outstanding amounts owed by the Hospital for services previously rendered.  The Hospital has challenged Dr. Neff’s efforts to proceed with arbitration efforts in the New Jersey courts.  The appellate division granted a stay motion, so the arbitration has been stayed pending oral argument, which has not yet been held and no decision has yet been rendered.  Until the appellate court rules, matters in the arbitration cannot go forward.

On March 8, 2006, IHC filed suit in the U.S. District Court for the District of New Jersey against the Hospital.  By the Complaint, IHC has asserted claims for fraud and seeks in excess of $4 million in compensatory damages plus additional amounts for punitive damages.  The Hospital has denied the substantive allegations against it.

The Hospital in turn filed a Counterclaim against IHC.  Initially, IHC moved to dismiss that Counterclaim for failure to state a claim and for failure to comply with pleading requirements.  Before that Motion could be ruled upon, the Hospital filed an Amended Counterclaim.  By the Amended Counterclaim, the Hospital asserts that IHC engaged in fraud as to the Hospital, allegedly concealing aspects of the overall transaction to the Hospital’s disadvantage, that IHC aided and abetted  Dr. Neff and his associates so they could acquire certain allegedly valuable assets of the Hospital without fair, reasonable, and adequate consideration, and that IHC conspired with Dr. Neff and his associates to acquire certain allegedly valuable assets of the Hospital without fair, reasonable, and adequate consideration.  By the Amended Counterclaim, the Hospital seeks compensatory damages of not less than $5 million and punitive damages of not less than $10 million.  IHC has moved to dismiss, and the motion remains pending at the present time.  IHC has also answered the Amended Counterclaim, denying all of the substantive allegations.  IHC intends to vigorously prosecute its case against the Hospital and defend against the Hospital’s claims.

On September 13, 2006, the Hospital filed a voluntary bankruptcy petition under Chapter 11 of Title 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court, District of New Jersey (Camden).  As a result, this case and the arbitration have been stayed pursuant to 11 U.S.C. § 362.  IHC and KIA have both filed proofs of claim in the Hospital’s bankruptcy case.  IHC has asserted contingent unliquidated claims based upon the litigation currently stayed in the U.S. District Court for the District of New Jersey.  KIA has filed a claim based upon the lease between KIA and the Hospital.  The Hospital remains a debtor-in-possession and is attempting to reorganize.  On August 16, 2007, the Hospital filed its first amended plan of reorganization and accompanying disclosure statement. 

IHC no longer provides any services to the Hospital and the lease has been terminated.  

ITEM 4.          SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of our fiscal year 2007, we solicited the vote of each record holder of Holdings’ common stock on the plan of reorganization.  The voting deadline for acceptances or rejections of the plan of reorganization for record holders of Holdings’ common stock was 5:00 p.m., New York City time, on May 29, 2007.  Holders of all outstanding shares of Holdings’ common stock (5,468,814 shares prior to the 1 for 6.326392 reverse stock split) voted for acceptance of the plan of reorganization and no holder abstained or voted against the plan of reorganization. 

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PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY; RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Holdings’ common stock is listed on the Over-The-Counter Bulletin Board under the symbol “ISGT.”   As of September 4, 2007, there were seven record holders of Holdings’ common stock and approximately 358 beneficial holders of Holdings’ common stock.  Holdings has never paid a cash dividend on its common stock and does not expect to do so in the foreseeable future.  The agreements governing our material indebtedness obligations contain restrictions on Holdings’ ability to pay dividends on its common stock.

Information regarding securities authorized for issuance under our equity compensation plans is set forth under Item 12.  “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

ITEM 6.          SELECTED FINANCIAL DATA

The selected consolidated financial data presented as of and for the years ended June 30, 2007, 2006, 2005, 2004 and 2003 has been derived from our audited consolidated financial statements.  The information in the following table should be read together with our audited consolidated financial statements and related notes, and Item 7.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this Form 10-K. 

On August 1, 2007, we implemented fresh-start reporting in accordance with SOP 90-7. The provisions of fresh-start reporting require that we revalue our assets and liabilities to fair value, reestablish stockholders’ equity using the reorganized value established in connection with the plan of reorganization, and record any applicable reorganization value in excess of amounts allocable to identifiable assets as an intangible asset. As a result of the adoption of SOP 90-7, we are reviewing the fair value of our assets and liabilities and expect that we will be required to adjust the value of some of our assets and liabilities. We expect that the implementation of fresh-start reporting under SOP 90-7 will have a material effect on our consolidated financial statements. As a result, our consolidated financial statements published for periods following the effectiveness of the plan of reorganization on August 1, 2007, will not be comparable to our consolidated financial statements published before the effectiveness of the plan and included elsewhere in this Form 10-K.  See Note 20 to our consolidated financial statements, which are a part of this Form 10-K.

	Years Ended June 30,
	2007			2006			2005			2004		2003
	(Amounts in thousands)
STATEMENT OF OPERATIONS DATA:
Revenues	$	286,914		$	306,298		$	316,873		$	290,884	$	237,752
Gross profit	25,488			35,026			48,716			57,463		57,708
Interest expense, net	52,780			50,754			44,860			40,682		37,514
Net (loss) income (1)(2)(3)	(99,041		)	(210,218		)	(27,217		)	2,924		4,922

	June 30,
	2007			2006			2005		2004		2003
BALANCE SHEET DATA:
Working capital	$	24,567		$	34,550		$	36,068	$	48,116	$	32,580
Property and equipment, net	144,823			181,026			209,461		242,336		219,121
Goodwill and other intangible assets	95,084			125,936			314,989		319,463		260,292
Total assets	323,051			408,204			624,523		675,631		577,317
Total long-term liabilities	517,200			504,360			512,608		537,177		442,484
Stockholders’ (deficit) equity	(241,432		)	(141,893		)	67,724		94,941		91,614

(1)No cash dividends have been paid on Holdings’ common stock for the periods indicated above.

(2)Includes impairment charges related to our goodwill of approximately $29.6 million and goodwill and other intangible assets of approximately $190.8 million for the years ended June 30, 2007 and 2006, respectively.

(3)Includes a charge for reorganization items of approximately $17.5 million for the year ended June 30, 2007.

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ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and accompanying notes which appear elsewhere in this Form 10-K. It contains forward-looking statements that reflect our plans, estimates and beliefs, and which involve risks, uncertainties and assumptions. Please see “Forward-Looking Statements Disclosure” for more information. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Form 10-K, particularly under the headings “Forward-Looking Statements Disclosure” and Item 1A. “Risk Factors”.

Overview

We are a nationwide provider of diagnostic imaging services through our integrated network of fixed-site centers and mobile facilities which are focused in core markets throughout the United States. Our services include MRI, CT, PET, PET/CT, and other technologies.  These services are noninvasive techniques that generate representations of internal anatomy on film or digital media, which are used by physicians for the diagnosis and assessment of diseases and disorders.

We serve a diverse portfolio of customers, including healthcare providers, such as hospitals and physicians, and payors, such as managed care organizations, Medicare, Medicaid and insurance companies. We operate in more than 30 states with a substantial presence in California, Arizona, New England, the Carolinas, Florida and the Mid-Atlantic states. While we generated approximately 69% of our total revenues from MRI services during the year ended June 30, 2007, we provide a comprehensive offering of diagnostic imaging and treatment services, including PET, PET/CT, CT, mammography, bone densitometry, ultrasound, lithotripsy and x-ray.

As of June 30, 2007, our network consists of 101 fixed-site centers and 112 mobile facilities. This combination allows us to provide a full continuum of imaging services to better meet the needs of our customers. Our fixed-site centers include freestanding centers and joint ventures with hospitals and radiology groups.  Our mobile facilities provide hospitals and physician groups access to imaging technologies when they lack either the resources or patient volume to provide their own imaging services or require incremental capacity.  We enter into agreements with radiologists to provide professional services, which include supervision and interpretation of radiological procedures and quality assurance.  We do not engage in the practice of medicine.  We have two reportable segments: mobile operations and fixed operations.  Our mobile operations include 20 parked mobile facilities, each of which serves a single customer.  Our fixed operations include five mobile facilities as part of our fixed operations in Maine.  Certain financial information regarding our reportable segments is included in Note 17 to our consolidated financial statements, which are a part of this Form 10-K.

Historically, we pursued a strategy that was largely focused on growth through the acquisition of imaging businesses in various parts of the country. More recently, we began the process of implementing a strategy based on core markets.  A core market strategy may allow us more operating efficiencies and synergies than are available in a nationwide strategy.  A core market will be based on many factors and not just the number of fixed-site centers or mobile facilities in an area.  Other factors would include, without limitation, the capabilities of our contracted radiologists, any hospital affiliations, the strength of returns on capital investment, the potential for growth and sustainability of our business in the area, the reimbursement environment for the area, the strength of competing providers in the area, population growth trends, and any regulatory restrictions.  We expect that this strategy will result in us exiting some markets while increasing our presence in others, which may be accomplished through business or asset sales, swaps, purchases, closures and the development of new fixed-site centers. As discussed below, our board of directors was recently reconfigured with five new members.  Our management is reviewing and analyzing with our board of directors our current core market strategy. As a result, we may determine to continue with such strategy, modify such strategy or identify an alternate strategy.

Growth in the diagnostic imaging industry has been and will continue to be driven by (1) an aging population, (2) the increasing acceptance of diagnostic imaging, particularly PET/CT and (3) expanding applications of CT, MRI and PET technologies.

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Reorganization

In November 2006, we engaged Lazard Frères & Co. LLC as our financial advisor to assist us in exploring strategic alternatives.  In March 2007, we announced an offer to exchange shares of Holdings’ common stock for up to $194.5 million aggregate principal amount of InSight’s 9.875% senior subordinated notes due 2011, or senior subordinated notes.  The exchange offer initially provided for consummation on an out-of-court basis or in connection with the filing of a prepackaged plan of reorganization under chapter 11 of the Bankruptcy Code. On May 29, 2007, Holdings and InSight filed voluntary petitions to reorganize their business under chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware (Case No. 07-10700).  The other subsidiaries of Holdings were not included in the bankruptcy filing and continued to operate their business.  On July 10, 2007, the bankruptcy court confirmed Holdings’ and InSight’s Second Amended Joint Plan of Reorganization pursuant to chapter 11 of the Bankruptcy Code. The plan of reorganization became effective and Holdings and InSight emerged from bankruptcy protection on August 1, 2007, or the effective date.

On August, 1, 2007, pursuant to the exchange offer and the plan of reorganization, all of Holdings’ common stock, all options for Holdings’ common stock and all of InSight’s senior subordinated notes were cancelled, and the following distributions were made (after giving effect to a 1 for 6.326392 reverse stock split of Holdings’ common stock):

·Holders of InSight’s senior subordinated notes received 7,780,000 shares of newly issued Holdings’ common stock, which represented 90% of all shares of Holdings’ common stock outstanding after consummation of the plan of reorganization.

·Holders of Holdings’ common stock prior to the effective date received 864,444 shares of newly issued Holdings’ common stock, which represented 10% of all shares of Holdings’ common stock after consummation of the plan of reorganization.

Holdings’ common stock is listed on the Over-The-Counter Bulletin Board under the symbol “ISGT”.

The plan of reorganization provided for the assumption of substantially all executory contracts and unexpired leases; provided, however, we did terminate (i) the management agreement with J. W. Childs Advisors II, L.P. and Halifax Genpar, L.P. and (ii) the stockholders agreement with holders of Holdings’ common stock and stock options.  Pursuant to the plan of reorganization, the boards of directors of Holdings and InSight were reconfigured, and five of the directors of each board were designated by an ad hoc committee of holders of senior subordinated notes, one was designated by the holders of Holdings’ common stock prior to the effective date, and Bret W. Jorgensen, the President and Chief Executive Officer of Holdings and InSight, remained a director.  Additional information regarding the new board of directors is set forth below in Part III of this Form 10-K.

This reorganization significantly deleveraged our balance sheet and improved our projected cash flow after debt service and long-term liquidity.  As a result, we believe this reorganization has improved our ability to compete in our industry, although we continue to operate with significant leverage and face the industry challenges of overcapacity and reimbursement reductions by Medicare and other third-party payors.

Executive Summary

As described in greater detail below, our business faces many challenges.  Some of these challenges are unique to our business, while other challenges are industry-wide.  Our revenues for the year ended June 30, 2007 decreased by approximately 6.3% as compared to the year ended June 30, 2006 and our costs of operations decreased by 3.6%.  Moreover, our corporate operating expenses and interest expense rose during the same period.  For the year ended June 30, 2007, our Adjusted EBITDA decreased approximately 24.2% as compared to the year ended June 30, 2006 (see our reconciliation of net cash provided by operating activities to Adjusted EBITDA in the subsection entitled “Financial Condition, Liquidity and Capital Resources” on page 41).  This 24.2% decline in Adjusted EBITDA was preceded by an approximate 19.3% decline in Adjusted EBITDA for the year ended June 30, 2006 compared to the year ended June 30, 2005.  The decline in Adjusted EBITDA as compared to prior years has become a historical trend based on our performance during the past three fiscal years.  This negative trend in Adjusted EBITDA may continue and may be exacerbated by the adverse effects of the Medicare reimbursement reductions

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with respect to PET and PET/CT rates and the DRA, as discussed in the subsection entitled “Reimbursement” below.

We have attempted to implement, and will continue to develop and implement, various revenue enhancement and cost reduction initiatives.  While we have experienced some improvements through our cost reduction initiatives, our revenue enhancement initiatives have produced minimal improvements to date.  Moreover, future revenue enhancement initiatives will face significant challenges because of the continued overcapacity in the diagnostic imaging industry and reimbursement reductions by Medicare and other third-party payors.

In the second quarter of fiscal 2007, we reduced our overall labor force by 40 positions, which we expect will result in estimated annual savings of approximately $3.3 million.  Additionally, certain other open positions have been eliminated, which we expect will result in additional annual savings of approximately $2.4 million.  In connection with the reduction of our labor force, we recorded a severance charge of approximately $0.6 million in the second quarter of fiscal 2007.

Notwithstanding the consummation of our exchange offer and plan of reorganization, we still have a substantial amount of debt, which requires significant interest and principal payments.  As of August 2, 2007, we had total indebtedness of approximately $321.4 million.  In addition, as a result of the various factors that affect our industry generally and our business specifically, we have experienced significant declines in our operating results and cash flows as compared to prior year periods for the past three fiscal years.  We believe, based on currently available information, that future net cash provided by operating activities and our credit facility will be adequate to meet our operating cash and debt service requirements for at least the next twelve months.  Moreover, if our net cash provided by operating activities declines further than we have anticipated, we are prepared to take steps to conserve our cash, including delaying or restructuring our capital projects (entering into capital and operating leases rather than using cash). We believe these steps would still enable us to meet our liquidity needs even if net cash provided by operating activities falls below what we have anticipated.  If our net cash provided by operating activities were to severely decline, we may be unable to service our indebtedness.  However, we believe that we will be able to meet our liquidity needs to allow us to continue normal operations.

Acquisition and Dispositions

In March 2006, we purchased a majority ownership interest in a joint venture that operates an MRI fixed-site center in San Ramon, California.  The purchase price was approximately $2.3 million, net of cash acquired.

During the fiscal year ended June 30, 2007, we closed three fixed-site centers and sold one fixed-site center.  During the fiscal year ended June 30, 2006, we closed four fixed-site centers and dissolved a mobile lithotripsy partnership.  During the fiscal year ended June 30, 2005, we sold a fixed-site center and our interests in two joint venture fixed-site centers.

Segments

We have two reportable segments, fixed operations and mobile operations:

Fixed Operations:  Generally, our fixed operations consist of freestanding imaging centers which we refer to as fixed-site centers.  Revenues at our fixed-site centers are primarily generated from services billed, on a fee-for-service basis, directly to patients or third-party payors such as managed care organizations, Medicare, Medicaid, commercial insurance carriers and workers’ compensation funds, which we generally refer to as our patient services revenues and management fees.  Revenues from our fixed operations have been and will continue to be driven by the growth in the diagnostic imaging industry discussed above and are dependent on our ability to:

·attract patient referrals from physician groups and hospitals;

·maximize  procedure volume;

·maintain our existing contracts and enter into new ones with managed care organizations and commercial insurance carriers; and

·acquire or develop new fixed-site centers.

Mobile Operations:  Our mobile operations consist of mobile facilities, which provide services to hospitals, physician groups and other healthcare providers.  Revenues from our mobile operations are primarily generated from fee-for-service arrangements and fixed fee contracts billed directly to our customers, which we generally refer

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to as contract services revenues.  Revenues from our mobile operations have been and will continue to be driven by the growth in the diagnostic imaging industry and are dependent on our ability to:

·establish new mobile customers within our core markets;

·structure efficient mobile routes that maximize equipment utilization and reduce vehicle operations costs; and

·renew existing contracts with our mobile customers.

Negative Trends

Our fixed and mobile operations have been and will continue to be adversely affected by the following negative trends:

·overcapacity in the diagnostic imaging industry;

·reductions in reimbursement from certain third-party payors including planned reductions from Medicare;

·reductions in compensation paid by our mobile customers;

·competition from other mobile providers;

·competition from equipment manufacturers which have caused some of our referral sources, some of our mobile customers, and our mobile customers’ referral sources to invest in their own diagnostic imaging equipment; and

·industry-wide increases in salaries and benefits for technologists.

Reimbursement

Medicare. The Medicare program provides reimbursement for hospitalization, physician, diagnostic and certain other services to eligible persons 65 years of age and over and certain others. Providers are paid by the federal government in accordance with regulations promulgated by the Department of Health and Human Services and generally accept the payment with nominal deductible and co-insurance amounts required to be paid by the service recipient, as payment in full. Since 1983, hospital inpatient services have been reimbursed under a prospective payment system. Hospitals receive a specific prospective payment for inpatient treatment services based upon the diagnosis of the patient.

Under Medicare’s prospective payment system for hospital outpatient services, or OPPS, a hospital is paid for outpatient services on a rate per service basis that varies according to the ambulatory payment classification group, or APC, to which the service is assigned rather than on a hospital’s costs. Each year the Centers for Medicare and Medicaid Services, or CMS, publishes new APC rates that are determined in accordance with the promulgated methodology. Multi-modality and certain fixed-site centers which are freestanding and not hospital-based facilities are not directly affected by OPPS.

Under the final rule for OPPS effective January 1, 2007, technical fees for PET and PET/CT were reduced.  The national rate for PET changed from $1,150 to $850 per scan plus reimbursement for the necessary radiopharmaceutical and the national rate for PET/CT changed from $1,250 to $950 per scan plus reimbursement for the necessary radiopharmaceutical.  CMS posted the review copy of its notice of proposed rule-making for OPPS on July 16, 2007.  As part of the proposal, among other things, CMS seeks to package many radiology and radiation oncology services and drugs into procedural codes, thereby paying one consolidated payment for a service that commonly involves several coding components.  In addition, CMS is proposing to reassign the current procedural terminology codes for PET/CT scans to a new APC, with a proposed increased median of $1,093.52; however, this new payment rate includes the reimbursement for both the technical service and the necessary radiopharmaceutical.

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Because unfavorable reimbursement policies constrict the profit margins of the mobile customers we bill directly, we have and may continue to lower our fees to retain existing PET and PET/CT customers and attract new ones.  Although CMS continues to expand reimbursement for new applications of PET and PET/CT, expanded application is unlikely to significantly offset the anticipated overall reductions in PET and PET/CT reimbursement.  Any modifications under OPPS further reducing reimbursement to hospitals may adversely impact our financial condition and results of operations since hospitals will seek to offset such modifications.

Furthermore, in August 2005, CMS published proposed regulations that would apply to hospital outpatient services that significantly decrease the reimbursement for diagnostic procedures performed together on the same day. Under the proposed new methodology, CMS identified families of imaging procedures by imaging modality and contiguous body area. Medicare would pay 100% of the technical component of the higher priced procedure and 50% for the technical component of each additional procedure for procedures involving contiguous body parts within a family of codes when performed in the same session. Under the current methodology, Medicare pays 100% of the technical component of each procedure. In November 2006, CMS published final regulations that delay the implementation of this reimbursement methodology.  Implementation of this reimbursement methodology would adversely impact our financial condition and results of operations since our hospital customers would seek to offset their reduced reimbursement through lower rates with us.

Services provided in non-hospital based freestanding facilities, such as independent diagnostic treatment facilities, are paid under the Medicare Part B fee schedule. In November 2005, CMS published final regulations, which would implement the same multi-procedure methodology rate reduction proposed for hospital outpatient services, for procedures reimbursed under the Part B fee schedule.  CMS proposed phasing in this rate reduction over two years, 25% in 2006, and another 25% in 2007.  The first phase of the rate reduction was effective January 1, 2006; however, pursuant to final regulations released in November 2006, CMS did not implement the second phase of the rate reduction in 2007.

The DRA was signed into law by President Bush in February 2006.  The DRA will result in significant reductions in reimbursement for radiology services for Medicare beneficiaries, with anticipated savings to the federal government.  The DRA provides, among other things, that reimbursement for the technical component for imaging services (excluding diagnostic and screening mammography) in non-hospital based freestanding facilities will be the lesser of OPPS or the Medicare Part B fee schedule.  These reductions became effective on January 1, 2007.  We believe that the implementation of the reimbursement reductions in the DRA will have a material adverse effect on our financial condition and results of operations.  For our fiscal year ended June 30, 2007, Medicare revenues represented approximately $32 million, or approximately 11% of our total revenues.  We believe that the DRA reimbursement reduction decreased our patient services revenues by approximately $3.1 million during the six months ended June 30, 2007.  We expect to experience a comparable decrease in our Medicare revenues for the remaining six months of calendar 2007.  While there are active and ongoing efforts to modify or otherwise mitigate the financial impact of the DRA on radiology services, we currently do not anticipate that these efforts will be materially successful.

Finally, Medicare reimbursement rates under the Medicare Part B fee schedule are calculated in accordance with a statutory formula.  As a result, for calendar years 2005, 2006 and 2007, CMS published regulations decreasing the Part B reimbursement rates by 3.3%, 4.3% and 5.0%, respectively.  In each instance, Congress enacted legislation preventing the decreases from taking effect.  This legislation increased the Part B reimbursement rates by 1.5% in 2005 and 2006.  No specific increase was included in the 2007 legislation.  We anticipate that CMS will continue to release regulations for decreases in reimbursement rates under the Medicare Part B fee schedule until the statutory formula is changed through enactment of new legislation.  In fact, the proposed decrease under the Medicare Part B fee schedule is 5.1% for calendar 2008.

All of the congressional and regulatory actions described above reflect industry-wide cost-containment pressures that we believe will continue to affect healthcare providers for the foreseeable future.

Medicaid. The Medicaid program is a jointly-funded federal and state program providing coverage for low-income persons. In addition to federally-mandated basic services, the services offered and reimbursement methods vary from state to state.  In many states, Medicaid reimbursement is patterned after the Medicare program; however, an

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increasing number of states have established or are establishing payment methodologies intended to provide healthcare services to Medicaid patients through managed care arrangements.

Managed Care and Private Insurance. Health Maintenance Organizations, or HMOs, Preferred Provider Organizations, or PPOs, and other managed care organizations attempt to control the cost of healthcare services by a variety of measures, including imposing lower payment rates, preauthorization requirements, limiting services and mandating less costly treatment alternatives. Managed care contracting is competitive and reimbursement schedules are at or below Medicare reimbursement levels. However, we believe that managed care organizations may also reduce or otherwise limit reimbursement in response to reductions in government reimbursement, which could have an adverse impact on our financial condition and results of operations.  These reductions may be similar to the reimbursement reductions set forth in the DRA.  The development and expansion of HMOs, PPOs and other managed care organizations within our core markets could have a negative impact on utilization of our services in certain markets and/or affect the revenues per procedure which we can collect, since such organizations will exert greater control over patients’ access to diagnostic imaging services, the selection of the provider of such services and the reimbursement thereof.

Some states have adopted or expanded laws or regulations restricting the assumption of financial risk by healthcare providers which contract with health plans. While we are not currently subject to such regulation, we or our customers may in the future be restricted in our ability to assume financial risk, or may be subjected to reporting requirements if we do so. Any such restrictions or reporting requirements could negatively affect our contracting relationships with health plans.

Private health insurance programs generally have authorized payment for our services on satisfactory terms. However, we believe that private health insurance programs may also reduce or otherwise limit reimbursement in response to reductions in government reimbursement, which could have an adverse impact on our financial condition and results of operations. These reductions may be similar to the reimbursement reductions set forth in the DRA.

Several significant third-party payors implemented the reduction for multiple images on contiguous body parts (as currently in effect under CMS regulations) and additional payors may propose to implement this reduction as well.  If CMS implements the second phase of the rate reduction for multiple images on contiguous body parts, third-party payors may follow CMS practice and implement a similar reduction.  Such reduction would further negatively affect our financial condition and results of operations.

Furthermore, certain third-party payors have proposed and implemented initiatives which have the effect of substantially decreasing reimbursement rates for diagnostic imaging services provided at non-hospital facilities, and payors are continuing to monitor reimbursement for diagnostic imaging services. A third-party payor has instituted a requirement of participation that requires freestanding imaging center providers offer multi-modality imaging services and not simply offer one type of diagnostic imaging service. Similar initiatives enacted in the future by a significant number of additional third-party payors would have an adverse impact on our financial condition and results of operations.

Revenues

We earn revenues by providing services to patients, hospitals and other healthcare providers.  Our patient services revenues are billed, on a fee-for-service basis, directly to patients or third-party payors such as managed care organizations, Medicare, Medicaid, commercial insurance carriers and workers’ compensation funds, collectively, payors.  Patient services revenues also includes balances due from patients, which are primarily collected at the time the procedure is performed.  Our charge for a procedure is comprised of charges for both the technical and professional components of the service.  Patient services revenues are presented net of (1) related contractual adjustments, which represent the difference between our charge for a procedure and what we will ultimately receive from the payors, and (2) payments due to radiologists for interpreting the results of the diagnostic imaging procedures.

Our billing system does not generate contractual adjustments.  Contractual adjustments are manual estimates based upon an analysis of historical experience of contractual payments from payors and the outstanding accounts

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receivables from payors. Contractual adjustments are written off against their corresponding asset account at the time a payment is received from a payor, with a reduction to the allowance for contractual adjustments to the extent such an allowance was previously recorded.

We report payments to radiologists on a net basis because (1) we are not the primary obligor for the provision of professional services, (2) the radiologists receive contractually agreed upon amounts from collections and (3) the radiologists bear the risk of non-collection; however, we have entered into arrangements with several radiologists pursuant to which we pay the radiologists directly for their professional services at an agreed upon contractual rate.  With respect to these arrangements, the professional component is included in our revenues, and our payments to the radiologists are included in costs of services.

Our collection policy is to obtain all required insurance information at the time a procedure is scheduled, and to submit an invoice to the payor immediately after a procedure is completed.  Most third-party payors require preauthorization before an MRI or PET procedure is performed on a patient.

We refer to our revenues from hospitals, physician groups and other healthcare providers as contract services revenues.  Contract services revenues are primarily generated from fee-for-service arrangements, fixed-fee contracts and management fees billed to the hospital, physician group or other healthcare provider.  Contract services revenues are generally billed to our customers on a monthly basis.  Contract services revenues are recognized over the applicable contract period.  Revenues collected in advance are recorded as unearned revenue.  Revenues are affected by the timing of holidays, patient and referring physician vacation schedules and inclement weather.

The provision for doubtful accounts is reflected as an operating expense rather than a reduction of revenues and represents our estimate of amounts that will be uncollectible from patients, payors, hospitals and other healthcare providers.  The provision for doubtful accounts includes amounts to be written off with respect to specific accounts involving customers which are financially unstable or materially fail to comply with the payment terms of their contract and other accounts based on our historical collection experience, including payor mix and the aging of patient accounts receivables balances.  Estimates of uncollectible amounts are revised each period, and changes are recorded in the period they become known. Receivables deemed to be uncollectible, either through a customer default on payment terms or after reasonable collection efforts have been exhausted, are fully written off against their corresponding asset account, with a reduction to the allowance for doubtful accounts to the extent such an allowance was previously recorded.  Our historical write-offs for uncollectible accounts are not concentrated in a specific payor class.

The following illustrates our payor mix based on revenues for the year ended June 30, 2007:

Percentage of Total Revenues
Hospitals, physician groups and other healthcare providers (1)	46	%
Managed care and insurance	37	%
Medicare	11	%
Medicaid	2	%
Workers’ compensation	2	%
Other, including self-pay patients	2	%

(1)No single hospital, physician group or other healthcare provider accounted for more than 5% of our total revenues.

As of June 30, 2007, our days sales outstanding for trade accounts receivables on a net basis was 54 days.  We calculate days sales outstanding by dividing accounts receivables, net of allowances, by the three-month average revenue per day.

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The aging of our gross and net trade accounts receivables as of June 30, 2007 is as follows (amounts in thousands):

													120 days
	Current			30 days			60 days			90 days			and older			Total
	(unaudited)
Hospitals, physician groups and other healthcare providers	$	10,360		$	4,645		$	1,248		$	564		$	2,213		$	19,030
Managed care and insurance	19,547			8,613			4,488			3,106			14,196			49,950
Medicare/Medicaid	5,740			1,468			977			744			3,818			12,747
Workers’ compensation	1,236			776			568			444			1,875			4,899
Other, including self-pay patients	236			101			104			95			84			620
Trade accounts receivables	37,119			15,603			7,385			4,953			22,186			87,246
Less: Allowances for professional fees	(4,193		)	(1,595		)	(892		)	(629		)	(3,152		)	(10,461		)
Allowances for contractual adjustments	(12,490		)	(4,413		)	(2,611		)	(157		)	(1,783		)	(21,454		)
Allowances for doubtful accounts	(318		)	(146		)	(67		)	(2,038		)	(10,079		)	(12,648		)
Trade accounts receivables, net	$	20,118		$	9,449		$	3,815		$	2,129		$	7,172		$	42,683

Operating Expenses

We operate in a capital intensive industry that requires significant amounts of capital to fund operations.  As a result, a high percentage of our total operating expenses are fixed.  Our fixed costs include depreciation and amortization, debt service and capital lease payments, rent and operating lease payments, salaries and benefit obligations, equipment maintenance expenses, and insurance and vehicle operation costs.  We expect that our costs for the salaries and benefits of technologists will continue to increase for the foreseeable future because of the industry’s competitive demand for their services.  Due to the increase in our mobile PET and PET/CT facilities, which are moved more frequently, our vehicle operation costs will continue to increase until we can maximize geographic operating efficiencies.  Because a large portion of our operating expenses are fixed, any increase in our procedure volume disproportionately increases our operating cash flow.  Conversely, any decrease in our procedure volume disproportionately decreases our operating cash flow.  Our variable costs, which comprise only a small portion of our total operating expenses, include the cost of service supplies such as film, contrast media and radiopharmaceuticals used in PET and PET/CT procedures.

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Results of Operations

The following table sets forth certain historical financial data expressed as a percentage of revenues for each of the periods indicated:

	Years Ended June 30,
	2007		2006		2005
REVENUES	100.0	%	100.0	%	100.0	%
COSTS OF OPERATIONS:
Costs of services	67.1		64.6		61.4
Provision for doubtful accounts	2.0		1.7		1.8
Equipment leases	2.1		1.1		0.7
Depreciation and amortization	19.9		21.2		20.7
Total costs of operations	91.1		88.6		84.6
Gross profit	8.9		11.4		15.4
CORPORATE OPERATING EXPENSES	(8.9	)	(7.7	)	(5.8	)
EQUITY IN EARNINGS OF UNCONSOLIDATED PARTNERSHIPS	1.1		1.0		0.8
INTEREST EXPENSE, net	(18.5	)	(16.6	)	(14.2	)
GAIN ON REPURCHASE OF NOTES PAYABLE	—		1.0		—
LOSS ON DISSOLUTION OF PARTNERSHIP	—		(0.3	)	—
IMPAIRMENT OF GOODWILL AND OTHER INTANGIBLE ASSETS	(10.3	)	(62.3	)	—
Loss before reorganization items and income taxes	(27.7	)	(73.5	)	(3.8	)
REORGANIZATION ITEMS	(6.1	)	—		—
Loss before income taxes	(33.8	)	(73.5	)	(3.8	)
PROVISION (BENEFIT) FOR INCOME TAXES	0.8		(4.8	)	4.8
Net loss	(34.6	)%	(68.6	)%	(8.6	)%

The following table sets forth certain historical financial data by segment for the periods indicated (amounts in thousands):

	Years Ended June 30,
	2007			2006			2005
Revenues
Fixed operations	$	180,115		$	191,637		$	196,482
Mobile operations	106,799			114,661			120,391
Total	$	286,914		$	306,298		$	316,873
Costs of Operations
Fixed operations	$	151,447		$	154,377		$	150,105
Mobile operations	91,345			97,586			98,147
Other	18,634			19,309			19,905
Total	$	261,426		$	271,272		$	268,157
Costs of Operations as a Percentage of Revenues
Fixed operations	84.1		%	80.6		%	76.4		%
Mobile operations	85.5			85.1			81.5
Total	91.1		%	88.6		%	84.6		%

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Years Ended June 30, 2007 and 2006

Revenues:  Revenues decreased approximately 6.3% from approximately $306.3 million for the year ended June 30, 2006, to approximately $286.9 million for the year ended June 30, 2007. This decrease was due to lower revenues from our fixed operations (approximately $11.5 million) and from our mobile operations (approximately $7.9 million). Revenues from our fixed and mobile operations represented approximately 63% and 37%, respectively, of our total revenues for the years ended June 30, 2007 and 2006.

Revenues from our fixed operations decreased approximately 6.0% from approximately $191.6 million for the year ended June 30, 2006, to approximately $180.1 million for the year ended June 30, 2007. This decrease was due primarily to (1) lower revenues from our existing fixed-site centers (approximately $8.5 million, which amount includes approximately $3.1 million as a result of the DRA) and (2) the loss of revenues from the centers we sold or closed during fiscal 2007 and 2006 (approximately $5.8 million), partially offset by (1) higher revenues from changes in payment arrangements with certain radiologists discussed above (approximately $2.0 million) and (2) revenues from a joint venture fixed-site center we acquired during the third quarter of fiscal 2006 (approximately $0.8 million).  Revenues from our existing fixed-site centers decreased because of (1) lower procedure volume (approximately 1%) as a result of the negative trends discussed above and (2) a decline in our average reimbursement from payors (approximately 4%).  Revenues have been and may continue to be adversely affected by the negative trends discussed above.

Revenues from our mobile operations decreased approximately 6.9% from approximately $114.7 million for the year ended June 30, 2006, to approximately $106.8 million for the year ended June 30, 2007. This decrease was partially due to (1) lower revenues from our existing mobile facilities (approximately $7.5 million) and (2) loss of revenues from a mobile lithotripsy partnership we dissolved during the second quarter of fiscal 2006 (approximately $0.4 million).  Revenues from our existing mobile facilities decreased because of lower MRI and lithotripsy revenues.  Revenues have been and may continue to be adversely affected by the negative trends discussed above.

Approximately 55% of our total revenues were generated from patient services revenues for the year ended June 30, 2007.  All patient services revenues were earned from our fixed operations for the year ended June 30, 2007. Approximately 45% of our total revenues for the year ended June 30, 2007 were generated from contract services revenues. Contract services revenues for fixed and mobile operations represented approximately 17% and 83%, respectively, of total contract services revenues for the year ended June 30, 2007.

Costs of Operations:  Costs of operations decreased approximately 3.6% from approximately $271.3 million for the year ended June 30, 2006, to approximately $261.4 million for the year ended June 30, 2007. This decrease was due primarily to (1) lower costs at our mobile operations (approximately $6.3 million); (2) lower costs at our fixed operations (approximately $3.0 million); and (3) lower costs at our billing and other operations (approximately $0.6 million).  The decrease at our billing and other operations is due to lower amortization expense on our other intangible assets as a result of a reduction in their carrying value from an impairment charge taken during the fourth quarter of fiscal 2006, partially offset by higher salaries and benefits, partially as a result of severance payments in connection with the consolidation of a billing office.

Costs of operations at our fixed operations decreased approximately 1.9% from approximately $154.4 million for the year ended June 30, 2006, to approximately $151.4 million for the year ended June 30, 2007.  Costs of operations decreased due to the elimination of costs from the centers we sold or closed in fiscal 2007 and 2006 (approximately $5.0 million), offset by (1) higher costs at our existing fixed-site centers (approximately $0.8 million); (2) costs from a joint venture fixed-site center we acquired during the third quarter of fiscal 2006 (approximately $0.8 million); (3) charges to close two fixed-site centers during the first quarter of fiscal 2007 (approximately $0.3 million); and (4) severance charges related to the reduction in labor force in the second quarter of fiscal 2007 discussed above (approximately $0.1 million). The increase in costs at our existing fixed-site centers was primarily due to (1) higher payments to radiologists (approximately $2.0 million) discussed above; (2) higher equipment lease costs as a result of entering into more operating leases (approximately $1.4 million); (3) higher occupancy costs (approximately $0.7 million); and (4) higher equipment maintenance costs (approximately $0.3 million), partially offset by (1) lower medical supply costs as a result of lower volumes and cost reduction initiatives throughout our fixed-site centers (approximately $1.2 million); (2) reduced taxes, primarily property taxes (approximately $0.7 million); (3) reduced

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minority interest expense and management fees as a result of lower earnings from our consolidated partnerships (approximately $0.5 million); and (4) reduced insurance premium costs (approximately $0.3 million).

Costs of operations at our mobile operations decreased approximately 6.5% from approximately $97.6 million for the year ended June 30, 2006, to approximately $91.3 million for the year ended June 30, 2007. The decrease was due primarily to a reduction in costs at our existing mobile facilities (approximately $6.7 million), partially offset by severance charges related to the reduction in labor force in the second quarter of fiscal 2007 discussed above (approximately $0.4 million).  The reduction in costs at our existing mobile facilities was primarily caused by (1) lower depreciation and amortization expense (approximately $4.9 million); (2) lower salaries and benefits (approximately $2.6 million); (3) lower medical supply costs as a result of lower volumes and cost reduction initiatives (approximately $0.6 million); (4) reduced travel and entertainment costs (approximately $0.5 million); and (5) reduced insurance premium costs (approximately $0.2 million), partially offset by (1) higher equipment lease costs as a result of entering into more operating leases (approximately $1.9 million); (2) higher vehicle operation costs (approximately $0.7 million); and (3) bad debt expense (approximately $0.5 million).

Corporate Operating Expenses:  Corporate operating expenses increased approximately 7.6% from approximately $23.7 million for the year ended June 30, 2006, to approximately $25.5 million for the year ended June 30, 2007.  The increase was due primarily to (1) higher legal and consulting fees relating to certain legal proceedings described in Item 3.  “Legal Proceedings” (approximately $2.2 million); (2) higher sales and marketing costs (approximately $0.8 million); and (3) higher accounting costs (approximately $0.5 million), primarily related to compliance with regulations related to the Sarbanes-Oxley Act, partially offset by the elimination of costs from a national sales meeting in the first quarter of fiscal 2006 (approximately $0.9 million).

Interest Expense, net:  Interest expense, net increased approximately 4.1% from approximately $50.7 million for the year ended June 30, 2006, to approximately $52.8 million for the year ended June 30, 2007.  The increase was due primarily to higher interest rates on our variable rate indebtedness.  We expect that interest expense, net will decrease materially for fiscal 2008 as a result of the cancellation and exchange of approximately $194.5 million of senior subordinated notes for Holdings’ common stock pursuant to the exchange offer and the plan of reorganization.

Impairment of Goodwill:  During the second quarter of fiscal 2007 we recorded a non-cash goodwill impairment charge of approximately $29.6 million.  This charge is a reduction in the carrying value of goodwill for our fixed reporting unit.  See “Critical Accounting Policies and Estimates” below and Note 7 to our consolidated financial statements, which are a part of this Form 10-K.

Reorganization Items:  During the fourth quarter of fiscal 2007, we recorded approximately $17.5 million for items in accordance with SOP 90-7 for expenses related to Holdings’ and InSight’s reorganization.  We expect to incur approximately $7.3 million in additional fees and expenses related to Holdings’ and InSight’s reorganization.

Provision (Benefit) for Income Taxes:  Provision (benefit) for income taxes increased from a benefit of approximately $14.8 million for the year ended June 30, 2006, to a provision of approximately $2.2 million for the year ended June 30, 2007.  The provision for income taxes for the year ended June 30, 2007 is primarily related to estimated state income taxes.  The benefit for the year ended June 30, 2006 is primarily related to a reduction in deferred tax liabilities related to financial statement and tax basis differences for goodwill.  As a result of the plan of reorganization, future utilization of our NOL carryforwards will be limited.  We anticipate that the limitation will allow use of approximately $3.0 million of attributes per year.

Years Ended June 30, 2006 and 2005

Revenues:  Revenues decreased approximately 3.3% from approximately $316.9 million for the year ended June 30, 2005, to approximately $306.3 million for the year ended June 30, 2006.  This decrease was due to lower revenues from our fixed operations (approximately $4.9 million) and from our mobile operations (approximately $5.7 million).  Revenues from our fixed operations and mobile operations represented approximately 63% and 37%, respectively, of our total revenues for the year ended June 30, 2006.

Revenues from our fixed operations decreased approximately 2.5% from approximately $196.5 million for the year ended June 30, 2005, to approximately $191.6 million for the year ended June 30, 2006.  This decrease was due

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primarily to (1) a loss of revenues from the centers we sold, deconsolidated or closed during fiscal 2006 and 2005 (approximately $5.9 million) and (2) lower revenues from our existing fixed-site centers (approximately $1.5 million), partially offset by (1) higher revenues from changes in payment arrangements with certain radiologists (approximately $2.1 million) and (2) increased revenues from the acquisition of a joint venture fixed-site center during the third quarter of fiscal 2006 (approximately $0.4 million).  Revenues were adversely affected by the negative trends described above.

Revenues from our mobile operations decreased approximately 4.7% from approximately $120.4 million for the year ended June 30, 2005, to approximately $114.7 million for the year ended June 30, 2006.  This decrease was partially due to the dissolution of a mobile lithotripsy partnership during the second quarter of fiscal 2006 (approximately $1.4 million) and lower revenues from our existing mobile facilities (approximately $4.4 million).  This decrease was due to lower MRI and lithotripsy revenues, partially offset by an increase in PET/CT revenues.  Our mobile operations revenues were also adversely affected by Hurricanes Katrina, Rita and Wilma (approximately $0.2 million).  Revenues were adversely affected by the negative trends described above.

Approximately 56% of our total revenues for the year ended June 30, 2006 were generated from patient services revenues.  Primarily all patient services revenues were earned from our fixed operations for the year ended June 30, 2006.  Approximately 44% of our total revenues for the year ended June 30, 2006, were generated from contract services revenues.  Contract services revenues from fixed operations and mobile operations represented approximately 15% and 85%, respectively, of total contract services revenues for the year ended June 30, 2006.

Costs of Operations:  Costs of operations increased approximately 1.2% from approximately $268.2 million for the year ended June 30, 2005, to approximately $271.3 million for the year ended June 30, 2006.  This increase was due primarily to higher costs in our fixed operations (approximately $4.3 million), partially offset by lower costs in our mobile operations (approximately $0.6 million) and at our billing and other operations (approximately $0.6 million).  The decrease at our billing and other operations is due to overall cost savings from the closure of two billing centers during fiscal 2005, offset by a charge for certain severance and the closure of two additional billing centers during fiscal 2006.

Costs of operations at our fixed operations increased approximately 2.9% from approximately $150.1 million for the year ended June 30, 2005, to approximately $154.4 million for the year ended June 30, 2006.  The increase was due primarily to higher costs at our existing fixed-site centers (approximately $9.7 million), partially offset by (1) the elimination of costs from the centers we sold, deconsolidated or closed in fiscal 2006 and 2005 (approximately $5.5 million) and (2) a charge for severance payments for a terminated employee during the first quarter of fiscal 2005 (approximately $0.3 million).  The increase at our existing fixed-site centers was primarily due to (1) higher salaries and benefits related to technologists and to additional field and center management (approximately $3.6 million); (2) higher payments to radiologists (approximately $2.0 million) discussed above; (3) higher equipment maintenance costs (approximately $1.3 million); (4) charges related to the closure of centers (approximately $0.4 million); and (5) higher occupancy costs (approximately $0.4 million).

Costs of operations at our mobile operations decreased approximately 0.5% from approximately $98.1 million for the year ended June 30, 2005, to approximately $97.6 million for the year ended June 30, 2006.  The decrease was due primarily to a reduction in costs associated with the dissolution of a mobile lithotripsy partnership during the second quarter of fiscal 2006 (approximately $1.1 million), partially offset by higher costs at our existing mobile facilities (approximately $0.6 million).  The increase in costs at our existing mobile facilities was primarily caused by higher travel and vehicle operations costs (approximately $1.4 million), partially offset by reduced bad debt expense related to certain mobile customers (approximately $0.6 million).

Corporate Operating Expenses:  Corporate operating expenses increased approximately 28.8% from approximately $18.4 million for the year ended June 30, 2005, to approximately $23.7 million for the year ended June 30, 2006.  The increase was due primarily to (1) higher salaries and benefits primarily relating to the transfer of certain field responsibilities to corporate (approximately $2.1 million); (2) higher legal and consulting fees relating to certain legal proceedings described in Item 3. “Legal Proceedings” (approximately $0.9 million); (3) severance charges related to organizational realignments during the third and fourth quarters of fiscal 2006 (approximately $0.7 million); (4) costs incurred as a result of a national sales meeting in September 2005 (approximately $0.7 million); and (5) higher consulting costs related to revenue enhancement initiatives (approximately $0.3 million), partially

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offset by a charge for severance payments for a terminated employee during the first quarter of fiscal 2005 (approximately $0.8 million).

Interest Expense, net:  Interest expense, net increased approximately 13.1% from approximately $44.9 million for the year ended June 30, 2005, to approximately $50.8 million for the year ended June 30, 2006.  The increase was due primarily to higher interest rates on our variable rate indebtedness, partially offset by lower outstanding debt due to principal payments on capital lease obligations.

Gain on Repurchase of Notes Payable:  In September 2005, we realized a net gain of $3.1 million in connection with our repurchase of approximately $55.5 million of our unsecured senior subordinated notes due 2011.

Loss on Dissolution of Partnership:  In December 2005, we dissolved a mobile lithotripsy partnership in Connecticut.  In connection with this dissolution, we recorded a $1.0 million reduction in associated goodwill.

Impairment of Goodwill and Other Intangible Assets:  For the year ended June 30, 2006, we recorded non-cash impairment charges of approximately $190.8 million.  These charges are a reduction in the carrying value of goodwill and other intangible assets at our reporting units (approximately $126.8 million for our fixed reporting unit and approximately $64.0 million for our mobile reporting unit).  See “Critical Accounting Policies and Estimates” below and Note 7 to our consolidated financial statements, which are a part of this Form 10-K.

Provision (Benefit) for Income Taxes: Provision (benefit) for income taxes changed from a provision of approximately $15.1 million for the year ended June 30, 2005 to a benefit of approximately $14.8 million for the year ended June 30, 2006.  As a result of our pre-tax loss for the year ended June 30, 2006 and anticipated future losses, we determined that a valuation allowance continued to be necessary due to the uncertainty of the future realization of net operating loss carryforwards and other assets.  This valuation allowance does not affect our cash flows or the timing of income taxes payable in the future.  The net deferred tax liability of approximately $15.2 million at the year ended June 30, 2005 was the result of financial statement and tax basis differences for goodwill.  These differences were not expected to reverse in the foreseeable future.  In the year ended June 30, 2006 this deferred tax liability was reduced to $3.5 million as a result of the impairment charges, net of recording a deferred tax liability related to financial and tax basis differences on our indefinite-lived other intangible assets.

Financial Condition, Liquidity and Capital Resources

We have historically funded our operations and capital project requirements from net cash provided by operating activities and capital and operating leases.  We expect to fund future working capital and capital project requirements from net cash provided by operating activities, capital and operating leases, and our revolving credit facility.  Due to the severity and duration of the negative trend in our Adjusted EBITDA and Medicare reimbursement reductions, we anticipate that operating cash flow will continue to decline as well, which will result in:

·a reduction in the amounts available under our revolving credit facility, and therefore a decline in our borrowing base;

·difficulty funding our capital projects; and

·more stringent financing and leasing terms from equipment manufacturers and other financing resources.

Liquidity: During recent years, we have experienced many adverse market conditions and our financial performance has deteriorated.  We reported a net loss of approximately $99.0 million, $210.2 million and $27.2 million for the years ended June 30, 2007, 2006 and 2005, respectively.  Though non-cash goodwill impairment charges and reorganization charges constituted a significant component of reported net losses, we have experienced, and expect to continue to experience, decreases in revenues and increases in cost of operations at our existing mobile facilities and fixed-site centers and corporate operating expenses; however, the reorganization materially improved our long-term liquidity by cancelling $194.5 million of long-term debt and associated interest expense.

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On and prior to May 29, 2007, we entered into several amendments to our $30 million asset-based revolving credit facility with Bank of America, N.A., as collateral agent, administrative agent and lender thereunder. These amendments, among other things, permitted Holdings and InSight to file voluntary petitions for reorganization pursuant to chapter 11 of the Bankruptcy Code (the “Chapter 11 Petitions”) and consummate their plan of reorganization. On May 29, 2007, we entered into Waiver and Agreement No. 1 to our floating rate notes indenture (the “Indenture Waiver”) and a Second Supplemental Indenture to our floating rate notes indenture (the “Indenture Supplement”), in each case with U.S. Bank National Association, as indenture trustee, and the holders of a majority of our floating rate notes. The Indenture Waiver and Indenture Supplement provided for, among other things, (1) a waiver of compliance by Holdings and its subsidiaries with those provisions of the floating rate notes indenture that the majority noteholders could waive that would restrict the filing of the Chapter 11 Petitions and consummation of the plan of reorganization, (2) a prohibition on optional redemptions by InSight of the floating rate notes prior to January 1, 2008 and the payment of redemption premiums to the extent the floating rate notes are redeemed thereafter and (3) various amendments to the negative covenants in the floating rate notes indenture, including removing the ability of Holdings and its subsidiaries (other than in certain limited circumstances) to pay dividends, redeem stock and make investments and further restricting the ability of Holdings and its subsidiaries to engage in asset sales and incur liens and additional indebtedness.  On May 29, 2007, Holdings and InSight filed the Chapter 11 Petitions.  Holdings and InSight emerged from bankruptcy on August 1, 2007, under a plan of reorganization that was approved by the U.S. Bankruptcy Court for the District of Delaware. The other subsidiaries of Holdings were not included in the bankruptcy filing and continued to operate their business.  Please see Item 1. “Business-Reorganization” for further information regarding bankruptcy matters.

Notwithstanding the consummation of our exchange offer and plan of reorganization, we still have a substantial amount of debt, which requires significant interest and principal payments.  As of August 2, 2007, we had total indebtedness of approximately $321.4 million.  In addition, as a result of the various factors that affect our industry generally and our business specifically, we have experienced significant declines in our operating results and cash flows as compared to prior year periods for the past three fiscal years.  We believe, based on currently available information, that future net cash provided by operating activities and our credit facility will be adequate to meet our operating cash and debt service requirements for at least the next twelve months.  Moreover, if our net cash provided by operating activities declines further than we have anticipated, we are prepared to take steps to conserve our cash, including delaying or restructuring our capital projects (entering into capital and operating leases rather than using cash). We believe these steps would still enable us to meet our liquidity needs even if net cash provided by operating activities falls below what we have anticipated.  If our net cash provided by operating activities were to severely decline, we may be unable to service our indebtedness.  However, we believe that we will be able to meet our liquidity needs to allow us to continue normal operations.

Our short-term and long-term liquidity needs will arise primarily from:

·interest payments relating to our floating rate notes and revolving credit facility;

·capital projects;

·working capital requirements; and

·potential acquisitions.

There are no scheduled principal repayments on our floating rate notes until 2011.

Cash and cash equivalents as of June 30, 2007 were approximately $20.8 million.  Our primary source of liquidity is cash provided by operating activities.  Our ability to generate cash flows from operating activities is based upon several factors including the following:

·the volume of patients at our fixed-site centers;

·the reimbursement we receive for our services;

·the demand for our mobile services;

·our ability to control expenses; and

·our ability to collect our trade accounts receivables from third-party payors, hospitals, physician groups, other healthcare providers and patients.

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A summary of cash flows is as follows (amounts in thousands):

	Years Ended June 30,
	2007			2006			2005
Net cash provided by operating activities	$	9,065		$	37,628		$	64,045
Net cash used in investing activities	(16,045		)	(28,507		)	(35,759		)
Net cash used in financing activities	(396		)	(1,752		)	(37,859		)
Increase (decrease) in cash and cash equivalents	$	(7,376	)	$	7,369		$	(9,573	)

Net cash provided by operating activities was approximately $9.1 million for the year ended June 30, 2007 and resulted primarily from (1) the net income before depreciation, amortization, impairment of goodwill and reorganization items; (2) an increase in accounts payable, other accrued expenses and accrued liabilities subject to compromise (approximately $11.1 million); and (3) a decrease in trade accounts receivables, net (approximately $1.0 million), partially offset by payments made in connection with our reorganization efforts (approximately $11.4 million).  The increase in accounts payable, other accrued expenses and accrued liabilities subject to compromise is primarily due to accrued interest on the senior subordinated notes.

Net cash used in investing activities was approximately $16.0 million for the year ended June 30, 2007.  Cash used in investing activities resulted primarily from our purchase or upgrade of diagnostic imaging equipment at our existing fixed-site centers and mobile facilities (approximately $16.2 million).

Net cash used in financing activities was approximately $0.4 million for the year ended June 30, 2007. Cash used in financing activities resulted primarily from notes payable and capital lease payments (approximately $6.5 million), partially offset by net proceeds from borrowings on our revolving credit facility and other notes payable (approximately $6.1 million).

The following table sets forth our Adjusted EBITDA for the years ended June 30, 2007, 2006 and 2005.  We define Adjusted EBITDA as our earnings before interest expense, income taxes, depreciation and amortization excluding the gain on repurchase of notes payable, the loss on dissolution of partnership, the impairment of goodwill and other intangible assets and reorganization items.  Adjusted EBITDA has been included because we believe that it is a useful tool for us and our investors to measure our ability to provide cash flows to meet debt service, capital projects and working capital requirements.  Adjusted EBITDA should not be considered an alternative to, or more meaningful than, income from company operations or other traditional indicators of operating performance and cash flow from operating activities determined in accordance with accounting principles generally accepted in the United States.  We present the discussion of Adjusted EBITDA because covenants in the agreements governing our material indebtedness contain ratios based on this measure.   While Adjusted EBITDA is used as a measure of liquidity and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculations.  Our reconciliation of net cash provided by operating activities to Adjusted EBITDA is as follows (amounts in thousands):

	Years Ended June 30,
	2007			2006			2005
Net cash provided by operating activities	$	9,065		$	37,628		$	64,045
Cash used for reorganization items	11,367			—			—
Provision (benefit) for income taxes	2,175			(14,824		)	15,069
Interest expense, net	52,780			50,754			44,860
Loss on sales of centers	—			—			(170		)
Amortization of deferred financing costs	(3,158		)	(3,051		)	(3,173		)
Equity in earnings of unconsolidated partnerships	3,030			3,072			2,613
Distributions from unconsolidated partnerships	(3,008		)	(3,387		)	(2,621		)
Net change in operating assets and liabilities	(12,189		)	(6,121		)	(7,086		)
Net change in deferred income taxes	—			15,224			(15,224		)
Adjusted EBITDA	$	60,062		$	79,295		$	98,313

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Adjusted EBITDA decreased approximately 24.2% from approximately $79.3 million for the year ended June 30, 2006, to approximately $60.1 million for the year ended June 30, 2007.  This decrease was due primarily to (1) reductions in Adjusted EBITDA from our fixed operations (approximately $9.0 million) and our mobile operations (approximately $6.5 million); (2) an increase in costs at our billing and other operations (approximately $1.9 million); and (3) an increase in corporate operating expenses (approximately $1.8 million).

Adjusted EBITDA from our fixed operations decreased approximately 13.7% from approximately $65.6 million for the year ended June 30, 2006, to approximately $56.6 million for the year ended June 30, 2007.  This decrease was due primarily to (1) a reduction in Adjusted EBITDA at our existing fixed-site centers (approximately $7.7 million); (2) the elimination of Adjusted EBITDA at the fixed-site centers we sold or closed during fiscal 2007 and 2006 (approximately $1.2 million); (3) charges to close two centers discussed above (approximately $0.3 million); and (4) severance charges discussed above (approximately $0.1 million), partially offset by Adjusted EBITDA from a joint venture fixed-site center we acquired during the third quarter of fiscal 2006 (approximately $0.3 million).  The reduction in Adjusted EBITDA at our existing fixed-site centers is primarily due to the reduction in revenues, including the reimbursement reductions from the DRA, offset by the decrease in costs discussed above.

Adjusted EBITDA from our mobile operations decreased approximately 13.7% from approximately $47.6 million for the year ended June 30, 2006, to approximately $41.1 million for the year ended June 30, 2007.  This decrease was due primarily to (1) the reduction in revenues discussed above; (2) severance charges discussed above (approximately $0.4 million); and (3) the elimination of Adjusted EBITDA from a mobile lithotripsy partnership we dissolved during the second quarter of fiscal 2006 (approximately $0.4 million), partially offset by the reduction in costs discussed above.

Adjusted EBITDA decreased approximately 19.3% from approximately $98.3 million for the year ended June 30, 2005, to approximately $79.3 million for the year ended June 30, 2006.  This decrease was due primarily to (1) reductions in Adjusted EBITDA from our fixed operations (approximately $8.5 million) and our mobile operations (approximately $5.8 million) and (2) an increase in corporate operating expenses (approximately $5.2 million), partially offset by a reduction in costs at our billing and other operations (approximately $0.6 million).

Adjusted EBITDA from our fixed operations decreased approximately 11.5% from approximately $74.1 million for the year ended June 30, 2005, to approximately $65.6 million for the year ended June 30, 2006.  This decrease was due primarily to (1) a reduction in Adjusted EBITDA at our existing fixed-site centers (approximately $8.1 million) and (2) the elimination of Adjusted EBITDA at the fixed-site centers we sold or closed during fiscal 2006 and 2005 (approximately $0.9 million), partially offset by (1) a charge for severance payments for a terminated employee during the first quarter of fiscal 2005 (approximately $0.3 million) and (2) an increase in Adjusted EBITDA from a joint venture fixed-site center we acquired during the third quarter of fiscal 2006 (approximately $0.2 million).  The reduction in Adjusted EBITDA at our existing fixed-site centers is primarily due to the reduction in revenues and increase in costs discussed above.

Adjusted EBITDA from our mobile operations decreased approximately 10.8% from approximately $53.4 million for the year ended June 30, 2005, to approximately $47.6 million for the year ended June 30, 2006.  This decrease was due primarily to the reduction in revenues and increase in costs discussed above.

Capital Projects:  In fiscal 2007, we purchased or leased 10 MRI systems, seven PET/CT systems and two CT systems.   As of June 30, 2007, we have committed to capital projects of approximately $2.4 million through September 2007, which includes the purchase of one MRI system (approximately $1.2 million) and one CT system (approximately $0.7 million).  We expect to use either internally generated funds or capital or operating leases to finance the acquisition of such equipment.  We may purchase, lease or upgrade other diagnostic imaging systems as opportunities arise to place new equipment into service when new contract services agreements are signed, existing agreements are renewed, acquisitions are completed, or new fixed-site centers and mobile facilities are developed in accordance with our core market strategy.  If we are unable to generate sufficient cash from our operations or obtain additional funds through bank financing, the issuance of equity or debt securities, or operating leases, we may be unable to maintain a competitive equipment base.  As a result, we may not be able to maintain our competitive position in our core markets or expand our business.

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Floating Rate Notes and Credit Facility:  As of June 30, 2007, through InSight, we had outstanding $300 million aggregate principal amount of floating rate notes.  The floating rate notes mature in November 2011 and bear interest at LIBOR plus 5.25% per annum, payable quarterly.  Holdings’ and InSight’s wholly owned subsidiaries unconditionally guarantee all of InSight’s obligations under the indenture for the floating rate notes.   The floating rate notes are secured by a first priority lien on substantially all of InSight’s and the guarantors’ existing and future tangible and intangible personal property including, without limitation, equipment, certain contracts and intellectual property, but are not secured by a lien on their accounts receivables and related assets, cash accounts related to receivables and certain other assets.  In addition, the floating rate notes are secured by a portion of InSight’s stock and the stock or other equity interests of InSight’s subsidiaries.

On July 9, 2007, certain holders of floating rate notes purchased from InSight an additional $15 million of aggregate principal amount of floating rate notes, which increased the aggregate principal amount of outstanding floating rate notes to $315 million.  Such notes were issued at 85% of their principal amount, or $12.75 million in cash, and are subject to customary registration rights and other terms in most cases consistent with our original issuance of floating rate notes.  We used a portion of the cash proceeds from such issuance to pay the approximately $3.0 million consent payment to those holders of floating rate notes who consented to the Indenture Waiver with respect to the floating rate notes indenture that was entered into on May 29, 2007, and will use the remainder of such proceeds for working capital and general corporate purposes.

In January 2006, through InSight, we purchased an interest rate cap contract.  The contract is for a term of two years, with a notional amount of $100 million and a LIBOR cap of 5.0%.  As of June 30, 2007, the fair value of the interest rate cap contract was approximately $0.3 million.

As of June 30, 2007, in addition to the indebtedness under the floating rate notes, through InSight, we had outstanding $194.5 million aggregate principal amount of senior subordinated notes.  The senior subordinated notes were cancelled in exchange for Holdings’ common stock on August 1, 2007 in connection with the exchange offer and plan of reorganization.

In connection with the consummation of the plan of reorganization, InSight’s wholly owned subsidiaries entered into a Second Amended and Restated Loan and Security Agreement, dated August 1, 2007, with the lenders named therein and Bank of America, N.A., as collateral and administrative agent.  Pursuant to such agreement, Bank of America, N.A. and the other lenders agreed to provide InSight’s wholly owned subsidiaries with an asset-based revolving credit facility of up to $30 million, maturing on June 30, 2011, to be used for working capital and general corporate purposes.  This agreement amends and restates our prior $30 million asset-based revolving credit facility with the lenders and Bank of America, N.A., as collateral and administrative agent.  As of August 31, 2007, there were no outstanding borrowings under this credit facility; however, there were letters of credit of approximately $2.6 million outstanding under the credit facility, of which approximately $0.6 million are cash collateralized.

Borrowings under the credit facility bear interest at a per annum rate equal to LIBOR, plus an applicable margin, or, at our option, the base rate (which is the Bank of America, N.A. prime rate).  The applicable margin is initially 2.50% per annum; however, commencing with delivery of our consolidated financial statements for the fiscal month ending March 31, 2008 and quarterly thereafter, the applicable margin will be adjusted in accordance with a pricing grid based on our fixed charge coverage ratio, and will range from 2.50% to 2.00% per annum.  In addition to paying interest on outstanding loans under the credit facility, we are required to pay a commitment fee to the lenders in respect of unutilized commitments thereunder at a rate equal to 0.50% per annum, subject to reduction based on a performance grid tied to our fixed charge coverage ratio, as well as customary letter-of-credit fees and fees of Bank of America, N.A.  There are no financial covenants included in the credit facility, except a minimum fixed charge coverage ratio test which will be triggered if availability under the credit facility plus eligible cash falls below $7.5 million.

Holdings and InSight unconditionally guarantee all obligations of InSight’s subsidiaries that are borrowers under the credit facility.  All obligations under the credit facility and the obligations of Holdings and InSight under the guarantees are secured, subject to certain exceptions, by a first priority security interest in all of Holdings’, InSight’s and the borrowers’: (i) accounts; (ii) instruments, chattel paper (including, without limitation, electronic chattel paper), documents, letter-of-credit rights and supporting obligations relating to any account; (iii) general intangibles that relate to any account; (iv) monies in the possession or under the control of the lenders under the credit facility;

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(v) products and cash and non-cash proceeds of the foregoing; (vi) deposit accounts established for the collection of proceeds from the assets described above; and (vii) books and records pertaining to any of the foregoing.

The agreements governing our credit facility and floating rate notes contain restrictions on among other things, our ability to incur additional liens and indebtedness, engage in mergers, consolidations and asset sales, make dividend payments, prepay other indebtedness, make investments and engage in transactions with affiliates.

Contractual Commitments:   As defined by SEC reporting regulations, our contractual obligations as of June 30, 2007 are as follows (amounts in thousands):

			Payments Due by Period
			Less than		1-3		3-5		More than
	Total		1 Year		Years		Years		5 Years
Long-term debt obligations	$	730,817	$	56,622	$	102,928	$	571,267	$	—
Capital lease obligations	6,970		3,265		2,442		1,263		—
Operating lease obligations	54,888		14,070		22,401		13,947		4,470
Purchase commitments	2,423		2,423		—		—		—
Total contractual obligations	$	795,098	$	76,380	$	127,771	$	586,477	$	4,470

The long-term debt obligations and capital lease obligations include both principal and interest commitments for the periods presented.  The long-term debt obligations include the $194.5 million of senior subordinated notes, which were exchanged for Holdings’ common stock on August 1, 2007, but exclude the $15 million of floating rate notes issued on July 9, 2007.   The interest commitment on our floating rate notes is based on the effective interest rate at June 30, 2007 (10.61%), after giving effect to our interest rate cap contract.

Off-Balance Sheet Arrangements

There are no off-balance sheet transactions, arrangements or obligations (including contingent obligations) that have, or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital projects or capital resources.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations, as well as disclosures included elsewhere in this Form 10-K are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingencies. We believe the critical accounting policies that most impact the consolidated financial statements are described below. A summary of our significant accounting policies can be found in the notes to our consolidated financial statements, which are a part of this Form 10-K.

Fresh-Start Reporting:  On August 1, 2007, we implemented fresh-start reporting in accordance with SOP 90-7. The provisions of fresh-start reporting require that we revalue our assets and liabilities to fair value, reestablish stockholders’ equity using the reorganized value established in connection with the plan of reorganization, and record any applicable reorganization value in excess of amounts allocable to identifiable assets as an intangible asset. As a result of the adoption of SOP 90-7, we are reviewing the fair value of our assets and liabilities and expect that we will be required to adjust the value of some of our assets and liabilities. We expect that the implementation of fresh-start reporting under SOP 90-7 will have a material effect on our consolidated financial statements. As a result, our consolidated financial statements published for periods following the effectiveness of the plan of reorganization on August 1, 2007, will not be comparable to our consolidated financial statements published before the effectiveness of the plan and included elsewhere in this Form 10-K.  See Note 20 to our consolidated financial statements, which are a part of this Form 10-K.

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Revenue Recognition:  Revenues from patient services and from contract services are recognized when services are provided. Patient services revenues are presented net of (1) related contractual adjustments, which represent the difference between our charge for a procedure and what we will ultimately receive from private health insurance programs, Medicare, Medicaid and other federal healthcare programs, and (2) payments due to radiologists. We report payments made to radiologists on a net basis because (1) we are not the primary obligor for the provision of professional services, (2) the radiologists receive contractually agreed upon amounts from collections and (3) the radiologists bear the risk of non-collection; however, we have recently entered into arrangements with several radiologists pursuant to which we pay the radiologists directly for their professional services at an agreed upon contractual rate.  With respect to these arrangements, the professional component is included in our revenues, and our payments to the radiologists are included in costs of services.  Contract services revenues are recognized over the applicable contract period.  Revenues collected in advance are recorded as unearned revenue.

Trade Accounts Receivables:  We review our trade accounts receivables and our estimates of the allowance for doubtful accounts and contractual adjustments each period.  Contractual adjustments are manual estimates based upon an analysis of (1) historical experience of contractual payments from payors and (2) the outstanding accounts receivables from payors.  Contractual adjustments are written off against their corresponding asset account at the time a payment is received from a payor, with a reduction to the allowance for contractual adjustments to the extent such an allowance was previously recorded.  Estimates of uncollectible amounts are revised each period, and changes are recorded in the period they become known. The provision for doubtful accounts includes amounts to be written off with respect to (1) specific accounts involving customers, which are financially unstable or materially fail to comply with the payment terms of their contract and (2) other accounts based on our historical collection experience, including payor mix and the aging of patient accounts receivables balances.  Receivables deemed to be uncollectible, either through a customer default on payment terms or after reasonable collection efforts have been exhausted, are fully written off against their corresponding asset account, with a reduction to the allowance for doubtful accounts to the extent such an allowance was previously recorded.  Our historical write-offs for uncollectible accounts receivables are not concentrated in a specific payor class.  While we have not in the past experienced material differences between the amounts we have collected and our estimated allowances, the amounts we realize in the future could differ materially from the amounts assumed in arriving at the allowance for doubtful accounts and contractual adjustments.

Goodwill and Other Intangible Assets:  Goodwill represents the excess purchase price we paid over the fair value of the tangible and intangible assets and liabilities acquired in acquisitions.   In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets”, or SFAS 142, the goodwill and indefinite-lived intangible asset balances are not being amortized, but instead are subject to an annual assessment of impairment by applying a fair-value based test.   Other intangible assets are amortized on a straight-line basis over the estimated lives of the assets ranging from five to thirty years.

We evaluate the carrying value of goodwill and other intangible assets, including the related amortization period, in the second quarter of each fiscal year.  Additionally, we review the carrying amount of goodwill and other intangible assets whenever events and circumstances indicate that their respective carrying amounts may not be recoverable. Impairment indicators include, among other conditions, cash flow deficits, historic or anticipated declines in revenue or operating profit and adverse legal or regulatory developments.  In a business combination, goodwill is allocated to our two reporting units (mobile and fixed), which are the same as our reportable operating segments, based on relative fair value of the assets acquired and liabilities assumed. In evaluating goodwill and other intangible assets not subject to amortization, we complete the two-step impairment test as required by SFAS 142.  In the first of a two-step impairment test, we determine the fair value of these reporting units using a discounted cash flow valuation model, market multiple model or appraised values, as appropriate.  SFAS 142 requires us to compare the fair value for the reporting unit to its carrying value on an annual basis to determine if there is potential impairment.  If the fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is considered not impaired and no further testing is required.  If the fair value does not exceed the carrying value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any.  The second step compares the implied fair value of the reporting unit with the carrying amount of that goodwill.

For the year ended June 30, 2007, based on the factors described above and in Note 7 to the consolidated financial statements, which are a part of this Form 10-K, in connection with our annual evaluation of the fair value of our reporting units, we recorded a non-cash goodwill impairment charge of approximately $29.6 million related to our

45

fixed reporting unit.  For the year ended June 30, 2006, we performed an interim evaluation in accordance with SFAS 142 using a discounted cash flow valuation model and a market multiple model, and we recorded a non-cash goodwill impairment charge of approximately $189.4 million related to our reporting units (approximately $126.8 million for our fixed reporting unit and approximately $62.6 for our mobile reporting unit).

We assess the ongoing recoverability of our intangible assets subject to amortization by determining whether the intangible asset balance can be recovered over the remaining amortization period through projected undiscounted future cash flows.  If projected future cash flows indicate that the unamortized intangible asset balances will not be recovered, an adjustment is made to reduce the net intangible asset to an amount consistent with projected future cash flows discounted at our incremental borrowing rate.  Cash flow projections, although subject to a degree of uncertainty, are based on trends of historical performance and management’s estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions.  During the year ended June 30, 2006, in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, we recorded a non-cash impairment charge related to our other intangible assets of approximately $1.4 million related to wholesale contracts in our mobile reporting unit.

Income Taxes:  We account for income taxes using the asset and liability method.  Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized.

New Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, “Fair Value Measurement”, or SFAS 157.  SFAS 157 defines fair value, establishes a framework for measuring fair value under accounting principles generally accepted in the United States, and expands disclosures about fair value measurements.  SFAS 157 does not require any new fair value measurements.  We will be required to adopt SFAS 157 as of August 1, 2007.  We are currently assessing the effect of SFAS 157 on our financial condition and results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects of Prior Year Misstatements when Qualifying Misstatements in Current Year Financial Statements”, or SAB 108, which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 is effective for companies with fiscal years ending after November 15, 2006 and we were required to adopt its provisions in our fiscal year ending June 30, 2007. The adoption of SAB 108 did not have a material effect on our financial condition and results of operations.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109”, or FIN 48.  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements.  FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in the tax return.  We are required to adopt the provisions of FIN 48 beginning in fiscal 2008.  The adoption of FIN 48 will not have a material effect on our financial condition and results of operations.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We provide our services in the United States and receive payment for our services exclusively in United States dollars. Accordingly, our business is unlikely to be affected by factors such as changes in foreign market conditions or foreign currency exchange rates.

Our market risk exposure relates primarily to interest rates relating to our floating rate notes and our credit facility.  As a result, we will periodically use interest rate swaps to hedge variable interest rates on long-term debt. We believe there was not a material quantitative change in our market risk exposure during the fiscal year ended June

46

30, 2007, as compared to prior periods.  However, as a result of the cancellation of $194.5 million of fixed-rate long-term indebtedness on August 1, 2007, pursuant to the exchange offer and plan of reorganization, the percentage of our total indebtedness which is variable indebtedness increased significantly.   At August 31, 2007, approximately 97.7% of our indebtedness was variable rate indebtedness; however, as a result of the interest rate cap contract discussed below our exposure on variable rate indebtedness is reduced by $100 million, to approximately 66.4% of our total indebtedness as of August 31, 2007.   We do not engage in activities using complex or highly leveraged instruments.

Interest Rate Risk

In order to modify and manage the interest characteristics of our outstanding indebtedness and limit the effects of interest rates on our operations, we may use a variety of financial instruments, including interest rate hedges, caps, floors and other interest rate exchange contracts. The use of these types of instruments to hedge our exposure to changes in interest rates carries additional risks such as counter-party credit risk and legal enforceability of hedging contracts. We do not enter into any transactions for speculative or trading purposes.

In January 2006, through InSight, we purchased an interest rate cap contract.  The contract is for a term of two years, with a notional amount of $100 million and a LIBOR cap of 5.0%.  As of June 30, 2007, the fair value of the interest rate cap contract was approximately $0.3 million.  The contract exposes us to credit risk in the event that the counterparty to the contract does not or cannot meet its obligations.  The counterparty to the contract is a major financial institution and we expect the counterparty to be able to perform its obligations under the contract.

Our future earnings and cash flows and some of our fair values relating to financial instruments are dependent upon prevailing market rates of interest, such as LIBOR. Based on interest rates and outstanding balances as of June 30, 2007, and after giving effect to our interest rate cap contract discussed above, a 1% increase or decrease in interest rates on our $300.0 million of floating rate debt would affect annual future earnings and cash flows by approximately $2.0 and $3.0 million, respectively.  The weighted average interest rate on our floating indebtedness as of June 30, 2007 was 10.61%.

These amounts are determined by considering the impact of hypothetical interest rates on our borrowing cost. These analyses do not consider the effects of the reduced level of overall economic activity that could exist in that environment. Further, in the event of a change of this magnitude, we would consider taking actions to further mitigate our exposure to any such change. Due to the uncertainty of the specific actions that would be taken and their possible effects, however, this sensitivity analysis assumes no changes in our capital structure.

Inflation Risk

We do not believe that inflation has had a material adverse impact on our business or operating results during the periods presented. We cannot assure you, however, that our business will not be affected by inflation in the future.

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PART II

ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INSIGHT HEALTH SERVICES HOLDINGS CORP. AND SUBSIDIARIES
Index to Consolidated Financial Statements
For the Years Ended June 30, 2007, 2006 and 2005

In accordance with SEC Rule 3-10 of Regulation S-X, the consolidated financial statements of InSight Health Services Holdings Corp., or the Company, are included herein and separate financial statements of InSight Health Services Corp., or InSight, the Company’s wholly owned subsidiary, and InSight’s subsidiary guarantors are not included.  Condensed financial data for InSight and its subsidiary guarantors is included in Note 21 to the consolidated financial statements.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of InSight Health Services Holdings Corp.:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of InSight Health Services Holdings Corp. (Debtor and Debtor-in-Possession) and its subsidiaries (the “Company”) at June 30, 2007 and 2006 and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2007 in conformity with accounting principles generally accepted in the United States of America.  In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.  These financial statements and the financial statement schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, on July 10, 2007 the U.S. Bankruptcy Court for the District of Delaware entered an order confirming the Company’s plan of reorganization which became effective on August 1, 2007.

As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for share-based compensation in the year ended June 30, 2007.

/s/ PRICEWATERHOUSECOOPERS LLP

Orange County, California

September 21, 2007

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INSIGHT HEALTH SERVICES HOLDINGS CORP. AND SUBSIDIARIES

(DEBTOR AND DEBTOR-IN-POSSESSION)

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2007 AND 2006

(Amounts in thousands, except share data)

	2007			2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	20,832		$	28,208
Trade accounts receivables, net	42,683			43,690
Other current assets	8,335			8,389
Total current assets	71,850			80,287
PROPERTY AND EQUIPMENT, net	144,823			181,026
INVESTMENTS IN PARTNERSHIPS	3,413			3,051
OTHER ASSETS	7,881			17,904
OTHER INTANGIBLE ASSETS, net	30,216			31,473
GOODWILL	64,868			94,463
	$	323,051		$	408,204
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Current portion of notes payable	$	5,737		$	555
Current portion of capital lease obligations	2,927			5,105
Accounts payable and other accrued expenses	38,619			40,077
Total current liabilities	47,283			45,737
LONG-TERM LIABILITIES:
Notes payable, less current portion	299,890			494,203
Liabilities subject to compromise	205,704			—
Capital lease obligations, less current portion	3,302			3,519
Other long-term liabilities	4,832			3,166
Deferred income taxes	3,472			3,472
Total long-term liabilities	517,200			504,360
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS’ DEFICIT:
Common stock, $.001 par value, 10,000,000 shares authorized, 5,468,814 shares issued and outstanding at June 30, 2007 and 2006	5			5
Additional paid-in capital	87,081			87,081
Accumulated other comprehensive income	103			601
Accumulated deficit	(328,621		)	(229,580		)
Total stockholders’ deficit	(241,432		)	(141,893		)
	$	323,051		$	408,204

The accompanying notes are an integral part of these consolidated financial statements.

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INSIGHT HEALTH SERVICES HOLDINGS CORP. AND SUBSIDIARIES

(DEBTOR AND DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED JUNE 30, 2007, 2006 AND 2005

(Amounts in thousands)

	Years Ended June 30,
	2007			2006			2005
REVENUES:
Contract services	$	128,693		$	134,406		$	136,537
Patient services	158,221			171,892			180,336
Total revenues	286,914			306,298			316,873
COSTS OF OPERATIONS:
Costs of services	192,599			197,812			194,507
Provision for doubtful accounts	5,643			5,351			5,723
Equipment leases	6,144			3,257			2,326
Depreciation and amortization	57,040			64,852			65,601
Total costs of operations	261,426			271,272			268,157
Gross profit	25,488			35,026			48,716
CORPORATE OPERATING EXPENSES	(25,496		)	(23,655		)	(18,447		)
LOSS ON SALES OF CENTERS	—			—			(170		)
EQUITY IN EARNINGS OF UNCONSOLIDATED PARTNERSHIPS	3,030			3,072			2,613
INTEREST EXPENSE, net	(52,780		)	(50,754		)	(44,860		)
GAIN ON REPURCHASE OF NOTES PAYABLE	—			3,076			—
LOSS ON DISSOLUTION OF PARTNERSHIP	—			(1,000		)	—
IMPAIRMENT OF GOODWILL AND OTHER INTANGIBLE ASSETS	(29,595		)	(190,807		)	—
Loss before reorganization items and income taxes	(79,353		)	(225,042		)	(12,148		)
REORGANIZATION ITEMS	(17,513		)	—			—
Loss before income taxes	(96,866		)	(225,042		)	(12,148		)
PROVISION (BENEFIT) FOR INCOME TAXES	2,175			(14,824		)	15,069
Net loss	$	(99,041	)	$	(210,218	)	$	(27,217	)

The accompanying notes are an integral part of these consolidated financial statements.

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INSIGHT HEALTH SERVICES HOLDINGS CORP. AND SUBSIDIARIES

(DEBTOR AND DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE YEARS ENDED JUNE 30, 2007, 2006 AND 2005

(Amounts in thousands, except share data)

						Accumulated
				Additional		Other			Retained
	Common Stock			Paid-In		Comprehensive			Earnings
	Shares	Amount		Capital		Gain (Loss)			(Deficit)			Total
BALANCE AT JUNE 30, 2004	5,468,814	$	5	$	87,081	$	—		$	7,855		$	94,941
Net loss	—	—		—		—			(27,217		)	(27,217		)
BALANCE AT JUNE 30, 2005	5,468,814	5		87,081		—			(19,362		)	67,724
Net loss	—	—		—		—			(210,218		)	(210,218		)
Other comprehensive income:
Unrealized gain attributable to change in fair value of derivative	—	—		—		601			—			601
Comprehensive loss												(209,617		)
BALANCE AT JUNE 30, 2006	5,468,814	5		87,081		601			(229,580		)	(141,893		)
Net loss	—	—		—		—			(99,041		)	(99,041		)
Other comprehensive income:
Unrealized loss attributable to change in fair value of derivative	—	—		—		(498		)	—			(498		)
Comprehensive loss												(99,539		)
BALANCE AT JUNE 30, 2007	5,468,814	$	5	$	87,081	$	103		$	(328,621	)	$	(241,432	)

The accompanying notes are an integral part of these consolidated financial statements.

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INSIGHT HEALTH SERVICES HOLDINGS CORP. AND SUBSIDIARIES

(DEBTOR AND DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 2007, 2006 AND 2005

(Amounts in thousands)

	Years Ended June 30,
	2007			2006			2005
OPERATING ACTIVITIES:
Net loss	$	(99,041	)	$	(210,218	)	$	(27,217	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Cash used for reorganization items	11,367			—			—
Write-off of deferred financing costs, included in reorganization items	6,146			—			—
Loss on sales of centers	—			—			170
Depreciation and amortization	57,040			64,852			65,601
Amortization of deferred financing costs	3,158			3,051			3,173
Equity in earnings of unconsolidated partnerships	(3,030		)	(3,072		)	(2,613		)
Distributions from unconsolidated partnerships	3,008			3,387			2,621
Gain on repurchase of notes payable	—			(3,076		)	—
Loss on dissolution of partnership	—			1,000			—
Impairment of goodwill and other intangible assets	29,595			190,807			—
Deferred income taxes	—			(15,224		)	15,224
Changes in operating assets and liabilites:
Trade accounts receivables, net	1,007			3,016			8,096
Other current assets	81			(407		)	(1,736		)
Accounts payable, other accrued expenses and accrued interest subject to compromise	11,101			3,512			726
Net cash provided by operating activities before reorganization items	20,432			37,628			64,045
Cash used for reorganization items	(11,367		)	—			—
Net cash provided by operating activities	9,065			37,628			64,045
INVESTING ACTIVITIES:
Acquisition of fixed-site center, net of cash acquired	—			(2,345		)	—
Proceeds from sales of centers	—			—			2,810
Additions to property and equipment	(16,163		)	(30,927		)	(30,459		)
Sale (purchase) of short-term investments	—			5,000			(5,000		)
Other	118			(235		)	(3,110		)
Net cash used in investing activities	(16,045		)	(28,507		)	(35,759		)
FINANCING ACTIVITIES:
Principal payments of notes payable and capital lease obligations	(6,529		)	(293,109		)	(37,781		)
Proceeds from issuance of notes payable	1,145			298,500			—
Borrowings on credit facility	5,000			—			—
Payments made in connection with refinancing notes payable	—			(6,836		)	—
Payment for interest rate cap contract	—			(307		)	—
Other	(12		)	—			(78		)
Net cash used in financing activities	(396		)	(1,752		)	(37,859		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:	(7,376		)	7,369			(9,573		)
Cash, beginning of period	28,208			20,839			30,412
Cash, end of period	$	20,832		$	28,208		$	20,839
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	42,116		$	42,852		$	42,461
Income taxes paid	318			422			202
Equipment additions under capital leases	3,358			737			—

The accompanying notes are an integral part of these consolidated financial statements.

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INSIGHT HEALTH SERVICES HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

1.       NATURE OF BUSINESS

All references to “we,” “us,” “our,” “our company” or “the Company” mean InSight Health Services Holdings Corp., a Delaware corporation, and all entities and subsidiaries owned or controlled by InSight Health Services Holdings Corp.   All references to “Holdings” mean InSight Health Services Holdings Corp. by itself.  All references to “InSight” mean InSight Health Services Corp., a Delaware corporation and a wholly owned subsidiary of Holdings by itself.  Through InSight and its subsidiaries, we provide diagnostic imaging, and related management services in more than 30 states throughout the United States.   Our operations are primarily concentrated in California, Arizona, New England, the Carolinas, Florida and the Mid-Atlantic states.  We have two reportable segments:  fixed operations and mobile operations.  Our services are provided through a network of 86 mobile magnetic resonance imaging, or MRI, facilities, seven mobile positron emission tomography, or PET, facilities, 14 mobile PET/CT facilities, two mobile lithotripsy facilities, three mobile computed tomography, or CT, facilities (collectively, mobile facilities), 56 MRI fixed-site centers, 43 multi-modality fixed-site centers, one PET/CT fixed center and one PET fixed-site center (collectively, fixed-site centers).

At our multi-modality fixed-site centers, we typically offer other services in addition to MRI, including PET, CT, x-ray, mammography, ultrasound, nuclear medicine and bone densitometry services.

2.     REORGANIZATION

In November 2006, we engaged Lazard Frères & Co. LLC as our financial advisor to assist us in exploring strategic alternatives.  In March 2007, we announced an offer to exchange shares of Holdings’ common stock for up to $194.5 million aggregate principal amount of InSight’s 9.875% senior subordinated notes due 2011, or senior subordinated notes.  The exchange offer initially provided for consummation on an out-of-court basis or in connection with the filing of a prepackaged plan of reorganization under chapter 11 of the Bankruptcy Code. On May 29, 2007, Holdings and InSight filed voluntary petitions to reorganize their business under chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware (Case No. 07-10700).  The other subsidiaries of Holdings were not included in the bankruptcy filing and continued to operate their business.  On July 10, 2007, the bankruptcy court confirmed Holdings’ and InSight’s Second Amended Joint Plan of Reorganization pursuant to chapter 11 of the Bankruptcy Code. The plan of reorganization became effective and Holdings and InSight emerged from bankruptcy protection on August 1, 2007, or the effective date.

On August 1, 2007 pursuant to the exchange offer and plan of reorganization, all of Holdings’ common stock, all options for Holdings’ common stock and all of InSight’s senior subordinated notes were cancelled and the following distributions were made (after giving effect to a 1 for 6.326392 reverse stock split of Holdings’ common stock):

·Holders of InSight’s senior subordinated notes received 7,780,000 shares of newly issued Holdings’ common stock, which represented 90% of all shares of Holdings’ common stock outstanding after consummation of the plan of reorganization.

·Holders of Holdings’ common stock prior to the effective date received 864,444 shares of newly issued Holdings’ common stock, which represented 10% of all shares of Holdings’ common stock after consummation of the plan of reorganization.

Holdings’ common stock is listed on the Over-The-Counter Bulletin Board under the symbol “ISGT”.

The plan of reorganization provided for the assumption of substantially all executory contracts and unexpired leases; provided, however, we did terminate (i) the management agreement with J.W. Childs Advisors II, L.P. and Halifax Genpar, L.P. and (ii) the stockholders agreement with holders of Holdings’ common stock and stock options.

On August 1, 2007, we implemented fresh-start reporting in accordance with American Institute of Certified Public Accountants’ Statement of Position 90-7 “Financial Reporting by Entities in Reorganization under the Bankruptcy

54

Code”, or SOP 90-7.  The provisions of fresh-start reporting require that we revalue our assets and liabilities to fair value, reestablish stockholders’ equity using the reorganized value established in connection with the plan of reorganization, and record any applicable reorganization value in excess of amounts allocable to identifiable assets as an intangible asset. As a result of the adoption of SOP 90-7, we are reviewing the fair value of our assets and liabilities and expect that we will be required to adjust the value of some of our assets and liabilities. We expect that the implementation of fresh-start reporting under SOP 90-7 will have a material effect on our consolidated financial statements. As a result, our consolidated financial statements published for periods following the effectiveness of our plan of reorganization on August 1, 2007, will not be comparable to our consolidated financial statements published before the effectiveness of the plan (Note 20).

We have prepared the accompanying consolidated financial statements in accordance with SOP 90-7 and on a going-concern basis, which assumes continuity of operations, realization of assets and satisfaction of liabilities in the ordinary course of business.

SOP 90-7 requires that the consolidated financial statements for periods subsequent to a Chapter 11 filing separate transactions and events that are directly associated with the reorganization from the ongoing operations of the business.  Accordingly, all transactions (including, but not limited to, all professional fees) directly associated with the reorganization of the business are reported separately in the financial statements.  As of June 30, 2007, we had recognized the following reorganization items in our consolidated financial statements (amounts in thousands):

	Year Ended
	June 30, 2007
Professional fees	$	7,559
Write-off of deferred financing costs	6,146
Consent fees	1,250
Management incentive	1,698
Other	860
	$	17,513

Notwithstanding the consummation of our exchange offer and plan of reorganization, we still have a substantial amount of debt, which requires significant interest and principal payments.  As of August 2, 2007, we had total indebtedness of approximately $321.4 million.  In addition, as a result of the various factors that affect our industry generally and our business specifically, we have experienced significant declines in our operating results and cash flows as compared to prior year periods for the past three fiscal years.  We believe, based on currently available information, that future net cash provided by operating activities and our credit facility will be adequate to meet our operating cash and debt service requirements for at least the next twelve months.  Moreover, if our net cash provided by operating activities declines further than we have anticipated, we are prepared to take steps to conserve our cash, including delaying or restructuring our capital projects (entering into capital and operating leases rather than using cash). We believe these steps would still enable us to meet our liquidity needs even if net cash provided by operating activities falls below what we have anticipated.  If our net cash provided by operating activities were to severely decline, we may be unable to service our indebtedness.  However, we believe that we will be able to meet our liquidity needs to allow us to continue normal operations.

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.     CONSOLIDATED FINANCIAL STATEMENTS

Our consolidated financial statements include our accounts and those of all controlled subsidiaries.  All significant intercompany transactions and balances have been eliminated,  Equity investments in which the Company exercises significant influence, but does not control, and is not the primary beneficiary are accounted for using the equity method (Note 15).  Investments in which the Company does not exercise significant influence over the investee are accounted for under the cost method.

b.     USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

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c.     REVENUE RECOGNITION

Revenues from contract services and from patient services are recognized when services are provided.  Patient services revenues are presented net of (1) related contractual adjustments, which represent the difference between our charge for a procedure and what we will ultimately receive from private health insurance programs, Medicare, Medicaid and other federal healthcare programs, and (2) payments due to radiologists.   We report payments made to radiologists on a net basis because (i) we are not the primary obligor for the provision of professional services, (ii) the radiologists receive contractually agreed upon amounts from collections and (iii) the radiologists bear the risk of non-collection; however, we have entered into arrangements with several radiologists pursuant to which we pay the radiologists directly for their professional services at an agreed upon contractual rate.  With respect to these arrangements, the professional component is included in our revenues, and our payments to the radiologists are included in costs of services.    Contract services revenues are recognized over the applicable contract period.  Revenues collected in advance are recorded as unearned revenue.

d.   CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash equivalents are generally composed of liquid investments with original maturities of three months or less, such as certificates of deposit and commercial paper.

e.     TRADE ACCOUNTS RECEIVABLES

We review our trade accounts receivables and our estimates of the allowance for doubtful accounts and contractual adjustments each period.  Contractual adjustments are manual estimates based upon an analysis of (i) historical experience of contractual payments from payors and (ii) the outstanding accounts receivables from payors.  Contractual adjustments are written off against their corresponding asset account at the time a payment is received from a payor, with a reduction to the allowance for contractual adjustments to the extent such an allowance was previously recorded.  Estimates of uncollectible amounts are revised each period, and changes are recorded in the period they become known. The provision for doubtful accounts includes amounts to be written off with respect to (1) specific accounts involving customers, which are financially unstable or materially fail to comply with the payment terms of their contract and (2) other accounts based on our historical collection experience, including payor mix and the aging of patient accounts receivables balances.  Receivables deemed to be uncollectible, either through a customer default on payment terms or after reasonable collection efforts have been exhausted, are fully written off against their corresponding asset account, with a reduction to the allowance for doubtful accounts to the extent such an allowance was previously recorded.

f.      LONG-LIVED ASSETS

Property and Equipment.  Property and equipment are depreciated and amortized on the straight-line method using the following estimated useful lives:

Vehicles	3 to 8 years
Buildings	7 to 20 years
Leasehold improvements	Lesser of the useful life or term of lease
Computer and office equipment	3 to 5 years
Diagnostic and related equipment	5 to 8 years
Equipment and vehicles under capital leases	Lesser of the useful life or term of lease

We capitalize expenditures for improvements and major equipment upgrades.  Maintenance, repairs and minor replacements are charged to operations as incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations.

Long-lived Asset Impairment. We review long-lived assets, including identified intangible assets, for impairment when events or changes in business conditions indicate that their full carrying value may not be recovered.  We consider assets to be impaired and write them down to fair value if expected associated

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undiscounted cash flows are less than the carrying amounts.  Fair value is determined based on the present value of the expected associated cash flows.

g.     DEFERRED FINANCING COSTS

Costs incurred in connection with financing activities are deferred and amortized using the effective interest method over the terms of the related debt agreements ranging from seven to ten years.  Amortization of these costs is charged to interest expense in the accompanying consolidated statements of operations.  Total costs deferred and included in other assets in the accompanying consolidated balance sheets at June 30, 2007 and 2006 were approximately $7.5 million and $16.8 million, respectively.  During the fourth quarter of fiscal 2007 we wrote-off approximately $6.1 million of deferred financing costs associated with our senior subordinated notes, which are included in reorganization items in the consolidated statements of operations (Note 2).

h.     SHARE-BASED COMPENSATION

On July 1, 2006, we adopted SFAS No. 123R, “Share-Based Payment”, or SFAS 123R.  SFAS 123R revises SFAS No. 123, “Accounting for Stock-Based Compensation”, or SFAS 123, and supersedes Accounting Principles Board (APB) No. 25, “Accounting for Stock Issued to Employees”, or APB 25.  SFAS 123R focuses primarily on the accounting for transactions in which an entity obtains employee services in share-based payment transactions.  SFAS 123R requires companies to recognize in the statement of operations the cost of employee services received in exchange for awards of equity instruments based on the grant date fair value of those awards.  Because we used the minimum value method of measuring share-based compensation expense under SFAS 123, and because we meet the definition of a nonpublic entity under SFAS 123R, we are required to adopt the provisions of SFAS 123R prospectively to new and modified awards on or after July 1, 2006.  Accordingly, we will continue to account for any portion of awards outstanding prior to July 1, 2006 under the pro forma provisions of SFAS 123, and prior periods have not been restated to reflect the impact of SFAS 123R.  There were no options or other forms of share-based payment granted during the year ended June 30, 2007.  As a result, no amounts of compensation cost were recognized in the consolidated statements of operations.

		Years Ended June 30,
		2007			2006			2005
Net loss:	As reported	$	(99,041	)	$	(210,218	)	$	(27,217	)
	Expense	(259		)	(291		)	(245		)
	Pro forma	$	(99,300	)	$	(210,509	)	$	(27,462	)

The fair value of each option grant issued is estimated on the date of grant or issuance using the Black-Scholes pricing model under the minimum value method with the following assumptions used for the grants and issuances in the years ended June 30, 2006 and 2005, respectively.

	Years Ended June 30,
	2006			2005
Assumptions
Weighted average estimated fair value per option granted	$	6.65		$	6.80
Risk-free interest rate	4.06-4.40		%	4.13-4.50		%
Volatility	0.00		%	0.00		%
Expected dividend yield	0.00		%	0.00		%
Estimated life	10.00 years			10.00 years

SFAS 123R requires the use of a valuation model to calculate the fair value of share-based awards.  We have elected to use the Black-Scholes option pricing model, which incorporates various assumptions including volatility, estimated life and interest rates.  The estimated life of an award is based on historical experience and on the terms and conditions of the stock awards granted to employees.  The average risk-free interest rate is based on the ten-year U.S. treasury security rate in effect as of the grant date.

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i.      GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and Other Intangible Assets.  Goodwill represents the excess purchase price we paid over the fair value of the tangible and intangible assets and liabilities acquired in acquisitions.   In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, or SFAS 142, the goodwill and indefinite-lived intangible asset balances are not being amortized, but instead are subject to an annual assessment of impairment by applying a fair-value based test.   Other intangible assets are amortized on a straight-line basis over the estimated lives of the assets ranging from five to thirty years.

We evaluate the carrying value of goodwill and acquisition-related intangible assets, including the related amortization period, in the second quarter of each fiscal year.  Additionally, we review the carrying amount of goodwill whenever events and circumstances indicate that the carrying amount of goodwill may not be recoverable. Impairment indicators include, among other conditions, cash flow deficits, historic or anticipated declines in revenue or operating profit and adverse legal or regulatory developments.  In a business combination, goodwill is allocated to our two reporting units (mobile and fixed), which are the same as our reportable operating segments, based on relative fair value of the assets acquired and liabilities assumed.  In evaluating goodwill and intangible assets not subject to amortization, we complete the two-step goodwill impairment test as required by SFAS 142.  In the first of a two-step impairment test, we determine the fair value of these reporting units using a discounted cash flow valuation model, market multiple model or appraised values, as appropriate.  SFAS 142 requires us to compare the fair value of the reporting unit to its carrying value on an annual basis to determine if there is potential impairment.  If the fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is considered not impaired and no further testing is required.  If the fair value does not exceed the carrying value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any.  The second step compares the implied fair value of the reporting unit with the carrying amount of that goodwill.  Impairment losses, if any, are reflected in the consolidated statements of operations.

We assess the ongoing recoverability of our intangible assets subject to amortization in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, or SFAS 144, by determining whether the intangible asset balance can be recovered over the remaining amortization period through projected undiscounted future cash flows.  If projected future cash flows indicate that the unamortized intangible asset balances will not be recovered, an adjustment is made to reduce the net intangible asset to an amount consistent with projected future cash flows discounted at our incremental borrowing rate.  Cash flow projections, although subject to a degree of uncertainty, are based on trends of historical performance and management’s estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions.

In connection with adoption of fresh-start reporting as of August 1, 2007, all of our goodwill and other intangible assets will be remeasured using current fair value (Note 20).

j.      INCOME TAXES

We account for income taxes using the asset and liability method.  Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized.

k.   COMPREHENSIVE INCOME (LOSS)

Components of comprehensive income (loss) are changes in equity other than those resulting from investments by owners and distributions to owners. Net income (loss) is the primary component of comprehensive income (loss).  Our only component of comprehensive income (loss) other than net income (loss) is the change in unrealized gain or loss on derivatives qualifying for hedge accounting, net of tax. The aggregate amount of

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such changes to equity that have not yet been recognized in net income (loss) are reported in the equity portion of the accompanying consolidated balance sheets as accumulated other comprehensive income.

l.    FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of financial instruments is estimated using available market information and other valuation methodologies. The fair value of our financial instruments is estimated to approximate the related book value, unless otherwise indicated.

m.NEW PRONOUNCEMENTS

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, “Fair Value Measurement”, or SFAS 157.  SFAS 157 defines fair value, establishes a framework for measuring fair value under accounting principles generally accepted in the United States, and expands disclosures about fair value measurements.  SFAS 157 does not require any new fair value measurements.  We will be required to adopt SFAS 157 as of August 1, 2007.  We are currently assessing the effect of SFAS 157 on our financial condition and results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects of Prior Year Misstatements when Qualifying Misstatements in Current Year Financial Statements”, or SAB 108, which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 is effective for companies with fiscal years ending after November 15, 2006 and we were required to adopt its provisions in our fiscal year ending June 30, 2007. The adoption of SAB 108 did not have a material effect on our financial condition and results of operations.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109”, or FIN 48.  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements.  FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in the tax return.  We are required to adopt the provisions of FIN 48 beginning in fiscal 2008.  The adoption of FIN 48 will not have a material effect on our financial condition and results of operations.

4.       TRADE ACCOUNTS RECEIVABLES

Trade accounts receivables, net are comprised of the following (amounts in thousands):

	June 30,
	2007		2006
Trade accounts receivables	$	87,246	$	85,972
Less: Allowances for professional fees	10,461		9,782
Allowances for contractual adjustments	21,454		22,712
Allowances for doubtful accounts	12,648		9,788
Trade accounts receivables, net	$	42,683	$	43,690

The allowances for doubtful accounts and contractual adjustments include management’s estimate of the amounts expected to be written off on specific accounts and for write-offs on other unidentified accounts included in accounts receivables.  In estimating the write-offs and adjustments on specific accounts, management relies on a combination of in-house analysis and a review of contractual payment rates from private health insurance programs or under the federal Medicare program.  In estimating the allowance for unidentified write-offs and adjustments, management relies on historical experience.  The amounts we will ultimately realize could differ materially in the near term from the amounts assumed in arriving at the allowances for doubtful accounts and contractual adjustments in the accompanying consolidated financial statements at June 30, 2007.

We reserve a contractually agreed upon percentage at several of our fixed-site centers, averaging 20 percent of the accounts receivables balance from patients and third-party payors for payments to radiologists representing

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professional fees for interpreting the results of the diagnostic imaging procedures.  Payments to radiologists are only due when amounts are received.  At that time, the balance is transferred from the allowance account to a professional fees payable account.

5.       OTHER CURRENT ASSETS

Other current assets are comprised of the following (amounts in thousands):

	June 30,
	2007		2006
Prepaid expenses	$	6,234	$	7,405
Amounts due from our unconsolidated partnerships	2,101		984
	$	8,335	$	8,389

6.       PROPERTY AND EQUIPMENT

Property and equipment, net are stated at cost and are comprised of the following (amounts in thousands):

	June 30,
	2007		2006
Vehicles	$	5,066	$	5,382
Land, building and leasehold improvements	35,045		30,706
Computer and office equipment	49,674		48,517
Diagnostic and related equipment	245,576		249,801
Equipment and vehicles under capital leases	66,068		71,499
	401,429		405,905
Less: Accumulated depreciation and amortization	256,606		224,879
Property and equipment, net	$	144,823	$	181,026

Depreciation expense was approximately $55.7 million, $61.1 million and $61.6 million for the years ended June 30, 2007, 2006 and 2005, respectively.

7.       GOODWILL AND OTHER INTANGIBLE ASSETS

During the second quarter of fiscal 2007, based on our continued declining financial performance and deteriorating market conditions, management determined that a goodwill impairment at our fixed reporting unit had occurred and we recorded a non-cash goodwill impairment charge of approximately $29.6 million related to our fixed reporting unit.

During the fourth quarter of fiscal 2006, as a result of (1) our negative financial trends and (2) the enactment of the Deficit Reduction Act of 2005 and its corresponding anticipated impact on our revenues, we determined that an interim impairment analysis of the fair value of our two reporting units (mobile and fixed) should be performed in accordance with SFAS 142 using a discounted cash flow model and a market multiples model.  We completed our analysis of the fair value of our reporting units utilizing the assistance of an independent valuation firm.  We concluded that impairments had occurred and we recorded a non-cash goodwill impairment charge of approximately $189.4 million related to our reporting units (approximately $126.8 million for our fixed reporting unit and approximately $62.6 million for our mobile reporting unit).  Additionally, in accordance with SFAS 144, we recorded a non-cash impairment charge related to our other intangible assets of approximately $1.4 million related to wholesale contracts in our mobile reporting unit.

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A reconciliation of goodwill for the years ended June 30, 2007 and 2006 is as follows (amounts in thousands):

	Mobile			Fixed			Consolidated
Goodwill, June 30, 2005	$	104,264		$	174,266		$	278,530
Acquired in acquisitions	—			2,404		(1)	2,404
Goodwill impairment charge (2)	(62,564		)	(126,869		)	(189,433		)
Adjustments to goodwill	2,472		(3)	490		(4)	2,962
Goodwill, June 30, 2006	44,172			50,291			94,463
Goodwill impairment charge (2)	—			(29,595		)	(29,595		)
Goodwill, June 30, 2007	$	44,172		$	20,696		$	64,868

(1)In March 2006, we purchased a majority ownership interest in a joint venture that operates an MRI fixed-site center in San Ramon, California.  In connection with this purchase, we recorded a $2.4 million increase in goodwill.

(2)We recorded goodwill impairment charges discussed above.

(3)In December 2005, we dissolved a mobile lithotripsy partnership in Connecticut.  In connection with this dissolution, we recorded a $1.0 million reduction in associated goodwill.  In 2006, we increased the balance of goodwill by $3.5 million as a result of recording a deferred tax liability on the indefinite-lived intangible assets acquired in Holdings’ fiscal 2002 acquisition of InSight and its subsidiaries not previously recorded.

 (4)In October 2005, we purchased the remaining ownership interest in a joint venture in Buffalo, New York.  In connection with this purchase, we recorded a $0.5 million increase in goodwill.

The following reconciliation of other intangible assets is as follows (amounts in thousands):

	June 30, 2007				June 30, 2006
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Value		Amortization		Value		Amortization
Amortized intangible assets:
Managed care contracts	$	24,410	$	4,202	$	24,410	$	3,388
Wholesale contracts	14,006		12,678		14,006		12,235
	38,416		16,880		38,416		15,623
Unamortized intangible assets:
Trademark	8,680		—		8,680		—
Other intangible assets	$	47,096	$	16,880	$	47,096	$	15,623

Other intangible assets are amortized on a straight-line method using the following estimated useful lives:

Managed care contracts	30 years
Wholesale contracts	5 to 7 years

Amortization of intangible assets was approximately $1.3 million, $3.6 million and $3.8 million for the years ended June 30, 2007, 2006 and 2005, respectively.

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Estimated amortization expense for the years ending June 30, are as follows (amounts in thousands):

2008	$	1,257
2009	1,257
2010	1,257
2011	814
2012	814

8.       ACCOUNTS PAYABLE AND OTHER ACCRUED EXPENSES

Accounts payable and other accrued expenses are comprised of the following (amounts in thousands):

	June 30,
	2007		2006
Accounts payable	$	2,651	$	3,723
Accrued equipment related costs	3,529		3,447
Accrued payroll and related costs	12,744		12,977
Accrued interest expense	5,289		8,444
Accrued professional fees	2,020		2,206
Accrued legal fees	3,309		1,489
Other accrued expenses	9,077		7,791
	$	38,619	$	40,077

9.       LIABILITIES SUBJECT TO COMPROMISE

Liabilities subject to compromise refers to unsecured obligations which will be accounted for under Holdings’ and InSight’s plan of reorganization. They represent the amount expected to be allowed on known claims to be resolved through the chapter 11 process.

At June 30, 2007, liabilities subject to compromise are comprised of the following (amounts in thousands):

	June 30,
	2007		2006
Unsecured senior subordinated notes payable	$	194,500	$	—
Accrued interest expense	11,204		—
	$	205,704	$	—

(1)  Includes accrued interest from November 1, 2006 to May 29, 2007.

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10.    NOTES PAYABLE

Notes payable are comprised of the following (amounts in thousands):

	June 30,
	2007		2006
Senior secured floating rate notes payable (floating rate notes), bearing interest at LIBOR plus 5.25% (10.61% at June 30, 2007), interest payable quarterly, principal due in November 2011. At June 30, 2007, the fair value of the notes was approximately $292.5 million.	$	300,000	$	300,000
Unsecured senior subordinated notes payable (senior subordinated notes), bearing interest at 9.875%, interest payable semi-annually, principal due in November 2011. At June 30, 2007, the fair value of the notes was approximately $62.2 million.	194,500		194,500
Revolving credit facility, bearing interest at LIBOR plus 2.5% or prime rate (8.25% at June 30, 2007), interest payable monthly, principal due in November 2011.	5,000		—
Other notes payable	1,777		1,614
Total notes payable	501,277		496,114
Less: Unamortized discount on floating rate notes	1,150		1,356
Less: Amounts classified as liabilities subject to compromise	194,500		—
Less: Current portion	5,737		555
Long-term notes payable	$	299,890	$	494,203

In September 2005, through InSight, we issued $300 million aggregate principal amount of senior secured floating rate notes, or floating rate notes.  The proceeds from the issuance of the floating rate notes were used to (1) repay all borrowings under our then existing credit facility (approximately $237.6 million); (2) repurchase approximately $55.5 million aggregate principal amount of our unsecured senior subordinated notes, or senior subordinated notes, in privately negotiated transactions; and (3) pay certain related fees and expenses (approximately $6.8 million).  This transaction is considered a debt modification under accounting principles generally accepted in the United States.  In connection with the $55.5 million repurchase, we realized a gain of approximately $3.1 million, net of a write-off of deferred financing costs of approximately $2.5 million.  Holdings’ and InSight’s wholly owned subsidiaries unconditionally guarantee all of InSight’s obligations under the indenture for the floating rate notes.   The floating rate notes are secured by a first priority lien on substantially all of InSight’s and the guarantors’ existing and future tangible and intangible personal property including, without limitation, equipment, certain contracts and intellectual property, but are not secured by a lien on their accounts receivables and related assets, cash accounts related to receivables and certain other assets.  In addition, the floating rate notes are secured by a portion of InSight’s stock and the stock or other equity interests of InSight’s subsidiaries.   We are prohibited from redeeming the floating rate notes prior to January 1, 2008, and thereafter we are required to pay certain redemption premiums if the floating rate notes are redeemed prior to maturity.  In July 2007, we issued an additional $15 million aggregate principal amount of floating rate notes.  Such notes were issued at 85% of their principal amount, or $12.75 million in cash, and are entitled to customary registration rights and other terms consistent with our original issuance floating rate notes.

In January 2006, through InSight, we purchased an interest rate cap contract.  The contract is for a term of two years, with a notional amount of $100 million and a LIBOR cap of 5.0% (Note 19).

Through InSight, we also had outstanding $194.5 million aggregate principal amount of senior subordinated notes.  On August 1, 2007, the senior subordinated notes were cancelled and exchanged for Holdings’ common stock as part of Holdings’ and InSight’s plan of reorganization and exchange offer (Note 2).

Through certain of InSight’s subsidiaries, we have an asset-based revolving credit facility of up to $30 million. Holdings and InSight unconditionally guarantee all obligations of InSight’s subsidiaries that are borrowers under the credit facility.  All obligations under the credit facility and the obligations of Holdings and InSight under the guarantees are secured, subject to certain exceptions, by a first priority security interest in all of Holdings’, InSight’s and the borrowers’: (i) accounts; (ii) instruments, chattel paper (including, without limitation, electronic chattel paper), documents, letter-of-credit rights and supporting obligations relating to any account; (iii) general intangibles that relate to any account; (iv) monies in the possession or under the control of the lenders under the credit facility; (v) products and cash and non-cash proceeds of the foregoing; (vi) deposit accounts established for the collection of

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proceeds from the assets described above; and (vii) books and records pertaining to any of the foregoing.  Borrowings under the revolving credit facility bear interest at LIBOR plus 2.5% per annum or, at our option, the prime rate (8.25% as of June 30, 2007).  At June 30, 2007 there was $5.0 million in borrowings outstanding under the revolving credit facility.  At June 30, 2007, there were letters of credit of approximately $2.6 million outstanding under the credit facility, of which approximately $0.6 million were cash collateralized.

The agreements governing our credit facility and floating rate notes contain restrictions on among other things, our ability to incur additional liens and indebtedness, engage in mergers, consolidations and asset sales, make dividend payments, prepay other indebtedness, make investments and engage in transactions with affiliates.  On and prior to May 29, 2007, we entered into several amendments to our $30 million asset-based revolving credit facility with Bank of America, N.A., as collateral agent, administrative agent and lender thereunder. These amendments, among other things, permitted Holdings and InSight to file voluntary petitions for reorganization pursuant to chapter 11 of the Bankruptcy Code (the “Chapter 11 Petitions”) and consummate their plan of reorganization. On May 29, 2007, we entered into Waiver and Agreement No. 1 to our floating rate notes indenture (the “Indenture Waiver”) and a Second Supplemental Indenture to our floating rate notes indenture (the “Indenture Supplement”), in each case with U.S. Bank National Association, as indenture trustee, and the holders of a majority of our floating rate notes. The Indenture Waiver and Indenture Supplement provided for, among other things, (1) a waiver of compliance by Holdings and its subsidiaries with those provisions of the floating rate notes indenture that the majority noteholders could waive that would restrict the filing of the Chapter 11 Petitions and consummation of the plan of reorganization, (2) a prohibition on optional redemptions by InSight of the floating rate notes prior to January 1, 2008 and the payment of redemption premiums to the extent the floating rate notes are redeemed thereafter, and (3) various amendments to the negative covenants in the floating rate notes indenture, including removing the ability of Holdings and its subsidiaries (other than in certain limited circumstances) to pay dividends, redeem stock and make investments and further restricting the ability of Holdings and its subsidiaries to engage in asset sales and incur liens and additional indebtedness.

Scheduled maturities of equipment and other notes payable at June 30, 2007, are as follows for the years ending (amounts in thousands):

2008	$	5,737
2009	636
2010	167
2011	180
2012	300,057
	$	306,777

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11.    LEASE OBLIGATIONS, COMMITMENTS AND CONTINGENCIES

We lease diagnostic equipment, certain other equipment and our office and imaging facilities under various capital and operating leases.  Future minimum scheduled rental payments required under these noncancelable leases at June 30, 2007 are as follows for the years ending (amounts in thousands):

	Capital		Operating
2008	$	3,265	$	14,070
2009	1,359		12,139
2010	1,083		10,262
2011	884		8,263
2012	379		5,684
Thereafter	—		4,470
Total minimum lease payments	6,970		$	54,888
Less: Amounts representing interest	741
Present value of capital lease obligations	6,229
Less: Current portion	2,927
Long-term capital lease obligations	$	3,302

Accumulated depreciation on assets under capital leases was $11.3 million and $13.1 million at June 30, 2007 and 2006, respectively.

Rental expense for diagnostic equipment and other equipment for the years ended June 30, 2007, 2006 and 2005 was $6.1 million, $3.3 million and $2.3 million, respectively.

We occupy facilities under lease agreements expiring through October 2017.  Some of these lease agreements may include provisions for an increase in lease payments based on the Consumer Price Index or scheduled increases based on a guaranteed minimum percentage or dollar amount.  Rental expense for these facilities for the years ended June 30, 2007, 2006 and 2005 was $8.8 million, $8.9 million and $9.2 million, respectively.

We are engaged from time to time in the defense of lawsuits arising out of the ordinary course and conduct of our business and have insurance policies covering such potential insurable losses where such coverage is cost-effective.  We believe that the outcome of any such lawsuits will not have a material adverse impact on our financial condition and results of operations.

On February 3, 2004, Southwest Outpatient Radiology, P.C, or SWOR, filed a Summons and Complaint against InSight Health Corp., one of InSight’s subsidiaries, or IHC, in the Superior Court, Maricopa County, Arizona, for Declaratory Relief seeking a declaration as to the meaning and effect of a certain provision of the professional services agreement, or PSA, pursuant to which SWOR provided professional services at IHC’s facilities in Phoenix, Arizona.  SWOR claimed the PSA provided a right of first refusal to provide professional services at any center IHC acquired in Maricopa County.  IHC believes that the provision related only to “de novo” centers which IHC developed.  In April 2004, IHC acquired the stock of Comprehensive Medical Imaging, Inc., which owned and operated 21 fixed-site centers, six of which were located in Maricopa County, pursuant to a stock purchase agreement.

Prior to signing the stock purchase agreement, IHC gave SWOR 180 days notice to terminate the PSA in accordance with the PSA.  SWOR claimed that the PSA had already terminated due to IHC’s breach of the right of first refusal provision.  IHC answered the Summons and Complaint and was cooperating with SWOR in expediting discovery and an early trial when SWOR decided to abandon the Declaratory Relief action and on April 20, 2004, SWOR filed a First Amended Complaint claiming breach of contract, anticipatory breach of contract, negligent misrepresentation, breach of covenant of good faith and fair dealing, intentional interference with contract, breach of fiduciary duty, declaratory relief and unspecified compensatory and punitive damages, prejudgment interest, and attorneys fees. We have answered the First Amended Complaint and discovery has commenced and is on-going.   We are vigorously defending this lawsuit and believe that SWOR’s claims are without merit.  We are unable to predict the outcome of this lawsuit.

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In August 2003, IHC entered into a series of agreements and acquired a joint venture interest through a limited liability company it formed called Kessler Imaging Associates, LLC, or KIA, in a CT fixed-site center in Hammonton, New Jersey.  KIA is owned 55% by IHC and 45% by Bernard Neff, M.D., or Dr. Neff.  KIA managed Kessler CAT Scan Associates, LLC, which provided CT, and mobile MRI and PET (using IHC mobile facilities) services to inpatients of William B. Kessler Memorial Hospital, or Hospital, and community outpatients.

Dr. Neff provided radiology services at the Hospital and to the outpatients.  IHC did not control billing and collections to the Hospital for inpatients or to third-party payors for outpatients.  Dr. Neff performed that function.

Management at the Hospital changed in 2005, and in late 2005 the Hospital notified the parties that it was “voiding” all the agreements because the prior management had no authority to execute the agreements and stopped paying for the inpatient services.  Immediately after the agreements were allegedly “voided,” Dr. Neff filed an arbitration claim against the Hospital, for among other things, collection of outstanding amounts owed by the Hospital for services previously rendered.  The Hospital has challenged Dr. Neff’s efforts to proceed with arbitration efforts in the New Jersey courts.  The appellate division granted a stay motion, so the arbitration has been stayed pending oral argument, which has not yet been held and no decision has yet been rendered.  Until the appellate court rules, matters in the arbitration cannot go forward.

On March 8, 2006, IHC filed suit in the U.S. District Court for the District of New Jersey against the Hospital.  By the Complaint, IHC has asserted claims for fraud and seeks in excess of $4 million in compensatory damages plus additional amounts for punitive damages.  The Hospital has denied the substantive allegations against it.

The Hospital in turn filed a Counterclaim against IHC.  Initially, we moved to dismiss that Counterclaim for failure to state a claim and for failure to comply with pleading requirements.  Before that Motion could be ruled upon, the Hospital filed an Amended Counterclaim.  By the Amended Counterclaim, the Hospital asserts that IHC engaged in fraud as to the Hospital, allegedly concealing aspects of the overall transaction to the Hospital’s disadvantage, that IHC aided and abetted Dr. Neff and his associates so they could acquire certain allegedly valuable assets of the Hospital without fair, reasonable, and adequate consideration, and that IHC conspired with Dr. Neff and his associates to acquire certain allegedly valuable assets of the Hospital without fair, reasonable, and adequate consideration.  By the Amended Counterclaim, the Hospital seeks compensatory damages of not less than $5 million and punitive damages of not less than $10 million.  We have moved to dismiss, and the motion remains pending at the present time.  We have also answered the Amended Counterclaim, denying all of the substantive allegations.  IHC intends to vigorously prosecute its case against the Hospital and defend the Hospital’s claims.

On September 13, 2006, the Hospital filed a voluntary bankruptcy petition under chapter 11 of Title 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court, District of New Jersey (Camden).  As a result, this case and the arbitration have been stayed pursuant to 11 U.S.C. § 362.  IHC and KIA have both filed proofs of claim in the Hospital’s bankruptcy case.  IHC has asserted contingent unliquidated claims based upon the litigation currently stayed in the U.S. District Court for the District of New Jersey.  KIA has filed a claim based upon the lease between KIA and the Hospital.  The Hospital remains a debtor-in-possession and is attempting to reorganize.  On August 16, 2007, the Hospital filed its first amended plan of reorganization and accompanying disclosure statement.

IHC no longer provides any services to the Hospital and the lease has been terminated.

12.    CAPITAL STOCK

STOCK OPTIONS:  We originally reserved 626,000 shares for the granting of nonstatutory stock options to key employees.  Options are issued with an exercise price of at least the fair market value, as determined by the board of directors, of our common stock on the grant date.  During fiscal 2006, we increased the number of shares reserved for such grants by 219,286 shares.  Typically, 50% of the options vest cumulatively over various periods up to five years from the grant date, and 50% vest cumulatively upon the achievement of certain performance targets on an exit event.  The options are exercisable in whole or in installments, and expire ten years from the grant date.  As of June 30, 2007, we had 175,500 shares available for issuance.

We had one stock option plan, which provided for the granting of nonstatutory stock options to four key employees (all of whom are no longer with the Company), all of which are fully vested.  Holders of options for 175,990 shares of InSight common stock rolled over their options and received options for Holdings’ common stock with the same terms

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under our stock option plan.  At June 30, 2007, options to purchase 123,490 shares of Holdings’ stock were outstanding under this plan.

The stock option plan was terminated and all outstanding options were cancelled on August 1, 2007 upon consummation of the plan of reorganization (Note 2).

A summary of the status of Holdings’ stock options at June 30, 2007, 2006 and 2005 and changes during the periods is presented below:

							Weighted
					Weighted		Average
			Weighted		Average		Remaining
	Number of		Average		Grant Date		Contractual
	Options		Exercise Price		Fair Value		Term (years)
Outstanding, June 30, 2004	602,990		$	16.10	$	6.57
Granted	209,500		19.82		6.80
Forfeited	(195,500	)	18.07		6.57
Outstanding, June 30, 2005	616,990		16.74		6.65
Granted	338,236		19.82		6.65
Forfeited	(105,500	)	19.43		6.58
Outstanding, June 30, 2006	849,726		17.74		6.66
Forfeited	(60,000	)	18.58		6.63
Outstanding, June 30, 2007	789,726		$	17.68	$	6.66
Exercisable at June 30, 2007	291,075		$	14.63	$	6.65	6.55
Non-vested, June 30, 2006	608,311		$	19.42	$	6.66
Vested	(76,735	)	19.36		6.64
Forfeited	(32,925	)	18.92		6.66
Non-vested, June 30, 2007	498,651		$	19.46	$	6.66
Exercisable at:
June 30, 2005	204,565		$	12.56
June 30, 2006	241,415		$	13.50
June 30, 2007	291,075		$	14.63

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Of the options outstanding at June 30, 2007, the characteristics are as follows:

Exercise Price	Weighted Average		Options	Total Options	Remaining Contractual
Range	Exercise Price		Exercisable	Outstanding	Life
$ 8.37	$	8.37	123,490	123,490	4.33 years
18.00 - 19.82	19.40		167,585	666,236	6.71 years
			291,075	789,726

13.    INCOME TAXES

The provision for income taxes includes income taxes currently payable and those deferred because of temporary differences between the financial statements and tax bases of assets and liabilities.  For the year ended June 30, 2007, we have provided approximately $1.7 million for tax exposure related to prior years.  The provision for income taxes for the years ended June 30, 2007, 2006 and 2005 is as follows (amounts in thousands):

	Years Ended June 30,
	2007			2006			2005
Current provision:
Federal	$	—		$	—		$	—
State	2,175			400			(155		)
	2,175			400			(155		)
Deferred taxes arising from temporary differences:
State income taxes	88			9			(9		)
Accrued expenses	335			181			(741		)
Reserves	(631		)	103			(1,376		)
Depreciation	(7,652		)	(7,114		)	3,604
Amortization	(1,249		)	(38,625		)	5,367
Creation/utilization of net operating losses	(14,758		)	(6,143		)	(11,758		)
Section 481 adjustment	—			—			1,161
Changes in valuation allowance	23,811			39,855			20,694
Non-goodwill intangible amortization	(89		)	(11		)	(1,001		)
(Loss) income from partnerships	124			(3,480		)	(536		)
Other	21			1			(181		)
Total deferred taxes arising from temporary differences	—			(15,224		)	15,224
Total provision (benefit) for income taxes	$	2,175		$	(14,824	)	$	15,069

A reconciliation between the statutory federal income tax rate and our effective income tax rate is as follows:

	Years Ended June 30,
	2007		2006		2005
Federal statutory tax rate	34.0	%	34.0	%	34.0	%
State income taxes, net of federal benefit	(2.2	)	0.6		(11.8	)
Permanent items, including goodwill and non-deductible merger costs	(0.2	)	(0.1	)	(1.5	)
Changes in valuation allowance	(29.7	)	(15.7	)	(138.9	)
Impairment of goodwill and other intangible assets	(4.1	)	(9.7	)	—
Other, net	(0.1	)	(2.5	)	(5.8	)
Net effective tax rate	(2.3	)%	6.6	%	(124.0	)%

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The components of our net deferred tax liability (including current and non-current portions) as of June 30, 2007 and 2006, respectively, which arise due to timing differences between financial and tax reporting and net operating loss (NOL) carryforwards are as follows (amounts in thousands):

	June 30,
	2007			2006
Accrued expenses	$	1,576		$	1,911
Depreciation	(13,283		)	(20,934		)
Amortization	24,650			23,400
Reserves	2,718			2,087
Income (loss) from partnerships	3,348			3,472
State income taxes	(85		)	3
Non-goodwill intangible amortization	(10,046		)	(10,135		)
NOL carryforwards	77,034			62,218
Other	57			78
Net deferred asset	85,969			62,100
Valuation allowance	(89,441		)	(65,572		)
	$	(3,472	)	$	(3,472	)

As of June 30, 2007, we had federal NOL carryforwards of approximately $212.5 million and various state NOL carryforwards.  These NOL carryforwards expire between 2007 and 2026.  The charitable contribution carryforwards of approximately $0.1 million will begin to expire in 2009 if not utilized.

A valuation allowance is provided against the net deferred tax asset when it is more likely than not that the net deferred tax asset will not be realized.  Based upon (1) our losses in recent years, (2) the impairment charges recorded in 2007 and 2006 (Note 7) and (3) the available evidence, management determined that is more likely than not that the deferred tax assets related to certain NOL carryforwards and other assets as of June 30, 2007 will not be realized.  Consequently, we have a valuation allowance in the amount of $89.4 million as of June 30, 2007.  In determining the net asset subject to a valuation allowance, we excluded a deferred tax liability related to our indefinite-lived other intangible assets that is not expected to reverse in the foreseeable future resulting in a net deferred tax liability of approximately $3.5 million after application of the valuation allowance.  The valuation allowance may be reduced in the future if we forecast and realize future taxable income or other tax planning strategies are implemented.  Importantly, the subsequent event, as discussed below, cannot be anticipated for purposes of the valuation allowance calculation at June 30, 2007.

On August 1, 2007, as discussed in Note 2, a plan of reorganization and cancellation of indebtedness became effective.  The NOL carryforwards will be significantly reduced by the cancellation of indebtedness income.  Furthermore, future utilization of any remaining NOL carryforwards will be limited by Internal Revenue Code section 382 and related provisions.  We anticipate that the limitation will allow use of approximately $3.0 million of attributes per year.

14.    RETIREMENT SAVINGS PLAN

InSight has a 401(k) Savings Plan, or the Plan, which is available to all eligible employees, pursuant to which InSight matches a percentage of employee contributions to the Plan.  InSight contributions of approximately $1.5 million, $1.4 million and $1.3 million were made for the years ended June 30, 2007, 2006 and 2005.

15.    INVESTMENTS IN AND TRANSACTIONS WITH PARTNERSHIPS

We have direct ownership in five Partnerships at June 30, 2007, four of which operate fixed-site centers and one of which operates a mobile PET/CT facility.  We own between 24% and 50% of these Partnerships, and provide certain management services pursuant to contracts or as a managing general partner.  These Partnerships are accounted for under the equity method.

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Set forth below is certain financial data of these Partnerships (amounts in thousands):

	June 30,
	2007			2006
Combined Financial Position:
Current assets:
Cash	$	3,334		$	3,275
Trade accounts receivables, net	3,499			2,958
Other	218			66
Property and equipment, net	3,550			3,073
Other assets	400			—
Intangible assets, net	2			34
Total assets	11,003			9,406
Current liabilities	(1,723		)	(1,958		)
Due to the Company	(1,797		)	(873		)
Long-term liabilities	(130		)	(364		)
Net assets	$	7,353		$	6,211

Set forth below are the combined operating results of the Partnerships and our equity in earnings of the Partnerships (amounts in thousands):

	Years Ended June 30,
	2007		2006		2005
Operating Results:
Revenues	$	28,505	$	27,430	$	25,935
Expenses	21,026		20,439		19,558
Net income	$	7,479	$	6,991	$	6,377
Equity in earnings of unconsolidated partnerships	$	3,030	$	3,072	$	2,613

16.    RELATED PARTY TRANSACTIONS

We had a management agreement with J.W. Childs Advisors II, L.P., the general partner of J.W. Childs Equity Partners II, L.P., and Halifax Genpar, L.P., the general partner of Halifax Capital Partners, L.P.  J.W. Childs Advisors II, L.P. and Halifax Genpar, L.P. provided business, management and financial advisory services to InSight and the Company in consideration of (i) an annual fee of $240,000 to be paid to J.W. Childs Advisors II, L.P. and (ii) an annual fee of $60,000 to be paid to Halifax Genpar, L.P.  This management agreement was terminated in connection with the consummation of Holdings’ and InSight’s plan of reorganization.

17.    SEGMENT INFORMATION

We have two reportable segments: mobile operations and fixed operations, which are business units defined primarily by the type of service provided. Mobile operations consist primarily of mobile facilities while fixed operations consist primarily of fixed-site centers, although each segment generates contract services and patient services revenues. We do not allocate corporate and billing related costs, depreciation related to our billing system and amortization related to other intangible assets to the two segments. We also do not allocate income taxes to the two segments.  We manage cash flows and assets on a consolidated basis, and not by segment.

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The following tables summarize our operating results by segment (amounts in thousands):

Year ended June 30, 2007:

	Mobile			Fixed			Other			Consolidated
Contract services revenues	$	106,799		$	21,894		$	—		$	128,693
Patient services revenues	—			158,221			—			158,221
Total revenues	106,799			180,115			—			286,914
Depreciation and amortization	25,674			24,898			6,468			57,040
Total costs of operations	91,345			151,447			18,634			261,426
Corporate operating expenses	—			—			(25,496		)	(25,496		)
Equity in earnings of unconsolidated partnerships	—			3,030			—			3,030
Interest expense, net	(4,014		)	(4,227		)	(44,539		)	(52,780		)
Impairment of goodwill and other intangible assets	—			(29,595		)	—			(29,595		)
Income (loss) before reorganization items and income taxes	11,440			(2,124		)	(88,669		)	(79,353		)
Additions to property and equipment	2,918			10,767			2,478			16,163

Year ended June 30, 2006:

	Mobile			Fixed			Other			Consolidated
Contract services revenues	$	113,757		$	20,649		$	—		$	134,406
Patient services revenues	904			170,988			—			171,892
Total revenues	114,661			191,637			—			306,298
Depreciation and amortization	30,565			25,280			9,007			64,852
Total costs of operations	97,586			154,377			19,309			271,272
Corporate operating expenses	—			—			(23,655		)	(23,655		)
Equity in earnings of unconsolidated partnerships	—			3,072			—			3,072
Interest expense, net	(6,131		)	(5,748		)	(38,875		)	(50,754		)
Gain on repurchase of notes payable	—			—			3,076			3,076
Loss on dissolution of partnership	(1,000		)	—			—			(1,000		)
Impairment of goodwill and other intangible assets	(63,938		)	(126,869		)	—			(190,807		)
Loss before income taxes	(53,994		)	(92,285		)	(78,763		)	(225,042		)
Additions to property and equipment	12,517			12,798			5,612			30,927

Year ended June 30, 2005:

	Mobile			Fixed			Other			Consolidated
Contract services revenues	$	118,891		$	17,646		$	—		$	136,537
Patient services revenues	1,500			178,836			—			180,336
Total revenues	120,391			196,482			—			316,873
Depreciation and amortization	31,176			25,301			9,124			65,601
Total costs of operations	98,147			150,105			19,905			268,157
Corporate operating expenses	—			—			(18,447		)	(18,447		)
Loss on sales of centers	—			(170		)	—			(170		)
Equity in earnings of unconsolidated partnerships	—			2,613			—			2,613
Interest expense, net	(8,572		)	(7,058		)	(29,230		)	(44,860		)
Income (loss) before income taxes	13,672			41,762			(67,582		)	(12,148		)
Additions to property and equipment	14,361			14,974			1,124			30,459

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18.    RESULTS OF QUARTERLY OPERATIONS (unaudited)

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter			Total
	(amounts in thousands)
2007:
Revenues	$	73,672		$	71,966		$	70,065		$	71,211		$	286,914
Gross profit	6,583			4,543			6,890			7,472			25,488
Net loss	(12,132		)	(43,546		)	(11,474		)	(31,889		)	(99,041		)
2006:
Revenues	$	78,708		$	75,639		$	76,560		$	75,391		$	306,298
Gross profit	12,463			9,333			7,533			5,697			35,026
Net loss	(2,447		)	(9,819		)	(11,205		)	(186,747		)	(210,218		)

19.    HEDGING ACTIVITIES

We account for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, or SFAS 133.  In accordance with SFAS 133, we formally document our hedge relationships, including identification of the hedging instruments and the hedged items, as well as our risk management objectives and strategies for undertaking the hedge.  We also formally assess, both at inception and at least quarterly thereafter, whether the derivative instruments that are used in hedging transactions are highly effective in offsetting the changes in either the fair value or cash flows of the hedged item.

In January 2006, through InSight, we purchased an interest rate cap contract for a cost of approximately $0.3 million.  The contract is for a term of two years, with a notional amount of $100 million and a LIBOR cap of 5.0%.  We have designated this interest cap contract as a highly effective cash flow hedge of our floating rate notes under SFAS 133.  Accordingly, the value of the contract is marked-to-market quarterly, with changes in the fair value of the contract included as a separate component of other comprehensive income (loss).  The premium paid for the contract will be amortized over the life of the contract as required under SFAS 133.  The fair value of the interest rate cap contract was approximately $0.3 million as of June 30, 2007.

20.    PRO FORMA FRESH-START BALANCE SHEET (Unaudited)

In connection with Holdings’ and InSight’s emergence from chapter 11 protection, we adopted fresh-start reporting as of August 1, 2007 in accordance with SOP 90-7.  Upon the adoption of fresh-start reporting our consolidated financial statements will not be comparable, in various material respects, to any of our previously issued consolidated financial statements.  The consolidated financial statements as of August 1, 2007, and for periods subsequent to the fresh-start effective date, reflect that of a new reporting entity.  Fresh-start reporting results in the creation of a new reporting entity having no retained earnings or accumulated deficit.

Fresh-start reporting reflects our value as determined in the plan of reorganization.  Under fresh-start reporting, our asset values are remeasured using fair value, and are allocated in conformity with Statement of Financial Accounting Standards No. 141, “Business Combinations”, or SFAS 141.  Fresh-start reporting also requires that all liabilities, other than deferred taxes, should be stated at fair value or at the present values of the amounts to be paid using appropriate market interest rates.  Deferred taxes are determined in conformity with Statement of Financial Accounting Standards No, 109 “Accounting for Income Taxes”.

The following unaudited Pro Forma Fresh-Start Balance Sheet illustrates the presently-estimated financial effects of the implementation of the plan of reorganization and the adoption of fresh-start reporting.  This Pro Forma Fresh- Start Balance Sheet reflects the assumed effect of the consummation of the transactions contemplated in the plan of reorganization, including the cancellation and exchange of InSight’s senior subordinated notes for Holdings’ common stock.  This Pro Forma Fresh-Start Balance Sheet is presented as if the effectiveness of the plan of reorganization had occurred, and we had adopted fresh-start reporting, as of June 30, 2007.

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This pro forma data is unaudited.   Asset appraisals for fresh-start reporting have not yet been entirely completed, and comparable interest rate and other data required for evaluation of liability values are still being compiled and finalized.  Changes in the values of assets and liabilities and changes in assumptions from those reflected in the Pro Forma Fresh-Start Balance Sheet could significantly impact the reported value of goodwill.  Accordingly, the amounts shown are not final, and are subject to changes and revisions, including differences between the estimates used to develop this Pro Forma Fresh-Start Balance Sheet and the actual amounts ultimately determined.  Balances also will differ due to the results of operations and other transactions occurring between June 30, 2007 and August 1, 2007, which is the adoption date of fresh-start reporting.

The pro forma effects of the plan of reorganization and fresh-start reporting on our Pro Forma Fresh-Start Balance Sheet as of June 30, 2007 are as follows (amounts in thousands):

	Fresh-Start Adjustments
				(a)			(b)
							Revaluation
				Settlement			of Assets			Pro Forma
	June 30,			of Unsecured			and			June 30,
	2007			Claims			Liabilities			2007
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	20,832		$	—		$	7,750		$	28,582
Trade accounts receivables, net	42,683			—			—			42,683
Other current assets	8,335			—			—			8,335
Total current assets	71,850			—			7,750			79,600
Property and equipment, net	144,823			—			—			144,823
Investments in partnerships	3,413			—			2,607			6,020
Other assets	7,881			—			(7,881		)	—
Reorganization value in excess of amounts allocable to identifiable assets	—			108,972			58,786			167,758
Other intangible assets, net	30,216						(4,208		)	26,008
Goodwill	64,868			—			(64,868		)	—
	$	323,051		$	108,972		$	(7,814	)	$	424,209
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current portion of notes payable and capital lease obligations	$	8,664		$	—		$	(5,000	)	$	3,664
Accounts payable and other accrued expenses	38,619			—			7,286			45,905
Total current liabilities	47,283			—			2,286			49,569
Long-term liabilities:
Notes payable and capital lease obligations, less current portion	303,192			—			(10,100		)	293,092
Liabilities subject to compromise	205,704			(205,704		)	—			—
Other long-term liabilities	8,304			—			—			8,304
Total long-term liabilities	517,200			(205,704		)	(10,100		)	301,396
Stockholders’ equity (deficit)
Common stock	5			4			—			9
Additional paid-in capital	87,081			(13,846		)	—			73,235
Accumulated other comprehensive income	103			(103		)	—			—
Accumulated deficit	(328,621		)	328,621			—			—
Total stockholders’ equity (deficit)	(241,432		)	314,676			—			73,244
	$	323,051		$	108,972		$	(7,814	)	$	424,209

(a)Settlement of Unsecured Claims.  This reflects the cancellation of approximately $205.7 million of liabilities subject to compromise pursuant to the terms of the plan of reorganization.  The unsecured creditors received 7,780,000 shares of Holdings’ common stock in satisfaction of such claims.

(b)Revaluation of Assets and Liabilities.  Fresh-start adjustments are made to reflect asset values at their estimated fair value and liabilities at estimated fair value, based on an estimated total reorganization value of approximately $370.0 million:

·Adjustments to cash and cash equivalents and notes payable to reflect the issuance of $15.0 million aggregate principal amount of floating rate notes in exchange for approximately $12.8 million of cash.

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·Adjustments to cash and cash equivalents and notes payable to reflect the repayment of approximately $5.0 million on the credit facility.

·Adjustments of approximately $2.6 million to increase the fair value of investments in partnerships.

·Adjustments of approximately $7.9 million to reduce the value of deferred loan fees.

·Adjustments of approximately $4.2 million to reduce the value of other intangible assets.

·Adjustments of approximately $64.9 million to reduce the value of goodwill.

·Adjustment of approximately $7.3 million to accounts payable and other accrued expenses to reflect the remaining fees and expenses related to the chapter 11 proceedings.

·Adjustments of approximately $22.9 million to reduce the value of floating rate notes.

·The elimination of the Holdings’ existing equity accounts.

·Additionally, goodwill of approximately $167.8 million is recorded to reflect the excess of the estimated fair value of identifiable assets over liabilities and equity.

21.    SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Holdings’ and all of InSight’s wholly owned subsidiaries, or guarantor subsidiaries, guarantee InSight’s payment obligations under the floating rate notes and senior subordinated notes (Note 10).  These guarantees are full, unconditional and joint and several.  The following condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10 “Financial statements of guarantors and issuers of guaranteed securities registered or being registered.”  We account for investment in InSight and its subsidiaries under the equity method of accounting.  Dividends from InSight to Holdings are restricted under the agreements governing our material indebtedness.  This information is not intended to present the financial position, results of operations and cash flows of the individual companies or groups of companies in accordance with accounting principles generally accepted in the United States.

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SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

JUNE 30, 2007

(Amounts in thousands)

							GUARANTOR			NON-GUARANTOR
	HOLDINGS			INSIGHT			SUBSIDIARIES			SUBSIDIARIES		ELIMINATIONS			CONSOLIDATED
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	—		$	17,960		$	2,872	$	—		$	20,832
Trade accounts receivables, net	—			—			36,525			6,158		—			42,683
Other current assets	—			—			8,072			263		—			8,335
Intercompany accounts receivable	87,086			501,435			10,207			—		(598,728		)	—
Total current assets	87,086			501,435			72,764			9,293		(598,728		)	71,850
Property and equipment, net	—			—			125,737			19,086		—			144,823
Investments in partnerships	—			—			3,413			—		—			3,413
Investments in consolidated subsidiaries	(328,518		)	(331,697		)	13,984			—		646,231			—
Other assets	—			260			7,621			—		—			7,881
Goodwill and other intangible assets, net	—			—			89,224			5,860		—			95,084
	$	(241,432	)	$	169,998		$	312,743		$	34,239	$	47,503		$	323,051
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of notes payable and capital lease obligations	$	—		$	—		$	6,861		$	1,803	$	—		$	8,664
Accounts payable and other accrued expenses	—			—			37,406			1,213		—			38,619
Intercompany accounts payable	—			—			588,521			10,207		(598,728		)	—
Total current liabilities	—			—			632,788			13,223		(598,728		)	47,283
Notes payable and capital lease obligations, less current portion	—			303,850			(5,000		)	4,342		—			303,192
Liabilities subject to compromise	—			194,500			11,204			—		—			205,704
Other long-term liabilities	—			166			5,448			2,690		—			8,304
Stockholders’ (deficit) equity	(241,432		)	(328,518		)	(331,697		)	13,984		646,231			(241,432		)
	$	(241,432	)	$	169,998		$	312,743		$	34,239	$	47,503		$	323,051

75

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

JUNE 30, 2006

(Amounts in thousands)

							GUARANTOR			NON-GUARANTOR
	HOLDINGS			INSIGHT			SUBSIDIARIES			SUBSIDIARIES		ELIMINATIONS			CONSOLIDATED
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	—		$	25,944		$	2,264	$	—		$	28,208
Trade accounts receivables, net	—			—			37,540			6,150		—			43,690
Other current assets	—			—			7,960			429		—			8,389
Intercompany accounts receivable	87,086			496,110			15,452			—		(598,648		)	—
Total current assets	87,086			496,110			86,896			8,843		(598,648		)	80,287
Property and equipment, net	—			—			164,637			16,389		—			181,026
Investments in partnerships	—			—			3,051			—		—			3,051
Investments in consolidated subsidiaries	(228,979		)	(232,656		)	7,046			—		454,589			—
Other assets	—			905			16,989			10		—			17,904
Goodwill and other intangible assets, net	—			—			121,433			4,503		—			125,936
	$	(141,893	)	$	264,359		$	400,052		$	29,745	$	(144,059	)	$	408,204
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of notes payable and capital lease obligations	$	—		$	—		$	4,730		$	930	$	—		$	5,660
Accounts payable and other accrued expenses	—			—			38,613			1,464		—			40,077
Intercompany accounts payable	—			—			583,196			15,452		(598,648		)	—
Total current liabilities	—			—			626,539			17,846		(598,648		)	45,737
Notes payable and capital lease obligations, less current portion	—			493,143			2,479			2,100		—			497,722
Other long-term liabilities	—			195			3,690			2,753		—			6,638
Stockholders’ (deficit) equity	(141,893		)	(228,979		)	(232,656		)	7,046		454,589			(141,893		)
	$	(141,893	)	$	264,359		$	400,052		$	29,745	$	(144,059	)	$	408,204

76

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE YEAR ENDED JUNE 30, 2007

(Amounts in thousands)

							GUARANTOR			NON-GUARANTOR
	HOLDINGS			INSIGHT			SUBSIDIARIES			SUBSIDIARIES			ELIMINATION		CONSOLIDATED
Revenues:
Contract services	$	—		$	—		$	120,765		$	7,928		$	—	$	128,693
Patient services	—			—			132,391			25,830			—		158,221
Total revenues	—			—			253,156			33,758			—		286,914
Costs of operations	—			—			228,583			32,843			—		261,426
Gross profit	—			—			24,573			915			—		25,488
Corporate operating expenses	—			—			(25,496		)	—			—		(25,496		)
Equity in earnings of unconsolidated partnerships	—			—			3,030			—			—		3,030
Interest expense, net	—			—			(51,960		)	(820		)	—		(52,780		)
Impairment of goodwill	—			—			(29,595		)	—			—		(29,595		)
(Loss) income before reorganization items and income taxes	—			—			(79,448		)	95			—		(79,353		)
Reorganization items	—			—			(17,513		)	—			—		(17,513		)
(Loss) income before income taxes	—			—			(96,961		)	95			—		(96,866		)
Provision for income taxes	—			—			2,175			—			—		2,175
(Loss) income before equity in (loss) income of consolidated subsidiaries	—			—			(99,136		)	95			—		(99,041		)
Equity in (loss) income of consolidated subsidiaries	(99,041		)	(99,041		)	95			—			197,987		—
Net (loss) income	$	(99,041	)	$	(99,041	)	$	(99,041	)	$	95		$	197,987	$	(99,041	)

77

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE YEAR ENDED JUNE 30, 2006

(Amounts in thousands)

	HOLDINGS			INSIGHT			GUARANTOR SUBSIDIARIES			NON-GUARANTOR SUBSIDIARIES			ELIMINATION		CONSOLIDATED
Revenues:
Contract services	$	—		$	—		$	127,092		$	7,314		$	—	$	134,406
Patient services	—			—			142,755			29,137			—		171,892
Total revenues	—			—			269,847			36,451			—		306,298
Costs of operations	—			—			237,060			34,212			—		271,272
Gross profit	—						32,787			2,239			—		35,026
Corporate operating expenses	—			—			(23,655		)	—			—		(23,655		)
Equity in earnings of unconsolidated partnerships	—			—			3,072			—			—		3,072
Interest expense, net	—			—			(49,756		)	(998		)	—		(50,754		)
Gain on repurchase of notes payable	—			3,076			—			—			—		3,076
Loss on dissolution of partnership	—			—			(1,000		)	—			—		(1,000		)
Impairment of goodwill and other intangible assets	—			—			(190,807		)	—			—		(190,807		)
Income (loss) before income taxes	—			3,076			(229,359		)	1,241			—		(225,042		)
Benefit for income taxes	—			—			(14,824		)	—			—		(14,824		)
Income (loss) before equity in (loss) income of consolidated subsidiaries	—			3,076			(214,535		)	1,241			—		(210,218		)
Equity in (loss) income of consolidated subsidiaries	(210,218		)	(213,294		)	1,241			—			422,271
Net (loss) income	$	(210,218	)	$	(210,218	)	$	(213,294	)	$	1,241		$	422,271	$	(210,218	)

78

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE YEAR ENDED JUNE 30, 2005

(Amounts in thousands)

	HOLDINGS			INSIGHT			GUARANTOR SUBSIDIARIES			NON-GUARANTOR SUBSIDIARIES			ELIMINATION		CONSOLIDATED
Revenues:
Contract services	$	—		$	—		$	128,619		$	7,918		$	—	$	136,537
Patient services	—			—			146,953			33,383			—		180,336
Total revenues	—			—			275,572			41,301			—		316,873
Costs of operations	—			—			231,144			37,013			—		268,157
Gross profit	—			—			44,428			4,288			—		48,716
Corporate operating expenses	—			—			(18,447		)	—			—		(18,447		)
Loss on sales of centers	—			—			(170		)	—			—		(170		)
Equity in earnings of unconsolidated partnerships	—			—			2,613			—			—		2,613
Interest expense, net	—			—			(43,615		)	(1,245		)	—		(44,860		)
(Loss) income before income taxes	—			—			(15,191		)	3,043			—		(12,148		)
Provision for income taxes	—			—			15,069			—			—		15,069
(Loss) income before equity in (loss) income of consolidated subsidiaries	—			—			(30,260		)	3,043			—		(27,217		)
Equity in (loss) income of consolidated subsidiaries	(27,217		)	(27,217		)	3,043			—			51,391		—
Net (loss) income	$	(27,217	)	$	(27,217	)	$	(27,217	)	$	3,043		$	51,391	$	(27,217	)

79

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED JUNE 30, 2007

(Amounts in thousands)

	HOLDINGS			INSIGHT			GUARANTOR SUBSIDIARIES			NON-GUARANTOR SUBSIDIARIES			ELIMINATIONS			CONSOLIDATED
OPERATING ACTIVITIES:
Net (loss) income	$	(99,041	)	$	(99,041	)	$	(99,041	)	$	95		$	197,987		$	(99,041	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Cash used for reorganization items	—			—			11,367									11,367
Write-off of deferred financing costs, included in reorganization items	—			—			6,146									6,146
Depreciation and amortization	—			—			51,308			5,732			—			57,040
Amortization of deferred financing costs	—			—			3,158			—			—			3,158
Equity in earnings of unconsolidated partnerships	—			—			(3,030		)	—			—			(3,030		)
Distributions from unconsolidated partnerships	—			—			3,008			—			—			3,008
Impairment of goodwill	—			—			29,595			—			—			29,595
Equity in (loss) income of consolidated subsidiaries	99,041			99,041			(95		)	—			(197,987		)	—
Changes in operating assets and liabilities:
Trade accounts receivables, net	—			—			1,015			(8		)	—			1,007
Intercompany receivables, net	—			(5,325		)	5,084			241			—			—
Other current assets	—			—			(112		)	193			—			81
Accounts payable, other accrued expenses and accrued interest
subject to compromise	—			—			11,352			(251		)	—			11,101
Net cash (used in) provided by operating activities before
reorganization items	—			(5,325		)	19,755			6,002			—			20,432
Cash used for reorganization items	—			—			(11,367		)	—			—			(11,367		)
Net cash (used in) provided by operating activities	—			(5,325		)	8,388			6,002			—			9,065
INVESTING ACTIVITIES:
Additions to property and equipment	—			—			(11,074		)	(5,089		)	—			(16,163		)
Other	—			118			63			(63		)	—			118
Net cash provided by (used in) investing activities	—			118			(11,011		)	(5,152		)	—			(16,045		)
FINANCING ACTIVITIES:
Principal payments of notes payable and capital lease obligations	—			207			(5,348		)	(1,388		)	—			(6,529		)
Proceeds from issuance of notes payable	—			—			—			1,145			—			1,145
Borrowings on revolving credit facility	—			5,000			—			—			—			5,000
Other	—			—			(13		)	1			—			(12		)
Net cash provided by (used in) financing activities	—			5,207			(5,361		)	(242		)	—			(396		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			—			(7,984		)	608			—			(7,376		)
Cash, beginning of year	—			—			25,944			2,264			—			28,208
Cash, end of year	$	—		$         —			$	17,960		$	2,872		$	—		$	20,832

80

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED JUNE 30, 2006

(Amounts in thousands)

	HOLDINGS			INSIGHT			GUARANTOR SUBSIDIARIES			NON-GUARANTOR SUBSIDIARIES			ELIMINATIONS			CONSOLIDATED
OPERATING ACTIVITIES:
Net (loss) income	$	(210,218	)	$	(210,218	)	$	(213,294	)	$	1,241		$	422,271		$	(210,218	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	—			—			59,716			5,136			—			64,852
Amortization of deferred financing costs	—			—			3,051			—			—			3,051
Equity in earnings of unconsolidated partnerships	—			—			(3,072		)	—			—			(3,072		)
Distributions from unconsolidated partnerships	—			—			3,387			—			—			3,387		)
Gain on repurchase of notes payable	—			(3,076		)	—			—			—			(3,076		)
Loss on dissolution of partnership	—			—			1,000			—			—			1,000
Impairment of goodwill and other intangible assets	—			—			190,807			—			—			190,807		)
Deferred income taxes	—			—			(15,224		)	—			—			(15,224		)
Equity in (loss) income of consolidated subsidiaries	210,218			213,294			(1,241		)	—			(422,271		)	—
Changes in operating assets and liabilities:
Trade accounts receivables, net	—			—			2,731			285			—			3,016
Intercompany receivables, net	—			(3,920		)	8,191			(4,271		)	—			—
Other current assets	—			—			(473		)	66			—			(407		)
Accounts payable and other accrued expenses	—			—			3,698			(186		)	—			3,512
Net cash (used in) provided by operating activities	—			(3,920		)	39,277			2,271			—			37,628
INVESTING ACTIVITIES:
Acquisition of fixed-site center	—			—			(2,345		)	—			—			(2,345		)
Additions to property and equipment	—			—			(29,603		)	(1,324		)	—			(30,927		)
Sale of short-term investments	—			—			5,000			—			—			5,000		)
Other	—			(22		)	647			(860		)	—			(235		)
Net cash used in investing activities	—			(22		)	(26,301		)	(2,184		)	—			(28,507		)
FINANCING ACTIVITIES:
Principal payments of notes payable and capital lease obligations	—			(287,415		)	(5,003		)	(691		)	—			(293,109		)
Proceeds from issuance of notes payable	—			298,500			—			—			—			298,500
Payments made in connection with refinancing notes payable	—			(6,836		)	—			—			—			(6,836		)
Payment for interest rate cap contract	—			(307		)	—			—			—			(307		)
Net cash provided by (used in) financing activities	—			3,942			(5,003		)	(691		)	—			(1,752		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			—			7,973			(604		)	—			7,369
Cash, beginning of year	—			—			17,971			2,868			—			20,839
Cash, end of year	$	—		$	—		$	25,944		$	2,264		$	—		$	28,208

81

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED JUNE 30, 2005

(Amounts in thousands)

							GUARANTOR			NON-GUARANTOR
	HOLDINGS			INSIGHT			SUBSIDIARIES			SUBSIDIARIES			ELIMINATIONS			CONSOLIDATED
OPERATING ACTIVITIES:
Net (loss) income	$	(27,217	)	$	(27,217	)	$	(27,217	)	$	3,043		$	51,391		$	(27,217	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss on sales of centers	—			—			170			—			—			170
Depreciation and amortization	—			—			60,261			5,340			—			65,601
Amortization of deferred financing costs	—			—			3,173			—			—			3,173
Equity in earnings of unconsolidated partnerships	—			—			(2,613		)	—			—			(2,613		)
Distributions from unconsolidated partnerships	—			—			2,621			—			—			2,621
Deferred income taxes	—			—			15,224			—			—			15,224
Equity in (loss) income of consolidated subsidiaries	27,217			27,217			(3,043		)	—			(51,391		)	—
Changes in operating assets and liabilities:
Trade accounts receivables, net	—			—			6,634			1,462			—			8,096
Intercompany receivables, net	—			32,219			(24,931		)	(7,288		)	—			—
Other current assets	—			—			(1,397		)	(339		)	—			(1,736		)
Accounts payable and other accrued expenses	—			—			539			187			—			726
Net cash provided by operating activities	—			32,219			29,421			2,405			—			64,045
INVESTING ACTIVITIES:
Proceeds from sales of centers	—			—			2,810			—			—			2,810
Additions to property and equipment	—			—			(28,449		)	(2,010		)	—			(30,459		)
Net purchases of short-term investments	—			—			(5,000		)	—			—			(5,000		)
Other	—			—			(1,627		)	(1,483		)	—			(3,110		)
Net cash used in investing activities	—			—			(32,266		)	(3,493		)	—			(35,759		)
INVESTING ACTIVITIES:
Principal payments of notes payable and capital lease obligations	—			(32,195		)	(4,950		)	(636		)	—			(37,781		)
Other	—			(24		)	(54		)	—			—			(78		)
Net cash used in financing activities	—			(32,219		)	(5,004		)	(636		)	—			(37,859		)
DECREASE IN CASH AND CASH EQUIVALENTS	—			—			(7,849		)	(1,724		)	—			(9,573		)
Cash, beginning of year	—			—			25,820			4,592			—			30,412
Cash, end of year	$	—		$	—		$	17,971		$	2,868		$	—		$	20,839

82

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.       CONTROLS AND PROCEDURES

We carried out an evaluation, with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (pursuant to Rule 15d-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Form 10-K.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us (including our consolidated subsidiaries) required to be included in our periodic SEC filings.  There has been no change in our internal control over financial reporting during the quarter ended June 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.       OTHER INFORMATION

None.

83

PART III

ITEM 10.       DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth the names, ages and positions of our directors and executive officers, including the executive officers of InSight who are deemed our executive officers (as defined under Rule 3b-7 of the Exchange Act), as of August 31, 2007:

Wayne B. Lowell	52	Chairman of the Board and Director
Bret W. Jorgensen	48	President and Chief Executive Officer and Director
Patricia R. Blank	57	Executive Vice President — Clinical Services and Support of InSight
Louis E. Hallman, III	48	Executive Vice President and Chief Strategy Officer of InSight
Donald F. Hankus	53	Executive Vice President and Chief Information Officer of InSight
Mitch C. Hill	48	Executive Vice President and Chief Financial Officer
Eugene Linden	60	Director
Marilyn U. MacNiven-Young	56	Executive Vice President, General Counsel and Secretary
Richard Nevins	60	Director
James A. Ovenden	44	Director
Keith E. Rechner	49	Director
Steven G. Segal	47	Director

Wayne B. Lowell has been a member of our board of directors since August 1, 2007 and our Chairman since August 7, 2007.  He established Jonchra Associates, LLC, which provides strategic and operating advice to senior management of venture capital-funded and publicly held entities, in 1998. Mr. Lowell worked at PacifiCare Health Systems from 1986 to 1998, most recently holding the positions of Executive Vice President, Chief Financial Officer and Chief Administrative Officer. Mr. Lowell currently serves as a director of Molina Healthcare, Inc., a multi-state managed care organization, and of IPC The Hospitalist Company, Inc., a provider of hospitalist services.

Bret W. Jorgensen has been a member of our board of directors and our President and Chief Executive Officer since July 1, 2005. Prior to this appointment, Mr. Jorgensen was the Chief Executive Officer of AdvoLife, a provider of senior care services, from June 2004 until the sale of the company in October 2004.  Prior to AdvoLife he was Chairman and Chief Executive Officer of Directfit, a web-centric recruiting solutions provider, from April 1999 to October 2003.  In 1989, Jorgensen co-founded TheraTx, which became a diversified healthcare services company listed on NASDAQ.  While at TheraTx, he served on the board of directors and held several executive leadership positions, including President of TheraTx Health Services, and was instrumental in TheraTx’s initial public offering in 1994 and sale in April 1997.  He currently serves on the board of directors of AllianceCare, a provider of senior healthcare services, rehabilitation therapy and home health services.

Patricia R. Blank has been InSight’s Executive Vice President-Clinical Services and Support since March 28, 2006.  She was InSight’s Executive Vice President-Enterprise Operations from October 22, 2004 to March 28, 2006.  She was InSight’s Executive Vice President and Chief Information Officer from September 1, 1999 to October 22, 2004.

84

Prior to joining InSight, Ms. Blank was the principal of Blank & Company, a consulting firm specializing in healthcare consulting. From 1995 to 1998, Ms. Blank served as Executive Vice President and Chief Operating Officer of HealthHelp, Inc., a Houston, Texas-based radiology services organization managing radiology provider networks in multiple states. From 1988 to 1995, she was corporate director of radiology of FHP, a California insurance company.

Louis E. Hallman, III, has been InSight’s Executive Vice President and Chief Strategy Officer since August 10, 2005.  Prior to this appointment, Mr. Hallman was the President of Right Manufacturing LLC, a specialty manufacturer, from January 2003 through January 2005.  From January 2002 until January 2003, Mr. Hallman was a private investor and reviewed various business opportunities.  From August 1999 through January 2002, he was President and CEO of Homesquared Inc., a supplier of web-based software applications to production homebuilders.  In July 1989, Mr. Hallman co-founded TheraTx, Inc., which became a diversified healthcare services company listed on NASDAQ.  While at TheraTx, he served as Vice President Corporate Development until its sale in April 1997.

Donald F. Hankus has been InSight’s Executive Vice President and Chief Information Officer since September 26, 2005. Prior to this appointment, Mr. Hankus was the Director of Sales Operations of Quest Software, Inc., a provider of application, database and infrastructure software, from January 2004 through September 2005. From January 2000 through January 2004, he was Chief Information Officer of Directfit. From December 1996 to January 2000, he served as Director of Software Development for Cendant Corporation, a real estate brokerage and hotel franchisor.

Mitch C. Hill has been our Executive Vice President and Chief Financial Officer since January 10, 2005.  Prior to this appointment, Mr. Hill was President and Chief Executive Officer of BMS Reimbursement Management, a provider of outsourced billing and collection, accounts receivable and practice management services, from April 2001 to December 2004.  Prior to that, he held the following positions with Buy.Com Inc., a multi-category Internet superstore, Chief Financial Officer from November 1999 to April 2000 and President and Chief Financial Officer from April 2000 to February 2001.

Eugene Linden has been a member of our board of directors since August 1, 2007.  He is the Chief Investment Strategist of Bennett Management Corporation, a hedge fund, and has also been a contributor at TIME Magazine since 1995. From 1987 to 1995, Mr. Linden was a senior writer at TIME Magazine. Mr. Linden currently serves as a director of Polymer Group, Inc., Cibus Genetics LLC and Syratech Corporation.

Marilyn U. MacNiven-Young has been our Executive Vice President, General Counsel and Secretary since February 11, 2002 and Executive Vice President, General Counsel and Secretary of InSight since August 1998.  From February 1996 through July 1998, she was an independent consultant to InSight. From September 1994 through June 1995, she was Senior Vice President and General Counsel of Abbey Healthcare Group, Inc., a home healthcare company. From 1991 through 1994, Ms. MacNiven-Young served as General Counsel of American Health Services Corp., a predecessor of InSight.

Richard Nevins has been a member of our board of directors since August 1, 2007.  Since July 2007, he has served as the interim chief executive officer for US Energy Services, Inc.  He has worked as an independent advisor since 2007. From 1998 until his retirement in 2007, Mr. Nevins was a managing director and co-head of the recapitalization and restructuring group at Jefferies & Company, Inc. Mr. Nevins currently serves as a director of Aurora Trailer Holdings and SPELL C LLC.

James A. Ovenden has been a member of our board of directors since August 1, 2007.  He is the Chief Financial Officer and a founding principal of OTO Development, LLC, a hospitality development company established in 2004. Mr. Ovenden has also served as a principal consultant with CFO Solutions of SC, LLC since 2002. Mr. Ovenden was the Chief Financial Officer of Extended Stay America, Inc. from January 2004 to May 2004 and held various positions at CMI Industries, Inc. from 1987 to 2002.  Mr. Ovenden currently serves as a director, and as chairman of the audit committee of the board of directors, of Polymer Group, Inc.

Keith E. Rechner has been a member of our board of directors since August 1, 2007.  He has been Chief Executive Officer and President of Benefit Advisors, Inc., an employee benefits consulting firm, since 1997. Mr. Rechner is also currently a financial advisor with AXA Advisors, a position he has held since 2005.  He also is a member of the

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operating committee of United Wealth Strategies LLC, a financial and consulting services company.  Mr. Rechner served as the Regional Vice President of Tax Sheltered Markets for AXA Advisors from 2002 to 2005 and Vice President of Traditional Markets for AXA Advisors from 2000 to 2002. From 1993 to 1996, Mr. Rechner held various positions with VHA Great Rivers, Inc./Great Rivers Network, including President and Chief Executive Officer, Great Rivers Network, Chief Operating Officer, Integrated Benefit Services (IBS) and Vice President, Managed Care.

Steven G. Segal has been a member of our board of directors since October 17, 2001.  He is a Special Limited Partner of J.W. Childs Associates, L.P. and has been at J.W. Childs Associates, L.P. since 1995. Prior to that time, he was an executive at Thomas H. Lee Company from 1987, most recently holding the position of Managing Director.  Since 2006, Mr. Segal is also an Executive-in-Residence/Lecturer at Boston University’s Graduate School of Management.  He is also a director of MAAX, Inc., The NutraSweet Company, Fitness Quest Inc., WS Packaging Group, Inc. and Round Grille, Inc. (d/b/a FIRE + iCE).

Each of our executive officers was an executive officer on May 29, 2007, the date Holdings and InSight filed voluntary petitions to reorganize their business under chapter 11 of the Bankruptcy Code.

Audit Committee

The audit committee of Holdings’ board of directors is in the process of reviewing and formalizing a written charter.  The written charter will be consistent with the following authority granted by Holdings’ board of directors to the audit committee:

·Prepare the audit committee report required by SEC rules to be included in Holdings’ annual proxy statement.

·Assist the board of directors in fulfilling its responsibility to oversee management regarding:

·the conduct and integrity of Holdings’ financial reporting to any governmental or regulatory body, stockholders, other users of Holdings’ financial reports, and the public;

·Holdings’ legal and regulatory compliance;

·the qualifications, engagement, compensation, independence, and performance of Holdings’ independent registered public accounting firm, its conduct of the annual audit of Holdings’ consolidated financial statements, and its engagement to provide any other services; and

·the performance of Holdings’ internal audit function and systems of internal control over financial reporting and disclosure controls and procedures.

·Maintain through regularly scheduled meetings, a line of communication between the board of directors and Holdings’ management, internal auditor and the independent registered public accounting firm.

Messrs. Ovenden (Chairman), Lowell and Nevins are the current members of the audit committee of Holdings’ board of directors.  Holdings’ board of directors has determined that each of Messrs. Ovenden and Lowell is an “audit committee financial expert” as defined by the SEC and is independent as defined in the rules of the NASDAQ Stock Market. See Item 13. “Certain Relationships and Related Transactions, and Director Independence”, below.  Holdings’ board of directors has determined that each of the members of the audit committee is financially literate and has accounting or related financial management expertise, as such terms are interpreted by Holdings’ board of directors.

Compensation Committee

The compensation committee assists Holdings’ board of directors by ensuring that our executives are compensated in accordance with our total compensation objectives and executive compensation policy.  Holdings’ board of directors has established a charter for the compensation committee, which is available on our website at the following internet address http://www.insighthealth.com/executives.asp?link=executives. The written charter provides that the compensation committee will:

·review the compensation of the Chief Executive Officer;

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·administer Holdings’ stock option or other equity-based compensation plans and programs; and

·oversee Holdings’ management compensation and benefits policies, including both qualified and non-qualified plans.

See Item 11. “Executive Compensation — Compensation Discussion and Analysis” below for a discussion of the process and procedure for consideration and determination of executive and director compensation.

Nomination of Directors

Holdings’ bylaws were amended on July 26, 2007 to provide, among other things, a procedure by which holders of Holdings’ common stock may nominate candidates for election to the board of directors.

Code of Ethical Conduct

We have adopted a code of ethical conduct that applies to all of our and our subsidiaries’ employees, including, our principal executive officer, principal financial officer and principal accounting officer.  A copy of the code of ethical conduct is posted on our website, www.insighthealth.com, under “About Us.”  We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of the code of ethical conduct applicable to our principal executive officer, principal financial officer, principal accounting officer or controller (or persons performing similar functions) by posting such information on our internet website, www.insighthealth.com, under “About Us”.

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ITEM 11.       EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Overview and Objectives

Following Holdings’ and InSight’s emergence from bankruptcy, the reconfigured board of Holdings established a compensation committee.  Prior to the consummation of Holdings’ and InSight’s plan of reorganization, our compensation structure was overseen by the compensation committee of InSight’s board of directors (Holdings’ board of directors did not have committees).  In connection with the establishment of the compensation committee, Holdings’ board directed the committee to:

·review the compensation of the Chief Executive Officer;

·administer Holdings’ stock option or other equity-based compensation plans and programs; and

·oversee Holdings’ management compensation and benefits policies, including both qualified and non-qualified plans.

Holdings’ compensation committee has retained a third-party compensation advisor to assist the committee in developing a compensation program for our key executives.  Though the structure is still in development, the committee intends the compensation for the executive officers named in the Summary Compensation Table below, whom we refer to as named executive officers, will be significantly performance-based.  More generally, the structure will be intended to achieve the following objectives:

·attract and retain individuals of superior ability and managerial talent;

·ensure executive compensation is aligned with our corporate strategies, business objectives and the long-term interests of our stockholders;

·create the incentive to achieve key strategic and financial performance measures by linking incentive award opportunities to the achievement of performance goals in these areas; and

·enhance the executives’ incentive to increase stockholder value, as well as promote retention of key people, by providing an equity interest in Holdings.

Generally, these objectives are consistent with the historical objectives of InSight’s compensation committee.

Executive compensation for the named executive officers includes the following:

·annual base salary;

·cash incentive awards;

·equity awards; and

·perquisites.

Each element is further described below.

Base Salary

Base salary is designed to compensate our named executive officers competitively based on industry and marketplace standards. Historically, InSight’s compensation committee:

·considered marketplace data for comparable positions and the relative performance and contribution of each executive to the business;

·did not rely solely on predetermined formulas or a limited set of criteria when it evaluated the performance of the named executive officers;

·reviewed base salary levels annually to ensure competitiveness; and

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·based on annual review and individual performance of each executive, implemented base salary increases, if appropriate.

For fiscal year 2007, InSight’s compensation committee determined that base salary levels should be increased by 2.25%.  Historically, we have gathered information from other companies in the industry or similar size companies; however, we have not designated a specific peer group for establishing compensation comparisons.

Cash Incentive Awards

Cash incentive awards provide a direct link between executive compensation and our overall performance. All executive officers, including the President and Chief Executive Officer, are eligible for cash incentive awards, which are intended to focus management attention and effort on the attainment of established performance goals. Specific performance goals and weightings are established at the corporate level and encompass goals for overall performance for each fiscal year.

InSight’s compensation committee tied individual cash incentive awards to an executive’s contribution to our achievement of established performance goals, as well as the successful achievement of individually tailored annual objectives.  InSight’s compensation committee designed the cash incentive award component of our compensation program to align executive pay with our annual (short-term) performance.  Cash incentive awards are generally paid in August or September of each year for the prior fiscal year’s performance.

Pursuant to their respective employment agreement, each named executive officer is eligible for a cash incentive award of up to a certain percentage of the executive’s annual base salary.  For fiscal 2007, Mr. Jorgensen’s targeted cash incentive award was equal to 100% of his annual base salary, and the targeted cash incentive award for each of the other named executive officers was equal to 40% of his or her respective annual base salary.   75% of the targeted cash incentive award was based on our achievement of budgetary goals, and 25% of the targeted cash incentive award was based upon the achievement of other goals (i.e., personal management objectives) mutually agreed upon by each executive and our President and Chief Executive Officer and approved by our board of directors (except in the case of Mr. Jorgensen, whose goals were agreed upon by our board of directors and himself).  Annual targets for the determination of the cash incentive awards are based on budgeted profitability levels, which have been approved by the compensation committee and are generally considered by the compensation committee to be reasonably attainable.

The budgetary goal for fiscal year 2007 was tied to Adjusted EBITDA (see our reconciliation of net cash provided by operating activities to Adjusted EBITDA in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition, Liquidity and Capital Resources”) after taking into account certain lease expenses associated with diagnostic imaging equipment acquired pursuant to operating leases.  For fiscal year 2007, we were required to exceed 90% of the budgeted amount ($72.5 million) in order for the named executive officers to become eligible for the 75% of the cash incentive award tied to a budgetary goal.  For fiscal year 2007, we achieved approximately 95% of the budgetary amount.  Based on our performance, the named executive officers received the annual cash incentive awards described in the Summary Compensation Table below.

In November 2006, InSight’s board of directors adopted a management incentive plan to ensure the retention of certain employees in light of our decision to explore strategic alternatives.  The management incentive plan was modeled after similar plans for other companies that had pursued strategic alternatives, including reorganizations.  The plan provided for (i) a progress payment upon the occurrence of a specified date, and (ii) full payment upon the achievement of a strategic milestone (i.e., sufficient agreements to complete the balance sheet reorganization). Certain named executive officers received the payments under the management incentive plan described in the Summary Compensation Table below.  No further payments will be made under such management incentive plan.

Equity Awards

We believe that equity awards encourage executive officers to manage from the perspective of a stockholder with an equity stake in the business.  If the value of Holdings’ common stock increases over time, the value of the equity awards granted to each of the executive officers increases, providing a strong incentive for executive officers to enhance stockholder value.  Historically, equity awards consisted of stock option awards, which were not limited to executive officers, but were granted to a broad range of key employees. Stock options provided recipients with the opportunity to purchase Holdings’ common stock at a price fixed on the grant date regardless of future price.

InSight’s compensation committee typically provided that (i) 50% of stock options would vest cumulatively over various periods up to five years from the grant date, and (ii) 50% of stock options would vest cumulatively upon the

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achievement of certain performance targets on an equity exit or liquidity event. The stock options were exercisable in whole or in installments, and would have expired ten years from the grant date.

There were no grants of stock options in fiscal year 2007.  Upon consummation of the plan of reorganization, the stock option plan was terminated and all outstanding stock options were cancelled on August 1, 2007.  Holdings’ compensation committee, with the assistance of a third-party compensation advisor, is evaluating a new equity award structure.

Perquisites

Named executive officers, and certain other officers, are provided with the following benefits as a supplement to their other compensation:

·Medical Insurance. At our sole cost, we provide to each named executive officer and the named executive officer’s eligible dependents such health, dental and vision insurance as we may from time to time make available.

·Life and Disability Insurance. At our sole cost, we provide each named executive officer such disability and/or life insurance as we in our sole discretion may from time to time make available.

·401(k) Savings Plan.  We currently make matching contributions to our 401(k) Savings Plan in an amount equal to fifty cents for each dollar of participant contributions, up to a maximum of six percent of the participant’s compensation for each pay period and subject to certain other limits. Participation is not limited to named executive officers, and all full-time employees are eligible to participate in the 401(k) Savings Plan.

·Automobile Allowance and Operating Expenses.  Mr. Jorgensen receives an automobile allowance of $1,000 per month, and the other named executive officers receive an automobile allowance of $750 per month.  We pay the named executive officers’ expenses incidental to the operation of an automobile.

Employment Agreements

We have entered into an employment agreement with each of our named executive officers and certain other executives.  Each employment agreement with our named executive officers provides for a term of 12 months on a continuing basis, subject to certain termination rights. These employment agreements provide for an annual salary as well as a cash incentive award of up to a certain percentage.  75% of the cash incentive award is based on our achievement of budgetary goals, and 25% of the cash incentive award is based upon the achievement of other goals (i.e., personal management objectives) mutually agreed upon by each executive and our President and Chief Executive Officer and approved by our board of directors (except in the case of Mr. Jorgensen, whose goals are agreed upon by our board of directors and himself).

Each executive is provided with a life insurance policy of three times the amount of his or her annual base salary and is entitled to participate in InSight’s life insurance, medical, health and accident and disability plan or program, pension plan or other similar benefit plan and any stock option plans (as noted above the stock option plan was terminated and all outstanding stock options were cancelled on August 1, 2007).

Each executive is subject to a noncompetition covenant and nonsolicitation provisions (relating to InSight’s employees and customers) during the term of his or her respective employment agreement and continuing for a period of 12 months after the termination of his or her respective employment.

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SUMMARY COMPENSATION TABLE

The following table sets forth information concerning the annual, long-term and all other compensation for services rendered in all capacities to us and our subsidiaries for the year ended June 30, 2007 of the persons who served as (1) our principal executive officer, (2) our principal financial officer, and (3) the other three most highly compensated executive officers for the year ended June 30, 2007. We refer to these officers collectively as the named executive officers.

	Fiscal		Non-Equity
	Year		Incentive Plan	All Other	Total
	Ended	Salary	Compensation(1)	Compensation (2)	Compensation
Name and Principal Position	June 30,	($)	($)	($)	($)
Bret W. Jorgensen	2007	406,231	773,050	76,802	1,256,083
President and Chief Executive
Officer
Mitch C. Hill	2007	279,284	423,484	56,470	759,238
Executive Vice President and
Chief Financial Officer
Marilyn U. MacNiven-Young	2007	279,284	423,484	29,443	732,211
Executive Vice President,
General Counsel and Secretary
Louis E. Hallman, III	2007	279,909	277,291	29,253	586,453
Executive Vice President and
Chief Strategy Officer
Patricia R. Blank	2007	279,284	82,000	39,663	400,947
Executive Vice President -
Clinical Services and Support

(1)Cash incentive awards which are based on our performance are earned and accrued during the fiscal year and paid subsequent to the end of each fiscal year.  The amounts include payments under the management incentive plan to Messrs. Jorgensen, Hill and Hallman and Ms. MacNiven-Young.   The components of Non-Equity Incentive Plan Compensation are annual cash incentive awards and payments under the management incentive plan (no further payments will be made under such management incentive plan).  Set forth below are the different components of non-equity incentive plan compensation paid to the named executive officers.

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	Management		Annual		Total
	Incentive		Cash		Non-Equity
	Plan		Incentive		Incentive Plan
Named Executive Officer	Payments		Award		Compensation
Bret W. Jorgensen	$	511,250	$	261,800	$	773,050
Mitch C. Hill	351,484		72,000		423,484
Marilyn U. MacNiven-Young	351,484		72,000		423,484
Louis E. Hallman, III	210,891		66,400		277,291
Patricia R. Blank	—		82,000		82,000

(2)Amounts of All Other Compensation are comprised of the following perquisites:  (1) automobile allowances, (2) automobile operating expenses, (3) the Company’s contributions to our 401(k) Savings Plan, (4) specified premiums on executive life insurance arrangements, (5) specified premiums on executive health and disability insurance arrangements and (6) certain professional membership dues.  With respect to specified premiums on executive health and disability insurance arrangements, the Company paid $33,889 and $31,772, respectively, on behalf of Messrs. Jorgensen and Hill.

GRANTS OF PLAN-BASED AWARDS

The following table sets forth grants of plan-based awards in fiscal year 2007 to the named executive officers:

		Estimated Future Payouts Under Non-Equity Incentive Plan Awards
Named Executive Officer	Grant Date(1)	Threshold ($)(2)		Target/Maximum ($)(3)
Bret W. Jorgensen	July 1, 2006	$	30,675	$	409,000
	November 14, 2006	255,625		511,250
Mitch C. Hill	July 1, 2006	8,436		112,475
	November 14, 2006	175,472		351,484
Marilyn U. MacNiven-Young	July 1, 2006	8,436		112,475
	November 14, 2006	175,472		351,484
Louis E. Hallman, III	July 1, 2006	8,436		112,475
	November 14, 2006	105,145		210,891
Patricia R. Blank	July 1, 2006	8,436		112,475

(1)Potential cash incentive awards were granted as of July 1, 2006 and potential management incentive plan payments were granted as of November 14, 2006.  

(2)The threshold amount assumes that (i) the minimum level of budgetary performance was met for the cash incentive award, but the personal management objectives were not achieved, and (ii) the occurrence of a specified date for the management incentive plan.

(3)The target amount assumes (i) that the targeted level of performance (both targeted budget and personal management objectives) was met for the cash incentive awards, and (ii) the achievement of the strategic milestone for the management incentive plan.  The maximum amount is equal to the target amount because (a) with respect to the management incentive plan the target amount is the maximum amount, and (b) with respect to cash incentive awards, if level of performance exceeds the targeted budget, the named executive officers may receive a discretionary award, but the amount of any discretionary award above the target amount is subject to the discretion of the compensation committee.  Actual amounts earned under these granted awards in fiscal year 2007 are reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table above.

OPTION GRANTS.  During the year ended June 30, 2007, no stock options were granted.

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2007 Outstanding Equity Awards at Fiscal Year End Table

The following table contains certain information regarding equity awards held by the named executive officers as of June 30, 2007:

	Number of	Number of
	Securities	Securities
	Underlying	Underlying
	Unexercised	Unexercised		Option		Option
	Options (#)	Options (#)		Exercise		Expiration
Name	Exercisable	Unexercisable		Price ($)		Date (1)
Bret W. Jorgensen	37,235	211,011	(2)	$	19.82	7/1/2015
Mitch C. Hill	8,000	32,000	(3)	$	19.82	1/10/2015
Marilyn U. MacNiven-Young	10,500	19,500	(3)	$	18.00	10/17/2011
	2,000	8,000	(3)	$	19.82	1/10/2015
Louis E. Hallman, III	4,000	36,000	(3)	$	19.82	8/10/2015
Patricia R. Blank	10,500	19,500	(3)	$	18.00	10/17/2011
	6,000	24,000	(3)	$	19.82	1/10/2015

(1)The stock option plan was terminated and all outstanding options were cancelled on August 1, 2007 upon consummation of the plan of reorganization.

(2)These options would have vested and become exercisable on the following vesting schedule:  15% upon each anniversary of the grant date on the second through sixth anniversary of the grant date, 25% upon the achievement of certain performance targets on an equity exit or a liquidity event.

(3)These options would have vested and become exercisable on the following vesting schedule:  10% upon each anniversary of the grant date on the second through sixth anniversary of the grant date, 50% upon the achievement of certain performance targets on an equity exit or a liquidity event.

Potential Payments on Termination and Change of Control

Under the terms of each executive’s employment agreement, each executive’s employment will immediately terminate upon his or her death and the executors or administrators of his or her estate or his or her heirs or legatees (as the case may be) will be entitled to all accrued and unpaid compensation up to the date of his or her death. Each executive’s employment agreement will terminate and each of them will be entitled to all accrued and unpaid compensation, as well as 12 months of compensation at the annual salary rate then in effect upon the occurrence of the following:

(1)Upon the executive’s permanent and total disability i.e., the executive is unable substantially to perform his or her services required by the employment agreement for three (3) consecutive months or shorter periods aggregating three (3) months during any twelve (12) month period; provided, however that our obligation to make payments of 12 months of compensation at the annual salary rate then in effect may be reduced by the amount which the executive is entitled to receive under the terms of our long-term disability insurance policy.

(2)Upon InSight’s 30 days’ written notice to the executive of the termination of the executive’s employment without cause.  The employment agreements generally define cause as the occurrence of one of the following:

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·the executive has been convicted or pled guilty or no contest to any crime or offense (other than any crime or offense relating to the operation of an automobile) which is likely to have a material adverse impact on the business operations or financial or other condition of our business, or any felony offense;

·the executive has committed fraud or embezzlement;

·the executive has breached any of his or her obligations under the employment agreement and failed to cure the breach within 30 business days following receipt of written notice of such breach;

·we, after reasonable investigation, find that the executive has violated our material written policies and procedures, including but not necessarily limited to, policies and procedures pertaining to harassment and discrimination;

·the executive has failed to obey a specific written direction from the board of directors (unless such specific written instruction represents an illegal act), provided that (i) such failure continues for a period of 30 business days after receipt of such specific written direction, and (ii) such specific written direction includes a statement that the failure to comply therewith will be a basis for termination hereunder; or

·any willful act or omission on the executive’s part which is materially injurious to the financial condition or business reputation of InSight or any of its subsidiaries.

(3)If the executive terminates his or her employment with InSight for good reason.  The employment agreements generally define good reason as:

·the relocation by InSight, without the executive’s consent, of the executive’s principal place of employment to a site that is more than a specified number of miles from executive’s principal residence;

·a reduction by InSight, without the executive’s consent, in the executive’s annual salary, duties and responsibilities, and title, as they may exist from time to time; or

·a failure by InSight to comply with any material provision of the employment agreement which is not cured within 30 days after notice of such noncompliance has been given by the executive,or if such failure is not capable of being cured in such time, for which a cure shall not have been diligently initiated by InSight within the 30 day period.

(4)If the executive’s employment is terminated by InSight without cause or he or she terminates his or her employment for good reason within 12 months of a change in control.  The consummation of the exchange offer and the plan of reorganization did not constitute a change in control under the employment agreements with the named executive officers. A change in control shall generally be deemed to have occurred if:

·any person, or any two or more persons acting as a group, and all affiliates of such person or persons (a “Group”), who prior to such time beneficially owned less than 50% of the then outstanding capital stock of InSight or Holdings, shall acquire shares of InSight’s or Holdings’ capital stockin one or more transactions or series of transactions, including by merger, and after such transaction or transactions such person or group and affiliates beneficially own 50% or more of InSight’s or Holdings’ outstanding capital stock, or

·InSight or Holdings shall sell all or substantially all of its assets to any Group which, immediately prior to the time of such transaction, beneficially owned less than 50% of the then outstanding capital stock of InSight or Holdings.

In addition, if any employment agreement is terminated pursuant to the foregoing (1) – (4), InSight will maintain at its expense until the earlier of 12 months after the date of termination or commencement of the executive’s benefits pursuant to full-time employment with a new employer under such employer’s standard benefits program, all life insurance, medical, health and accident and disability plans or programs, in which the executive was entitled to participate immediately prior to the date of termination.  If an employment agreement is terminated with a named executive officer pursuant to the foregoing (1) – (4) we estimate that the value of the payments and benefits would be as follows:

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Named Executive Officer	Salary		Benefits (1)		Total
Bret W. Jorgensen	$	409,000	$	28,265	$	437,265
Mitch C. Hill	281,187		32,125		313,312
Marilyn U. MacNiven-Young	281,187		8,257		289,444
Louis E. Hallman, III	281,187		15,514		296,701
Patricia R. Blank	281,187		18,220		299,407

(1)For purposes of this table we have assumed that (i) the terminated executive would not commence receiving benefits with a new employer until 12 months after the date of termination, and (ii) cost of benefits for the 12 month period following termination would be consistent with the actual costs incurred during fiscal year 2007.  Benefits include all life insurance, medical, health and accident and disability plans or programs, in which the executive was entitled to participate immediately prior to the date of termination.  We have not included in this table the value of outstanding stock options as of June 30, 2007 because such stock options were out of the money as of that date and were cancelled on August 1, 2007 upon consummation of the plan of reorganization.

Compensation Committee Interlocks and Insider Participation

During fiscal year 2007, InSight’s compensation committee consisted of Michael N. Cannizzaro (Chairman), David W. Dupree and Messrs. Jorgensen and Segal. Mr. Cannizzaro served as our President and Chief Executive Officer from August 9, 2004 to July 1, 2005. Mr. Jorgensen did not participate in decisions relating to his own compensation.  During fiscal year 2007, Messrs. Cannizzaro and Segal were affiliated with J.W. Childs Advisors, II, L.P. and Mr. Dupree was affiliated with Halifax Genpar, L.P.

Management Agreement.  We entered into a management agreement with J.W. Childs Advisors II, L.P., the general partner of J.W. Childs Equity Partners II, L.P. and Halifax Genpar, L.P., the general partner of Halifax Capital Partners, L.P.  Pursuant to the management agreement, J.W. Childs Advisors II, L.P. and Halifax Genpar, L.P. provided business, management and financial advisory services to us in consideration of (i) an annual fee of $240,000 paid to J.W. Childs Advisors II, L.P. and (ii) an annual fee of $60,000 paid to Halifax Genpar, L.P.  We were required to reimburse such entities for all travel and other out-of-pocket expenses incurred by such entities in connection with their performance of the advisory services under the agreement.  Furthermore, we and InSight agreed to indemnify and hold harmless J.W. Childs Advisors II, L.P. and Halifax Genpar, L.P. and their affiliates, from and against any and all claims, losses, damages and expenses arising out of the Holdings’ 2001 acquisition of InSight or the performance by J.W. Childs Advisors II, L.P. and Halifax Genpar, L.P. of their obligations under the management agreement.   This management agreement was terminated in connection with the consummation of Holdings’ and InSight’s plan of reorganization.

Stockholders Agreement.  We, J.W. Childs Equity Partners II, L.P., JWC-InSight Co-invest LLC, Halifax Capital Partners, L.P., Mr. Dupree, management of InSight and all other holders of our capital stock or stock options entered into a stockholders agreement.  Under the stockholders agreement, we and each of our stockholders had a right of first refusal to purchase any stock proposed to be sold by all other stockholders, except J.W. Childs Equity Partners II, L.P. and JWC-InSight Co-invest LLC.  Additionally, the stockholders agreement afforded: (1) stockholders, other than J.W. Childs Equity Partners II, L.P. and JWC-InSight Co-invest LLC, so-called “tag-along rights”, which gave these stockholders the right to participate with respect to proposed sales of our capital stock by J.W. Childs Equity Partners II, L.P. and JWC - InSight Co-invest LLC; (2) J.W. Childs Equity Partners II, L.P. and JWC-InSight Co-invest LLC, so-called “drag-along rights”, which gave these stockholders the right to require other stockholders to participate in proposed sales of a majority of our capital stock; and (3) all stockholders certain registration rights with respect to our capital stock.  Furthermore, the stockholders agreement contained put and call features on capital stock and stock options held by InSight management which were triggered upon termination of such individual’s employment with InSight; however, these put and call features were inapplicable to Mr. Jorgensen’s capital stock and stock options.  The stockholders agreement also obligated us and our stockholders to take all necessary action to

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appoint, as our directors, up to eight nominees designated by J.W. Childs Equity Partners II, L.P. (as would constitute a majority of our entire board of directors) and two nominees designated by Halifax Capital Partners, L.P.  This stockholders agreement was terminated in connection with the consummation of Holdings’ and InSight’s plan of reorganization.

Compensation of Directors

We reimburse our non-employee directors for all out-of-pocket expenses incurred in the performance of their duties as directors. Prior to the consummation ofHoldings’ and InSight’s plan of reorganization, we did not pay fees to directors for attendance at meetings or for their services as members of the board of directors or committees thereof.   Accordingly, we did not make any compensation payments to our directors in fiscal 2007.  As a result of the appointment of the new board members, the non-executive directors of Holdings will each receive an annual fee of $30,000, a fee of $2,000 for each in-person board of directors meeting and a fee of $1,000 for each telephonic board of directors meeting.  In addition, the chairman of the board, the chairman of the audit committee and the chairman of the compensation committee, will each receive an additional annual fee of $20,000, $10,000 and $5,000, respectively. Also, each audit and compensation committee member will receive a fee of $1,000 for each in-person committee meeting and a fee of $500 for each telephonic committee meeting. Finally, it is also contemplated that Holdings will establish an equity plan for the non-executive directors in an amount of approximately 2% of Holdings’ issued and outstanding common stock.

The following Compensation Committee Report shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or under the Exchange Act, and shall not otherwise be deemed filed under either of these acts.

Compensation Committee Report

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussions, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this Form 10-K.

THE COMPENSATION COMMITTEE

Keith E. Rechner (Chairman)

James A. Ovenden

Steven G. Segal

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ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding beneficial ownership of our common stock as of August 31, 2007, by:  (i) each person or entity known to us owning beneficially 5% or more of our common stock; (ii) each member of our board of directors; (iii) each of the named executive officers; and (iv) all directors and executive officers (as defined by Rule 3b-7), as a group.  At August 31, 2007, our outstanding securities consisted of approximately 8,644,444 shares of common stock.  Beneficial ownership of the securities listed in the table has been determined in accordance with the applicable rules and regulations promulgated under the Exchange Act.

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	Amount and Nature	Percent of
	of Beneficial	Common Stock
	Ownership of	Beneficially
Names and Addresses of Beneficial Owners	Common Stock (1)	Owned (1)
James D. Bennett(2)	2,040,000	23.6	%
2 Stamford Plaza, Suite 1501
Stamford, Connecticut 06901
Bennett Restructuring Fund, L.P.(3)	1,206,000	14.0	%
2 Stamford Plaza, Suite 1501
Stamford, Connecticut 06901
Bennett Offshore Restructuring Fund, Inc.(4)	730,000	8.4	%
2 Stamford Plaza, Suite 1501
Stamford, Connecticut 06901
J.W. Childs Equity Partners II, L.P.(5)	687,641	8.0	%
111 Huntington Avenue, Suite 2900
Boston, Massachusetts 02199
Morgan Asset Management, Inc.(6)	1,223,200	14.2	%
1100 Ridgeway Loop Road, Suite 510
Memphis, Tennessee 38120
RMK Select High Income Fund, Inc.(7)	451,000	5.2	%
1100 Ridgeway Loop Road, Suite 510
Memphis, Tennessee 38120
Wayne B. Lowell	—	—
26250 Enterprise Court, Suite 100
Lake Forest, California 92630
Eugene Linden(8)	—	—
2 Stamford Plaza, Suite 1501
Stamford, Connecticut 06901
Richard Nevins	—	—
26250 Enterprise Court, Suite 100
Lake Forest, California 92630
James A. Ovenden	—	—
26250 Enterprise Court, Suite 100
Lake Forest, California 92630
Keith E. Rechner	—	—
26250 Enterprise Court, Suite 100
Lake Forest, California 92630
Steven G. Segal(9)	—	—
111 Huntington Avenue, Suite 2900
Boston, Massachusetts 02199
Bret W. Jorgensen	—	—
26250 Enterprise Court, Suite 100
Lake Forest, California 92630
Mitch C. Hill	—	—
26250 Enterprise Court, Suite 100
Lake Forest, California 92630
Marilyn U. MacNiven-Young	—	—
26250 Enterprise Court, Suite 100
Lake Forest, California 92630
Louis E. Hallman, III	—	—
26250 Enterprise Court, Suite 100
Lake Forest, California 92630
Patricia R. Blank	—	—
26250 Enterprise Court, Suite 100
Lake Forest, California 92630
All executive officers and directors, as a group (12 persons)	—	—

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(1)   For purposes of this table, a person is deemed to have “beneficial ownership” of any security that such person has the right to acquire within 60 days after August 31, 2007.

(2)Includes 1,206,000 shares of common stock owned directly by Bennett Restructuring Fund, L.P., 104,000 shares of common stock owned directly by affiliate BRF High Value, L.P. and 730,000 shares of common stock owned directly by affiliate Bennett Offshore Restructuring Fund, Inc.  The general partner of Bennett Restructuring Fund, L.P. and BRF High Value, L.P. is Restructuring Capital Associates, L.P., a Delaware limited partnership, and the general partner of Restructuring Capital Associates, L.P. is Bennett Capital Corporation, a Delaware corporation, of which James D. Bennett is President and sole stockholder.  Mr. Bennett, Bennett Capital Corporation and Restructuring Capital Associates, L.P. may be deemed to beneficially own an aggregate of 1,310,000 shares of common stock held by Bennett Restructuring Fund, L.P. and BRF High Value, L.P. together.  The investment manager of Bennett Offshore Restructuring Fund, Inc. is Bennett Offshore Investment Corporation, a Connecticut corporation, of which James D. Bennett is the President and, together with the BT Trust U/D 12/9/2004, the owner.  Mr. Bennett, BT Trust U/D 12/9/2004 and Bennett Offshore Investment Corporation may be deemed to beneficially own the 730,000 shares of common stock held by Bennett Offshore Restructuring Fund, Inc.  Each of Mr. Bennett, BT Trust, Restructuring Capital Associates, L.P., Bennett Capital Corporation and Bennett Offshore Investment Corporation specifically disclaim beneficial ownership of the shares of common stock deemed to be beneficially owned except to the extent of his or its pecuniary interest therein.

(3)Includes 1,206,000 shares of common stock owned directly by Bennett Restructuring Fund, L.P. The general partner of Bennett Restructuring Fund, L.P. is Restructuring Capital Associates, L.P., a Delaware limited partnership, and the general partner of Restructuring Capital Associates, L.P. is Bennett Capital Corporation, a Delaware corporation, of which James D. Bennett is President and sole stockholder.  Mr. Bennett, Bennett Capital Corporation and Restructuring Capital Associates, L.P.  may be deemed to beneficially own an aggregate of 1,206,000 shares of common stock held by Bennett Restructuring Fund, L.P.  Each of Mr. Bennett, Restructuring Capital Associates, L.P., and Bennett Capital Corporation specifically disclaim beneficial ownership of the shares of common stock deemed to be beneficially owned except to the extent of his or its pecuniary interest therein.

(4)Includes 730,000 shares of common stock owned directly by Bennett Offshore Restructuring Fund, Inc.  The investment manager of Bennett Offshore Restructuring Fund, Inc. is Bennett Offshore Investment Corporation, a Connecticut corporation, of which James D. Bennett is the President and, together with the BT Trust U/D 12/9/2004, the owner.  Mr. Bennett, BT Trust U/D 12/9/2004 and Bennett Offshore Investment Corporation may be deemed to beneficially own the 730,000 shares of common stock held by Bennett Offshore Restructuring Fund, Inc.  Each of Mr. Bennett, BT Trust U/D 12/9/2004 and Bennett Offshore Investment Corporation specifically disclaim beneficial ownership of the shares of common stock deemed to be beneficially owned except to the extent of his or its pecuniary interest therein.

 (5)Includes 634,130 shares of our common stock owned directly by J.W. Childs Equity Partners II, L.P. and 53,511 shares of our common stock owned directly by JWC-InSight Co-invest LLC, an affiliate of J.W. Childs Equity Partners II, L.P. The general partner of J.W. Childs Equity Partners II, L.P. is J.W. Childs Advisors II, L.P., a Delaware limited partnership. The general partner of J.W. Childs Advisors II, L.P. is J.W. Childs Associates, L.P., a Delaware limited partnership. The general partner of J.W. Childs Associates, L.P. is J.W. Childs Associates, Inc., a Delaware corporation. J.W. Childs Advisors II, L.P., J.W. Childs Associates, L.P. and J.W. Childs Associates, Inc. may be deemed to beneficially own the 687,641 shares of our common stock held by J.W. Childs Equity Partners II, L.P. and JWC-InSight Co-invest LLC. John W. Childs, Glenn A. Hopkins, Adam L. Suttin, William E. Watts, and David Fiorentino, as well as Steven G. Segal (as indicated in footnote 9), share voting and investment control over, and therefore may be deemed to beneficially own, the shares of common stock held by these entities.

(6) Includes 451,000 shares of common stock owned directly by RMK Select High Income Fund, Inc., 160,000 shares of common stock owned directly by RMK High Income Fund, Inc., 189,000 shares of common stock owned directly by RMK Strategic Income Fund, Inc., 202,200 shares of common stock owned directly by RMK Advantage Income Fund, Inc., and 221,000 shares of common stock held by RMK Multi-Sector High Income Fund, Inc. Morgan Asset Management, Inc. is the manager/investor of the foregoing fund entities.

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(7)Includes 451,000 shares of common stock owned directly by RMK Select High Income Fund, Inc. Morgan Asset Management, Inc. is the manager/investor of RMK Select High Income Fund, Inc.

(8)As the Chief Investment Strategist of Bennett Management Corporation, an affiliate of James D. Bennett, Mr. Linden may be deemed to beneficially own the shares of common stock beneficially held by Mr. Bennett and his affiliated entities.  Mr. Linden disclaims beneficial ownership of such shares.

(9)As a Special Limited Partner of J.W. Childs Associates, L.P., which manages J.W. Childs Equity Partners II, L.P., and a member of JWC-InSight Co-invest LLC, Mr. Segal may be deemed to beneficially own the 634,130 shares of our common stock owned by J.W. Childs Equity Partners II, L.P. and the 53,511 shares of our common stock held directly by JWC-InSight Co-invest LLC. Mr. Segal disclaims beneficial ownership of such shares.

Equity Compensation Plan Information

The following table provides information as of June 30, 2007, with respect to compensation plans under which our common stock is authorized for issuance.  These compensation plans include:  (i) the 2001 Stock Option Plan; and (ii) stock options granted pursuant to stock option agreements.  Our stockholders approved the 2001 Stock Option Plan and the issuance of options to purchase up to 666,236 shares of our common stock, pursuant to individual stock option agreements.

				Number of Shares
				Remaining Available for
				Future Issuance Under
	Number of Shares to be	Weighted Average		Equity Compensation
	Issued Upon Exercise of	Exercise Price of		Plans (Excluding Shares
Plan Category	Outstanding Options	Outstanding Options		Reflected in Column (a))
	(a)	(b)		(c)
Equity compensation plans approved by stockholders	789,726	$	17.68	175,500

(1)The stock option plan was terminated and all outstanding options were cancelled on August 1, 2007 upon consummation of the plan of reorganization.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Management Agreement

We entered into a management agreement with J.W. Childs Advisors II, L.P., the general partner of J.W. Childs Equity Partners II, L.P. and Halifax Genpar, L.P., the general partner of Halifax Capital Partners, L.P.  Pursuant to the management agreement, J.W. Childs Advisors II, L.P. and Halifax Genpar, L.P. provided business, management and financial advisory services to us in consideration of (i) an annual fee of $240,000 paid to J.W. Childs Advisors II, L.P. and (ii) an annual fee of $60,000 paid to Halifax Genpar, L.P.  We were required to reimburse such entities for all travel and other out-of-pocket expenses incurred by such entities in connection with their performance of the advisory services under the agreement.  Furthermore, we and InSight agreed to indemnify and hold harmless J.W. Childs Advisors II, L.P. and Halifax Genpar, L.P. and their affiliates, from and against any and all claims, losses, damages and expenses arising out of Holdings’ 2001 acquisition of InSight or the performance by J.W. Childs Advisors II, L.P. and Halifax Genpar, L.P. of their obligations under the management agreement.  This management agreement was terminated in connection with the consummation of Holdings’ and InSight’s plan of reorganization.

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Stockholders Agreement

We, J.W. Childs Equity Partners II, L.P., JWC-InSight Co-invest LLC, Halifax Capital Partners, L.P., Mr. Dupree, management of InSight and all other holders of our capital stock or stock options entered into a stockholders agreement.  Under the stockholders agreement, we and each of our stockholders had a right of first refusal to purchase any stock proposed to be sold by all other stockholders, except J.W. Childs Equity Partners II, L.P. and JWC-InSight Co-invest LLC.  Additionally, the stockholders agreement afforded: (1) stockholders, other than J.W. Childs Equity Partners II, L.P. and JWC-InSight Co-invest LLC, so-called “tag-along rights”, which gave these stockholders the right to participate with respect to proposed sales of our capital stock by J.W. Childs Equity Partners II, L.P. and JWC - InSight Co-invest LLC; (2) J.W. Childs Equity Partners II, L.P. and JWC-InSight Co-invest LLC, so-called “drag-along rights”, which gave these stockholders the right to require other stockholders to participate in proposed sales of a majority of our capital stock; and (3) all stockholders certain registration rights with respect to our capital stock.  Furthermore, the stockholders agreement contained put and call features on capital stock and stock options held by InSight management which were triggered upon termination of such individual’s employment with InSight; however, these put and call features were inapplicable to Mr. Jorgensen’s capital stock and stock options.  The stockholders agreement also obligated us and our stockholders to take all necessary action to appoint, as our directors, up to eight nominees designated by J.W. Childs Equity Partners II, L.P. (as would constitute a majority of our entire board of directors) and two nominees designated by Halifax Capital Partners, L.P.  This stockholders agreement was terminated in connection with the consummation of Holdings’ and InSight’s plan of reorganization.

Family-Member Relationship

Patricia K. Kincaid, M.D. is a sister-in-law of Donald F. Hankus, InSight’s Executive Vice President and Chief Information Officer, and a principal or partner of West Rad Medical Group, Inc. (“WRMG”), a professional radiology medical group.  During the years ended June 30, 2007 and 2006, we paid WRMG approximately $0.4 million and $0.5 million, respectively, in connection with its provision of certain professional services to three fixed-site centers in California.  In addition, an affiliated company of WRMG’s has economic interest in the joint venture that owns one of these fixed-site centers.  WRMG’s provision of professional services to us began more than two years prior to our employment of Mr. Hankus.

Policies and Procedures Regarding Related Persons

We have a written policy that requires all employees to avoid any activity that conflicts or appears to conflict with our interest. This policy extends to the family members of our employees. Each employee is instructed to report any actual or potential conflict of interest to their immediate supervisor. Conflicts of interest are only permitted upon the prior written consent of our general counsel. Conflicts of interest that would involve an employee taking for himself or herself an opportunity discovered in connection with their employment require the written consent of our board of directors. This policy is part of our Code of Ethical Conduct. Moreover, at least annually each director and executive officer completes a detailed questionnaire regarding relationships or arrangements that require disclosure under the SEC’s rules and regulations.

The prior management and stockholders agreements that were terminated upon consummation of the plan of reorganization were not subject to this policy. The family relationship involving Mr. Hankus was disclosed in 2006 through our annual questionnaire process and our general counsel granted permission.

Director Independence

For the fiscal year ended June 30, 2007, none of our directors was independent.  Mr. Jorgensen was the President and Chief Executive Officer of Holdings and InSight, and the remaining six directors (Michael N. Cannizzaro, Kenneth M. Doyle, David W. Dupree, Steven G. Segal, Mark J. Tricolli and Edward D. Yun) were employees and or affiliates of two stockholders who beneficially owned substantially all of Holdings’ outstanding common stock.

Pursuant to the plan of reorganization, the boards of directors of Holdings and InSight were reconfigured, and five of the directors of each board were designated by an ad hoc committee of holders of senior subordinated notes

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(Messrs. Linden, Lowell, Nevins, Ovenden and Rechner), one was designated by the holders of Holdings’ common stock prior to the effective date (Mr. Segal), and Mr. Jorgensen remained a director.

Holdings’ common stock does not trade on any national securities exchange or any inter-dealer quotation system which has requirements as to the independence of directors.  In accordance with the rules of the SEC, the following statements regarding director independence are based on the requirements of the NASDAQ Stock Market.  Based on these independence requirements, we believe that our directors are independent, except for Mr. Jorgensen, our President and Chief Executive Officer, and Mr. Linden.  Mr. Linden is the Chief Investment Strategist of Bennett Management Corporation, which is an affiliate of James D. Bennett, who through affiliates, is the largest beneficial holder of Holdings’ common stock.  See Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”  As noted above, Mr. Segal would not have qualified as an independent director as of June 30, 2007 because he is a Special Limited Partner of J.W. Childs Associates, L.P.  However, as a result of the consummation of the plan of reorganization, the management services agreement with J.W. Childs Advisors II, L.P. was terminated, and J.W. Childs Equity Partners II, L.P.’s beneficial ownership of Holdings’ common stock was reduced from approximately 79.5% to 8.0%.

ITEM 14.       PRINCIPAL ACCOUNTING FEES AND SERVICES

Independent Registered Public Accounting Firm

The following table presents information about fees that PricewaterhouseCoopers LLP charged us (1) to audit our annual consolidated financial statements for the years ended June 30, 2007 and 2006, and (2) for other services rendered in those years.

	2007		2006
Audit Fees (1)	$	720,000	$	566,000
Audit Related Fees	—		—
Tax Fees (2)	206,884		110,000
Subtotal	$	926,884	$	676,000
All Other Fees	—		—
Total Fees	$	926,884	$	676,000

(1)Audit Fees – fees for auditing our annual consolidated financial statements, reviewing the condensed consolidated financial statements included in our quarterly reports on Form 10-Q, the offering memorandum and registration statement related to the exchange offer and other SEC filings.

(2)Tax Fees – fees for reviewing federal, state, and local income and franchise tax returns, tax research and other tax planning services.

InSight’s audit committee had implemented a policy that required the audit committee’s pre-approval for all audit and non-audit services performed by our independent registered public accounting firm.  Consistent with this policy, for the years ended June 30, 2007 and 2006 all audit and non-audit services initiated by PricewaterhouseCoopers LLP were pre-approved by InSight’s audit committee.  Holdings’ recently constituted audit committee implemented a similar policy.

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PART IV

ITEM 15.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES

ITEM 15 (a) (1).   FINANCIAL STATEMENTS

Included in Part II of this report:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

ITEM 15 (a) (2).   FINANCIAL STATEMENT SCHEDULES

Schedule II - Valuation and Qualifying Accounts

All other schedules have been omitted because they are either not required or not applicable, or the information is presented in the consolidated financial statements or notes thereto.

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ITEM 15 (a) (3).    EXHIBITS

EXHIBIT NUMBER	DESCRIPTION AND REFERENCES
2.1	Second Amended Joint Prepackaged Plan of Reorganization of InSight Health Services Holdings Corp. (the “Company”), et al. dated May 29, 2007, filed herewith.
2.2	Amended Plan Supplement of the Company, et al. dated July 7, 2007, filed herewith.
3.1	Amended and Restated Certificate of Incorporation of the Company, filed herewith.
3.2	Second Amended and Restated Bylaws of the Company, filed herewith.
*4.1	Indenture, dated September 22, 2005, by and among InSight Health Services Corp. (“InSight”), the Company, the subsidiary guarantors (named therein) and U.S. Bank National Association, (“the Trustee”), with respect to Senior Secured Floating Rate Notes due 2011, previously filed and incorporated herein by reference from InSight’s Registration Statement on Form S-4, filed on October 28, 2005.
*4..2	First Supplemental Indenture, dated as of May 18, 2006, to the Indenture dated September 22, 2005, previously filed and incorporated herein by reference from the Company’s Annual Report on Form 10-K, filed on September 27, 2006.
*4..3	Second Supplemental Indenture, dated as of May 29, 2007, to the Indenture dated September 22, 2005, previously filed and incorporated herein by reference from the Company’s Current Report on Form 8-K, filed on June 4, 2007.
4.4	Third Supplemental Indenture, dated as of July 9, 2007, to the Indenture dated September 22, 2005, filed herewith.
*4.5	Security Agreement, dated September 22, 2005, by and among the Loan Parties (as defined therein) and U.S. Bank National Association, as Collateral Agent, previously filed and incorporated herein by reference from InSight’s Registration Statement on Form S-4, filed on October 28, 2005.
*4.6	Pledge Agreement, dated September 22, 2005, by and among the Loan Parties (as defined therein) and U.S. Bank National Association, as Collateral Agent, previously filed and incorporated herein by reference from InSight’s Registration Statement on Form S-4, filed on October 28, 2005.
*4.7	Collateral Agency Agreement, dated September 22, 2005, among the Loan Parties (as defined therein) and U.S. Bank National Association, as Trustee and Collateral Agent, previously filed and incorporated herein by reference from InSight’s Registration Statement on Form S-4, filed on October 28, 2005.
4..8	Registration Rights Agreement, dated as of August 1, 2007, by and among the Company and certain holders of the Company’s common stock, filed herewith.
4..9	Registration Rights Agreement, dated as of July 9, 2007, by and among InSight, the Company, the Subsidiary Guarantors (named therein) and the Purchasers (named therein), filed herewith.
*10.1	Second Amended and Restated Loan and Security Agreement, dated August 31, 2007, by and among InSight’s subsidiaries listed therein, the lenders named therein and Bank of America, N.A. as collateral and administrative agent, previously filed and incorporated herein by reference from the Company’s Current Report on Form 8-K, filed on August 7, 2007.

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*10.2	Executive Employment Agreement, dated July 1, 2005, among InSight, the Company and Bret W. Jorgensen, previously filed and incorporated herein by reference from the Company’s Current Report on Form 8-K, filed on July 8, 2005.
*10.3	Executive Employment Agreement, dated October 22, 2004, among InSight, the Company and Patricia R. Blank, previously filed and incorporated herein by reference from the Company’s Current Report on Form 8-K, filed on January 26, 2005.
*10.4	Executive Employment Agreement, dated January 10, 2005, among InSight, the Company and Mitch C. Hill, previously filed and incorporated herein by reference from the Company’s Current Report on Form 8-K, filed on January 14, 2005.
*10.5	Executive Employment Agreement, dated August 10, 2005, among InSight, the Company and Louis E. Hallman, previously filed and incorporated herein by reference from the Company’s Current Report on Form 8-K, filed on August 15, 2005.
*10.6	Executive Employment Agreement, dated December 27, 2001, between InSight and Marilyn U. MacNiven-Young, previously filed and incorporated herein by reference from InSight’s Registration Statement on Form S-4, filed on December 27, 2001.
*10.7	Executive Employment Agreement, dated August 10, 2005, among InSight, the Company and Donald F. Hankus, previously filed and incorporated herein by reference from the Company’s Current Report on Form 8-K, filed on September 30, 2005.
*10.8	Form of Amended and Restated Indemnification Agreement, previously filed and incorporated herein by reference from the Company’s Annual Report on Form 10-K, filed on September 22, 2005.
10.9	Form of the Company’s and InSight’s Indemnification Agreement, filed herewith.
21.1	Subsidiaries of Company, filed herewith.
31.1	Certification of Bret W. Jorgensen, the Company’s Chief Executive Officer, pursuant to Rule 15d-14 of the Securities Exchange Act of 1934, filed herewith.
31.2	Certification of Mitch C. Hill, the Company’s Chief Financial Officer, pursuant to Rule 15d-14 of the Securities Exchange Act of 1934, filed herewith.
32.1	Certification of Bret W. Jorgensen, the Company’s Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.2	Certification of Mitch C. Hill, the Company’s Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

* Previously filed
ITEM 15 (b).	The Exhibits described above in Item 15(a)(3) are attached hereto or incorporated by reference herein, as noted.
ITEM 15 (c).	Not applicable.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INSIGHT HEALTH SERVICES HOLDINGS CORP.
By	/s/ Bret W. Jorgensen
	Bret W. Jorgensen, President and
	Chief Executive Officer
Date: September 21, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Bret W. Jorgensen	President		September 21 , 2007
Bret W. Jorgensen	and Chief Executive Officer
	and Director
	(Principal Executive Officer)
/s/ Mitch C. Hill	Executive Vice President		September 21, 2007
Mitch C. Hill	and Chief Financial Officer
	(Principal Financial and
	Accounting Officer)
/s/ Wayne B. Lowell	Chairman of the Board		September 21, 2007
Wayne B. Lowell	and Director
/s/ Eugene Linden	Director		September 21, 2007
Eugene Linden
/s/ Richard Nevins	Director		September 21, 2007
Richard Nevins
/s/ James A. Ovenden	Director		September 21, 2007
James A. Ovenden
/s/ Keith E. Rechner	Director		September 21, 2007
Keith E. Rechner
/s/ Steven G. Segal	Director		September 21, 2007
Steven G. Segal

106

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

No annual report to security holders of InSight Health Services Holdings Corp. or proxy statement, form of proxy or other proxy soliciting material has been sent to security holders relating to fiscal year 2007.

107

SCHEDULE II

INSIGHT HEALTH SERVICES HOLDINGS CORP. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED JUNE 30, 2007, 2006, AND 2005

(amounts in thousands)

	Balance at									Balance at
	Beginning of		Charges to		Charges to					End of
	Year		Expenses		Revenues		Other			Year
June 30, 2005:
Allowance for doubtful accounts	$	8,097	$	5,723	$	—	$	(4,933	)(A)	$	8,887
Allowance for contractual adjustments	37,209		—		194,928		(202,725		)(B)	29,412
	$	45,306	$	5,723	$	194,928	$	(207,658	)	$	38,299
June 30, 2006:
Allowance for doubtful accounts	$	8,887	$	5,351	$	—	$	(4,450	)(A)	$	9,788
Allowance for contractual adjustments	29,412		—		183,751		(190,451		)(B)	22,712
	$	38,299	$	5,351	$	183,751	$	(194,901	)	$	32,500
June 30, 2007:
Allowance for doubtful accounts	$	9,788	$	5,643	$	—	$	(2,783	)(A)	$	12,648
Allowance for contractual adjustments	22,712		—		175,085		(176,343		)(B)	21,454
	$	32,500	$	5,643	$	175,085	$	(179,126	)	$	34,102

(A) Write-off of uncollectible accounts.

(B) Write-off of contractual adjustments, representing the difference between our charge for a procedure and what we

receive from payors.

108

EXHIBIT INDEX

EXHIBIT NUMBER	DESCRIPTION AND REFERENCES
2.1	Second Amended Joint Prepackaged Plan of Reorganization of InSight Health Services Holdings Corp. (the “Company”), et al. dated May 29, 2007, filed herewith.
2.2	Amended Plan Supplement of the Company, et al. dated July 7, 2007, filed herewith.
3.1	Amended and Restated Certificate of Incorporation of the Company, filed herewith.
3.2	Second Amended and Restated Bylaws of the Company, filed herewith.
*4.1	Indenture, dated September 22, 2005, by and among InSight Health Services Corp. (“InSight”), the Company, the subsidiary guarantors (named therein) and U.S. Bank National Association, (“the Trustee”), with respect to Senior Secured Floating Rate Notes due 2011, previously filed and incorporated herein by reference from InSight’s Registration Statement on Form S-4, filed on October 28, 2005.
*4..2	First Supplemental Indenture, dated as of May 18, 2006, to the Indenture dated September 22, 2005, previously filed and incorporated herein by reference from the Company’s Annual Report on Form 10-K, filed on September 27, 2006.
*4..3	Second Supplemental Indenture, dated as of May 29, 2007, to the Indenture dated September 22, 2005, previously filed and incorporated herein by reference from the Company’s Current Report on Form 8-K, filed on June 4, 2007.
4.4	Third Supplemental Indenture, dated as of July 9, 2007, to the Indenture dated September 22, 2005, filed herewith.
*4.5	Security Agreement, dated September 22, 2005, by and among the Loan Parties (as defined therein) and U.S. Bank National Association, as Collateral Agent, previously filed and incorporated herein by reference from InSight’s Registration Statement on Form S-4, filed on October 28, 2005.
*4.6	Pledge Agreement, dated September 22, 2005, by and among the Loan Parties (as defined therein) and U.S. Bank National Association, as Collateral Agent, previously filed and incorporated herein by reference from InSight’s Registration Statement on Form S-4, filed on October 28, 2005.
*4.7	Collateral Agency Agreement, dated September 22, 2005, among the Loan Parties (as defined therein) and U.S. Bank National Association, as Trustee and Collateral Agent, previously filed and incorporated herein by reference from InSight’s Registration Statement on Form S-4, filed on October 28, 2005.
4..8	Registration Rights Agreement, dated as of August 1, 2007, by and among the Company and certain holders of the Company’s common stock, filed herewith.
4..9	Registration Rights Agreement, dated as of July 9, 2007, by and among InSight, the Company, the Subsidiary Guarantors (named therein) and the Purchasers (named therein), filed herewith.
*10.1	Second Amended and Restated Loan and Security Agreement, dated August 31, 2007, by and among InSight’s subsidiaries listed therein, the lenders named therein and Bank of America, N.A. as collateral and administrative agent, previously filed and incorporated herein by reference from the Company’s Current Report on Form 8-K, filed on August 7, 2007.

109

*10.2	Executive Employment Agreement, dated July 1, 2005, among InSight, the Company and Bret W. Jorgensen, previously filed and incorporated herein by reference from the Company’s Current Report on Form 8-K, filed on July 8, 2005.
*10.3	Executive Employment Agreement, dated October 22, 2004, among InSight, the Company and Patricia R. Blank, previously filed and incorporated herein by reference from the Company’s Current Report on Form 8-K, filed on January 26, 2005.
*10.4	Executive Employment Agreement, dated January 10, 2005, among InSight, the Company and Mitch C. Hill, previously filed and incorporated herein by reference from the Company’s Current Report on Form 8-K, filed on January 14, 2005.
*10.5	Executive Employment Agreement, dated August 10, 2005, among InSight, the Company and Louis E. Hallman, previously filed and incorporated herein by reference from the Company’s Current Report on Form 8-K, filed on August 15, 2005.
*10.6	Executive Employment Agreement, dated December 27, 2001, between InSight and Marilyn U. MacNiven-Young, previously filed and incorporated herein by reference from InSight’s Registration Statement on Form S-4, filed on December 27, 2001.
*10.7	Executive Employment Agreement, dated August 10, 2005, among InSight, the Company and Donald F. Hankus, previously filed and incorporated herein by reference from the Company’s Current Report on Form 8-K, filed on September 30, 2005.
*10.8	Form of Amended and Restated Indemnification Agreement, previously filed and incorporated herein by reference from the Company’s Annual Report on Form 10-K, filed on September 22, 2005.
10.9	Form of the Company’s and InSight’s Indemnification Agreement, filed herewith.
21.1	Subsidiaries of Company, filed herewith.
31.1	Certification of Bret W. Jorgensen, the Company’s Chief Executive Officer, pursuant to Rule 15d-14 of the Securities Exchange Act of 1934, filed herewith.
31.2	Certification of Mitch C. Hill, the Company’s Chief Financial Officer, pursuant to Rule 15d-14 of the Securities Exchange Act of 1934, filed herewith
32.1	Certification of Bret W. Jorgensen, the Company’s Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.2	Certification of Mitch C. Hill, the Company’s Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

* Previously filed

110

EX-2.1

Exhibit 2.1

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

		x
In re:		:	Chapter 11
		:
InSight Health Services Holdings Corp.,		:	Case No. 07-
et al.		:
		:
	Debtors.	:
		x

SECOND AMENDED JOINT PREPACKAGED PLAN OF REORGANIZATION OF
INSIGHT HEALTH SERVICES HOLDINGS CORP., ET AL.

Mark D. Collins
Daniel J. DeFranceschi
RICHARDS, LAYTON & FINGER, P.A.
One Rodney Square
920 North King Street
Wilmington, DE 19801
Telephone:  (302) 651-7700
Facsimile:    (302) 498-7701

-and-

Michael B. Solow
Harold D. Israel
KAYE SCHOLER LLC
70 West Madison Street
Suite 4100
Chicago, IL 60602
Telephone:  (312) 583-2300
Facsimile:    (312) 583-2360

Attorneys for InSight Health Services
Holdings Corp., et al.

Dated: Wilmington, Delaware
May 29, 2007

TABLE OF CONTENTS

ARTICLE I.	DEFINITIONS, RULES OF INTERPRETATION, AND COMPUTATION OF TIME			1
	A.	Scope Of Definitions; Rules Of Construction		1
	B.	Definitions		1
		1.1	“Ad Hoc Committee”	1
		1.2	“Administrative Claim”	1
		1.3	“Allowed”	1
		1.4	“Allowed Claim”	2
		1.5	“Allowed Class . . . Claim”	2
		1.6	“Allowed Class . . . Interest”	2
		1.7	“Amended Prospectus and Solicitation Statement”	2
		1.8	“Bankruptcy Code”	2
		1.9	“Bankruptcy Court”	2
		1.10	“Bankruptcy Rules”	2
		1.11	“Bar Date(s)”	2
		1.12	“Business Day”	3
		1.13	“Cash”	3
		1.14	“Certificate”	3
		1.15	“Chapter 11 Cases”	3
		1.16	“Claim”	3
		1.17	“Class”	3
		1.18	“Collateral”	3
		1.19	“Committee”	3
		1.20	“Confirmation”	3
		1.21	“Confirmation Date”	3
		1.22	“Confirmation Order”	3
		1.23	“Corporate Documents”	3
		1.24	“Creditor”	3
		1.25	“Debtors”	3
		1.26	“Disbursing Agent”	3
		1.27	“Disputed Claim”	3
		1.28	“Distribution Date”	4
		1.29	“Distribution Notification Date”	4
		1.30	“Distribution Reserve”	4
		1.31	“Effective Date”	4
		1.32	“Equity Securities”	4
		1.33	“Estates”	5
		1.34	“Exchange Offer”	5
		1.35	“Existing Equity”	5
		1.36	“Exit Lenders”	5
		1.37	“Face Amount”	5
		1.38	“Final Order”	5
		1.39	“FRN Claim”	5
		1.40	“FRN Documents”	5

i

1.41	“FRN Holder”	5
1.42	“FRN Indenture”	5
1.43	“FRN Indenture Trustee”	5
1.44	“FRN Transaction Documents”	5
1.45	“FRNs”	6
1.46	“General Unsecured Claim”	6
1.47	“Holder”	6
1.48	“Holdings”	6
1.49	“Impaired”	6
1.50	“Indentures”	6
1.51	“InSight”	6
1.52	“InSight Entities”	6
1.53	“Intercompany Claims”	6
1.54	“Interest”	6
1.55	Initial Consenting Parties”	6
1.56	“Lender”	6
1.57	“Lender Secured Claims”	6
1.58	“Lien”	6
1.59	“Litigation Claims”	6
1.60	“Loan and Security Agreement”	7
1.61	“Loan Documents”	7
1.62	“Loan Parties”	7
1.63	“Lockup Agreement”	7
1.64	“Management Incentive Plan”	7
1.65	“New Common Stock”	7
1.66	“New Revolving Loan Facility”	7
1.67	“Old Common Stock”	7
1.68	“Original Lockup Agreement”	8
1.69	“Original Signing Noteholders”	8
1.70	“Other Interests”	8
1.71	“Other Priority Claims”	8
1.72	“Other Secured Claim”	8
1.73	“Person”	8
1.74	“Petition Date”	8
1.75	“Plan”	8
1.76	“Plan Supplement”	8
1.77	“Priority Tax Claim”	8
1.78	“Professional”	8
1.79	“Professional Fee Claim”	8
1.80	“Pro Rata”	9
1.81	“Prospectus and Solicitation Statement”	9
1.82	“Registration Rights Agreement”	9
1.83	“Reinstated” or “Reinstatement”	9
1.84	“Reorganized Debtors”	9
1.85	“Reorganized Holdings”	9
1.86	“Reorganized InSight”	9

ii

		1.87		“Restated Corporate Documents”		9
		1.88		“Restructuring”		9
		1.89		“Schedules”		10
		1.90		“Second Lockup Agreement”		10
		1.91		“Secured Claim”		10
		1.92		“Securities Act”		10
		1.93		“Setoff Claim”		10
		1.94		“SSN Claim”		10
		1.95		“SSN Holder”		10
		1.96		“SSN Indenture”		10
		1.97		“SSN Indenture Trustee”		10
		1.98		“SSNs”		10
		1.99		“Stock Certificate”		10
		1.100		“Stock Options”		10
		1.101		“Subsequent Signing Noteholders”		10
		1.102		“Subsidiary Equity Interests”		11
		1.103		“Substantial Contribution Claim”		11
		1.104		“Unimpaired Claim”		11
		1.105		“Unsecured Claim”		11
	C.	Rules of Interpretation				11
		1.			General	11
		2.			Rule of “Contra Proferentum”	11
	D.	Computation of Time				11
ARTICLE II.	CLASSIFICATION OF CLAIMS AND INTERESTS					12
	A.	Introduction				12
	B.	Unclassified Claims (not entitled to vote on the Plan)				12
		1.	Administrative Claims			12
		2.	Priority Tax Claims			12
	C.	Unimpaired Classes of Claims (deemed to have accepted the Plan and, therefore, not entitled to vote)				12
		1.	Class 1: Other Priority Claims			12
		2.	Class 2: Lender Secured Claims			12
		3.	Class 3: FRN Claims			12
		4.	Class 4: Other Secured Claims			13
		5.	Class 6: General Unsecured Claims			13
		6.	Class 7: Intercompany Claims			13
	D.	Impaired Classes Of Claims And Interests (Classes 5 and 8 are entitled to vote on the Plan)				13
		1.	Class 5: SSN Claims			13
		2.	Class 8: Old Common Stock Interests			13
		3.	Class 9: Other Interests			13
ARTICLE III.	TREATMENT OF CLAIMS AND INTERESTS					13
	A.	Unclassified Claims				13
		1.	Administrative Claims			13
		2.	Priority Tax Claims			14

iii

	B.		Unimpaired Classes Of Claims			14
			1.	Class 1: Other Priority Claims		14
			2.	Class 2: Lender Secured Claims		14
			3.	Class 3: FRN Claims		14
			4.	Class 4: Other Secured Claims		14
			5.	Class 6: General Unsecured Claims		15
			6.	Class 7: Intercompany Claims		15
	C.		Impaired Classes of Claims			15
			1.	Class 5: SSN Claims		15
			2.	Class 8: Old Common Stock Interests		15
			3.	Class 9: Other Interests		15
	D.		Special Provision Regarding Unimpaired Claims			16
ARTICLE IV.	MEANS FOR IMPLEMENTATION OF THE PLAN					16
	A.		Continued Corporate Existence			16
	B.		Corporate Action			16
			1.	Cancellation of the Equity Securities, SSNs and SSN Indenture		16
			2.	Restated Corporate Documents		17
			3.	Other General Corporate Matters		17
	C.		Restructuring Transactions			17
			1.	Implementation of Settlement/Lockup Agreements		17
			2.	New Securities		18
			3.	New Revolving Loan Facility		18
	D.		Directors And Officers			18
	E.		Revesting Of Assets			19
	F.		Preservation Of Rights Of Action; Settlement Of Litigation Claims			19
			1.		Retention of Causes of Action	19
	G.		Exclusivity Period			20
	H.		Termination Of Loan and Security Agreement			20
	I.		Effectuating Documents; Further Reorganization Transactions			20
	J.		Exemption From Certain Transfer Taxes			20
ARTICLE V.	ACCEPTANCE OR REJECTION OF THE PLAN					21
	A.		Classes Entitled To Vote			21
	B.		Acceptance By Impaired Classes			21
ARTICLE VI.	SECURITIES TO BE ISSUED IN CONNECTION WITH THE PLAN					21
ARTICLE VII.	PROVISIONS GOVERNING DISTRIBUTIONS					21
	A.	Distributions For Claims And Interests Allowed As Of The Effective Date				21
	B.	Interest On Claims				22
	C.	Disbursing Agent				22
	D.	Surrender Of Securities Or Instruments				22
	E.	Instructions To Disbursing Agent				23

iv

	F.			Services Of Indenture Trustees, Agents, And Servicers			23
	G.			Notification Date For Distributions To Holders Of Debt and Equity Securities			23
	H.			Means Of Cash Payment			23
	I.			Delivery Of Distributions			23
	J.			Fractional Dollars; De Minimis Distributions			24
	K.			Withholding And Reporting Requirements			24
	L.			Calculation of Distribution Amounts of New Common Stock			24
	M.			Setoffs			25
	N.			Change of Control			25
ARTICLE VIII.	EXECUTORY CONTRACTS AND UNEXPIRED LEASES						25
	A.		Assumption				25
	B.		Pass-Through				25
	C.		Assumed Executory Contracts and Unexpired Leases Related to Real Property				26
	D.		Cure Costs and Bar Dates				26
			1.			Cure	26
			2.			Bar Date for Filing Claims for Rejection Damages	26
	E.		Survival of Indemnification and Corporation Contribution				26
ARTICLE IX.	PROCEDURES FOR RESOLVING DISPUTED, CONTINGENT, AND UNLIQUIDATED CLAIMS						27
	A.		Objection Deadline; Prosecution Of Objections				27
	B.		No Distributions Pending Allowance				27
	C.		Distribution Reserve				27
	D.		Distributions After Allowance				28
	E.		General Unsecured Claims				28
ARTICLE X.	CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN						28
	A.		Conditions To Confirmation				28
	B.		Conditions To Consummation				29
	C.		Substantial Consummation				31
	D.		Waiver Of Conditions				31
ARTICLE XI.	MODIFICATIONS AND AMENDMENTS						32
ARTICLE XII.	RETENTION OF JURISDICTION						32
ARTICLE XIII.	COMPROMISES AND SETTLEMENTS						33
ARTICLE XIV.	MISCELLANEOUS PROVISIONS						34
	A.	Bar Dates For Certain Claims					34
		1.			Administrative Claims: Substantial Contribution Claims		34
		2.			Administrative Ordinary Course Liabilities		34
		3.			Administrative Tax Claims		34

v

		4.	Professional Fee Claims	35
	B.	Payment Of Statutory Fees		35
	C.	Severability Of Plan Provisions		35
	D.	Successors And Assigns		35
	E.	Discharge Of The Debtors		36
	F.	Exculpation And Limitation Of Liability		36
	G.	Permanent Injunction		37
	H.	Debtors’ Releases		37
	I.	Releases by Holders of Claims and Interests		38
	J.	Binding Effect		38
	K.	Revocation, Withdrawal, Or Non-Consummation		39
	L.	Plan Supplement		39
	M.	Notices		39
	N.	Indemnification Obligations		40
	O.	Prepayment		40
	P.	Term Of Injunctions Or Stay		41
	Q.	Registration Rights Agreement		41
	R.	Hart-Scott-Rodino Compliance		41
	S.	Allocation of Plan Distributions Between Principal and Interest		41
	T.	Dissolution of Committee		41
	U.	No Admissions		41
	V.	Governing Law		42
ARTICLE XV.	CONFIRMATION REQUEST			42

vi

TABLE OF EXHIBITS

Exhibit	Name
A	Amended and Restated Certificate of Incorporation of Holdings
B	Second Amended and Restated Bylaws of Holdings
C	Registration Rights Agreement
D	Schedule of Rejected Executory Contracts

vii

INTRODUCTION

InSight Health Services Holdings Corp. and InSight Health Services Corp., each a Delaware corporation, (the “Debtors”) hereby propose the following second amended joint prepackaged plan of reorganization (the “Plan”) for the resolution of their outstanding creditor Claims (hereinafter defined) and equity Interests (hereinafter defined). All holders of Claims and Interests are encouraged to read the Plan and the accompanying solicitation materials in their entirety before voting to accept or reject the Plan. No materials other than the accompanying solicitation materials and any exhibits and schedules attached thereto or referenced therein have been authorized by the Debtors for use in soliciting acceptances or rejections of the Plan. The Debtors are the proponents of this Plan within the meaning of section 1129 of the Bankruptcy Code (hereinafter defined).

Subject to certain restrictions and requirements set forth in section 1127 of the Bankruptcy Code and Fed. R. Bankr. P. 3019 and those restrictions on modifications set forth in Article X of this Plan, the Debtors reserve the right to alter, amend, modify, revoke or withdraw this Plan prior to its substantial consummation.

ARTICLE I.

Definitions, Rules of Interpretation,
and Computation of Time

A.Scope Of Definitions; Rules Of Construction

For purposes of this Plan, except as expressly provided or unless the context otherwise requires, all capitalized terms not otherwise defined shall have the meanings ascribed to them in Article 1 of this Plan. Any term used in this Plan that is not defined herein, but is defined in the Bankruptcy Code or the Bankruptcy Rules, shall have the meaning ascribed to that term in the Bankruptcy Code or the Bankruptcy Rules. Whenever the context requires, such terms shall include the plural as well as the singular number. The masculine gender shall include the feminine, and the feminine gender shall include the masculine.

B.Definitions

1.1           “Ad Hoc Committee” means the informal committee of certain holders of the SSNs that was formed prior to the Petition Date who, among other things, negotiated the terms and conditions of this Plan and certain other related documents and pleadings with the Debtors prior to the Petition Date.

1.2           “Administrative Claim” means a Claim for payment of an administrative expense of a kind specified in section 503(b) of the Bankruptcy Code and entitled to priority pursuant to section 507(a)(1) of the Bankruptcy Code and incurred prior to the Effective Date, including, but not limited to (a) Professional Fee Claims and (b) all fees and charges assessed against the Estates under chapter 123 of title 28, United States Code.

1.3           “Allowed” means when used in reference to a Claim or Interest within a particular Class, an Allowed Claim or Allowed Interest of the type described in such Class.

1.4           “Allowed Claim” means a Claim or any portion thereof (a) as to which no objection to allowance or request for estimation has been interposed on or before the Effective Date or the expiration of such other applicable period of limitation fixed by the Bankruptcy Code, Bankruptcy Rules, or the Bankruptcy Court or is listed on the Schedules as liquidated, non-contingent and undisputed, (b) as to which any objection to its allowance has been settled, waived through payment, or withdrawn, or has been denied by a Final Order, (c) that has been allowed by a Final Order, (d) as to which the liability of the Debtors, and the amount thereof are determined by final order of a court of competent jurisdiction other than the Bankruptcy Court, or (e) that is expressly allowed in a liquidated amount in the Plan; provided, however, that with respect to an Administrative Claim, “Allowed Claim” means an Administrative Claim as to which a timely request for payment has been made in accordance with Article XIV.A of this Plan (if such written request is required) or other Administrative Claim, in each case as to which the Debtors (1) have not interposed a timely objection or (2) have interposed a timely objection and such objection has been settled, waived through payment or withdrawn, or has been denied by a Final Order.

1.5           “Allowed Class . . . Claim” means an Allowed Claim in the particular Class described.

1.6           “Allowed Class . . . Interest” means an Interest in the particular Class described (a) that has been allowed by a Final Order, (b) for which (i) no objection to its allowance has been filed within the periods of limitation fixed by the Bankruptcy Code or by any Final Order of the Bankruptcy Court or is listed on the Schedules as liquidated, non-contingent and undisputed, or (ii) any objection to its allowance has been settled or withdrawn, or (c) that is expressly allowed in the Plan.

1.7           “Amended Prospectus and Solicitation Statement” means the Amended Prospectus and Solicitation Statement for solicitation of the Exchange Offer filed under Rule 424(b) under the Securities and Exchange Act of 1933 with the United States Securities and Exchange Commission on May 2, 2007.

1.8           “Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as codified in title 11 of the United States Code, 11 U.S.C. §§ 101-1532, as now in effect or hereafter amended.

1.9           “Bankruptcy Court” means the United States Bankruptcy Court for the District of Delaware or such other court as may have jurisdiction over the Chapter 11 Cases.

1.10         “Bankruptcy Rules” means, collectively, the Federal Rules of Bankruptcy Procedure and the Official Bankruptcy Forms, as amended, the Federal Rules of Civil Procedure, as amended, as applicable to the Chapter 11 Cases or proceedings therein, and the Local Rules of the Bankruptcy Court, as applicable to the Chapter 11 Cases or proceedings therein, as the case may be.

1.11         “Bar Date(s)” means the date(s), if any, designated by the Bankruptcy Court as the last dates for filing proofs of Claim or Interest against the Debtors.

2

1.12         “Business Day” means any day, excluding Saturdays, Sundays or “legal holidays” (as defined in Fed. R. Bankr. P. 9006(a)), on which commercial banks are open for business in New York, New York.

1.13         “Cash” means legal tender of the United States or equivalents thereof.

1.14         “Certificate” shall have the meaning set forth in Article VII.D of the Plan.

1.15         “Chapter 11 Cases” means the bankruptcy cases of the Debtors commenced under chapter 11 of the Bankruptcy Code, captioned “In re InSight Health Services Holdings Corp.,” et al. (Case No. 07                ).

1.16         “Claim” means a claim against the Debtors, whether or not asserted, as defined in section 101(5) of the Bankruptcy Code.

1.17         “Class” means a category of Holders of Claims or Interests, as described in Article II below.

1.18         “Collateral” means any property or interest in property of the Debtors’ Estates subject to a Lien to secure the payment or performance of a Claim, which Lien is not subject to avoidance under the Bankruptcy Code or otherwise invalid under the Bankruptcy Code or applicable state law.

1.19         “Committee” means the committee of unsecured Creditors, if any, appointed pursuant to section 1102(a) of the Bankruptcy Code in the Chapter 11 Cases.

1.20         “Confirmation” means entry by the Bankruptcy Court of the Confirmation Order.

1.21         “Confirmation Date” means the date of entry by the clerk of the Bankruptcy Court of the Confirmation Order.

1.22         “Confirmation Order” means the order entered by the Bankruptcy Court confirming the Plan pursuant to section 1129 of the Bankruptcy Code.

1.23         “Corporate Documents” means, as applicable, the certificate of incorporation and bylaws (or any other applicable organizational documents) of the Debtors in effect as of the Petition Date.

1.24         “Creditor” means any Person who holds a Claim against any Debtor.

1.25         “Debtors” means Holdings and InSight.

1.26         “Disbursing Agent” means the Reorganized Debtors or any party designated by the Reorganized Debtors, in their sole discretion, to serve as a disbursing agent under the Plan.

1.27         “Disputed Claim” or “Disputed Interest” means any Claim or Interest not otherwise Allowed or paid pursuant to the Plan or an order of the Bankruptcy Court (a) which has been or hereafter is listed on the Schedules as unliquidated, contingent, or disputed, and

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which has not been resolved by written agreement of the parties or an order of the Bankruptcy Court, (b) proof of which was required to be filed by order of the Bankruptcy Court but as to which a proof of Claim or Interest was not timely or properly filed, (c) proof of which was timely and properly filed and which has been or hereafter is listed on the Schedules as unliquidated, disputed or contingent, (d) that is disputed in accordance with the provisions of this Plan, or (e) as to which the Debtors have interposed a timely objection or request for estimation in accordance with the Bankruptcy Code, the Bankruptcy Rules, and any orders of the Bankruptcy Court, or is otherwise disputed by the Debtors in accordance with applicable law, which objection, request for estimation, or dispute has not been withdrawn or determined by a Final Order; provided, however, that for purposes of determining whether a particular Claim or Interest is a Disputed Claim or Disputed Interest prior to the expiration of any period of limitation fixed for the interposition by the Debtors of objections to the allowance of Claims or Interests, any Claim or Interest that is not identified by the Debtors as an Allowed Claim or Allowed Interest shall be deemed a Disputed Claim or Disputed Interest, respectively.

1.28         “Distribution Date” means the date, occurring as soon as practicable after the Effective Date, upon which distributions are made by the Reorganized Debtors to Holders of Administrative, Priority Tax, and Class 1, 2, 4, 5 and 6 Claims and Class 8 Interests.

1.29         “Distribution Notification Date” means the notification date for purposes of making distributions under the Plan on account of Allowed Claims, which date shall be the fifth (5th) Business Day following the Effective Date.

1.30         “Distribution Reserve” means the reserve, if any, established and maintained by the Reorganized Debtors, into which the Reorganized Debtors shall deposit the amount of Cash or other property that would have been distributed by the Reorganized Debtors on the Distribution Date to Holders of (a) Disputed Claims, (b) contingent liquidated Claims, if such Claims had been undisputed or noncontingent Claims on the Distribution Date, pending (i) the allowance of such Claims, (ii) the estimation of such Claims for purposes of allowance, or (iii) the realization of the contingencies, and (c) unliquidated Claims, if such Claims had been liquidated on the Distribution Date, such amount to be estimated by the Bankruptcy Court or agreed upon by the Debtors or Reorganized Debtors, as the case may be, and the Holders thereof as sufficient to satisfy such unliquidated Claim upon such Claim’s (x) allowance, (y) estimation for purposes of allowance, or (z) liquidation, pending the occurrence of such estimation or liquidation.

1.31         “Effective Date” means the Business Day on which all conditions to the consummation of the Plan as set forth in Article X.B hereof have been satisfied or waived as provided in Article X.D hereof.

1.32         “Equity Securities” means, collectively, the Old Common Stock and Stock Options, together with any options, warrants, or rights, contractual or otherwise, to acquire or receive any such stock or ownership interests, including, but not limited to, the Stock Options and any contracts or agreements pursuant to which the non-debtor party was or could have been entitled to receive shares of stock or other ownership interests in Holdings.

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1.33         “Estates” means the estates of the Debtors in the Chapter 11 Cases, created pursuant to section 541 of the Bankruptcy Code.

1.34         “Exchange Offer” means the exchange offer defined in the Amended Prospectus and Solicitation Statement.

1.35         “Existing Equity” means the holders of the Equity Securities as of the Petition Date.

1.36         “Exit Lenders” means the lender(s) under the New Revolving Loan Facility.

1.37         “Face Amount” means (a) when used in reference to a Disputed Claim, the full stated amount claimed by the Holder of such Claim in any proof of Claim timely filed with the Bankruptcy Court or otherwise deemed timely filed by any Final Order of the Bankruptcy Court or other applicable bankruptcy law, and (b) when used in reference to an Allowed Claim, the allowed amount of such Claim.

1.38         “Final Order” means an order or judgment of the Bankruptcy Court, or other court of competent jurisdiction, as entered on the docket in the Chapter 11 Cases, the operation or effect of which has not been stayed, reversed, or amended and as to which order or judgment (or any revision, modification, or amendment thereof) the time to appeal or seek review or rehearing has expired and as to which no appeal or petition for review or rehearing was filed or, if filed, remains pending.

1.39         “FRN Claim” means a Claim of a FRN Holder arising under or on account of the FRNs.

1.40         “FRN Documents” means, collectively, (a) the FRN Indenture, (b) each other security agreement or pledge agreement entered into pursuant to the FRN Indenture or other documents designated as a “Security Document” in the FRN Indenture and (c) each other agreement that creates or purports to create or perfect a Lien in favor of the FRN Indenture Trustee.

1.41         “FRN Holder” means a Holder of the FRNs.

1.42         “FRN Indenture” means the indenture dated September 22, 2005, among InSight, Holdings and each other subsidiary guarantor a signatory thereto and the FRN Indenture Trustee, as amended, pursuant to which the FRNs were issued.

1.43         “FRN Indenture Trustee” means U.S. Bank National Association or its successor, in either case in its capacity as indenture trustee pursuant to the FRN Indenture.

1.44         “FRN Transaction Documents” means that certain (i) Waiver and Agreement No. 1 to Indenture dated May 29, 2007 by and among the Loan Parties and the Initial Consenting Parties, and acknowledged by the FRN Indenture Trustee (ii) the Second Supplemental Indenture dated May 29, 2007 by and among the Loan Parties and the FRN Indenture Trustee, (iii) commitment letter dated May 29, 2007 by and among Initial Consenting Parties and the Debtors,

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and (iv) that certain Black Diamond Capital Management, L.L.C. (“Black Diamond”) Participation Agreement dated May 29, 2007 by and among the Debtors and Black Diamond.

1.45         “FRNs” means the Senior Secured Floating Rate Notes due 2011 of InSight issued and outstanding under the FRN Indenture.

1.46         “General Unsecured Claim” means any Unsecured Claim against the Debtors that is not (a) included in Classes 1 through 5, inclusive, (b) an Administrative Claim, (c) a Priority Tax Claim, or (d) an Intercompany Claim.

1.47         “Holder” means the beneficial holder of any Claim or Interest.

1.48         “Holdings” means InSight Health Services Holdings Corp.

1.49         “Impaired” means, when used with reference to a Claim or Interest, a Claim or Interest that is impaired within the meaning of section 1124 of the Bankruptcy Code.

1.50         “Indentures” shall mean the FRN Indenture and the SSN Indenture.

1.51         “InSight” means InSight Health Services Corp.

1.52         “InSight Entities” means the Debtors’ domestic operating subsidiaries.

1.53         “Intercompany Claims” means any Claims by a Debtor or an affiliate of a Debtor against another Debtor or an affiliate of a Debtor.

1.54         “Interest” means (a) the legal, equitable, contractual and other rights of any Person with respect to Old Common Stock, Stock Options, or any other Equity Securities of Holdings and (b) the legal, equitable, contractual or other rights of any Person to acquire or receive any of the foregoing.

1.55         Initial Consenting Parties” means J.P. Morgan Securities, Inc. and Black Diamond Capital Management, L.L.C. and each of their affiliates.

1.56         “Lender” means Bank of America, N.A.

1.57         “Lender Secured Claims” means all of the Claims of Lender and its successors and permitted assigns, under or arising out of any of the Loan Documents.

1.58         “Lien” means a charge against or interest in property to secure payment of a debt or performance of an obligation.

1.59         “Litigation Claims” means the claims, rights of action, suits, or proceedings, whether in law or in equity, whether known or unknown, that the Debtors or the Estates may hold against any Person, which are to be retained by the Reorganized Debtors pursuant to Article IV.F of this Plan.

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1.60         “Loan and Security Agreement” means that certain Amended and Restated Loan and Security Agreement, dated as of September 22, 2005, among the Loan Parties and the Lender, as amended, modified, or supplemented from time to time thereafter.

1.61         “Loan Documents” means, collectively (a) the Loan and Security Agreement, (b) each other security agreement or pledge agreement entered into pursuant to the Loan and Security Agreement or other documents designated as a “Loan Document” in the Loan and Security Agreement, and (c) each other agreement that creates or purports to create or perfect a Lien in favor of the Lender.

1.62         “Loan Parties” means Holdings, InSight and the following direct and indirect wholly-owned subsidiaries of Holdings: Comprehensive Medical Imaging Centers, Inc., Comprehensive Medical Imaging, Inc., Comprehensive Medical Imaging-Bakersfield, Inc., Comprehensive Medical Imaging-Biltmore, Inc., Comprehensive Medical Imaging-Fairfax, Inc., Comprehensive Medical Imaging-Fremont, Inc., Comprehensive Medical Imaging-San Francisco, Inc., Comprehensive OPEN MRI-Garland, Inc., Comprehensive OPEN MRI-Carmichael/Folsom, LLC, Comprehensive OPEN MRI-East Mesa, Inc., Diagnostic Solutions Corp., IMI of Arlington, Inc., IMI of Kansas City, Inc., InSight Health Corp., InSight Imaging Services Corp., Jefferson MRI, Jefferson MRI-Bala, Los Gatos Imaging Center, Maxum Health Corp., Maxum Health Services Corp., Maxum Health Services of Dallas, Inc., Maxum Health Services of North Texas, Inc., Mesa MRI, Mountain View MRI, MRI Associates, L.P., NDDC, Inc., Open MRI, Inc., Orange County Regional PET Center-Irvine, LLC, Parkway Imaging Center, LLC, Phoenix Regional PET Center-Thunderbird, LLC, Radiosurgery Centers, Inc., San Fernando Valley Regional PET Center, LLC, Signal Medical Services, Inc., Syncor Diagnostics Bakersfield, LLC, Syncor Diagnostics Sacramento, LLC, TME Arizona, Inc., Valencia MRI, LLC, Wilkes-Barre Imaging, L.L.C., and Woodbridge MRI.

1.63         “Lockup Agreement” means the Original Lockup Agreement and the Second Lockup Agreement.

1.64         “Management Incentive Plan” means the management incentive plan that will be implemented by the Reorganized Debtors to provide equity incentives to the Reorganized Debtors’ management; provided that any equity issued under the Management Incentive Plan will dilute all holders of New Common Stock, including the Holders of SSN Claims and Old Common Stock Interests, on a pro rata basis.

1.65         “New Common Stock” means 8,644,444 registered shares of common shares of Reorganized Holdings authorized under Article IV of the Plan and issued pursuant to the Plan or the Exchange Offer, as the case may be.

1.66         “New Revolving Loan Facility” means the new senior secured credit facilit(ies) in an aggregate principal amount that is not anticipated to be more than $30 million, which the Reorganized Debtors will enter into as a condition to the consummation of the Plan.

1.67         “Old Common Stock” means the common stock of Holdings issued and outstanding as of the Petition Date with a par value $0.0001 per share.

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1.68         “Original Lockup Agreement” means the Lockup Agreement, dated as of February 16, 2007, among the Debtors and the Original Signing Noteholders who have agreed to tender all of their SSNs to the Debtors in the Exchange Offer, as amended.

1.69         “Original Signing Noteholders” means the holders of the SSNs that are signatories to the Original Lockup Agreement.

1.70         “Other Interests” means all Interests in the Debtors as of the Petition Date that are not included in Class 8. Other Interests shall include the Interests of Holders of Stock Options to purchase Old Common Stock issued and outstanding on the Petition Date.

1.71         “Other Priority Claims” means a Claim entitled to priority under sections 507(a)(2), (3), (4), (5), (6), (7) and/or (9) of the Bankruptcy Code.

1.72         “Other Secured Claim” means any Secured Claim against Debtors, other than Claims in Classes 2 and 3.

1.73         “Person” means an individual, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agreed or political subdivision thereof) or other entity of any kind.

1.74         “Petition Date” means the date or dates on which each of the respective Debtors file their voluntary petitions for reorganization relief under chapter 11 of the Bankruptcy Code commencing the Chapter 11 Cases.

1.75         “Plan” means this chapter 11 reorganization plan for the Debtors and all exhibits annexed hereto or referenced herein, as the same may be amended, modified or supplemented from time to time.

1.76         “Plan Supplement” means the compilation of documents and forms of documents specified in the Plan which will be filed with the Bankruptcy Court not later than ten (10) days prior to the Confirmation Date.

1.77         “Priority Tax Claim” means a Claim that is entitled to priority pursuant to section 507(a)(8) of the Bankruptcy Code.

1.78         “Professional” means any professional employed (i) by the Ad Hoc Committee in the event that the Ad Hoc Committee does not disband after the commencement of the Chapter 11 Cases, and (ii) in the Chapter 11 Cases pursuant to sections 327, 328 or 1103 of the Bankruptcy Code or otherwise and the professionals seeking compensation or reimbursement of expenses in connection with the Chapter 11 Cases pursuant to section 503(b)(4) of the Bankruptcy Code.

1.79         “Professional Fee Claim” means a Claim of a Professional for compensation or reimbursement of costs and expenses relating to services incurred after the Petition Date and prior to and including the Effective Date.

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1.80         “Pro Rata” means, at any time, the proportion that the Face Amount of a Claim or Interest, as applicable in a particular Class bears to the aggregate Face Amount of all Claims (including Disputed Claims) in such Class or all Interests (including Disputed Interests), as applicable, unless the Plan provides otherwise.

1.81         “Prospectus and Solicitation Statement” means the Prospectus and Solicitation Statement for solicitation and approval of this Plan set forth in the Registration Statement on Form S-4, dated as of March 21, 2007, Registration No. 333-140754.

1.82         “Registration Rights Agreement” means an agreement to be entered into by the Reorganized Debtors and certain holders of the New Common Stock with respect to the New Common Stock, a copy of which will be filed as a Plan Supplement.

1.83         “Reinstated” or “Reinstatement” means (i) leaving unaltered the legal, equitable, and contractual rights to which a Claim entitles the holder of such Claim so as to leave such Claim unimpaired in accordance with section 1124 of the Bankruptcy Code or (ii) notwithstanding any contractual provision or applicable law that entitles the holder of such Claim to demand or receive accelerated payment of such Claim after the occurrence of a default (a) curing any such default that occurred before or after the Petition Date, other than a default of a kind specified in section 365(b)(2) of the Bankruptcy Code; (b) reinstating the maturity of such Claim as such maturity existed before such default; (c) compensating the holder of such Claim for any damages incurred as a result of any reasonable reliance by such holder on such contractual provision or such applicable law; and (d) not otherwise altering the legal, equitable, or contractual rights to which such Claim entitles the holder of such Claim; provided, however, that any contractual right that does not pertain to the payment when due of principal and interest on the obligation on which such Claim is based, including, but not limited to, financial covenant ratios, negative pledge covenants, covenants or restrictions on merger or consolidation, and affirmative covenants regarding corporate existence prohibiting certain transactions or actions contemplated by the Plan, or conditioning such transactions or actions on certain factors, shall not be required to be reinstated in order to accomplish Reinstatement.

1.84         “Reorganized Debtors” means the Debtors as revested with the property of the Estates on and after the Effective Date.

1.85         “Reorganized Holdings” means Holdings as revested with the property of its Estate on and after the Effective Date.

1.86         “Reorganized InSight” means InSight as revested with the property of its Estate on and after the Effective Date.

1.87         “Restated Corporate Documents” means as applicable, the amended and restated certificate of incorporation and bylaws (or any other applicable organizational documents) of the Reorganized Debtors in effect on the Effective Date, a copy of which will be filed as a Plan Supplement.

1.88         “Restructuring” means, collectively, the transactions and transfers described in Article IV of this Plan.

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1.89         “Schedules” means the schedules of assets and liabilities and the statements of financial affairs, if any, filed in the Bankruptcy Court pursuant to section 521 of the Bankruptcy Code and Bankruptcy Rule 1007(b) by the Debtors as such schedules or statements may be amended or supplemented from time to time in accordance with Fed. R. Bankr. P. 1009 or orders of the Bankruptcy Court.

1.90         “Second Lockup Agreement” means the Lockup Agreement, dated as of May 1, 2007, among the Debtors and the Subsequent Signing Noteholders who have agreed to tender all of their SSNs to the Debtors in the Exchange Offer.

1.91         “Secured Claim” means a Claim that is secured by a security interest in or lien upon property, or the proceeds of the sale of such property, in which the Debtors have an interest, to the extent of the value, as of the Effective Date or such later date as is established by the Bankruptcy Court, of such interest or lien as determined by a Final Order of the Bankruptcy Court pursuant to section 506 of the Bankruptcy Code or as otherwise agreed upon in writing by the Debtors or Reorganized Debtors and the Holder of such Claim.

1.92         “Securities Act” means the Securities Act of 1933, 15 U.S.C. §§ 77a-77aa, as now in effect or hereafter amended.

1.93         “Setoff Claim” means a Claim, against the Debtors, of a Holder that has a valid right of setoff with respect to such Claim, which right is enforceable under section 553 of the Bankruptcy Code as determined by a Final Order or as otherwise agreed in writing by the Debtors, to the extent of the amount subject to such right of setoff.

1.94         “SSN Claim” means a Claim of a SSN Holder arising under or on an account of the SSNs.

1.95         “SSN Holder” means a holder of the SSNs.

1.96         “SSN Indenture” means the indenture, dated as of October 30, 2001, among InSight, Holdings and each other subsidiary guarantor a signatory thereto and the SSN Indenture Trustee, as amended, pursuant to which the SSNs were issued.

1.97         “SSN Indenture Trustee” means U.S. Bank Trust National Association (as successor to State Street Bank and Trust Company, N.A) or its successor, in either case in its capacity as indenture trustee pursuant to the SSN Indenture.

1.98         “SSNs” means the 9.875% Senior Subordinated Notes Due 2011 of InSight, issued and outstanding under the SSN Indenture.

1.99         “Stock Certificate” shall have the meaning set forth in Article VII.D of the Plan.

1.100       “Stock Options” means the outstanding options to purchase Old Common Stock, as of the Petition Date, if any.

1.101       “Subsequent Signing Noteholders” means the holders of the SSNs that are signatories to the Second Lockup Agreement.

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1.102       “Subsidiary Equity Interests” means any Interest of a Debtor in another Debtor.

1.103       “Substantial Contribution Claim” means a claim for compensation or reimbursement of expenses incurred in making a substantial contribution in the Chapter 11 Cases pursuant to sections 503(b)(3), (4), or (5) of the Bankruptcy Code.

1.104       “Unimpaired Claim” means a Claim that is not an Impaired Claim.

1.105       “Unsecured Claim” means any claim against the Debtors that is not an Other Priority Claim, Other Secured Claim, Priority Tax Claim or Secured Claim.

C.Rules of Interpretation

1.             General

For purposes of the Plan (a) any reference in the Plan to a contract, instrument, release, indenture, or other agreement or document being in a particular form or on particular terms and conditions means that such document shall be substantially in such form or substantially on such terms and conditions, (b) any reference in the Plan to an existing document or exhibit filed or to be filed means such document or exhibit as it may have been or may be amended, modified, or supplemented, (c) unless otherwise specified, all references in the Plan to Sections, Articles, Schedules, and Exhibits are references to Sections, Articles, Schedules, and Exhibits of or to the Plan, (d) the words “herein” and “hereto” refer to the Plan in its entirety rather than to a particular portion of the Plan, (e) captions and headings to Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation of the Plan, and (f) the rules of construction set forth in section 102 of the Bankruptcy Code and in the Bankruptcy Rules shall apply.

2.             Rule of “Contra Proferentum” Not Applicable

This Plan is the product of extensive discussions and negotiations between and among, inter alia, the Debtors, the Ad Hoc Committee, and certain other creditors and constituencies. Each of the foregoing was represented by counsel who either (a) participated in the formulation and documentation of or (b) was afforded the opportunity to review and provide comments on, the Plan, the Lockup Agreements, the Prospectus and Solicitation Statement, and the documents ancillary thereto. Accordingly, unless explicitly indicated otherwise, the general rule of contract construction known as “contra proferentum” shall not apply to the construction or interpretation of any provision of this Plan, the Lockup Agreements, the Prospectus and Solicitation Statement, or any contract, instrument, release, indenture, or other agreement or document generated in connection therewith.

D.Computation of Time

In computing any period of time prescribed or allowed by the Plan, the provisions of Fed. R. Bankr. P. 9006(a) shall apply.

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ARTICLE II.

Classification of Claims and Interests

A.Introduction

All Claims and Interests, Administrative Claims and Priority Tax Claims, are placed in the Classes set forth below. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims, as described below, have not been classified.

A Claim or Interest is placed in a particular Class only to the extent that a Claim or Interest falls within the description of that Class, and is classified in other Classes to the extent that any portion of the Claim or Interest falls within the description of such other Classes. A Claim is also placed in a particular Class for the purpose of receiving distributions pursuant to the Plan only to the extent that such Claim is an Allowed Claim in that Class and such Claim has not been paid, released, or otherwise settled prior to the Effective Date.

B.Unclassified Claims (not entitled to vote on the Plan)

1.             Administrative Claims

2.             Priority Tax Claims

C.Unimpaired Classes of Claims (deemed to have accepted the Plan and, therefore, not entitled to vote)

1.             Class 1:  Other Priority Claims

Class 1 consists of all Other Priority Claims. These Claims are primarily for employee wages, vacation pay, severance pay, contributions to benefit plans and other similar amounts. The Debtors estimate that the aggregate amount of Allowed Other Priority Claims will be $0 on the Effective Date.

2.             Class 2:  Lender Secured Claims

Class 2 consists of all Claims against Debtors, secured by and to the extent of the value (as of the Petition Date), if any, of the Collateral securing such Claims directly or indirectly arising from or under, or relating in any way to, the Loan Documents. The Debtors’ records reflect that there was $9.6 million outstanding under the Loan and Security Agreement on the Petition Date and approximately $2.6 million of standby letters of credit outstanding thereunder, of which $600,000 is cash collateralized and not drawn against the Prepetition Loan Agreement. As of that date, the Debtors had $4.5 million in additional effective borrowing availability under the Loan and Security Agreement as of that date.

3.             Class 3:  FRN Claims

Class 3 consists of all Claims against the Debtors, secured by and to the extent of the value (as of the Petition Date), if any, of the Collateral securing such Claims directly or

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indirectly arising from, or relating in any way to the FRN Documents. The Class 3 FRN Claims shall be deemed Allowed Class 3 FRN Claims in the aggregate amount of $300 million.

4.             Class 4:  Other Secured Claims

Class 4 consists of all Secured Claims against the Debtors other than those claims in Classes 2 and 3. For purposes of the Plan, each such Allowed Other Secured Claim will be deemed a separate subclass.

5.             Class 6:  General Unsecured Claims

Class 6 consists of all General Unsecured Claims. General Unsecured Claims include trade and vendor claims, lease rejection Claims filed in accordance with Article VIII.D.2 and all other Unsecured Claims. The Debtors records indicate approximately $1 million in Unsecured Claims that would be included in Class 6 as of the Petition Date.

6.             Class 7:  Intercompany Claims

Class 7 consists of all Intercompany Claims.

D.Impaired Classes Of Claims And Interests (Classes 5 and 8 are entitled to vote on the Plan)

1.             Class 5:  SSN Claims

Class 5 consists of all SSN Claims against the Debtors. The Class 5 SSN Claims shall be deemed Allowed Class 5 SSN Claims in the aggregate amount of $194.5 million.

2.             Class 8:  Old Common Stock Interests

Class 8 consists of all Interests in Holdings directly or indirectly arising from or under, or relating in any way to, any of the Old Common Stock of Holdings.

3.             Class 9:  Other Interests

Class 9 consists of all Other Interests of Holdings.

ARTICLE III.

Treatment of Claims and Interests

A.Unclassified Claims

1.             Administrative Claims

Except as otherwise provided for herein, and subject to the requirements of Article XIV.A.1 hereof, each Holder of an Allowed Administrative Claim shall, in full satisfaction, release, settlement and discharge of such Allowed Administrative Claim: (i) to the extent such Claim is due and owing on the Effective Date, be paid in full, in Cash, on the

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Distribution Date; (ii) to the extent such Claim is not due and owing on the Effective Date, be paid in full, in Cash, in accordance with the terms of any agreement between the Debtors and such Holder, or as may be due and owing under applicable non-bankruptcy law or in the ordinary course of business; or (iii) be treated on such other terms and conditions as are acceptable to the Debtors and the Holder of such Claim.

2.             Priority Tax Claims

Each Holder of an Allowed Priority Tax Claim shall, in full satisfaction, release, and discharge of such Allowed Priority Tax Claim: (a) to the extent such Claim is due and owing on the Effective Date, be paid in full, in Cash, on the Distribution Date; (b) to the extent such Claim is not due and owing on the Effective Date, be paid in full, in Cash, in accordance with the terms of any agreement between the Debtors and such Holder, or as may be due and owing under applicable non-bankruptcy law, or in the ordinary course of business; or (c) be treated on such other terms and conditions as are acceptable to the Debtors and the Holder of such Claim.

B.Unimpaired Classes Of Claims

1.             Class 1:  Other Priority Claims

The Debtors intend to seek an order approving the payment of Other Priority Claims in the ordinary course during the pendency of the Chapter 11 Cases. To the extent such an order is not entered or such claims are not paid prior to the Effective Date, pursuant to the Plan, the legal, equitable and contractual rights of the Holders of Allowed Class 1 Claims are unaltered by the Plan. Each Holder of an Allowed Class 1 Claim, will, in full satisfaction of and in exchange for such Allowed Class 1 Claim: (a) to the extent such claim is due and owing on the Effective Date, be paid in full, in Cash, on the Distribution Date; (b) to the extent such claim is not due and owing on the Effective Date, be paid in full, in Cash, in accordance with the terms of any agreement between the parties, or as may be due and owing under applicable non-bankruptcy law or in the ordinary course of business; or (c) be treated on such other terms and conditions as are acceptable to the parties.

2.             Class 2:  Lender Secured Claims

On the Effective Date, the Holder of the Allowed Class 2 Lender Secured Claims shall, to the extent any Allowed Class 2 Lender Secured Claim has not been paid or satisfied by performance in full prior to the Effective Date, be paid in full, in Cash, on the Effective Date.

3.             Class 3:  FRN Claims

On the Effective Date, each Holder of an Allowed Class 3 FRN Claim shall have its Claim Reinstated.

4.             Class 4:  Other Secured Claims

At the Debtors’ option, each Holder of an Allowed Class 4 Claim will either (a) have the property that serves as collateral for its claim returned, or (b) have its claim cured and Reinstated, within the meaning of section 1124(2) of the Bankruptcy Code.

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5.             Class 6:  General Unsecured Claims

To the extent any Allowed General Unsecured Claim has not been paid or satisfied by performance in full prior to the Effective Date, the legal, equitable and contractual rights of the Holders of the Allowed Class 6 Claims are unaltered by the Plan. In full satisfaction of and in exchange for each Allowed Class 6 Claim, the Holder will: (a) to the extent such Claim is due and owing on the Effective Date, be paid in full, in cash, on the Distribution Date; (b) to the extent such Claim is not due and owing on the Effective Date, be paid in full, in cash, in accordance with the terms of any agreement between the parties, or as may be due and owing under applicable nonbankruptcy law or in the ordinary course of business; or (c) be treated on such other terms and conditions as are acceptable to the parties.

6.             Class 7:  Intercompany Claims

On the Effective Date, each Holder of an Allowed Class 7 Intercompany Claim shall have its Claim Reinstated.

C.Impaired Classes of Claims

1.             Class 5:  SSN Claims

On, or as soon as reasonably practicable after, the Distribution Date, the Debtors or the Reorganized Debtors, as the case may be, shall distribute to the SSN Indenture Trustee, for the ratable benefit of the Holders of Allowed Class 5 SSN Claims, and in full satisfaction, settlement, release, and discharge of and in exchange for all such Allowed Class 5 SSN Claims, 90% of the aggregate New Common Stock, subject to dilution resulting from the issuance of equity pursuant to the Management Incentive Plan. The SSN Indenture Trustee shall, in accordance with the terms of the SSN Indenture, promptly distribute to each Holder of an Allowed Class 5 SSN Claim, as of the Distribution Notification Date, such Holder’s Pro Rata share of 90% of the aggregate New Common Stock, subject to dilution resulting from the issuance of equity pursuant to the Management Incentive Plan. As of the Effective Date, the SSNs will be cancelled as set forth in Article IV.B.1 hereof.

2.             Class 8:  Old Common Stock Interests

On, or as soon as reasonably practicable after, the Distribution Date, the Debtors or the Reorganized Debtors, as the case may be, shall distribute to each Holder of an Allowed Class 8 Old Common Stock Interest, such Holder’s Pro Rata share of 10% of the aggregate New Common Stock, subject to dilution resulting from the issuance of equity pursuant to the Management Incentive Plan. As of the Effective Date, all of the Equity Securities will be cancelled as set forth in Article IV.B.1 hereof.

3.             Class 9:  Other Interests

On the Effective Date, the Holders of Allowed Other Interests shall not receive a Distribution on or on account of such Other Interests and such Other Interests shall be cancelled. Each Holder of a Class 9 Other Interest is deemed to reject the Plan.

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D.Special Provision Regarding Unimpaired Claims

Except as otherwise provided in the Plan, nothing shall affect the Debtors’ or Reorganized Debtors’ rights and defenses, both legal and equitable, with respect to any Unimpaired Claims, including, but not limited to, all rights with respect to legal and equitable defenses to Setoff Claims or recoupments against Unimpaired Claims.

ARTICLE IV.

MEANS FOR IMPLEMENTATION OF THE PLAN

A.Continued Corporate Existence

The Debtors shall continue to exist after the Effective Date as separate corporate entities, in accordance with applicable non-bankruptcy law, and pursuant to their Corporate Documents in effect prior to the Effective Date, except to the extent such Corporate Documents are amended by the Restated Corporate Documents pursuant to this Plan.

B.Corporate Action

1.Cancellation of the Equity Securities, SSNs and SSN Indenture

On the Effective Date, except as otherwise provided for herein, (i) the SSNs, the Equity Securities and any other note, bond, indenture, or other instrument or document evidencing or creating any indebtedness or obligation of the Debtors related to the SSNs and the Equity Securities, shall be canceled, and (ii) the obligations of the Debtors under any agreements, indentures or certificates of designation governing the SSNs, the Equity Securities and any other note, bond, indenture or other instrument or document evidencing or creating any indebtedness or obligation of the Debtors related to the SSNs, the Equity Securities, shall be discharged; provided, however, that each indenture or other agreement that governs the rights of the Holder of a SSN Claim and that is administered by an indenture trustee, an agent, or a servicer shall continue in effect solely for the purposes of (a) allowing such indenture trustee, agent, or servicer to make the distributions to be made on account of such Claims under the Plan as provided in Article III hereof and (b) permitting such indenture trustee, agent, or servicer to maintain any rights or liens it may have for fees, costs and expenses under such indenture or other agreement; provided, further, that the provisions of clause (ii) of this paragraph shall not affect the discharge of the Debtors’ liabilities under the Bankruptcy Code and the Confirmation Order or result in any expense or liability to the Reorganized Debtors.  The Reorganized Debtors shall not have any obligations to any indenture trustee, agent or servicer (or to any Disbursing Agent replacing such indenture trustee, agent or servicer) for any fees, costs or expenses related to the SSNs; provided, however, that nothing herein shall preclude such indenture trustee, agent or servicer (or any Disbursing Agent replacing such indenture trustee, agent or servicer) from being paid or reimbursed for pre-petition and post-petition fees, costs and expenses from the distributions until payment in full of such fees, costs or expenses related to the SSNs that are governed by the respective indenture or other agreement in accordance with the provisions set forth therein.

Any actions taken by an indenture trustee, an agent, or a servicer that are not for the purposes authorized in this Article IV.B.1 of the Plan shall not be binding upon the Debtors.

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Notwithstanding the foregoing, the Debtors may terminate any indenture or other governing agreement related to the SSNs and the authority of any indenture trustee, agent, or servicer to act thereunder at any time, with or without cause, by giving five (5) days written notice of termination to the indenture trustee, agent, or servicer.  If distributions under the Plan have not been completed at the time of termination of the indenture or other governing agreement, the Debtors shall designate a Disbursing Agent to act in place of the indenture trustee, agent, or servicer, and the provisions of this Article IV.B.1 shall be deemed to apply to the new distribution agent.

For the avoidance of doubt, none of the foregoing shall be applicable to the FRN Indenture and the FRN Indenture Trustee.  The FRN Notes and the FRN Indenture Trustee shall continue to be governed by the FRN Indenture, which shall be assumed and Reinstated.

2.Restated Corporate Documents

The Corporate Documents of Holdings shall be amended as necessary to satisfy the provisions of the Plan and the Bankruptcy Code and shall include, among other things, pursuant to section 1123(a)(6) of the Bankruptcy Code, (x) a provision prohibiting the issuance of non-voting equity securities, and if applicable (y) a provision as to the classes of securities issued pursuant to the Plan or thereafter possessing voting power, for an appropriate distribution of such power among such classes, including, in the case of any class of equity securities having a preference over another class of equity securities with respect to dividends, adequate provisions for the election of directors representing such preferred class in the event of default in the payment of such dividends.  On the Effective Date or as soon thereafter as is practicable, Reorganized Holdings shall file with the Secretary of the State of Delaware in accordance with sections 103 and 303 of the Delaware General Corporation Law, the applicable amended certificate of incorporation.

3.Other General Corporate Matters

On or after the Effective Date, the Reorganized Debtors will be authorized to take such action as is necessary under the laws of the State of Delaware, federal law and other applicable law to effect the terms and provisions of the Plan.  Without limiting the foregoing, the issuance of the New Common Stock, the election and the appointment of directors or officers, the Management Incentive Plan, and any other matter involving the corporate structure of the Reorganized Debtors shall be deemed to have occurred and shall be in effect from and after the Effective Date pursuant to section 303 of the Delaware General Corporation Law without any requirement of further action by the stockholders or directors of the Debtors or the Reorganized Debtors.

C.Restructuring Transactions

1.Implementation of Settlement/Lockup Agreements

The Plan incorporates and implements a compromise and settlement with certain Holders of the SSN Claims, as set forth in the Lockup Agreements.  The distributions provided for herein to Holders of Claims and Interests represent the negotiated distributions as set forth in the Lockup Agreements.

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2.New Securities

(a)Authorization

As of the Effective Date, the issuance by Reorganized Holdings of the New Common Stock is hereby authorized without further act or action under applicable law, regulation, order or rule.

(b)Issuance

The New Common Stock authorized pursuant to Article IV.C.2 hereof shall be issued by Reorganized Holdings pursuant to the Plan and the Amended Prospectus and Solicitation Statement without further act or action under applicable law, regulation, order or rule.  The holders thereof will have no preemptive or other rights to subscribe for additional shares.  The Confirmation Order shall provide that the issuance of the New Common Stock shall be exempt from the registration requirements of the Securities Act of 1933, as amended, in accordance with section 1145 of the Bankruptcy Code.  The Confirmation Order shall provide that the issuance of the New Common Stock was in compliance with the registration requirements of the Securities Act of 1933, as amended.

3.New Revolving Loan Facility

The Debtors or the Reorganized Debtors, as the case may be, expect to enter into one or more post-confirmation loan facilities, which may be the New Revolving Loan Facility, in order to (a) refinance amounts outstanding on the Effective Date under  the Loan and Security Agreement, (b) make other payments required to be made on the Effective Date or the Distribution Date, and (c) provide the additional borrowing capacity required by the Reorganized Debtors and their subsidiaries following the Effective Date to maintain their operations.

D.Directors And Officers

The initial directors and officers of Reorganized Holdings and Reorganized InSight shall each consist of the identical seven members, five designated by the Ad Hoc Committee, all of whom shall be reasonably acceptable to the Holdings’ board of directors as of the Petition Date and shall comply with the director independence requirements that are imposed on public companies, one designated by the Holders of the Old Common Stock, and Reorganized Holdings’ Chief Executive Officer.  Those directors and officers of the Debtors, if any, who continue to serve after the Effective Date shall not be liable to any Person for any Claim that arose prior to the Effective Date in connection with such directors’ or officers’ service to the Debtors, in their capacity as director or officer.  On or before the deadline for filing the Plan Supplement, the Debtors shall file with the Bankruptcy Court (i) a schedule setting forth the names of the persons to be appointed by the board of directors of the Reorganized Debtors pursuant to this section and (ii) a schedule disclosing such additional information as is necessary to satisfy section 1129(a)(5) of the Bankruptcy Code including (1) the identity and affiliation of any other individual who is proposed to serve as an officer or director of the Reorganization Debtors; (2) the identity of any other insider who will be employed or retained by the Reorganized Debtors; and (3) the compensation for each such individual.  The initial board of directors of Reorganized Holdings and Reorganized InSight shall serve until the first annual

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meeting of the holders of the New Common Stock.  Thereafter, the board of directors of Reorganized Holdings and Reorganized InSight will be elected in accordance with the Restated Corporate Documents set forth in Article IV.B.2 above and applicable non-bankruptcy law.  The boards of directors of the Reorganized Debtors shall have the responsibility for the management, control, and operation of the Reorganized Debtors on and after the Effective Date.

E.Revesting Of Assets

Except as otherwise set forth herein or in the Confirmation Order, as of the Effective Date, all property of the Estates shall revest in the Reorganized Debtors free and clear of all Claims, Liens, encumbrances and other Interests of the Holders of Claims or Interests.  Subsidiary Equity Interests shall be retained, and the legal, equitable and contractual rights to which the Holders of such Allowed Subsidiary Equity Interests are entitled shall remain unaltered.  From and after the Effective Date, the Reorganized Debtors may operate their businesses and use, acquire and dispose of property and settle and compromise Claims or Interests without supervision by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly imposed by the Plan and the Confirmation Order.  Without limiting the generality of the foregoing, the Debtors may, without application to or approval by the Bankruptcy Court, pay fees that it incurs after the Effective Date for professional fees and expenses.

F.Preservation Of Rights Of Action; Settlement Of Litigation Claims

1.Retention of Causes of Action

Except to the extent such rights, Claims, causes of action, defenses, and counterclaims are expressly and specifically released in connection with the Plan, the Confirmation Order or in any settlement agreement approved during the Chapter 11 Cases, or otherwise provided in the Confirmation Order or in any contract, instrument, release, indenture or other agreement entered into in connection with the Plan, in accordance with section 1123(b) of the Bankruptcy Code:  (1) any and all rights, Claims, causes of action (including avoidance actions or recovery actions under Chapter 5 of the Bankruptcy Code), defenses, and counterclaims of or accruing to the Debtors or their Estates shall remain assets of and vest in the Reorganized Debtors, whether or not litigation relating thereto is pending on the Effective Date, and whether or not any such rights, claims, causes of action, defenses and counterclaims have been listed or referred to in the Plan, the Schedules, or any other document filed with the Bankruptcy Court, and (2) neither the Debtors nor the Reorganized Debtors waive, relinquish, or abandon (nor shall they be estopped or otherwise precluded from asserting) any right, Claim, cause of action, defense, or counterclaim that constitutes property of the Estates:  (a) whether or not such right, Claim, cause of action, defense, or counterclaim has been listed or referred to in the Plan or the Schedules, or any other document filed with the Bankruptcy Court, (b) whether or not such right, Claim, cause of action, defense, or counterclaim is currently known to the Debtors, and (c) whether or not a defendant in any litigation relating to such right, Claim, cause of action, defense or counterclaim filed a proof of Claim in the Chapter 11 Cases, filed a notice of appearance or any other pleading or notice in the Chapter 11 Cases, voted for or against the Plan, or received or retained any consideration under the Plan.  Without in any manner limiting the generality of the foregoing, notwithstanding any otherwise applicable principal of law or equity, without limitation, any

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principals of judicial estoppel, res judicata, collateral estoppel, issue preclusion, or any similar doctrine, the failure to list, disclose, describe, identify, or refer to a right, Claim, cause of action, defense, or counterclaim, or potential right, Claim, cause of action, defense, or counterclaim, in the Plan, the Schedules, or any other document filed with the Bankruptcy Court shall in no manner waive, eliminate, modify, release, or alter the Reorganized Debtors’ right to commence, prosecute, defend against, settle, and realize upon any rights, Claims, causes of action, defenses, or counterclaims that the Debtors or the Reorganized Debtors have, or may have, as of the Confirmation Date.  The Reorganized Debtors may commence, prosecute, defend against, settle, and realize upon any rights, Claims, causes of action, defenses, and counterclaims in their sole discretion, in accordance with what is in the best interests, and for the benefit, of the Reorganized Debtors.

G.Exclusivity Period

The Debtors shall retain the exclusive right to amend or modify the Plan, and to solicit acceptances of any amendments to or modifications of the Plan, through and until the earlier of (i) the Effective Date, or, (ii) the expiration of the Debtors’ exclusive period to solicit acceptances of the Plan under section 1121(d) of the Bankruptcy Code.

H.Termination Of  Loan and Security Agreement

The Loan and Security Agreement shall be terminated upon Full Payment (as defined in the Loan and Security Agreement) of the Lender Secured Claims, provided, however, that the obligations of the Debtors and the Reorganized Debtors that expressly survive termination of the Loan and Security Agreement shall survive as provided therein.  Notwithstanding anything to the contrary in this Plan, unless and until Lender has received Full Payment of all Lender Secured Claims, each of the Loan Documents shall remain binding and enforceable according to its terms and all liens and security interests granted by or arising under any of the Loan Documents shall continue to encumber property of the Debtors and the Reorganized Debtors as if the Plan had not been confirmed.

I.Effectuating Documents; Further Reorganization Transactions

The chairman of the board of directors, president, chief financial officer, manager, or any other appropriate officer of the Debtors or, after the Effective Date, the Reorganized Debtors, shall be authorized to execute, deliver, file, or record such contracts, instruments, releases, indentures, and other agreements or documents, and take such actions as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan.  The secretary or assistant secretary of the Debtors or, after the Effective Date, the Reorganized Debtors, shall be authorized to certify or attest to any of the foregoing actions.

J.Exemption From Certain Transfer Taxes

Pursuant to section 1146(c) of the Bankruptcy Code, the issuance, transfer, or exchange of a security, or the making of delivery of an instrument of transfer from the Debtors to the Reorganized Debtors or any other Person or entity pursuant to the Plan may not be taxed under any law imposing a stamp tax or similar tax, and the Confirmation Order shall direct the appropriate state or local governmental officials or agents to forego the collection of any such tax

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or governmental assessment and to accept for filing and recordation any of the foregoing instruments or other documents without the payment of any such tax or governmental assessment.

ARTICLE V.

ACCEPTANCE OR REJECTION OF THE PLAN

A.Classes Entitled To Vote

Each Impaired Class of Claims that will (or may) receive or retain property or any interest in property under the Plan, shall be entitled to vote to accept or reject the Plan.  By operation of law, each Unimpaired Class of Claims is deemed to have accepted the Plan and, therefore, is not entitled to vote to accept or reject the Plan.

B.Acceptance By Impaired Classes

An Impaired Class of Claims shall have accepted the Plan if (i) the Holders (other than any Holder designated under section 1126(e) of the Bankruptcy Code) of at least two-thirds in amount of the Allowed Claims actually voting in such Class have voted to accept the Plan and (ii) the Holders (other than any Holder designated under section 1126(e) of the Bankruptcy Code) of more than one-half in number of the Allowed Claims actually voting in such Class have voted to accept the Plan.  An Impaired Class of Interests shall have accepted the Plan if (i) the Holders (other than any Holder designated under section 1126(e) of the Bankruptcy Code) of at least two-thirds in amount of the Allowed Interests actually voting in such Class have voted to accept the Plan.

ARTICLE VI.

SECURITIES TO BE ISSUED
IN CONNECTION WITH THE PLAN

On or before the Distribution Date, the Reorganized Holdings shall issue for distribution in accordance with the provisions of the Plan the New Common Stock.  All securities to be issued will be deemed issued as of the Distribution Date regardless of the date on which they are actually distributed.

ARTICLE VII.

PROVISIONS GOVERNING DISTRIBUTIONS

A.Distributions For Claims And Interests Allowed As Of The Effective Date

Except as otherwise provided herein or as ordered by the Bankruptcy Court, distributions to be made on account of Claims that are Allowed Claims and Interests that are Allowed Interests as of the Effective Date shall be made on the Distribution Date, or as soon thereafter as practicable.  The New Common Stock to be issued under this Plan shall be deemed issued as of the Distribution Date regardless of the date on which they are actually distributed.  Distributions

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on account of Claims that first become Allowed Claims after the Effective Date shall be made pursuant to Articles III, VII, and IX of this Plan.

B.Interest On Claims

Except for interest, fees and expenses owed and owing to the Lender pursuant to the Loan Documents or, to the FRN Holders pursuant to the FRN Documents, unless otherwise specifically provided by this Plan or the Confirmation Order, or by applicable bankruptcy law, post-petition interest shall not accrue and not be paid on Allowed Claims when due under the contract, agreement, or other instrument governing the terms and conditions of the obligation comprising such Allowed Claim.  Post-petition interest shall accrue and be paid upon, and to the extent, any Disputed Claim in respect of the period from the Effective Date to the date a final distribution is made thereon, if and after such Disputed Claim becomes an Allowed Claim.

C.Disbursing Agent

The Disbursing Agent shall make all distributions required under this Plan (subject to the provisions of Articles III and IX hereof) except distributions to the Holders of Allowed Class 5 SSN Claims, which distributions shall be deposited with the SSN Indenture Trustee, who shall deliver such distributions to the Holders of such Claims in accordance with the provisions of this Plan and the terms of the SSN Indenture.

If the Disbursing Agent is an independent third party designated by the Reorganized Debtors to serve in such capacity, such Disbursing Agent shall receive, without further Bankruptcy Court approval, reasonable compensation for distribution services rendered pursuant to the Plan and reimbursement of reasonable out-of-pocket expenses incurred in connection with such services from the Reorganized Debtors on terms acceptable to the Reorganized Debtors.  No Disbursing Agent shall be required to give any bond or surety or other security for the performance of its duties unless otherwise ordered by the Bankruptcy Court.  If otherwise so ordered, all costs and expenses of procuring any such bond shall be paid by the Reorganized Debtors.

D.Surrender Of Securities Or Instruments

On or before the Distribution Date, or as soon as practicable thereafter, each holder of an instrument evidencing (i) a Claim on account of SSNs (a “Certificate”) shall surrender such Certificate to the SSN Indenture Trustee and such Certificate shall be cancelled and (ii) an Equity Security Interest (a “Stock Certificate”) shall surrender such Stock Certificate to the Disbursing Agent and such Stock Certificate shall be cancelled.  No distribution of property hereunder shall be made by the SSN Indenture Trustee or the Disbursing Agent, as the case may be, to any such holder unless and until such Certificate or Stock Certificate is received by the SSN Indenture Trustee or the Disbursing Agent, as applicable, or the unavailability of such Certificate or Stock Certificate is reasonably established to the satisfaction of the SSN Indenture Trustee or the Disbursing Agent, as applicable.  Any such holder who fails to surrender or cause to be surrendered such Certificate or Stock Certificate or fails to execute and deliver an affidavit of loss and indemnity reasonably satisfactory to the SSN Indenture Trustee or the Disbursing Agent, as applicable, prior to the second (2nd) anniversary of the Effective Date, shall be deemed

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to have forfeited all rights and Claims in respect of such Certificate or all rights and Interests in respect of such Stock Certificate, as applicable, and shall not participate in any distribution hereunder, and all property in respect of such forfeited distribution, including interest accrued thereon, shall revert to the Reorganized Debtors notwithstanding any federal or state escheat laws to the contrary.

E.Instructions To Disbursing Agent

Prior to any distribution on account of an Allowed Class 5 SSN Claim, the SSN Indenture Trustee shall instruct the Disbursing Agent, in a form and manner that the Disbursing Agent reasonably determines to be acceptable, of the names of the Holders of Allowed Class 5 SSN Claims, and the New Common Stock to be issued and distributed to or on behalf of such Holders of Allowed Class 5 SSN Claims in exchange for properly surrendered SSNs.

F.Services Of Indenture Trustees, Agents, And Servicers

The services, with respect to consummation of the Plan, of indenture trustees, agents, and servicers under indentures and other agreements that govern the rights of Holders of Claims, shall be as set forth in Article IV.B.1 and elsewhere in the Plan.

G.Notification Date For Distributions To Holders Of Debt and Equity Securities

At the close of business on the Distribution Notification Date, the transfer ledgers for the SSNs and the Old Common Stock shall be closed, the Claims register for transfer of Claims and Interests pursuant to Bankruptcy Rule 3001(e) will also be closed and there shall be no further changes in the record holders of the SSNs and the Old Common Stock.  The Reorganized Debtors and the Disbursing Agent, if any, shall have no obligation to recognize any transfer of such SSNs or Old Common Stock occurring after the Distribution Notification Date and shall be entitled instead to recognize and deal for all purposes hereunder with only those holders stated on the applicable transfer ledgers as of the close of business on the Distribution Notification Date.

H.Means Of Cash Payment

Cash payments made pursuant to this Plan shall be in U.S. funds, by the means agreed to by the payor and the payee, including by check or wire transfer, or, in the absence of an agreement, such commercially reasonable manner as the payor shall determine in its sole discretion.

I.Delivery Of Distributions

Distributions to Holders of Allowed Claims and Allowed Interests shall be made by the Disbursing Agent or the SSN Indenture Trustee, as the case may be, (a) at the addresses set forth on the proofs of Claim or Interest filed by such Holders (or at the last known addresses of such Holders if no proof of Claim or Interest is filed or if the Debtors have been notified in writing of a change of address), (b) at the addresses set forth in any written notices of address changes delivered to the Disbursing Agent after the date of any related proof of Claim or Interest, (c) at the addresses reflected in the Schedules if no proof of Claim or Interest has been filed and the

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Disbursing Agent has not received a written notice of a change of address, (d) in the case of the Holder of a Claim that is governed by an indenture or other agreement and is administered by an indenture trustee, agent, or servicer, at the addresses contained in the official records of such indenture trustee, agent, or servicer, or (e) at the addresses set forth in a properly completed letter of transmittal accompanying securities properly remitted to the Debtors.  If any Holder’s distribution is returned as undeliverable, no further distributions to such Holder shall be made unless and until the Disbursing Agent or the appropriate indenture trustee, agent, or servicer is notified of such Holder’s then current address, at which time all missed distributions shall be made to such Holder without interest.  Amounts in respect of undeliverable distributions made through the Disbursing Agent or the indenture trustee, agent, or servicer, shall be returned to the Reorganized Debtors until such distributions are claimed.  All claims for undeliverable distributions must be made on or before the second (2nd) anniversary of the Effective Date, after which date all unclaimed property shall revert to the Reorganized Debtors free of any restrictions thereon and the claim of any holder or successor to such holder with respect to such property shall be discharged and forever barred, notwithstanding any federal or state escheat laws to the contrary.

J.Fractional Dollars; De Minimis Distributions

Any other provision of the Plan notwithstanding, payments of fractions of dollars shall not be made.  Whenever any payment of a fraction of a dollar under the Plan would otherwise be called for, the actual payment made shall reflect a rounding of such fraction to the nearest whole dollar (up or down), with half dollars being rounded down.  The Disbursing Agent, or any indenture trustee, agent, or servicer, as the case may be, shall not make any payment of less than twenty-five dollars ($25.00) with respect to any Claim unless a request therefor is made in writing to such Disbursing Agent, indenture trustee, agent, or servicer, as the case may be.

K.Withholding And Reporting Requirements

In connection with this Plan and all distributions hereunder, the Disbursing Agent shall, to the extent applicable, comply with all tax withholding and reporting requirements imposed by any federal, state, local, or foreign taxing authority, and all distributions hereunder shall be subject to any such withholding and reporting requirements.  The Disbursing Agent shall be authorized to take any and all actions that may be necessary or appropriate to comply with such withholding and reporting requirements.

L.Calculation of Distribution Amounts of New Common Stock

No fractional shares of New Common Stock shall be issued or distributed under the Plan by the Reorganized Debtors, the Disbursing Agent, or the SSN Indenture Trustee.  Each Person entitled to receive New Common Stock will receive the total number of whole shares of New Common Stock to which such Person is entitled.  Whenever any distribution to a particular Person would otherwise call for distribution of a fraction of a share of New Common Stock, the actual distribution of shares of such New Common Stock shall be rounded to the next higher or lower whole number as follows:  (a) fractions ½ or greater shall be rounded to the next higher whole number, and (b) fractions of less than ½ shall be rounded to the next lower whole number.  The total number of shares of New Common Stock to be distributed to the holder of a Class 5

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SSN Claim shall be adjusted as necessary to account for the rounding provided for in this Article VII.L.  No consideration shall be provided in lieu of fractional shares that are rounded down.

M.Setoffs

The Reorganized Debtors may, but shall not be required to, set off against any Claim, and the payments or other distributions to be made pursuant to the Plan in respect of such Claim, claims of any nature whatsoever that the Debtors or Reorganized Debtors may have against the holder of such Claim; provided, however, that neither the failure to do so nor the allowance of any Claim hereunder shall constitute a waiver or release by the Reorganized Debtors of any such claim that the Debtors or Reorganized Debtors may have against such holder.

N.Change of Control

Notwithstanding anything to the contrary contained in this Plan, the Loan and Security Agreement, the Indentures, or any executory contract to which any of the Debtors is a party, the transactions to be consummated in accordance with the Plan shall not create, or be deemed to create, (a) any right on the part of the Holder of an SSN or FRN to require that any of the Debtors or the Reorganized Debtors repurchase such Holder’s SSNs or FRNs, respectively, or (b) any other claim in connection therewith, upon a “Change of Control,” as such term may be defined in any of the Indentures, the Loan and Security Agreement or in any executory contract being assumed pursuant to the Plan.

ARTICLE VIII.

EXECUTORY CONTRACTS AND UNEXPIRED LEASES

A.Assumption

On the Effective Date, and to the extent permitted by applicable law, all of the Debtors’ executory contracts and unexpired leases will be assumed by the Debtors, unless such executory contract or unexpired lease:

(a)is filed as part of the Plan Supplement as a contract or lease that is being rejected pursuant to the Plan; or

(b)is the subject of a motion to reject filed on or before the Confirmation.

B.Pass-Through

Any rights or arrangements necessary or useful to the operation of the Debtors’ business but not otherwise addressed as a claim or equity interest, including non-exclusive or exclusive patent, trademark, copyright, maskwork or other intellectual property licenses and other executory contracts not assumable under section 365(c) of the Bankruptcy Code, shall, in the absence of any other treatment, be passed through the bankruptcy proceedings for the Debtors and the Debtors’ counterparty’s benefit, unaltered and unaffected by the bankruptcy filings or the Chapter 11 Cases.

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C.Assumed Executory Contracts and Unexpired Leases Related to Real Property

Each executory contract and unexpired lease that is assumed and relates to the use, ability to acquire, or occupancy of real property will include (a) all modifications, amendments, supplements, restatements, or other agreements made directly or indirectly by any agreement, instrument, or other document that in any manner affect such executory contract or unexpired lease, and (b) all executory contracts or unexpired leases and other rights appurtenant to the property, including all easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, powers, uses, reciprocal easement agreements, vaults, tunnel or bridge agreements or franchises, and any other equity interests in real estate or rights in rem related to such premises, unless any of the foregoing agreements has been rejected pursuant to an order of the Bankruptcy Court or is the subject of a motion to reject filed on or before the Confirmation Date.

D.Cure Costs and Bar Dates

1.Cure

Except to the extent different treatment is agreed to among the parties, any monetary amounts by which each executory contract and unexpired lease to be assumed pursuant to the Plan is in default will be satisfied, under section 365(b)(1) of the Bankruptcy Code, at the Debtors’ option, by the payment of Cash or distribution of other property as necessary to cure any defaults.  If there is a dispute regarding (i) the nature or amount of any cure, (ii) the Debtors’ ability or the ability of the Debtors’ assignees to provide “adequate assurance of future performance” (within the meaning of section 365 of the Bankruptcy Code) under the contract or lease to be assumed, or (iii) any other matter pertaining to assumption, cure will occur following the entry of a Final Order resolving the dispute and approving the assumption or assumption and assignment, as the case may be.

2.Bar Date for Filing Claims for Rejection Damages

If the rejection of an executory contract or unexpired lease gives rise to a Claim, a proof of Claim must be served upon the Debtors and the Debtors’ counsel within 30 days after the later of:

(a)notice of entry of the Confirmation; or

(b)other notice that the executory contract or unexpired lease has been rejected.

Any claim not served within such time period will be forever barred.  Each such Claim will constitute a Class 6 Claim, to the extent such Claim is Allowed by the Bankruptcy Court.

E.Survival of Indemnification and Corporation Contribution

Notwithstanding anything to the contrary contained in the Plan, the obligations of the Debtors, if any, to indemnify and/or provide contribution to its directors, officers, agents, employees and representatives who are serving in such capacity on the Petition Date, pursuant to

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the Corporate Documents applicable statutes, or contractual obligations, in respect of all past, present and future actions, suits and proceedings against any of such directors, officers, agents, employees and representatives, based on any act or omission related to the service with, for or on behalf of the Debtors will be deemed and treated as executory contracts that are assumed by the applicable Debtor or Reorganized Debtor pursuant to the Plan and section 365 of the Bankruptcy Code as of the Effective Date.  Accordingly, such indemnification obligations will not be discharged, but will instead survive and be unaffected by entry of the Confirmation Date.

ARTICLE IX.

PROCEDURES FOR RESOLVING DISPUTED,
CONTINGENT, AND UNLIQUIDATED CLAIMS

A.Objection Deadline; Prosecution Of Objections

As soon as practicable, but in no event after the later (i) than sixty (60) days after the Effective Date (unless extended by an order of the Bankruptcy Court) and (ii) the date any Claim is filed and served upon the Debtors, the Reorganized Debtors shall file objections to Claims with the Bankruptcy Court and serve such objections upon the holders of each of the Claims to which objections are made.  Nothing contained herein, however, shall limit the Reorganized Debtors’ right to object to Claims, if any, filed or amended more than sixty (60) days after the Effective Date.

B.No Distributions Pending Allowance

Notwithstanding any other provision of the Plan, no payments or distributions shall be made with respect to all or any portion of a Disputed Claim unless and until all objections to such Disputed Claim have been settled or withdrawn or have been determined by Final Order, and the Disputed Claim, or some portion thereof, has become an Allowed Claim.

C.Distribution Reserve

The Disbursing Agent shall withhold the Distribution Reserve from the Cash or other property (other than the New Common Stock to be distributed to the SSN Indenture Trustee for the ratable benefit of the holders of Allowed Class 5 SSN Claims) to be distributed under the Plan.  As to any Disputed Claim, upon a request for estimation by the Debtors, the Bankruptcy Court shall determine what amount is sufficient to withhold as the Distribution Reserve.  The Debtors may request estimation for every Disputed Claim that is unliquidated and the Disbursing Agent shall withhold the Distribution Reserve based upon the estimated amount of such Claim as set forth in a Final Order.  In no event shall the holder of a Disputed Claim be entitled to a distribution in excess of the Debtors’ estimate of such Disputed Claim.  If the Debtors elect not to request such an estimation from the Bankruptcy Court with respect to a Disputed Claim that is liquidated, the Disbursing Agent shall withhold the Distribution Reserve based upon the Face Amount of such Claim.

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D.Distributions After Allowance

The Reorganized Debtors or the Disbursing Agent, as the case may be, shall make payments and distributions from the Distribution Reserve to each holder of a Disputed Claim that has become an Allowed Claim in accordance with the provisions of the Plan governing the class of Claims to which such holder belongs.  On the next succeeding interim distribution date after the date that the order or judgment of the Bankruptcy Court allowing all or part of such Claim becomes a Final Order, the Disbursing Agent shall distribute to the holder of such Claim any Cash or other property in the Distribution Reserve that would have been distributed on the Distribution Date had such Allowed Claim been allowed on the Distribution Date.  After a Final Order has been entered, or other final resolution has been reached, with respect to each Disputed Claim, any Cash or other property remaining in the Distribution Reserve shall become property of the Reorganized Debtors.  All distributions made under Article IX.D of the Plan on account of an Allowed Claim shall be made together with any dividends, payments, or other distributions made on account of, as well as any obligations arising from, the distributed property, as if such Allowed Claim had been an Allowed Claim on the Distribution Date.  Notwithstanding the foregoing, the Disbursing Agent shall not be required to make distributions under Article IX.D more frequently than once every 180 days or to make any individual payments in an amount less than $25.00.

E.General Unsecured Claims

Notwithstanding the contents of the Schedules, Claims listed therein as undisputed, liquidated and not contingent shall be reduced by the amount, if any, that was paid by the Debtors prior to the Effective Date including pursuant to orders of the Bankruptcy Court.  To the extent such payments are not reflected in the Schedules, such Schedules will be deemed amended and reduced to reflect that such payments were made.  Nothing in the Plan shall preclude the Reorganized Debtors from paying Claims that the Debtors were authorized to pay pursuant to any Final Order entered by the Bankruptcy Court prior to the Confirmation Date.

ARTICLE X.

CONDITIONS PRECEDENT TO CONFIRMATION AND
CONSUMMATION OF THE PLAN

A.Conditions To Confirmation

1.The Bankruptcy Court shall not enter the Confirmation Order unless and until (i) the Confirmation Order shall be reasonably acceptable in form and substance to the Debtors, the Initial Consenting Parties, and the Exit Lenders and (ii) the Confirmation Order includes a finding of fact that the Debtors, the Reorganized Debtors, the Initial Consenting Parties, the Ad Hoc Committee, and their respective present and former members, officers, directors, employees, advisors, attorneys, and agents acted in good faith within the meaning of and with respect to all of the actions described in section 1125(e) of the Bankruptcy Code and are therefore not liable for the violation of any applicable law, rule, or regulation governing such actions.

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2.The Debtors shall have arranged for credit availability under the New Revolving Loan Facility, in amount, form and substance acceptable to the Debtors or Reorganized Debtors, as the case may be, to provide the Reorganized Debtors and their subsidiaries with their working capital needs.

B.Conditions To Consummation

The following are conditions precedent to the occurrence of the Effective Date, each of which must be (i) satisfied or (ii) waived in accordance with Article X.D. below:

1.The Confirmation Order, in form and substance reasonably acceptable to the Debtors, the Initial Consenting Parties, and the Exit Lenders, confirming the Plan, as the same may have been modified, must, among other things, provide that:

(a)the Debtors and Reorganized Debtors are authorized and directed to take all actions necessary or appropriate to enter into, implement and consummate the contracts, instruments, releases, indentures and other agreements or documents created in connection with the Plan or the Restructuring;

(b)the provisions of the Confirmation Order are nonseverable and mutually dependent;

(c)the transfers of property by the Debtors (a) to the Reorganized Debtors (i) are or will be legal, valid, and effective transfers of property, (ii) vest or will vest the Reorganized Debtors with good title to such property free and clear of all Liens, charges, Claims, encumbrances, or Interests, except as expressly provided in the Plan or Confirmation Order, (iii) do not and will not constitute avoidable transfers under the Bankruptcy Code or under applicable bankruptcy or nonbankruptcy law, and (iv) do not and will not subject the Reorganized Debtors to any liability by reason of such transfer under the Bankruptcy Code or under applicable nonbankruptcy law, including, without limitation, any laws affecting successor or transferee liability, and (b) to holders of Claims under the Plan are for good consideration and value and are in the ordinary course of the Debtors’ businesses;

(d)except as expressly provided in the Plan, the Debtors are discharged effective upon the Confirmation Date from any “debt” (as that term is defined in section 101(12) of the Bankruptcy Code), and the Debtors’ liability in respect thereof is extinguished completely, whether reduced to judgment or not, liquidated or unliquidated, contingent or noncontingent, asserted or unasserted, fixed or unfixed, matured or unmatured, disputed or undisputed, legal or equitable, or known or unknown, or obligation of the Debtors incurred before the Confirmation Date, or from any conduct of the Debtors prior to the Confirmation Date, or that otherwise arose before the Confirmation Date, including, without limitation, all interest, if any, on any such debts, whether such interest accrued before or after the Petition Date;

(e)the Plan does not provide for the liquidation of all or substantially all of the property of the Debtors and its confirmation is not likely to be followed by the liquidation of the Reorganized Debtors or the need for further financial reorganization;

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(f)the New Common Stock, issued under the Plan in exchange for the SSN Claims against the Debtors are exempt from registration under the Securities Act pursuant to section 1145 of the Bankruptcy Code, except to the extent that holders of the New Common Stock are “underwriters,” as that term is defined in section 1145 of the Bankruptcy Code.  The issuance of the New Common Stock pursuant to the Exchange Offer was in compliance with the registration requirements of the Securities Act of 1933, as amended;

(g)no beneficial owner of an SSN Claim shall receive a distribution of New Common Stock for 35% or more of the shares of the New Common Stock that will be outstanding on the Effective Date; and

(h)all executory contracts or unexpired leases assumed or assumed and assigned by the Debtors during the Chapter 11 Cases or hereunder shall remain in full force and effect for the benefit of the Debtors or their assignees notwithstanding any provision in such contract or lease (including those described in sections 365(b)(2) and (f) of the Bankruptcy Code) that prohibits such assignment or transfer or that enables, permits, or requires termination of such contract or lease.

2.The Reorganized Debtors shall have credit availability under the New Revolving Loan Facility, in amount, form and substance acceptable to the Debtors or Reorganized Debtors, as the case may be, to provide the Reorganized Debtors and their subsidiaries with their working capital needs.

3.The following agreements, in form reasonably satisfactory to the Debtors or Reorganized Debtors, shall have been executed and delivered, and all conditions precedent thereto shall have been satisfied:

(a)Restated Corporate Documents.

(b)Registration Rights Agreement.

(c)New Revolving Loan Facility.

4.All authorizations, consents, and regulatory approvals required, if any, in connection with the consummation of this Plan shall have been obtained.

5.The Amended Prospectus and Solicitation Statement shall remain effective and no “stop order” is in effect.

6.The Debtors shall have executed and delivered all documents necessary to effectuate the issuance of the New Common Stock.

7.Confirmation shall have occurred and the Confirmation Order shall have been entered by the Bankruptcy Court.

8.The Confirmation Order shall have become a Final Order.

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9.There shall not be in effect on the Effective Date any (i) order entered by a U.S. court or (ii) any order, opinion, ruling or other decision entered by any other court or governmental entity or (iii) United States or other applicable law staying, restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by the Plan.

10.No request for revocation of the Confirmation Order under section 1144 of the Bankruptcy Code shall remain pending.

11.None of the Lockup Agreements shall have been terminated.

12.The Debtors or the Reorganized Debtors have made Full Payment (as such term is defined in the Loan and Security Agreement) of all of the Lender Secured Claims.

13.The Debtors shall have issued $15 million of new senior secured floating rates notes to the Initial Consenting Parties or such other parties identified by them pursuant to the terms of that certain commitment letter (the “Commitment Letter”) dated May 29, 2007 by and among the Debtors and the Initial Consenting Parties.

14.The Debtors shall have paid all fees related to (i) Waiver and Agreement No. 1 to the FRN Indenture dated May 29, 2007 by and among the Initial Consenting Parties and the Loan Parties, and acknowledged by the FRN Indenture Trustee and (ii) the Commitment Letter.

15.All definitive documentation relating to the Plan and the transactions contemplated thereby shall be consistent in all material respects with the Lockup Agreements and all other documents material to the consummation of the transactions contemplated under the Plan shall be reasonably acceptable to the Debtors and in form and substance.

16.All actions, documents and agreements necessary to implement the Plan shall have been effected or executed.

C.Substantial Consummation

On the Effective Date, the Plan shall be deemed to be substantially consummated under sections 1101 and 1127(b) of the Bankruptcy Code.

D.Waiver Of Conditions

Each of the conditions set forth in Article X. (except with respect to the Full Payment (as such term is defined in the Loan and Security Agreement) of the Lender Secured Claim may be waived in whole or in part by the Debtors or Reorganized Debtors, without any notice to parties in interest or the Bankruptcy Court (except to the Ad Hoc Committee and the Initial Consenting Parties) and without a hearing.  The failure to satisfy or waive any condition to the Effective Date may be asserted by the Debtors or the Reorganized Debtors, regardless of the circumstances giving rise to the failure of such condition to be satisfied (including any action or inaction by the Debtors or Reorganized Debtors).  The failure of the Debtors or the Reorganized Debtors to exercise any of the foregoing rights shall not be deemed a waiver of any other rights, and each such right shall be deemed an ongoing right that may be asserted at any time.

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ARTICLE XI.

MODIFICATIONS AND AMENDMENTS

The Debtors may alter, amend, or modify the Plan or any Exhibits thereto under section 1127(a) of the Bankruptcy Code at any time prior to the Confirmation Date.  After the Confirmation Date and prior to substantial consummation of the Plan, as defined in section 1101(2) of the Bankruptcy Code, the Debtors may, under section 1127(b) of the Bankruptcy Code, institute proceedings in the Bankruptcy Court to remedy any defect or omission or reconcile any inconsistencies in the Plan, or the Confirmation Order, and such matters as may be necessary to carry out the purposes and effects of the Plan so long as such Proceedings do not materially adversely affect the treatment of Holders of Claims or Interests under the Plan; provided, however, that prior notice of such proceedings shall be served in accordance with the Bankruptcy Rules or order of the Bankruptcy Court.

ARTICLE XII.

RETENTION OF JURISDICTION

Under sections 105(a) and 1142 of the Bankruptcy Code, and notwithstanding entry of the Confirmation Order and occurrence of the Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction over all matters arising out of, and related to, the Chapter 11 Cases and the Plan to the fullest extent permitted by law, including, among other things, jurisdiction to:

A.Allow, disallow, determine, liquidate, classify, estimate or establish the priority or secured or unsecured status of any Claim or Interest, including the resolution of any request for payment of any Administrative Claim and the resolution of any objections to the allowance or  priority of Claims or Interests;

B.Hear and determine all applications for compensation and reimbursement of expenses of Professionals under the Plan or under sections 330, 331, 503(b), 1103 and 1129(a)(4) of the Bankruptcy Code; provided, however, that from and after the Effective Date, the payment of the fees and expenses of the retained professionals of the Reorganized Debtors shall be made in the ordinary course of business and shall not be subject to the approval of the Bankruptcy Court;

C.Hear and determine all matters with respect to the assumption or rejection of any executory contract or unexpired lease to which one or more of the Debtors are parties or with respect to which one or more of the Debtors may be liable, including, if necessary, the nature or amount of any required cure or the liquidation of any claims arising therefrom;

D.Hear and determine any and all adversary proceedings, motions, applications, and contested or litigated matters arising out of, under, or related to, the Chapter 11 Cases;

E.Enter such orders as may be necessary or appropriate to execute, implement, or consummate the provisions of the Plan and all contracts, instruments, releases, and other agreements or documents created in connection with the Plan, or the Confirmation Order;

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F.Hear and determine disputes arising in connection with the interpretation, implementation, consummation, or enforcement of the Plan, including disputes arising under agreements, documents or instruments executed in connection with the Plan;

G.Consider any modifications of the Plan, cure any defect or omission, or reconcile any inconsistency in any order of the Bankruptcy Court, including, without limitation, the Confirmation Order;

H.Issue injunctions, enter and implement other orders, or take such other actions as may be necessary or appropriate to restrain interference by any entity with implementation, consummation, or enforcement of the Plan or the Confirmation Order;

I.Enter and implement such orders as may be necessary or appropriate if the Confirmation Order is for any reason reversed, stayed, revoked, modified, or vacated;

J.Hear and determine any matters arising in connection with or relating to the Plan, the Confirmation Order, or any contract, instrument, release, or other agreement or document created in connection with the Plan, or the Confirmation Order;

K.Enforce all orders, judgments, injunctions, releases, exculpations, indemnifications and rulings entered in connection with the Chapter 11 Cases;

L.Recover all assets of the Debtors and property of the Debtors’ Estates, wherever located;

M.Hear and determine matters concerning state, local, and federal taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy Code;

N.Hear and determine all disputes involving the existence, nature, or scope of the Debtors’ discharge;

O.Hear and determine such other matters as may be provided in the Confirmation Order or as may be authorized under, or not inconsistent with, provisions of the Bankruptcy Code; and

P.Enter a final decree closing the Chapter 11 Cases.

ARTICLE XIII.

COMPROMISES AND SETTLEMENTS

Pursuant to Bankruptcy Rule 9019, and in consideration for the classification, distribution and other benefits provided under the Plan, the provisions of the Plan shall constitute a good faith compromise and settlement of all Claims and controversies resolved pursuant to the Plan, including, without limitation, all Claims arising prior to the Petition Date, whether known or unknown, foreseen or unforeseen, asserted or unasserted, arising out of, relating to or in connection with the business or affairs of, or transactions with, the Debtors.  The entry of the Confirmation Order shall constitute the Bankruptcy Court’s approval of each of the foregoing

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compromises or settlements, and all other compromises and settlements provided for in the Plan, and the Bankruptcy Court’s findings shall constitute its determination that such compromises and settlements are in the best interests of the Debtors, the Estate, Creditors and other parties in interest, and are fair, equitable and within the range of reasonableness.

ARTICLE XIV.

MISCELLANEOUS PROVISIONS

A.Bar Dates For Certain Claims

1.Administrative Claims:  Substantial Contribution Claims

The Confirmation Order will establish an Administrative Claims Bar Date for filing of all Administrative Claims, including Substantial Contribution Claims (but not including Professional Fee Claims or claims for the expenses of the members of the Committee (if one has been appointed)), which date will be 45 days after the Effective Date.  Holders of asserted Administrative Claims, other than Professional Fee Claims, claims for U.S. Trustee fees under 28 U.S.C. §1930, administrative tax claims and administrative ordinary case liabilities, must submit proofs of Administrative Claim on or before such Administrative Claims Bar Date or forever be barred from doing so.  A notice prepared by the Reorganized Debtors will set forth such date and constitute notice of this Administrative Claims Bar Date.  The Debtors or Reorganized Debtors, as the case may be, shall have 45 days (or such longer period as may be allowed by order of the Bankruptcy Court) following the Administrative Claims Bar Date to review and object to such Administrative Claims before a hearing for determination of allowance of such Administrative Claims.

2.Administrative Ordinary Course Liabilities

Holders of Administrative Claims that are based on liabilities incurred in the ordinary course of the Debtors’ businesses (other than Claims of governmental units for taxes (and for interest and/or penalties related to such taxes)) shall not be required to file any request for payment of such Claims.  Such Administrative Claims, unless objected to by the Debtors, shall be assumed and paid by the Debtors, in Cash, pursuant to the terms and conditions of the particular transaction giving rise to such Administrative Claim.

3.Administrative Tax Claims

All requests for payment of Administrative Claims by a governmental unit for taxes (and for interest and/or penalties related to such taxes) for any tax year or period, all or any portion of which occurs or falls within the period from and including the Petition Date through and including the Effective Date, and for which no bar date has otherwise been previously established, must be filed and served on the Reorganized Debtors and any other party specifically requesting a copy in writing on or before the later of (a) thirty (30) days following the Effective Date; and (b) one hundred and twenty (120) days following the filing of the tax return for such taxes for such tax year or period with the applicable governmental unit.  Any Holder of any such Claim that is required to file a request for payment of such taxes and does not file and properly serve such a claim by the applicable bar date shall be forever barred from

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asserting any such claim against the Debtors, the Reorganized Debtors or their property, regardless of whether any such Claim is deemed to arise prior to, on, or subsequent to the Effective Date.  Any interested party desiring to object to an Administrative Claim for taxes must file and serve its objection on counsel to the Debtors and the relevant taxing authority no later than ninety (90) days after the taxing authority files and serves its application.

4.Professional Fee Claims

All final requests for compensation or reimbursement of Professional Fees pursuant to sections 327, 328, 330, 331, 503(b) or 1103 of the Bankruptcy Code for services rendered to the Debtors or the Committee (if one has been appointed) prior to the Effective Date (other than Substantial Contribution Claims under section 503(b)(4) of the Bankruptcy Code) must be filed and served on the Reorganized Debtors and their counsel no later than 45 days after the Effective Date, unless otherwise ordered by the Bankruptcy Court.  Objections to applications of such Professionals or other entities for compensation or reimbursement of expenses must be filed and served on the Reorganized Debtors and their counsel and the requesting Professional or other entity no later than 45 days (or such longer period as may be allowed by order of the Bankruptcy Court) after the date on which the applicable application for compensation or reimbursement was served.

B.Payment Of Statutory Fees

All fees payable pursuant to section 1930 of title 28 of the United States Code, as determined by the Bankruptcy Court at Confirmation shall be paid on or before the Effective Date.

C.Severability Of Plan Provisions

If, prior to Confirmation, any term or provision of the Plan is held by the Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy Court, at the request of the Debtors, shall have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision shall then be applicable as altered or interpreted.  Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of the Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated by such holding, alteration or interpretation.  The Confirmation Order shall constitute a judicial determination and shall provide that each term and provision of the Plan, as it may have been altered or interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms.

D.Successors And Assigns

The rights, benefits and obligations of any entity named or referred to in the Plan shall be binding on, and shall inure to the benefit of, any heir, executor, administrator, successor or assign of such entity.

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E.Discharge Of The Debtors

All consideration distributed under the Plan shall be in exchange for, and in complete satisfaction, settlement, discharge, and release of, all Claims of any nature whatsoever against the Debtors or any of their assets or properties, and, except as otherwise provided herein or in the Confirmation Order, and regardless of whether any property shall have been distributed or retained pursuant to the Plan on account of such Claims, upon the Effective Date, (a) the Debtors, shall be deemed discharged and released under section 1141(d)(1)(A) of the Bankruptcy Code from any and all Claims, including, but not limited to, demands and liabilities that arose before the Confirmation Date, and all debts of the kind specified in sections 502(g), 502(h) or 502(i) of the Bankruptcy Code, whether or not (i) a proof of Claim based upon such debt is filed or deemed filed under section 501 of the Bankruptcy Code, (ii) a Claim based upon such debt is Allowed under section 502 of the Bankruptcy Code, or (iii) the Holder of a Claim based upon such debt accepted the Plan; and (b) all Interests and other rights of the equity security holders in the Debtors shall be terminated.  The Confirmation Order shall be a judicial determination of discharge of all liabilities of the Debtors, subject to the Effective Date occurring.

F.Exculpation And Limitation Of Liability

None of the Reorganized Debtors, Lender, the Initial Consenting Parties, or the Ad Hoc Committee, or any of their respective present or former members, equity holders, partners, officers, directors, employees, advisors, attorneys, or agents, shall have or incur any liability to any Holder of a Claim or an Interest, or any other party in interest, or any of their respective agents, employees, representatives, financial advisors, attorneys, or affiliates, or any of their successors or assigns, for any act or omission in connection with, relating to, or arising out of, the Chapter 11 Cases, negotiation of the Plan, the solicitation of acceptances of the Plan, the pursuit of confirmation of the Plan, the consummation of the Plan, or the administration of the Plan or the property to be distributed under the Plan, except for their gross negligence or willful misconduct, and in all respects shall be entitled to reasonably rely upon the advice of counsel with respect to their duties and responsibilities under the Plan.

Notwithstanding any other provision of this Plan, no Holder of a Claim or Interest, no other party in interest, none of their respective agents, employees, representatives, financial advisors, attorneys, or affiliates, and no successors or assigns of the foregoing, shall have any right of action against the Reorganized Debtors, the Estates, the Lender, the Initial Consenting Parties, the Ad Hoc Committee, any official committee appointed in the Chapter 11 Cases, or any of their respective present or former members, equity holders, partners, officers, directors, employees, advisors, attorneys, or agents, for any act or omission in connection with, relating to, or arising out of, the Exchange Offer, the Chapter 11 Cases, the solicitation of acceptances of the Plan, the pursuit of confirmation of the Plan, the consummation of the Plan, or the administration of the Plan or the property to be distributed under the Plan, except for their gross negligence or willful misconduct.

The foregoing exculpation and limitation on liability shall not, however, limit, abridge, or otherwise affect the rights, if any, of the Reorganized Debtors to enforce, sue on, settle, or compromise the Litigation Claims retained pursuant to Article IV.F hereof.

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G.Permanent Injunction

Except as otherwise expressly provided in the Plan or the Confirmation Order, all entities who have held, hold or may hold Claims against, or Interests in, the Debtors will be permanently enjoined, on and after the Effective Date, from (i) commencing or continuing in any manner any action or other proceeding of any kind with respect to any such Claim or Interest, (ii) the enforcement, attachment, collection, or recovery by any manner or means of judgment, award, decree or order against the Debtors on account of any such Claim or Interest, (iii) creating, perfecting, or enforcing any encumbrance of any kind against the Debtors or against the property or interests in property of the Debtors on account of any such Claim or Interest, and (iv) asserting any right of setoff or subrogation of any kind against any obligation due from the Debtors or against the property or interests in property of the Debtors on account of any such Claim or Interest.  The foregoing injunction will extend to successors of the Debtors (including, without limitation, the Reorganized Debtors) and their respective properties and interests in property.

H.Debtors’ Releases

As of the Effective Date, the Debtors, the Reorganized Debtors and any successors shall be deemed, to the maximum extent permitted by applicable law, to forever release, waive and discharge all claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action and liabilities whatsoever in connection with or related to the Debtors or the Reorganized Debtors, the Chapter 11 Cases or the Plan (other than the rights of the Debtors and Reorganized Debtors and any successors to enforce the Plan and the contracts, instruments, releases, indentures, and other agreements or documents assumed, passed through or delivered in connection with such plan) and whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity or otherwise that are based in whole or part on any act, omission, transaction, event or other occurrence taking place on or prior to the Effective Date and in any way relating to the Debtors, Reorganized Debtors or any successors or their property, the Chapter 11 Cases, the Plan, the Lender, the Initial Consenting Parties (solely in their capacity as Holders of FRN Claims or as parties to the FRN Transaction Documents), or the Ad Hoc Committee and its present and former members (solely in their capacity as present or former members of such committee), any official committee appointed in the Chapter 11 Cases and its present and former members (solely in their capacity as present or former members of such committee) and that may be asserted by or on behalf of the Debtors or the Reorganized Debtors against the Lender, the Initial Consenting Parties (solely in their capacity as Holders of FRN Claims or as parties to the FRN Transaction Documents), the Holders of the SSN Claims (including the Ad Hoc Committee and its present and former members), the SSN Indenture Trustee, any official committee appointed in the Chapter 11 Cases and its present and former members (solely in their capacity as present or former members of such committee) and any successors or their property and each of their directors, officers, employees, agents, financial advisors, representatives, affiliates, attorneys and professionals as of the Effective Date; provided, however, that such releases shall not operate as a waiver or release of any causes of action arising out of (x) any express contractual obligation owing by any such director, officer, or employee, agent, financial advisor, representative, affiliate, attorney or professional, or (y) the willful misconduct, gross negligence, intentional fraud or criminal conduct of such director, officer, or employee, agent, financial advisor, representative, affiliate or professional.

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I.Releases by Holders of Claims and Interests

As of the Effective Date, for good and valuable consideration, the adequacy of which is hereby confirmed, each Holder of a Claim (including a Lender Secured Claim, FRN Claim, or a SSN Claim) or Interest that votes in favor of the Plan (or is deemed to accept the Plan), and to the fullest extent permissible under applicable law, as such law may be extended or integrated after the Effective Date, each Holder of a Claim or Interest that does not vote to accept the Plan, shall be deemed to unconditionally, forever release, waive and discharge all Claims, Interests, suits, judgments, damages, demands, debts, rights, causes of action and liabilities whatsoever in connection with or related to the recapitalization and restructuring efforts undertaken by the Debtors, the Chapter 11 Cases, the Plan (other than the rights to enforce the Plan and the contracts, instruments, releases, indentures, and other agreements or documents assumed, passed through or delivered in connection with such Plan) whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity or otherwise that are based in whole or in part on any act, omission, transaction, event or other occurrence taking place on or prior to the Effective Date in any way relating to the Debtors, the Reorganized Debtors, the InSight Entities and any successors, the Chapter 11 Cases, the Plan, the Lender, the Initial Consenting Parties (solely in their capacity as Holders of FRN Claims or as parties to the FRN Transaction Documents), the Ad Hoc Committee and its present and former members (solely in their capacity as present or former members of such committee), or any official committee appointed in the Chapter 11 Cases (and its present and former members solely in their capacity as present or former members of such committee) against (i) the Debtors, the Reorganized Debtors and any successors, (ii) the Debtors’ present and former directors, officers, employees, agents, financial advisors, attorneys and professionals, (iii) the Lender and its successors and assigns and advisors, (iv) the Initial Consenting Parties and each of their successors and assigns (solely in their capacity as Holders of FRN Claims or as parties to the FRN Transaction Documents), (v) the Ad Hoc Committee and its present and former members (solely in their capacity as present or former members of such committee) and advisors, and (vi) any official committee appointed in the Chapter 11 Cases and its present and former members (solely in their capacity as present or former members of such committee) and advisors; provided, however, that the foregoing shall not waive or release any causes of action arising out of (x) any express contractual obligations owing by any such director, officer, employee, agent, financial advisor, attorney or professional of the Debtors, the Reorganized Debtors and any successors, or (y) the willful misconduct, gross negligence, intentional fraud or criminal conduct of such director, officer, employee, agent, financial advisor, representative or professional of the Debtors.

J.Binding Effect

The Plan shall be binding upon and inure to the benefit of the Debtors, all present and former Holders of Claims against and Interests in the Debtors, their respective successors and assigns, including, but not limited to, the Reorganized Debtors, and all other parties-in-interest in these Chapter 11 Cases.

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K.Revocation, Withdrawal, Or Non-Consummation

The Debtors reserve the right to revoke or withdraw the Plan at any time prior to the Confirmation Date and to file subsequent plans of reorganization.  If the Debtors revoke or withdraw the Plan, or if Confirmation or consummation of the Plan does not occur, then (i) the Plan shall be null and void in all respects, (ii) any settlement or compromise embodied in the Plan (including the fixing or limiting to an amount certain any Claim or Class of Claims), and any document or agreement executed pursuant to the Plan shall be deemed null and void, and (iii) nothing contained in the Plan, and no acts taken in preparation for consummation of the Plan, shall (a) constitute or be deemed to constitute a waiver or release of any Claims by or against, or any Interests in, the Debtors or any other Person, (b) prejudice in any manner the rights of the Debtors or any Person in any further proceedings involving the Debtors, or (c) constitute an admission of any sort by the Debtors or any other Person.

L.Plan Supplement

Any and all exhibits, lists, or schedules not filed with the Plan shall be contained in the Plan Supplement and filed with the Clerk of the Bankruptcy Court not later than the tenth (10th) day prior to the Effective Date.  Upon filing with the Bankruptcy Court, the Plan Supplement may be inspected in the office of the Clerk of the Bankruptcy Court during normal court hours.  Holders of Claims or Interests may obtain a copy of the Plan Supplement upon written request to the Debtors in accordance with Article XIV.M of the Plan.

M.Notices

Any notice, request, or demand required or permitted to be made or provided to or upon  Debtors, Reorganized Debtors or the Ad Hoc Committee under the Plan shall be (i) in writing, (ii) served by (a) certified mail, return receipt requested, (b) hand delivery, (c) overnight delivery service, (d) first class mail, or (e) facsimile transmission, and (iii) deemed to have been duly given or made when actually delivered or, in the case of notice by facsimile transmission, when received and telephonically confirmed, addressed as follows:

INSIGHT HEALTH SERVICES HOLDINGS CORP.
26250 Enterprise Court
Suite 100
Lake Forest, CA  92630
Attn:  General Counsel
Telephone:  (949) 282-6000
Facsimile:   (949) 462-3703

with a copy to:

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Mark D. Collins
Daniel J. DeFranceschi
RICHARDS, LAYTON & FINGER, P.A.
One Rodney Square
920 North King Street
Wilmington, DE 19801
Telephone:(302) 651-7700
Facsimile:(302) 498-7701

and

Michael B. Solow
Harold D. Israel
KAYE SCHOLER LLC
70 West Madison Street
Suite 4100
Chicago, IL 60602
Telephone:(312) 583-2300
Facsimile:(312) 583-2360

and

AD HOC COMMITTEE OF HOLDERS OF
INSIGHT’S SENIOR SUBORDINATED NOTES
c/o Robert J. Stark
Brown Rudnick Berlack Israels LLP
7 Times Square
New York, NY  10036
Telephone:(212) 704-0100
Facsimile:(212) 704-0196

N.Indemnification Obligations

Except as otherwise specifically limited in this Plan, any obligations or rights of the Debtors to indemnify its present and former directors, officers, or employees pursuant to the Debtors’ Corporate Documents, policy of providing employee indemnification, applicable state law, or specific agreement in respect of any claims, demands, suits, causes of action, or proceedings against such directors, officers, or employees based upon any act or omission related to such present and former directors’, officers’, or employees’ service with, for, or on behalf of the Debtors, shall survive confirmation of this Plan and remain unaffected thereby, irrespective of whether indemnification is owed in connection with an occurrence before or after the Petition Date.

O.Prepayment

Except as otherwise provided in this Plan, the Confirmation Order or the FRN Indenture, the Debtors shall have the right to prepay, without penalty, all or any portion of an Allowed

40

Claim at any time; provided, however, that any such prepayment shall not be violative of, or otherwise prejudice, the relative priorities among the Classes of Claims.

P.Term Of Injunctions Or Stay

Unless otherwise provided herein or in the Confirmation Order, all injunctions or stays provided for in the Chapter 11 Cases under sections 105 or 362 of the Bankruptcy Code or otherwise, and extant on the Confirmation Date (excluding any injunctions or stays contained in this Plan or the Confirmation Order), shall remain in full force and effect until the Effective Date.

Q.Registration Rights Agreement

Without limiting the effect of section 1145 of the Bankruptcy Code, on the Effective Date, certain holders of New Common Stock shall have the option to become a party to a Registration Rights Agreement and, accordingly, will be afforded the rights thereby and will be subject to the obligations provided therein.  The Registration Rights Agreement will provide, among other things, for demand and piggyback registration rights for the benefit of the signatories thereto.

R.Hart-Scott-Rodino Compliance

Any shares of New Common Stock distributed to any entity required to file a Premerger Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall not be distributed until the notification and waiting periods applicable under such Act to such entity shall have expired or been terminated.  Any filing fees associated with any such filing shall be paid by the Reorganized Debtors.

S.Allocation of Plan Distributions Between Principal and Interest

To the extent that any Allowed Claim entitled to a distribution under the Plan is comprised of indebtedness and accrued but unpaid interest thereon, the value of such distribution shall be allocated to the principal amount of the Claim first and then, to the extent consideration exceeds the principal amount of the Claim, to accrued but unpaid interest.

T.Dissolution of Committee

On the Effective Date, the Committee shall dissolve and the members of the Committee shall be released and discharged from all authority, duties, responsibilities and obligations related to and arising from and in connection with the Chapter 11 Cases.

U.No Admissions

Notwithstanding anything herein to the contrary, nothing contained in the Plan shall be deemed as an admission by the Debtors with respect to any matter set forth herein including, without limitation, liability on any Claim.

[Remainder of Page Intentionally Left Blank]

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V.Governing Law

Unless a rule of law or procedure is supplied by federal law (including the Bankruptcy Code and Bankruptcy Rules), the laws of the State of Delaware shall govern the construction and implementation of the Plan and any agreements, documents, and instruments executed in connection with the Plan as well as corporate governance matters with respect to the Debtors, without giving effect to the principles of conflicts of law thereof.

ARTICLE XV.

CONFIRMATION REQUEST

The Debtors request Confirmation of the Plan under section 1129 of the Bankruptcy Code.  If any Impaired Class does not accept the Plan pursuant to section 1126 of the Bankruptcy Code, the Debtors request Confirmation pursuant to section 1129(b) of the Bankruptcy Code.  In that event, the Debtors reserve the right to modify the Plan to the extent (if any) that Confirmation of the Plan under section 1129(b) of the Bankruptcy Code requires modification.

Dated:	Wilmington, Delaware
	May 29, 2007
		INSIGHT HEALTH SERVICES HOLDINGS CORP., ET AL.
		By:	/s/ Mitch C. Hill
			Name:	Mitch C. Hill
			Title:	Executive Vice President and
				Chief Financial Officer

Mark D. Collins
Daniel J. DeFranceschi
RICHARDS, LAYTON & FINGER, P.A.
One Rodney Square
920 North King Street
Wilmington, DE 19801
Telephone:	(302) 651-7700
Facsimile:	(302) 498-7701
Michael B. Solow
Harold D. Israel
KAYE SCHOLER LLC
70 West Madison Street
Suite 4100
Chicago, IL 60602
Telephone:	(312) 583-2300
Facsimile:	(312) 583-2360

EXHIBIT A

AMENDED CERTIFICATE OF INCORPORATION OF HOLDINGS

(To follow)

EXHIBIT B

SECOND AMENDED AND RESTATED BYLAWS OF HOLDINGS

EXHIBIT C

REGISTRATION RIGHTS AGREEMENT

(To follow)

EXHIBIT D

SCHEDULE OF REJECTED EXECUTORY CONTRACTS

EX-2.2

Exhibit 2.2

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

	)
In re:	)	Chapter 11
	)
INSIGHT HEALTH SERVICES HOLDINGS	)	Case No. 07-10700 (BLS)
CORP., et al.,	)
	)	(Jointly Administered)
Debtors.	)
	)
	)

AMENDED PLAN SUPPLEMENT

This Amended Plan Supplement is being filed in support of confirmation of the Second Amended Joint Prepackaged Plan of Reorganization of InSight Health Services Holdings Corp., et al. [Docket No. 21].  Certain changes have been made to the Registration Rights Agreement and the Second Amended and Restated Bylaws of Holdings that were filed with the Plan Supplement dated June 29, 2007 [Docket No. 99].  Clean and redlined versions of the Registration Rights Agreement and the Second Amended and Restated Bylaws of Holdings are attached hereto.

Dated:	Wilmington, Delaware July 7, 2007	Respectfully submitted,
		INSIGHT HEALTH SERVICES HOLDINGS CORP., ET AL.,
		RICHARDS, LAYTON & FINGER, P.A.
		By:
		Mark D. Collins (DE No. 2981)
		Daniel J. DeFranceschi (DE No. 2732)
		Paul N. Heath (DE No. 3704)
		Jason M. Madron (DE No. 4431)
		One Rodney Square
		920 North King Street
		Wilmington, DE 19801
		Telephone: (302) 651-7700
		Facsimile: (302) 651-7701
		Email:	collins@rlf.com
			defranceschi@rlf.com
			heath@rlf.com
			madron@rlf.com
		-and-

KAYE SCHOLER LLC
Michael B. Solow
Harold D. Israel
Matthew j. Micheli
70 West Madison Street, Suite 4100
Chicago, IL 60602
Telephone:  (312) 583-2300
Facsimile:  (312) 583-2360
Email:	msolow@kayescholer.com
	hisrael@kayescholer.com
	mmicheli@kayescholer.com
Attorneys for the Debtors and Debtors-in-Possession

Index

Document	Exhibit
Registration Rights Agreement	1
Redlined Version of the Registration Rights Agreement	2
Second Amended and Restated Bylaws of Holdings	3
Redlined Version of the Second Amended and Restated Bylaws of Holdings	4

* Copies of the final registration rights agreement and the Second Amended and Restated Bylaws of Holdings have been separately filed with the SEC, and the registrant agrees to supplementally furnish the SEC a copy of the redlined versions of the registration rights agreement and Second Amended and Restated Bylaws of Holdings.

EX-3.1

Exhibit 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

INSIGHT HEALTH SERVICES HOLDINGS CORP.

Pursuant to Sections 242 and 245 of the Delaware General Corporation Law

The undersigned corporation (the “Corporation”), in order to amend and restate its Certificate of Incorporation (the “Certificate of Incorporation”), hereby certifies as follows:

FIRST:	The name of the Corporation is InSight Health Services Holdings Corp.
SECOND:	The name under which the Corporation was originally incorporated is JWC/Halifax Holdings Corp. The date of filing of its original Certificate of Incorporation with the Secretary of State was June 13, 2001.
THIRD:	This Amended and Restated Certificate of Incorporation amends and restates the original Certificate of Incorporation, as amended to date, and has been duly adopted in accordance with the provisions of Sections 242 and 245 of the Delaware General Corporation Law.
FOURTH:	This Amended and Restated Certificate of Incorporation incorporates that certain Certificate of Amendment to the Certificate of Incorporation of the Corporation, dated as of June 29, 2001, amends Article 4, as heretofore amended, supplemented and restated, by adding at the end of Article 4 a new paragraph and adds a new Article 12.

The undersigned, an officer of the Corporation, in order to amend the Certificate of Incorporation, hereby certifies as follows:

Article 1.                Name.  The name of the Corporation is InSight Health Services Holdings Corp.

Article 2.                Registered Office. The address of the Corporation’s registered office in Delaware is 1209 Orange Street, Wilmington (New Castle County), Delaware 19801.  CT Corporation System is the Corporation’s registered agent at that address.

Article 3.                Purpose. The purpose of the Corporation is to engage in any lawful business, act or activity for which corporations may be organized under the Delaware General Corporation Law.

Article 4.                Capitalization. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 11,000,000 shares, consisting of:

(i)               1,000,000 shares of Preferred Stock, $0.001 par value (the “Preferred Stock”), and

(ii)              10,000,000 shares of Common Stock, $0.001 par value (the “Common Stock”).

Upon the filing and effectiveness (the “Effective Time”) of this Amended and Restated Certificate of Incorporation pursuant to the Delaware General Corporation Law, every 6.326392 shares of the Common Stock issued and outstanding immediately prior to the Effective Time shall be automatically reclassified and combined into one validly issued, fully paid and non-assessable share of the Corporation’s Common Stock, without any action by the holder thereof.  No fractional share shall be issued in connection with the foregoing reverse stock split; and all shares of Common Stock so split that are held by a stockholder will be aggregated subsequent to the foregoing reverse stock split and each fractional share resulting from such aggregation of Common Stock held by such stockholder shall be rounded up to the nearest full share.  Each stock certificate that theretofore represented shares of Common Stock shall, automatically and without the need to surrender the same for exchange, represent the number of shares of Common Stock immediately after the Effective Time resulting from the reverse stock split.

Article 5.                Preferred Stock. The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions of the Preferred Stock are as follows:

(i)               The Preferred Stock may be issued from time to time in one or more series, with such distinctive serial designations as shall be stated and expressed in the resolution or resolutions providing for the issue of such shares from time to time adopted by the Board of Directors; and in such resolution or resolutions providing for the issue of shares of each particular series, the Board of Directors is expressly authorized to fix, without limitation: the annual rate or rates of dividends for the particular series; the dividend payment dates for the particular series and the date from which dividends on all shares of such series issued prior to the record date for the first dividend payment date shall be cumulative; the redemption price or prices for the particular series; the voting powers for the particular series; the rights to which the holders of the shares of such series shall be entitled on the voluntary or involuntary liquidation, dissolution or winding up of, or upon any distribution of the assets of, the Corporation, which rights may be different in the case of a voluntary liquidation, dissolution or winding up than in the case of such an involuntary event; the rights, if any, of holders of the shares of the particular series to convert the same into shares of any other series or class or other securities of the Corporation, with any provisions for the subsequent adjustment of such conversion rights; and to classify or reclassify any unissued preferred shares by fixing or altering from time to time any of the foregoing powers, preferences and rights and qualifications, limitations or restrictions.

(ii)              All the Preferred Stock of any one series shall be identical with each other in all respects, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative; and all shares of Preferred Stock shall be of equal rank, regardless of series, and shall be identical in all respects except as to the particulars fixed by the Board of Directors as hereinabove provided or as fixed herein.

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Article 6.                Common Stock. The powers, rights and other matters relating to the Common Stock are as follows:

(i)               Subject to the limitations set forth in this Section 6, dividends may be paid on the Common Stock out of any funds legally available for that purpose, when, as and if declared by the Board of Directors.

(ii)              In the event of any liquidation, dissolution or winding up of the Corporation, after there shall have been paid to or set aside for the holders of outstanding shares having superior liquidation preferences to Common Stock the full preferential amounts to which they are respectively entitled, the holders of outstanding shares of Common Stock shall be entitled to receive pro rata, according to the number of shares held by them, the remaining assets of the Corporation legally available for distribution to the stockholders.

(iii)             At every meeting of the stockholders every holder of Common Stock shall be entitled to one vote in person or by proxy for each share of Common Stock standing in his, her or its name on the stock transfer records of the Corporation provided that, if at any time there is outstanding more than one class of stock, the Corporation may not effect or consummate (1) any merger or consolidation of the Corporation with or into any other entity; (2) any sale, lease, exchange or other disposition of all or substantially all of the assets of the Corporation to or with any other person; or (3) any dissolution of the Corporation, unless such transaction is authorized by the holders of the Common Stock voting separately as a class.  The foregoing shall not apply to any merger or other transaction described above if the other party to the merger or other transaction is a Subsidiary of the Corporation. For purposes hereof, a “Subsidiary” is any person more than 50% of the voting securities of which are owned directly or indirectly by the Corporation; and a “person” is any individual, partnership, corporation or entity.

Article 7.                Conduct of Business. The following provisions relate to the management of the business and the conduct of the affairs of the Corporation and are not inserted for the purpose of creating, defining, limiting and regulating the powers of the Corporation and its directors and stockholders:

(i)               Bylaws. The election of officers may be conducted in any manner the Bylaws provide, and need not be by written ballot.

(ii)              Amendment of Bylaws. The Board of Directors shall have the power to make, alter, amend or repeal the Bylaws of the Corporation, except to the extent that the Bylaws otherwise provide.

Article 8.                Indemnification. The Corporation shall indemnify to the full extent authorized by law any person made or threatened to be made a party to an action or proceeding whether criminal, civil, administrative or investigative, by reason of the fact that he or she, or his or her testator or intestate is or was a director or officer of the Corporation or serves or served any other enterprise as a director or officer at the request of the Corporation or any predecessor

3

of the Corporation. No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the Delaware General Corporation Law; or (iv) for any transaction from which the director derived an improper personal benefit.

Article 9.                Section 203. The Corporation elects not to be governed by Section 203 of the Delaware General Corporation Law.

Article 10.              Director Voting. Except as otherwise provided in the Bylaws of the Corporation, each member of the Board of Directors shall have one vote on each matter brought to a vote before the Board of Directors.

Article 11.              Original Incorporator.  The name and address of the sole incorporator is Jon E. Flaute, c/o Kaye Scholer LLP, 425 Park Avenue, New York, New York 10022.

Article 12.              Prohibition on Issuance of Nonvoting Equity Securities.  Notwithstanding anything contained herein to the contrary, the Corporation shall not issue nonvoting equity securities of the Corporation, or warrants, rights or options to acquire nonvoting equity securities of the Corporation, to the extent prohibited by section 1123(a)(6) of title 11 of the United States Code, for so long as such section is in effect and applicable to the Corporation.

INSIGHT HEALTH SERVICES HOLDINGS CORP.
By:	/s/ Mitch C. Hill
	Name: Mitch C. Hill
	Title:	Executive Vice President
		and Chief Financial Officer

4

EX-3.2

Exhibit 3.2

SECOND AMENDED AND RESTATED
BYLAWS
OF

INSIGHT HEALTH SERVICES HOLDINGS CORP.

(the “Corporation”)

adopted on July 26, 2007

1.MEETING OF STOCKHOLDERS.

1.1.         Annual Meeting of Stockholders.  An annual meeting of stockholders shall be held in each year on such date and at such time as may be set by the board of directors (the “Board”) (or by an officer of the Corporation authorized to do so by the Board) for the purpose of electing directors and the transaction of such other business as may properly come before the meeting.

1.2.         Special Meetings of Stockholders.  Special meetings of the stockholders may be called at any time by the Board (or by an officer of the Corporation authorized to do so by the Board), the President or the Secretary.

At any time, upon the written request of any person or persons entitled to call and who have duly called a special meeting, it shall be the duty of the Secretary to set the date of the meeting, if such date has not been set by the Board, on a day not more than 60 days after the receipt of the request, and to give due notice of such meeting to the stockholders.  If the Secretary shall neglect or refuse to set the date of the meeting and give notice thereof, the person or persons calling the meeting may do so.

1.3.         Place and Notice of Meetings of Stockholders.  All meetings of stockholders shall be held at the principal office of the Corporation unless the Board (or an officer of the Corporation authorized to do so by the Board) shall decide otherwise, in which case such meetings may be held at such location within or without the State of Delaware as the Board may from time to time direct.  Written notice of the place, day and hour of all meetings of stockholders and, in the case of a special meeting, of the general nature of the business to be transacted at the meeting, shall be given to each stockholder of record entitled to vote at the particular meeting either personally or by sending a copy of the notice through the mail or by overnight courier to the address of the stockholder appearing on the books of the Corporation or supplied by him, her or it to the Corporation for the purpose of notice or by any other means, including electronic means, permitted by law.  Except as otherwise provided by the Bylaws or by law, such notice shall be given at least 10 days before the date of the meeting by the President or the Secretary.  A waiver in writing of any written notice required to be given, signed by the person entitled to such notice, whether before or after the time stated, shall be deemed equivalent to the giving of such notice.  Attendance of a person, either in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except where a person attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened.

1.4.         Nominations by Stockholders of Candidates for Election as Directors.  In addition to the nomination by the Board of candidates for election to the Board as hereinafter provided, candidates may be nominated by any stockholder of the Corporation entitled to notice of, and to vote at, any meeting called for the election of directors.  Subject to the last sentence of this section, nominations, other than those made by or on behalf of the Board, shall be made in writing and shall be received by the Secretary of the Corporation not later than (a) with respect to an election of directors to be held at an annual meeting of stockholders, 75 days prior to the anniversary date of the immediately preceding annual meeting, provided that, if the date of the annual meeting is more than 30 days before or after the anniversary date of the immediately preceding annual meeting, the stockholder nomination shall be received within 15 days after the public announcement by the Corporation of the date of the annual meeting, and (b) with respect to an election of directors to be held at a special meeting of stockholders, the close of business on the 15th day following the date on which notice of such meeting is first given to stockholders or public disclosure of the meeting is made, whichever is earlier.  Such nomination shall contain the following information to the extent known to the notifying stockholder: (i) the name, age, business address and residence address of each proposed nominee and of the notifying stockholder; (ii) the principal occupation of each proposed nominee; (iii) a representation that the notifying stockholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iv) the class and total number of shares of capital stock and other securities of the Corporation that are beneficially owned by the notifying stockholder and by the proposed nominee and, if such securities are not owned solely and directly by the notifying stockholder or the proposed nominee, the manner of beneficial ownership (beneficial ownership has the same meaning as provided in Regulation 13D under the Securities Exchange Act of 1934, as from time to time in effect (and any successor regulation) (the “Exchange Act”)); (v) a description of all arrangements or understandings between the notifying stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the notifying stockholder; (vi) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Exchange Act had the nominee been nominated, or intended to be nominated, by the Board; and (vii) the consent of each nominee to serve as a director of the Corporation if so elected.  The Corporation may request any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the qualifications of the proposed nominee to serve as a director of the Corporation.  Within 15 days following the receipt by the Secretary of a stockholder notice of nomination pursuant hereto, the Nominating Committee or the Board shall instruct the Secretary of the Corporation to advise the notifying stockholder of any deficiencies in the notice as determined by the Board.  The notifying stockholder shall cure such deficiencies within 15 days of receipt of such notice.  No persons shall be eligible for election as a director of the Corporation unless nominated in accordance with the Bylaws.  Nominations not made in accordance herewith may, in the discretion of the presiding officer at the meeting and with the advice of the Nominating Committee or the Board, be disregarded by the presiding officer and, upon his or her instructions, all votes cast for each such nominee may be disregarded.  The determinations of the presiding officer at the meeting shall be conclusive and binding upon all stockholders of the Corporation for all purposes.

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1.5.         Advance Notice of Other Matters to be Presented by Stockholders.  At any annual meeting or special meeting of stockholders, only such business as is properly brought before the meeting in accordance with this section may be transacted.  To be properly brought before any meeting, any proposed business must be either (a) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board, (b) otherwise brought before the meeting by or at the direction of the Board, or (c) if brought before the meeting by a stockholder, then written notification of such proposed business (a “Stockholder Notification”) must have been received by the Secretary of the Corporation from a stockholder of record on the record date for the determination of stockholders entitled to vote at such meeting not later than (i), with respect to business to be proposed at an annual meeting of stockholders, 75 days prior to the anniversary date of the immediately preceding annual meeting; provided, that if the date of the annual meeting is more than 30 days before or after the anniversary date of the immediately preceding annual meeting, the Stockholder Notification must have been received within 15 days after the public announcement by the Corporation of the date of the annual meeting and (ii) with respect to business to be proposed at a special meeting of stockholders, the close of business on the 15th day following the date on which notice of such meeting is first given to stockholders or public disclosure of the meeting is made, whichever is earlier.  Such Stockholder Notification shall set forth the nature of and reasons for the proposal in reasonable detail and, as to the stockholder giving notification, (A) the name and address of such stockholder and (B) the class and series of all shares of the Corporation that are owned beneficially by such stockholder.

Within 15 days following receipt by the Secretary of a Stockholder Notification pursuant hereto, the Corporation shall advise the stockholder of any deficiencies in the Stockholder Notification.  The notifying stockholder may cure such deficiencies within 15 days after receipt of such advice, failing which the Stockholder Notification shall be deemed invalid.

1.6.         Quorum for Stockholder’s Meetings.  At any meeting of the stockholders, the presence, in person or by proxy, of stockholders entitled to cast at least a majority of the votes which all stockholders are entitled to vote upon a matter shall constitute a quorum for the transaction of business upon such matter, and the stockholders present at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.  If a meeting cannot be organized because a quorum has not attended, those present may, except as otherwise provided by law, adjourn the meeting to such time and place as they may determine, but in the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors.

1.7.         Voting.  Except as otherwise provided in the Corporation’s Certificate of Incorporation (including in respect of the voting rights of shares of the Preferred Stock), each stockholder of record shall have, at every stockholders’ meeting, one vote for every share standing in his or her name on the books of the Corporation.  “Certificate of Incorporation” means the Amended and Restated Certificate of Incorporation, as filed with the Secretary of State of the State of Delaware on July 26, 2007, of the Corporation, as it may from time to time be amended and in effect in accordance with law, and shall include any certificate of designations determining the designation, voting rights, preferences, limitations and special

3

rights of any shares of the Corporation which have been adopted by the Board as permitted by the certificate of incorporation and the law, as then in effect.

1.8.         Proxies.  Every stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him, her or it by proxy.  A proxy may be submitted to the Secretary by a stockholder in writing, by telephone, electronically or any other means permitted by law.

1.9.         Required Votes for Stockholder Action.  Except in respect of the election of directors (as to which a plurality of the votes of the shares entitled to vote on the election of a director and voted in favor thereof shall be required), all questions submitted to the stockholders and all actions by the stockholders shall be decided by the affirmative vote of the stockholders present, in person or by proxy, entitled to cast at least a majority of the votes which all stockholders present are entitled to vote on the matter, unless otherwise provided by the Certificate of Incorporation, the Bylaws or by law.  For purposes of this section, in the event that a holder of shares of a class or series which are entitled to vote on a matter is present in person or by proxy at a meeting but is not permitted by reason of a legal disability or by a contractual restriction or otherwise to vote the shares such holder holds on such matter, the shares held by such holder and not so permitted to be voted shall nevertheless be considered entitled to vote and present for purposes of determining the number of votes required for stockholder action.

1.10.       Ballots; Judges of Election.  Elections for directors need not be by ballot but the Board or the presiding officer at a meeting of stockholders may direct the use of ballots for voting at the meeting.  In advance of any meeting of stockholders, the Board may appoint judges of election who need not be stockholders to act at such meeting or any adjournment thereof, and if such appointment is not made, the presiding officer of any such meeting may, and on request of any stockholder or his, her or its proxy shall, make such appointment at the meeting.  The number of judges shall be one or three and, if appointed at a meeting on request of one or more stockholders or their proxies, the majority of the shares present and entitled to vote shall determine whether one or three judges are to be appointed.  No person who is a candidate for office shall act as a judge.  In case any person appointed as judge fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Board in advance of the convening of the meeting or at the meeting by the person or officer presiding at the meeting.  On request of the presiding officer of the meeting or of any stockholder or his, her or its proxy, the judges shall make a report in writing of any challenge or question or matter determined by them and execute a certificate of any fact found by them.

2.BOARD OF DIRECTORS.

2.1.         Authority of the Board of Directors.  Except as otherwise provided by law and subject to the provisions of the Certificate of Incorporation and the Bylaws, all powers vested by law in the Corporation may be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, a Board that shall be constituted as provided by law, the Certificate of Incorporation and the Bylaws.

2.2.         Number, Qualification, Election and Term of Directors.  The business of the Corporation shall be managed by the Board, which shall consist of seven directors.  Except

4

as otherwise provided by law or these Bylaws, directors shall be elected at each annual meeting of stockholders by a plurality of votes cast and shall hold office until the next annual meeting of stockholders and until the election and qualification of their respective successors.  As used in these Bylaws, the term “entire Board” means the total number of directors which the Corporation would have if there were no vacancies on the Board.

2.3.         Nomination of Directors.  Only persons who are nominated in accordance with the provisions set forth in these Bylaws shall be eligible to be elected as directors at an annual or special meeting of stockholders.  Nomination for election to the Board shall be made by the Board or the Nominating Committee of the Board.  Nomination for election of any person to the Board may also be made by a stockholder as provided in Section 1.4 of these Bylaws.

2.4.         Vacancies.  Vacancies on the Board may be filled by the affirmative vote of a majority of directors then in office or by a remaining sole director. If there are no directors in office, then an election of directors may be held in the manner provided by statute by a plurality of the votes cast by the holders of shares of capital stock entitled to vote at a special meeting of stockholders called for that purpose.

2.5.         Annual Organizational Meeting of the Board.  The Board shall hold an annual organizational meeting immediately following the annual meeting of the stockholders at the place thereof, without notice in addition to the notice of the annual meeting of stockholders, or at such other time as soon as practicable after such meeting as the Board shall determine and shall at the annual organizational meeting elect a President, a Secretary and a Treasurer of the Corporation and such other officers, including Executive Vice Presidents, Senior Vice Presidents and Vice Presidents, of the Corporation as shall be provided by the Bylaws or determined by the Board to be appropriate, shall establish the standing committees of the Board provided by the Bylaws and may take such other action as the Board determines to be appropriate.  Officers of the Corporation and standing and other committees of the Board may also be elected at any other time by the Board.

2.6.         Other Meetings of the Board.  All meetings of the Board, other than the annual organizational meeting, shall be held at the principal office of the Corporation unless the Board (or the person or persons entitled to call and calling the meeting) shall decide otherwise, in which case such meetings may be held at such location within or without the State of Delaware as the Board (or the person or persons entitled to call and calling the meeting) may from time to time direct.  Regular meetings of the Board shall be held at such time (and place) in accordance with such schedule as the Board shall have determined in advance and no further notice of regular meetings of the Board shall be required.  The non-management Directors (i.e., directors who are not then serving as executive officers of the Corporation or any subsidiary) may meet in their discretion without any member of management present to consider the overall performance of management and the performance of the role of the non-management Directors in the governance of the Corporation; such meetings may be held in connection with a regularly scheduled meeting of the Board or as the non-management Directors shall otherwise determine.  Special meetings of the Board may be called by the Chairman of the Board (if any), a Vice Chairman of the Board (if any), the President or by any two or more directors by giving written notice at least two business days in advance of the day and hour of the meeting to each director

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(unless it is determined by the President or the Chairman of the Board (if any) to be necessary to meet earlier, in which case no less than 24 hours written notice shall be given), either personally or by facsimile, or other means including electronic means permitted by law.  Attendance at any meeting of the Board shall be a waiver of notice thereof, unless such lack of notice is protested at the outset of the meeting.  If all the members of the Board are present at any meeting, no notice of the meeting shall be required.

2.7.         Quorum. A majority of the whole number of the directors then in office and entitled to vote on a particular matter shall constitute a quorum for the transaction of business with respect to such matter, but if at any meeting a quorum shall not be present, the meeting may adjourn from time to time until a quorum shall be present.

2.8.         Board or Committee Action Without a Meeting.  Any action required or permitted to be taken by the Board or by any committee of the Board may be taken without a meeting if all of the members of the Board or of the committee consent in writing to the adoption of a resolution authorizing the action.  The written consents by the members of the Board or the committee shall be filed with the Secretary with the minutes of the proceedings of the Board or of the committee.

2.9.         Participation in Board or Committee Meetings by Conference Telephone.  Any or all members of the Board or of any committee of the Board may participate in a meeting of the Board or a committee thereof by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time.  Participation by such means shall constitute presence in person at the meeting.

2.10.       Chairman and Vice Chairman of the Board.  The Board may, by resolution adopted by a majority of the entire Board, at any time designate one of its members as Chairman of the Board. The Chairman of the Board shall preside at the meetings of the Board, shall be responsible for the orderly conduct by the Board of its oversight of the business and affairs of the Corporation and its other duties as provided by law, the Certificate of Incorporation and the Bylaws and shall have such other authority and responsibility as the Board may designate. The Board may, by resolution adopted by a majority of the entire Board, at any time also designate one or more of its members as Vice Chairman of the Board. A Vice Chairman of the Board shall assist the Chairman of the Board in the conduct of his or her duties, including by presiding at meetings of the Board in the absence of the Chairman of the Board, and shall have such other authority and responsibility as the Board may designate. A Chairman or Vice Chairman of the Board shall not be considered an officer of the Corporation unless otherwise provided by the Board.

2.11.       Committees of the Board. The Board may, by resolution adopted by a majority of the entire Board, at any time designate one or more committees, each committee to consist of one or more of the directors of the Corporation, except as otherwise provided by the Bylaws. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in such resolution, shall have and may exercise any or all of the authority and responsibility of the Board in the management of the business and affairs of the Corporation, except as otherwise provided by law, the Certificate of Incorporation or the Bylaws.

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Except as otherwise provided by the Certificate of Incorporation, the Bylaws or action of the Board, a quorum for action by a committee shall be a majority of the members (assuming no vacancy) and action by vote of a majority of the members at a meeting duly called at which a quorum is present shall constitute action by the committee. Each committee shall keep a record with the Secretary of its actions and all material actions taken by a committee on behalf of the Board shall be reported to the full Board periodically. In all other respects, the Board may, by resolution adopted by a majority of the entire Board, establish rules of procedure for a committee, including designating a member of a committee as its chair. In the absence of such rules each committee shall conduct its business in the same manner as the Board conducts its business pursuant to this Section 2. In the absence of the designation by the Board of the chairman of a committee or the adoption by the Board of rules of procedure for a committee, the committee may adopt its own rules of procedure and elect its chair. In the event any or all of the members of any committee are required to be independent under any then applicable listing standards to which the Corporation is subject or any other legal requirement, for the performance of some, but not all, of the duties of such committee, the Board may establish a separate committee for the performance of only those duties the performance of which requires such independent directors.

The Board shall approve a charter describing the purposes, functions and responsibilities of each standing committee of the Board. Each standing committee of the Board shall prepare and recommend to the Board for its approval the committee’s charter. Each standing committee of the Board shall have the authority and responsibility provided by its Board-approved charter, subject to further action by the Board, and no further authorization of the Board shall be necessary for actions by a committee within the scope of its charter. Any other committee of the Board may likewise prepare and recommend to the Board a charter for the committee and shall have the authority and responsibility provided by its Board-approved charter.

2.12.       Compensation.  Directors and members of the committees of the Board shall receive such compensation as the Board determines, together with reimbursement of their reasonable expenses in connection with the performance of their duties, all as permitted by law.  A director may also be paid for serving the Corporation, its affiliates or subsidiaries in other capacities.

3.OFFICERS.

3.1.         Number; Security. The executive officers of the Corporation shall be the President, one or more Executive Vice Presidents, Senior Vice Presidents and Vice Presidents, a Secretary and a Treasurer. Any two or more offices may be held by the same person, except the offices of President and Secretary. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties.

3.2.         Election; Term of Office. The executive officers of the Corporation shall be elected annually by the Board, and each such officer shall hold office until the next annual meeting of the Board and until the election of his or her successor, subject to the provisions of Section 3.4.

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3.3.         Subordinate Officers. The Board may appoint subordinate officers (including Assistant Secretaries and Assistant Treasurers), agents or employees, each of whom shall hold office for such period and have such powers and duties as the Board determines. The Board may delegate to any executive officer or to any committee the power to appoint and define the powers and duties of any subordinate officers, agents or employees.

3.4.         Resignation and Removal of Officers. Any officer may resign at any time by delivering his or her resignation in writing to the President or the Secretary of the Corporation, to take effect at the time specified in the resignation; the acceptance of a resignation, unless required by its terms, shall not be necessary to make it effective. Any officer appointed by the Board or appointed by an executive officer or by a committee may be removed by the Board either with or without cause, and in the case of an officer appointed by an executive officer or by a committee, by the officer or committee who appointed him or her or by the President.

3.5.         Vacancies. A vacancy in any office may be filled for the unexpired term in the manner prescribed in Sections 3.2 and 3.3 of these Bylaws for election or appointment to the office.

3.6.         The President. The President shall be the chief executive officer of the Corporation and shall preside at all meetings of the Board and of the stockholders. Subject to the control of the Board and the Chairman of the Board, the President shall have general supervision over the business of the Corporation and shall have such other powers and duties as presidents of corporations usually have or as the Board assigns to him or her.

3.7.         Executive Vice President, Senior Vice President and Vice President. Each Executive Vice President, Senior Vice President and Vice President shall have such powers and duties as the Board or the President assigns to him or her.

3.8.         The Treasurer. The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned by the Board or President.  In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, including without limitation the duty and power to keep and be responsible for all funds and securities of the Corporation, to deposit funds of the Corporation in depositories selected in accordance with these Bylaws, to disburse such funds as ordered by the Board, to make proper accounts of such funds, and to render as required by the Board statements of all such transactions and of the financial condition of the Corporation.

3.9.         The Secretary. The Secretary shall be the secretary of, and keep the minutes of, all meetings of the Board and of the stockholders, shall be responsible for giving notice of all meetings of stockholders and of the Board, and shall keep the seal and, when authorized by the Board, apply it to any instrument requiring it. Subject to the control of the Board, the Secretary shall have such powers and duties as the Board or the President assigns to him or her. In the absence of the Secretary from any meeting, the minutes shall be kept by the person appointed for that purpose by the presiding officer.

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3.10.       Salaries. The Board may fix the officers’ salaries, if any, or it may authorize the President to fix the salary of any other officer.

4.STOCK CERTIFICATES AND TRANSFERS.

4.1.         Form of Stock Certificates. Shares of the Corporation may be represented by certificates or may be uncertificated, but stockholders shall be entitled to receive stock certificates representing their shares as provided by law. Stock certificates shall be in such form as the Board may from time to time determine and shall be signed by the Chairman of the Board or the President and countersigned by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary and embossed with the seal of the Corporation or, if not so signed and sealed, shall bear the engraved or printed facsimile signatures of the officers authorized to sign and the engraved or printed facsimile of the seal of the Corporation. The death, incapacity, resignation or removal of an officer who signed or whose facsimile signature appears on a stock certificate shall not affect the validity of the stock certificate.

4.2.         Transfers of Record. The shares of the Corporation shall, upon the surrender and cancellation of the certificate or certificates representing the same, be transferred upon the books of the Corporation at the request of the holder thereof, named in the surrendered certificate or certificates, in person or by his, her or its legal representatives or by his, her or its attorney duly authorized by written power of attorney filed with the Corporation or its transfer agent. In case of loss or destruction of a certificate of stock, another may be issued in lieu thereof in such manner and upon such terms as the Board shall authorize.

4.3.         Record Dates. The Board may set a time, not more than 60 days nor less than 10 days prior to the date of any meeting of the stockholders, or not more than 60 days prior to the date set for the payment of any dividend or distribution or the date for the allotment of rights, or the date when any change or conversion or exchange of shares of stock will be made or go into effect, as a record date for the determination of the stockholders entitled to notice of, or to vote at, any such meeting, or entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect to any such change, conversion, or exchange of shares of the Corporation. In such case, only such stockholders as shall be stockholders of record on the date so set shall be entitled to notice of, or to vote at, such meeting, or to receive payment of such dividend or distribution, or to receive such allotment of rights, or exercise such rights, as the case may be, notwithstanding any transfer of shares of the Corporation on the books of the Corporation after any record date set as aforesaid.

5.MISCELLANEOUS.

5.1.         Indemnification of Directors, Officers, Employees and Agents.  The Corporation shall indemnify its officers, directors, employees and agents to the extent permitted by the General Corporation Law of Delaware.

5.2.         Seal.  The Corporation shall have a seal that shall contain the words “InSight Health Services Holdings Corp.” and may be affixed to documents of the Corporation as prima facie evidence of the act of the Corporation to the extent provided by law.

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5.3.         Fiscal Year.  The fiscal year of the Corporation shall end on the 30th day of June.

5.4.         Amendments.  The Bylaws, as from time to time in effect, may be amended, modified or repealed, in whole or in part, at any time and from time to time in any respect either (i) by the stockholders, by the affirmative vote of the holders of a majority of the outstanding shares of common stock, $.001 par value per share, of the Corporation or (ii) by the Board, by the affirmative vote of a majority of the entire Board, in either case except as otherwise provided by law or by the Certificate of Incorporation; provided, however, that the affirmative vote of the holders of a majority of the outstanding shares of common stock shall be required for any amendment to Sections 1.4, 1.5, 1.6, 1.7, 1.8, 1.9, 2.2, 2.3, 2.7 and this Section 5.4 of these Bylaws.

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EX-4.4

Exhibit 4.4

THIRD SUPPLEMENTAL INDENTURE

Dated as of July 9, 2007

among

INSIGHT HEALTH SERVICES CORP.
as Issuer,

INSIGHT HEALTH SERVICES HOLDINGS CORP. and
THE SUBSIDIARIES LISTED IN THE PREAMBLE
as Guarantors,

and

U.S. BANK NATIONAL ASSOCIATION,
as Trustee,

to

INDENTURE

Dated as of September 22, 2005

This THIRD SUPPLEMENTAL INDENTURE, dated as of July 9, 2007 (the “Third Supplemental Indenture”), is entered into by and among InSight Health Services Corp., a Delaware corporation (the “Company”), InSight Health Services Holdings Corp., a Delaware corporation (the “Parent”), and the Subsidiary Guarantors signatory hereto (collectively, the “Subsidiary Guarantors” and together with the Parent, the “Guarantors”), and U.S. Bank National Association, a national banking association, as trustee (the “Trustee”).

RECITALS

WHEREAS, the Company, the Guarantors and the Trustee have entered into an Indenture, dated as of September 22, 2005, as amended and supplemented by a First Supplemental Indenture dated May 18, 2006 and a Second Supplemental Indenture dated May 29, 2007 (as amended and supplemented, the “Existing Indenture”), pursuant to which the Company initially issued $300,000,000 aggregate principal amount of Notes (such term and all other capitalized terms used herein and not otherwise defined herein having the meanings in the Existing Indenture); and

WHEREAS, in accordance with Section 2.02 of the Existing Indenture and subject to Article Four, the Trustee may at any time and from time to time, upon receipt of an Authentication Order, authenticate for original issue Notes in the aggregate principal amount specified in such Authentication Order up to an unlimited amount, provided that certain conditions set forth in Section 2.02 of the Existing Indenture are satisfied; and

WHEREAS, in accordance with Section 9.01 of the Existing Indenture, the Company, the Guarantors and the Trustee may amend or supplement the Existing Indenture without the consent of the Holders to, among other things, provide for the issuance of Additional Notes in accordance with the limitations set forth in the Existing Indenture and make certain changes that do not adversely affect the interests of the Holders in any material respect; and

WHEREAS, the Board of the Company has, as evidenced by a Board Resolution, authorized the amendment of the Existing Indenture pursuant to this Third Supplemental Indenture to clarify certain definitions in the Existing Indenture in connection with the issuance of $15,000,000 aggregate principal amount of Additional Notes on the date of this Third Supplemental Indenture (the “Second Issue Date”); and

WHEREAS, all things necessary to make this Third Supplemental Indenture a valid supplement to the Existing Indenture according to its terms have been done and the Existing Indenture, as amended and supplemented by the Third Supplemental Indenture, is hereafter referred as the Indenture.

NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:

For and in consideration of the premises, and of other valuable consideration the sufficiency of which is hereby acknowledged, each of the Company and the Guarantors, jointly

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and severally, covenant and agree with the Trustee, for the equal and proportionate benefit of all Holders, as follows:

ARTICLE I

DEFINITIONS

Section 1.1.  Amendment to Definitions.  Each of the following defined terms in Section 1.01 of the Existing Indenture is amended and restated as follows:

“Registration Rights Agreement” means (i) with respect to the Notes initially issued on the Issue Date, the Registration Rights Agreement, dated as of the Issue Date, by and among the Company, the Guarantors and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and (ii) with respect to the Notes issued on the Second Issue Date, the Registration Rights Agreement, dated as of July 9, 2007, by and among the Company, the Guarantors party thereto and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time.

“Second Issue Date” means the date on which the $15,000,000 aggregate principal amount of Additional Notes are issued.

ARTICLE II

CLOSING DOCUMENTS

Section 2.1.  Documents to Be Given to Trustee.  Pursuant to the provisions of Sections 2.02, 9.01 and 13.05 of the Indenture, the Company will deliver to the Trustee concurrently with the execution and delivery of this Third Supplemental Indenture (i) an Authentication Order dated as of July 9, 2007, satisfying the provisions of Section 2.02 of the Indenture, (ii) a Board Resolution satisfying the provisions of Section 9.01 of the Indenture and (iii) an Opinion of Counsel and an Officer’s Certificate, each dated as of July 9, 2007, satisfying the provisions of Sections 13.04 and 13.05 of the Indenture.

ARTICLE III

MISCELLANEOUS

Section 3.1.  Trustee’s Acceptance.  The Trustee accepts the provisions of this Third Supplemental Indenture upon the terms and conditions set forth in the Existing Indenture; provided, however, that the foregoing acceptance shall not make the Trustee responsible in any manner whatsoever for the correctness of recitals or statements by other parties herein.

Section 3.2.  Indenture to Remain in Full Force and Effect.  Except as hereby expressly provided in this Third Supplemental Indenture, the Existing Indenture, as supplemented and amended by the First Supplemental

3

Indenture and the Second Supplemental Indenture, is in all respects ratified and confirmed and all its terms, provisions and conditions shall be and remain in full force and effect.

Section 3.3.  Guarantees.  Each Guarantor hereby agrees, ratifies and reaffirms that its Guarantee pursuant to Section 11.01 of the Indenture shall remain in full force and effect with respect to the Notes (including the Notes issued on the Issue Date, the Notes issued on the Second Issue Date, any other Notes issued in accordance with the Indenture and any Exchange Notes issued in exchange therefor).

Section 3.4.  Rights, Etc. of Trustee.  All recitals in this Third Supplemental Indenture are made by the Company and the Guarantors and not by the Trustee.  All of the provisions contained in the Existing Indenture in respect of the rights, privileges, immunities, powers and duties of the Trustee shall be applicable in respect hereof as fully and with like effect as if set forth herein in full.

Section 3.5.  Successors and Assigns.  All covenants and agreements in this Third Supplemental Indenture made by the Company and the Guarantors shall bind their respective successors and assigns, whether so expressed or not.

Section 3.6.  Conflict with Trust Indenture Act.  If any provision of this Third Supplemental Indenture limits, qualifies or conflicts with the duties imposed by the operation of Trust Indenture Act Section 318(c), the imposed duties shall control.

Section 3.7.  Governing Law.  The laws of the State of New York shall govern this Third Supplemental Indenture.  The Trustee, the Company and the Guarantors agree to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Third Supplemental Indenture.

Section 3.8.  Titles, Headings, Etc.  The Article and Section headings of this Third Supplemental Indenture are for convenience only and shall not affect the construction hereof.

Section 3.9.  Severability. In case any provision in this Third Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 3.10.  Execution in Counterparts.  This Third Supplemental Indenture may be executed in any number of counterparts, each of which shall be deemed an original, but such counterparts shall together represent one and the same instrument.

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

INSIGHT HEALTH SERVICES CORP.
By:	/s/ Mitch C. Hill
Name:		Mitch C. Hill
Title:		Executive Vice President and Chief Financial
		Officer
INSIGHT HEALTH SERVICES HOLDINGS CORP.
By:	/s/ Mitch C. Hill
Name:		Mitch C. Hill
Title:		Executive Vice President and Chief Financial Officer
WILKES-BARRE IMAGING, L.L.C.
By: InSight Health Corp., as the sole member and sole manager
By:	/s/ Mitch C. Hill
Name:		Mitch C. Hill
Title:		Executive Vice President and Chief Financial Officer
MRI ASSOCIATES, L.P.
By: InSight Health Corp., as the general partner
By:	/s/ Mitch C. Hill
Name:		Mitch C. Hill
Title:		Executive Vice President and Chief Financial Officer

[Signatures continued on following page]

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VALENCIA MRI, LLC ORANGE COUNTY REGIONAL PET CENTER- IRVINE, LLC SAN FERNANDO VALLEY REGIONAL PET CENTER, LLC
By: InSight Health Corp., as the general partner
By:	/s/ Mitch C. Hill
Name:		Mitch C. Hill
Title:		Executive Vice President and Chief Financial Officer

PARKWAY IMAGING CENTER, LLC
By:	/s/ Manager
Name:		Mitch C. Hill
Title:		Manager

[Signatures continued on following page]

6

INSIGHT HEALTH CORP.
OPEN MRI, INC.
MAXUM HEALTH CORP.
RADIOSURGERY CENTERS, INC.
DIAGNOSTIC SOLUTIONS CORP.
MAXUM HEALTH SERVICES OF NORTH
TEXAS, INC.
MAXUM HEALTH SERVICES OF DALLAS,
INC.
NDDC, INC.
SIGNAL MEDICAL SERVICES, INC.
INSIGHT IMAGING SERVICES CORP.
COMPREHENSIVE MEDICAL IMAGING,
INC.
COMPREHENSIVE MEDICAL IMAGING
CENTERS, INC.
COMPREHENSIVE MEDICAL IMAGING-
BILTMORE, INC.
COMPREHENSIVE OPEN MRI-EAST MESA,
INC.
TME ARIZONA, INC.
COMPREHENSIVE MEDICAL IMAGING-
FREMONT, INC.
COMPREHENSIVE MEDICAL IMAGING-
SAN FRANCISCO, INC.
COMPREHENSIVE OPEN MRI- GARLAND,
INC.
IMI OF ARLINGTON, INC.
COMPREHENSIVE MEDICAL IMAGING-
FAIRFAX, INC.
IMI OF KANSAS CITY, INC.
COMPREHENSIVE MEDICAL IMAGING-
BAKERSFIELD, INC.
MAXUM HEALTH SERVICES CORP.

By:	/s/ Mitch C. Hill
Name:		Mitch C. Hill
Title:		Executive Vice President and Chief Financial Officer

[Signatures continued on following page]

7

COMPREHENSIVE OPEN MRI- CARMICHAEL/FOLSOM, LLC SYNCOR DIAGNOSTICS SACRAMENTO, LLC SYNCOR DIAGNOSTICS BAKERSFIELD, LLC
By: Comprehensive Medical Imaging, Inc. and Comprehensive Medical Imaging Centers, Inc., as the partners
By:	/s/ Mitch C. Hill
Name:		Mitch C. Hill
Title:		Executive Vice President and Chief Financial Officer

PHOENIX REGIONAL PET CENTER- THUNDERBIRD, LLC
By:  Comprehensive Medical Imaging Centers, Inc., as the sole member
By:	/s/ Mitch C. Hill
Name:		Mitch C. Hill
Title:		Executive Vice President and Chief Financial Officer

[Signatures continued on following page]

8

MESA MRI MOUNTAIN VIEW MRI LOS GATOS IMAGING CENTER WOODBRIDGE MRI JEFFERSON MRI-BALA JEFFERSON MRI
By:  Comprehensive Medical Imaging, Inc. and Comprehensive Medical Imaging Centers, Inc., as the members
By:	/s/ Mitch C. Hill
Name:		Mitch C. Hill
Title:		Executive Vice President and Chief Financial Officer

[Signatures continued on following page]

9

This foregoing Third Supplemental Indenture is hereby confirmed and accepted by the Trustee as of the date first written above.

U.S. BANK NATIONAL ASSOCIATION
By:	/s/ James E. Murphy
	Name: James E. Murphy
	Title: Vice President

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EX-4.8

Exhibit 4.8

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement, is dated as of August 1, 2007, by and among InSight Health Services Holdings Corp., a Delaware corporation (the “Company”), and the other persons listed on the signature pages hereto and such other stockholders of the Company as may, from time to time, become parties to this Agreement in accordance with the provisions hereof (the “Holders”).

The Company has commenced an exchange offer (the “Offer”) pursuant to which it plans to acquire the entire outstanding aggregate principal amount of 97/8% senior subordinated notes due 2011 (the “Notes”) of its wholly owned subsidiary InSight Health Services Corp. in exchange for shares of Common Stock of the Company.   In accordance with the terms of the Offer, the Company also agreed to grant certain registration rights with respect to the Common Stock of the Company to the Holders upon consummation of the Offer, the terms of which are set forth in this Agreement.

1.  Definitions.

As used in this Agreement, the following capitalized terms shall have the meanings ascribed thereto below (such meanings being equally applicable to both the singular and plural form of the terms defined):

“Agreement” shall mean this Registration Rights Agreement, as the same may from time to time be amended, modified and supplemented in accordance with its terms.

“Business Day” means any day on which commercial banks are required to be open for business in New York, New York.

“Common Stock” means the Company’s common stock, par value $0.001 per share.

“Person” means an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization or a government or any department or agency thereof.

“Public Offering” means the sale in a public offering under the Securities Act of equity securities of the Company.

“Public Sale” means any underwritten Public Offering or sale of equity securities to the public pursuant to a registration statement or through a broker, dealer or to a market maker pursuant to the provisions of Rule 144 adopted under the Securities Act.

“Registrable Securities” means (i) any Common Stock issued and outstanding, (ii) any Common Stock issued or issuable with respect to the securities referred to in clause (i) by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, and (iii) any other shares of

Common Stock held by Persons holding securities described in clauses (i) or (ii).  As to any particular Registrable Securities, such securities will cease to be Registrable Securities when they have been sold pursuant to a Public Sale (other than pursuant to the Offer). For purposes of this Agreement, a Person will be deemed to be a Holder of Registrable Securities whenever such Person has the right to acquire directly or indirectly such Registrable Securities (upon conversion, exchange or exercise in connection with a transfer of securities or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected.

“Securities Act” means the Securities Act of 1933, as amended, or any similar federal law then in force.

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended, or any similar federal law then in force.

2.  Demand Registration.

(a)     Requests for Registration.  If at any time on or after sixty (60) days from the date hereof, the Company shall receive a request (a “Demand Notice”) from any of the Holders (such Holder making the request shall be referred to as the “Requesting Holder”) that the Company effect the registration under the Securities Act of all or any portion of the Requesting Holder’s Registrable Securities, and specifying the intended method of disposition thereof, then the Company shall use its best efforts to prepare and cause to be filed with the Securities and Exchange Commission (the “SEC”), as promptly as practicable but in no event later than fifty-six (56) days following receipt of the Demand Notice, a registration statement on the appropriate form relating to resales by the Requesting Holder of such Registrable Securities (a “Demand Registration”).  Within ten (10) days after receipt of any such request, the Company will give written notice of such Demand Registration to all other Holders of Registrable Securities.  The Company shall use its reasonable best efforts to cause the registration statement to become effective under the Securities Act, and for Public Sale of (i) all Registrable Securities for which the Requesting Holder shall have requested registration under this Section 2(a) and (ii) all other Registrable Securities that any Holders with rights to request registration under Section 3 (all such Holders, together with the Requesting Holder, the “Participating Holders,” and each individually a “Participating Holder”) have requested the Company to register by request received by the Company within fifteen (15) days after such Holders have received the Company’s notice of Demand Registration, within sixty (60) days thereafter (including, without limitation, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations).  The obligations of the Company under this Section 2(a) are subject to the provisions of Sections 2(b), 2(c), 2(d) and 2(e).

(b)     Limitations on Demand Registration.  Each of the Holders shall be entitled to one (1) Demand Registration in accordance with Section 2(a); provided, however, that in no event shall the Company be required to effect more than one (1) Demand

2

Registration hereunder within any six-month period; and provided, further that the Company shall not be obligated to effect a Demand Registration unless (i) the aggregate proceeds expected to be received from the sale of the Registrable Securities requested to be included in such Demand Registration equals or exceeds five million dollars ($5,000,000) or (ii) all of the Registrable Securities then held by the Requesting Holder are requested to be included in such Demand Registration.

(c)  Demand Registration Expenses.  The Registration Expenses (as defined below) of the Holders of Registrable Securities will be paid by the Company in all Demand Registrations.

(d)  Priority on Demand Registrations.  The Company will not include in any Demand Registration any securities that are not Registrable Securities without the prior written consent of the Holders of at least a majority of the Registrable Securities included in such registration. If the Company determines or, in the event a Demand Registration is an underwritten offering, the managing underwriter(s) advise the Company in writing, that the number of Registrable Securities and, if permitted pursuant to the immediately preceding sentence, other securities requeste d to be included in such offering exceeds the number of Registrable Securities and other securities, if any, which can be sold therein without adversely affecting the marketability of the offering, the Company will include in such registration prior to the inclusion of any securities which are not Registrable Securities the number of Registrable Securities requested to be included (whether upon exercise of a Demand Registration right or upon exercise of the right to participate in such a Demand Registration) that in the opinion of the Company or such underwriter(s), as the case may be, can be sold without adversely affecting the marketability of the offering, pro rata among the respective Holders thereof on the basis of the number of Registrable Securities held by each such Holder; provided, however, that if, as a result of such pro-ration, the Requesting Holder shall not be entitled to include in a registration all Registrable Securities of the class that such Requesting Holder had requested t o be included, then such registration shall not count as a Demand Registration under Section 2(b).

(e) Conditions to Requirements to Effect a Demand Registration. The obligations of the Company set forth in Section 2(a) are subject to each of the following limitations, conditions and qualifications:

(i) The Company’s obligations shall be subject to the obligations of each Requesting Holder to furnish all information and materials and to take any and all actions as may be required of it under federal and state securities laws and regulations to permit the Company to comply with all applicable requirements of the SEC and to obtain any acceleration of the effective date of such registration statement. Without limiting the generality of the forgoing, the Requesting Holders shall each furnish to the Company in writing, promptly after receipt of a request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Securities Act for use in connection with any registration statement or prospectus or preliminary prospectus included therein. Each Requesting Holder agrees to promptly furnish additional information required to be

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disclosed in order to make the information previously furnished to the Company by such Requesting Holder not materially misleading.

(ii) The Company shall not be obligated to cause any special audit (other than a fiscal year-end audit) to be undertaken in connection with preparing or causing to become effective any registration statement.

(f)  Selection of Underwriters.  The Holders of a majority of the Registrable Securities included in any Demand Registration will have the right to select the investment banker(s) and manager(s) to administer the offering, subject to the Company’s approval which shall not be unreasonably withheld.

(g)  Other Registration Rights.  The Company agrees that it shall not, without the consent of Holders holding a majority of the then outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any equity securities of the Company or any securities convertible into or exchangeable for equity securities of the Company (A) that would allow such holder or prospective holder to include such securities in any Demand Registration or Piggyback Registration (as defined below) unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that their inclusion would not reduce the amount of the Registrable Securities of the Holders included therein or (B) on terms that are equivalent or superior to the rights of the Holders as granted herein.

3.  Piggyback Registration.

(a)  Right to Piggyback.  Whenever the Company proposes to register any of its equity securities under the Securities Act (including primary registrations on behalf of the Company and secondary registrations on behalf of the holders of its securities but excluding registrations on Form S-4 or S-8 or any successor form thereto) and the registration form to be used may be used for the registration of Registrable Securities (a “Piggyback Registration”), the Company will give prompt written notice to all Holders of Registrable Securities of its intention to effect such a registration (a “Piggyback Notice”) and, subject to Section 3(d), will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within fifteen (15) days after the receipt of the Company’s Piggyback Notice.

(b)  Limitations on Piggyback Registration.  Each of the Holders shall be entitled to participate in two (2) Piggyback Registrations in accordance with Section 3(a).

(c)  Piggyback Registration Expenses.  The Registration Expenses (as defined below) of the Holders of Registrable Securities will be paid by the Company in all Piggyback Registrations.

(d)  Priority on Primary Registrations.  If a Piggyback Registration is a primary registration on behalf of the Company, and the Company determines, or, in the event such Piggyback Registration is an underwritten offering, the managing underwriter(s) advise the

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Company in writing, that the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company will include in such registration (i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities requested to be included in such registration, pro rata among the Holders of such Registrable Securities on the basis of the number of shares held by each such Holder, and (iii) third, other securities requested to be included in such registration; provided, however, that if, as a result of such pro-ration, the Participating Holder shall not be entitled to include in a registration all Registrable Securities of the class that such Participating Holder had requested to be included, then such registration shall not count as one of such Participating Holder’s permitted Piggyback Registrations under Section 3(b).

(e)  Priority on Secondary Registrations.  If a Piggyback Registration is a secondary registration on behalf of holders of the Company’s securities, and the Company determines, or, in the event such Piggyback Registration is an underwritten offering, the managing underwriter(s) advise the Company in writing, that the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company will include in such registration (i) first, pro rata among the securities requested to be included therein by the Holders requesting such registration and the other Registrable Securities requested to be included in such registration, on the basis of the number of shares held by each such Holder, and (ii) second, other securities requested to be included in such registration; provided, however, that if, as a result of such pro-ration, the Participating Holder shall not be entitled to include in a registration all Registrable Securities of the class that such Participating Holder had requested to be included, then such registration shall not count as one of such Participating Holder’s permitted Piggyback Registrations under Section 3(b).

(f)  Conditions to Participation in a Piggyback Registration. In order to participate in any Piggyback Registration, each Participating Holder must furnish all information and materials and take any and all actions as may be required of it under federal and state securities laws and regulations to permit the Company to comply with all applicable requirements of the SEC and to obtain any acceleration of the effective date of such registration statement. Without limiting the generality of the forgoing, the Participating Holders shall each furnish to the Company in writing, promptly after receipt of a request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Securities Act for use in connection with any registration statement or prospectus or preliminary prospectus included therein. Each Participating Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Company by such Participating Holder not materially misleading.

(g)  Selection of Underwriters.  If any Piggyback Registration is an underwritten offering other than a Demand Registration, the Company’s selection of investment banker(s) and manager(s) for the offering will be subject to approval by the

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Holders of a majority of the Registrable Securities included in such Piggyback Registration.  Such approval will not be unreasonably withheld.

(h)  Other Registrations.  If the Company has previously filed a registration statement with respect to Registrable Securities pursuant to Section 2(a) or pursuant to this Section 3, and if such previous registration has not been withdrawn or abandoned, the Company will not, except as required by Section 2(a), file or cause to be effected any other registration of any of its equity securities or securities convertible or exchangeable into or exercisable for its equity securities under the Securities Act (except on Form S-4 or Form S-8 or any successor form), whether on its own behalf or at the request of any Holder or Holders of such securities, until a period of at least six (6) months has elapsed from the effective date of such previous registration.

4.  Holdback Agreement.  If the Company shall file a registration statement (other than a registration statement on Form S-4 or S-8 or any successor form for securities to be offered solely in a transaction of a type referred to in Rule 145 under the Securities Act or to employees of the Company pursuant to employee benefit plans or dividend reinvestment plans) and, with reasonable prior notice, the Company (in the case of a non-underwritten Public Offering by the Company pursuant to such registration statement) advises the Holders in writing that a public sale or distribution of Registrable Securities would materially adversely affect such offering, or the managing underwriter(s) (in the case of an underwritten Public Offering by the Company pursuant to such registration statement) advise the Company in writing (in which case the Company shall notify the Holders with a copy of such underwriter’s notice) that a public sale or distribution of Registrable Securities would materially adversely impact such Public Offering, then the Holders shall, to the extent not inconsistent with applicable law, refrain from effecting any public sale or distribution of Registrable Securities during the ten (10) days prior to the effective date of such registration statement and until the earliest of (a) the abandonment of such Public Offering, (b) ninety (90) days after the effective date of such registration statement and (c) if such Public Offering is an underwritten Public Offering, the termination in whole or in part of any “hold back” period obtained by the underwriter(s) in such Public Offering from the Company in connection therewith.

5.  Registration Procedures.  Whenever the Holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement, the Company will use commercially reasonable efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of distribution thereof, and pursuant thereto the Company will as expeditiously as possible:

(a) prepare and file with the SEC 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;

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(b) 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 one hundred fifty (150) days after the effective date of such registration statement if such date is less than one year from the date hereof, and for a period of one year from the effective date, if such date is one year or more from the date hereof (unless all securities covered by such registration statement are sooner disposed of), all as requested by such Holder or Holders;

(c) 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;

(d) 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 (d) 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 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;

(e) 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

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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;

(f) notify the Holders of Registrable Securities covered by such registration statement promptly and, if requested, confirm such notice in writing, of the issuance by the SEC of any stop order suspending the effectiveness of such registration statement or the initiation of any proceedings for that purpose and use best efforts to obtain the withdrawal of any order suspending the effectiveness of such registration statement, or the lifting of any suspension of the qualification or exemption from qualification of any Registrable Securities for sale in any jurisdiction in the United States;

(g) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its stockholders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months but not more than eighteen (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

(h) 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.

6.  Registration Expenses.

(a)  All expenses incident to the Company’s performance of or compliance with this Agreement, including without limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses and fees and disbursements of counsel for the Company and all independent certified registered public accountants, underwriters (excluding discounts and commissions) and other Persons retained by the Company (all such expenses being herein called “Registration Expenses”), will be borne as provided in this Agreement, except that the Company will, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed.

(b) In connection with each Demand Registration and each Piggyback Registration, the Company will reimburse the Holders of Registrable Securities covered by such registration for, or pay directly, the reasonable fees and disbursements of one counsel chosen by the Holders of a majority of the Registrable Securities included in such registration, including, in the case of a registration that is both a Demand Registration and

8

a Piggyback Registration, the Registrable Securities included in such registration by the Requesting Holder and the Participating Holders.

(c) To the extent Registration Expenses are not required to be paid by the Company, each Holder of securities included in any registration hereunder will pay those Registration Expenses allocable to the registration of such Holder’s securities so included, and any Registration Expenses not so allocable will be borne by all sellers of securities included in such registration in proportion to the aggregate selling price of the securities to be so registered.

7.  Indemnification.

(a)  The Company agrees to indemnify, to the extent permitted by law, each Holder of Registrable Securities, its officers and directors and each Person who controls such Holder (within the meaning of the Securities Act or the Securities Exchange Act) against all losses, claims, damages, liabilities and expenses (including any amounts paid in any settlement effected with the Company’s consent, which consent shall not be unreasonably withheld) caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading or any violation by the Company of any federal, state or common law applicable to the Company and relating to action required of or inaction by the Company in connection with such registration, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such Holder which specifically states that it is for use in the preparation of such registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or by 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. In connection with an underwritten offering, the Company will indemnify the underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act or the Securities Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders of Registrable Securities.

(b) In connection with any registration statement in which a Holder of Registrable Securities is participating, each such Holder, severally and not jointly, will furnish to the Company in writing such information relating to such Holder and its Registrable Securities as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, will indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act or the Securities Exchange Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to

9

make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information so furnished in writing by such Holder which specifically states that it is for use in the preparation of such registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto; provided that the obligation to indemnify will be individual to each Holder and will be limited to the net amount of proceeds received by such Holder from the sale of Registrable Securities pursuant to such registration statement.

(c) Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (but any failure to so notify the indemnifying party shall not relieve it of any liability which it may otherwise have to any indemnified party unless such failure shall materially adversely affect the defense of such claim) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). 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, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim.

(d) If for any reason the indemnification provisions contemplated by Section 7(a) or Section 7(b) are unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations.  The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 7(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 7(d).  The amount paid or payable by an indemnified party as a result of the losses, claims, damages, or liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of

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this Section 7(d), an indemnifying party that is a Holder shall not be required to contribute any amount which is in excess of the amount by which the total proceeds (net of all underwriting discounts and commissions) received by such Holder from the sale of the Registrable Securities sold by such Holder in the applicable offering exceeds the amount of any damages that such indemnifying party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

8.  Participation in Registrations.

(a)  No Person may participate in any registration hereunder which is underwritten unless such Person (i) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.

(b) Each Person that is participating in any registration hereunder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5(e), such Person will forthwith discontinue the disposition of its Registrable Securities pursuant to the registration statement until such Person’s receipt of the copies of a supplemented or amended prospectus as contemplated by Section 5(e).

9.  Current Public Information.  The Company will use commercially reasonable efforts to file all reports required to be filed by it under the Securities Act and the Securities Exchange Act and the rules and regulations adopted by the SEC thereunder, and will take such further action as any Holder or Holders of Registrable Securities may reasonably request, all to the extent required to enable such Holders to sell Registrable Securities pursuant to Rule 144 adopted by the SEC under the Securities Act (as such rule may be amended from time to time) or any similar rule or regulation hereafter adopted by the SEC.

10.  Duration of Registration Rights.  The rights and obligations provided for in this Agreement (except for the indemnification and contribution obligations of Section 7) shall terminate with respect to a Holder on the earlier to occur of (i) the first date on which such Holder may sell any and all Registrable Securities owned by such Holder pursuant to Rule 144 under the Securities Act within any three (3) month period, other than as a result of the fact that the average weekly trading volume of the Common Stock on such date (as calculated for purposes of Rule 144(e)) is greater than or equal to the number of Registrable Securities held by such Holder and (ii) such time as such Holder no longer owns any Registrable Securities.

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11.  Miscellaneous.

(a) No Inconsistent Agreements. The Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the Holders of Registrable Securities in this Agreement.

(b) Remedies. The parties shall be entitled to enforce their rights under this Agreement specifically to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or temporary, preliminary or permanent injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement.

(c) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may be amended or waived only upon the prior written consent of the Company and the Holders of at least a majority of the Registrable Securities; provided, that no such amendment or waiver shall disproportionately adversely affect any Holder that has not consented in writing to such amendment or waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.  No purported waiver shall be effective unless in writing. The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent or other breach.

(d) Successors and Assigns. All covenants and agreements in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not.  Except in respect of a successor company to the Company, the rights and obligations of the parties hereunder shall not be assignable.

(e) Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provisions of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

(f) Counterparts; Facsimile Signatures. This Agreement may be executed in counterparts, each of which shall be considered an original, but all of which together shall constitute one and the same instrument.  Delivery of an executed counterpart of a signature page by facsimile shall be effective as delivery of a manually executed counterpart.

(g) Interpretation. In this Agreement, unless a contrary intention appears, (i) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision, (ii) the words

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“include,” “includes” or “including” shall be deemed to be followed by the words “without limitation,” (iii) reference to any Section means such Section hereof, (iv) words of any gender shall be deemed to include each other gender, and (v) words using the singular or plural number shall also include the plural or singular number, respectively. No provision of this Agreement shall be interpreted or construed against any party hereto solely because such party or its legal representative drafted such provision.

(h) Captions. The captions in this Agreement are for convenience of reference only and shall not be given any effect in the interpretation of this Agreement.

(i) Governing Law. This Agreement shall be construed in accordance with, and governed by, the laws of the State of New York without regard to conflicts of law principles which would result in the application of the laws of another jurisdiction.

(j) Jurisdiction. The parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the State of New York, County of New York and the United States District Court for the Southern District of New York for any actions, suits or proceedings arising out of or relating to this agreement and the transactions contemplated hereby (and agree not to commence any action, suit or proceeding relating thereto except in such courts). The parties hereby irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the courts of the State of New York, County of New York and the United States District Court from the Southern District of New York, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

(k) Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(l) Complete Agreement. This Agreement, the documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understanding, agreements or representations by or among the parties, written or oral, that may be related to the subject matter hereof in any way.

(m) 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) three (3) Business Days after mailing by first class certified mail, postage prepaid, (ii) when delivered by hand, (iii) upon confirmation of receipt by facsimile, or (iv) one (1) Business Day after sending by overnight delivery service, to the respective addresses or telecopy numbers of the parties set forth below:

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if to the Company, at:

InSight Health Services Holdings Corp.

26250 Enterprise Court

Suite 100

Lake Forest, California 92630

Attn.: General Counsel

Facsimile: (949) 462-3703

with a copy similarly sent to:

Kaye Scholer LLP

425 Park Avenue

New York, New York 10022

Attn: Stephen C. Koval, Esq.

Facsimile: (212) 836-6419,

and

If to any Holder, to the address or facsimile number for such Holder set forth on the signature pages hereto,

or at such other addresses as may be substituted by notice given as herein provided.  The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice.

[Signature Pages Follow]

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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto, all as of the date first above written.

INSIGHT HEALTH SERVICES HOLDINGS CORP.
By:	/s/ Mitch C. Hill
	Name: Mitch C. Hill
	Title:	Executive Vice President and
		Chief Financial Officer

Name of Holder:
J.W. CHILDS EQUITY PARTNERS II, L.P.
By:	/s/ Alan A. Dowds
	Name: Alan A. Dowds
	Title: Assistant Treasurer
Address for Notices:
JW Childs Associates
111 Huntington Ave.
Boston, Massachusetts, 02199
Telecopier:

Name of Holder:
JWC-INSIGHT CO-INVEST LLC
By:	/s/ Alan A. Dowds
	Name: Alan A. Dowds
	Title: Assistant Treasurer
Address for Notices:
JW Childs Associates
111 Huntington Ave.
Boston, Massachusetts, 02199
Telecopier:

Name of Holder:
BRF High Value, L.P.
By:	/s/ John V. Koerber
	Name: John V. Koerber
	Title:
Address for Notices:
c/o Bennett Management Corporation 2 Stamford Plaza, Suite 1501
281 Tresser Blvd., Stamford CT 06901
Attn: Warren Frank
Telecopier:

Name of Holder:
Bennett Offshore Restructuring Fund, Inc.
By:	/s/ John V. Koerber
	Name: John V. Koerber
	Title:
Address for Notices:
c/o Bennett Management Corporation 2 Stamford Plaza, Suite 1501
281 Tresser Blvd., Stamford CT 06901
Attn: Warren Frank
Telecopier:

Name of Holder:
Bennett Restructuring Fund, L.P.
By:	/s/ John V. Koerber
	Name: John V. Koerber
	Title:
Address for Notices:
c/o Bennett Management Corporation 2 Stamford Plaza, Suite 1501
281 Tresser Blvd., Stamford CT 06901
Attn: Warren Frank
Telecopier:

Name of Holder:
RMK Select High Income Fund
By:	/s/ David Tannehill
	Name: David Tannehill
	Title: Assistant Portfolio Manager
Address for Notices:
1100 Ridgeway Loop Road, Suite 510
Memphis, TN 38120
Attn: David Tannehill
Telecopier:

Name of Holder:
RMK High Income Fund
By:	/s/ David Tannehill
	Name: David Tannehill
	Title: Assistant Portfolio Manager
Address for Notices:
1100 Ridgeway Loop Road, Suite 510
Memphis, TN 38120
Attn: David Tannehill
Telecopier:

RMK Strategic Income Fund
By:	/s/ David Tannehill
	Name: David Tannehill
	Title: Assistant Portfolio Manager
Address for Notices:
1100 Ridgeway Loop Road, Suite 510
Memphis, TN 38120
Attn: David Tannehill
Telecopier:

RMK Advantage Income Fund
By:	/s/ David Tannehill
	Name: David Tannehill
	Title: Assistant Portfolio Manager
Address for Notices:
1100 Ridgeway Loop Road, Suite 510
Memphis, TN 38120
Attn: David Tannehill
Telecopier:

RMK Multi-Sector High Income Fund
By:	/s/ David Tannehill
	Name: David Tannehill
	Title: Assistant Portfolio Manager
Address for Notices:
1100 Ridgeway Loop Road, Suite 510
Memphis, TN 38120
Attn: David Tannehill
Telecopier:

EX-4.9

Exhibit 4.9

$15,000,000

Senior Secured Floating Rate Notes due 2011

REGISTRATION RIGHTS AGREEMENT

Dated as of July 9, 2007

by and among

InSight Health Services Corp.,

InSight Health Services Holdings Corp.,

The Subsidiary Guarantors listed in Schedule A hereto

and

The Purchasers Signatory hereto

This Registration Rights Agreement (this “Agreement”) is made and entered into as of July 9, 2007, by and among InSight Health Services Corp., a Delaware corporation (the “Company”), InSight Health Services Holdings Corp., a Delaware corporation (“Holdings”), the subsidiaries of the Company listed in Schedule A hereto (the “Subsidary Guarantors,” and, together with Holdings, the “Guarantors”), and the Purchasers signatory hereto (each a “Purchaser” and, collectively, the “Purchasers”), who collectively have purchased $15 million in aggregate principal amount of the Company’s Senior Secured Floating Rate Notes due 2011 (the “Notes”) pursuant to the Purchase Agreement, dated as of July 9, 2007, (the “Purchase Agreement”), by and among the Company, the Guarantors and the Purchasers.

Capitalized terms used herein and not otherwise defined shall have the meaning assigned to them under the Indenture, dated as of September 22, 2005 (as amended, restated, supplemented or otherwise modified from time to time, the “Indenture”) among the Company, the Guarantors and U.S. Bank National Association, as Trustee, relating to the Notes and the Exchange Notes (as defined below).

The parties hereby agree as follows:

Section 1.  Definitions.

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

Act:  The Securities Act of 1933, as amended.

Affiliate:  As defined in Rule 144 under the Act.

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

Certificated Securities:  Definitive Notes, as defined in the Indenture.

Commission:  The Securities and Exchange Commission.

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

Consummation Date:  The date that the joint plan of reorganization for the Company and Holdings, as confirmed by an order of the United States Bankruptcy Court for the District of Delaware in the case captioned In re InSight Health Services Holdings Corp., et al, case no. 07-10700 (BLS), is consummated.

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

Effective Period:  As defined in Section 4(a) hereof.

Effectiveness Deadline:  The Exchange Effectiveness Deadline or the Shelf Effectiveness Deadline, as the case may be.

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

Exchange Notes:  The Company’s Senior Secured Floating Rate Notes due 2011 to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as contemplated by Sections 4 and 6(b)(ii) hereof.

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

Exchange Filing Deadline:  As defined in Section 3(a) hereof.

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

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

Filing Deadline:  The Exchange Filing Deadline or the Shelf Filing Deadline, as the case may be.

Holders:  As defined in Section 2 hereof.

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

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

Registration Default:  As defined in Section 5 hereof.

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

Rule 144: Rule 144 promulgated under the Act.

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

Shelf Filing Deadline:  As defined in Section 4(a) hereof.

Shelf Registration Statement:  As defined in Section 4(a) hereof.

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

Transfer Restricted Securities: Each (A) Note, until the earliest to occur of (i) the date on which such Note is exchanged in the Exchange Offer for an Exchange Note which is entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (ii) the date on which such Note has been disposed of in accordance with a Shelf Registration Statement (and the purchasers thereof have been issued Exchange Notes), or (iii) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act (or similar provisions then in effect) and (B) Exchange Note held by a Broker-Dealer until the date on which such Exchange Note is disposed of by a Broker-Dealer pursuant to the “Plan of Distribution” contemplated by the Exchange Offer Registration Statement (including the delivery of the Prospectus contained therein).

Section 2.  Holders.  A Person is deemed to be a holder of Transfer Restricted Securities (each, a “Holder”) whenever such Person owns Transfer Restricted Securities.

Section 3.  Registered Exchange Offer.  (a)  Unless the Exchange Offer shall not be permitted by applicable federal law (after the procedures set forth in Section 6(a)(i) below have been complied with), the Company and the Guarantors shall (i) cause the Exchange Offer Registration Statement to be filed with the Commission no later than 60 days after the Consummation Date (such 60th day being the “Exchange Filing Deadline”), (ii) use reasonable best efforts to cause such Exchange Offer Registration Statement to become effective no later than 120 days after the Consummation Date (such 120th day being the “Exchange Effectiveness Deadline”); provided, that if such Exchange Offer Registration Statement does not become effective by such 120th day as a result of review and comment by the Commission, the Exchange Effectiveness Deadline shall be extended by an additional 30 days, (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause it to become effective, (B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer Registration Statement, commence and Consummate the Exchange Offer.  The Exchange Offer shall be on the appropriate form permitting (i) registration of the Exchange Notes to be offered in exchange for the Notes that are Transfer Restricted Securities and (ii) resales of Exchange Notes by Broker-Dealers that tendered into the Exchange Offer Notes that such Broker-Dealer acquired for its own account as a result of market-making activities or other trading activities (other than Notes acquired directly from the Company or any of its Affiliates) as contemplated by Section 3(c) below.

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(b)        The Company and the Guarantors shall use reasonable best efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer open, for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 Business Days.  The Company and the Guarantors shall cause the Exchange Offer to comply with all applicable federal and state securities laws.  No securities other than the Exchange Notes shall be included in the Exchange Offer Registration Statement.  The Company and the Guarantors shall use reasonable best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event shall the Exchange Offer be Consummated later than 30 days thereafter (such 30th day being the “Consummation Deadline”).

(c)        The Company shall include a “Plan of Distribution” section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Broker-Dealer who holds Transfer Restricted Securities that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities (other than Notes acquired directly from the Company or any Affiliate of the Company), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer.  Such “Plan of Distribution” section shall also contain all other information with respect to such sales by such Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such “Plan of Distribution” shall not name any such Broker-Dealer or disclose the amount of Transfer Restricted Securities held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in policy, rules or regulations after the date of this Agreement.  See the Shearman & Sterling no-action letter (available July 2, 1993).

Because such Broker-Dealer may be deemed to be an “underwriter” within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with its initial sale of any Exchange Notes received by such Broker-Dealer in the Exchange Offer, the Company and the Guarantors shall permit the use of the Prospectus contained in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such prospectus delivery requirement.  To the extent necessary to ensure that the prospectus contained in the Exchange Offer Registration Statement is available for sales of Exchange Notes by Broker-Dealers, the Company and the Guarantors agree to use reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(a) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of 30 days from the Consummation Deadline or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold pursuant thereto.  The Company shall provide sufficient copies of the latest version of such Prospectus to such Broker-Dealers, promptly upon request, and in no event later than one day after such request, at any time during such period.

Section 4.  Shelf Registration.  (a)  If (i) the Exchange Offer is not permitted by applicable law (after the Company has complied with the procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted Securities shall notify the Company by the Consummation Date that (A) such Holder was prohibited by law or Commission policy from participating in the Exchange Offer or (B) such Holder may not resell the Exchange Notes acquired by it in the

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Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Notes acquired directly from the Company or any of its Affiliates, then the Company shall:

(x) cause to be filed within 60 days after the Consummation Date (such 60th day, the “Shelf Filing Deadline”), a shelf registration statement pursuant to Rule 415 under the Act (the “Shelf Registration Statement”), relating to such notifying Holder’s Transfer Restricted Securities, and

(y) use its reasonable best efforts to cause such Shelf Registration Statement to become effective on or prior to 120 days after the Consummation Date (such 120th day the “Shelf Effectiveness Deadline”); provided, that if such Shelf Registration Statement does not become effective by such 120th day as a result of review and comment by the Commission, the Shelf Effectiveness Deadline shall be extended by an additional 30 days.

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

To the extent necessary to ensure that the Shelf Registration Statement is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a) and the other securities required to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and the Guarantors shall use reasonable best efforts to keep any Shelf Registration Statement required by this Section 4(a) continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(b) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of up to 180 days (the “Effective Period”) (as extended pursuant to this Section 4(a) or Section 6(d)), or such shorter period as will terminate when all Transfer Restricted Securities covered by such Shelf Registration Statement have been sold pursuant thereto.

Following the 60th day of the Effective Period, the Company shall be entitled to suspend the use of any effective Registration Statement under this Section 4 (each such suspension, a “Blackout Period”) if the Company determines in good faith that the distribution of the Notes covered by such Registration Statement would materially interfere with any pending financing, acquisition or corporate reorganization or other corporate development material to the Company and its subsidiaries, taken as a whole, or would require premature disclosure thereof and promptly gives the Holders written notice of such determination, containing a statement of the reasons for such postponement, without disclosing specific details; provided, however that the Company will be entitled to a maximum of two Blackout Periods of up to 30 days each and that any such Blackout Period used by the Company shall extend the Effective Period by the length of such Blackout Period.  The Purchasers agree to keep confidential any information disclosed to them by

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the Company in connection with the use of a Blackout Period until such information has been publicly disclosed by the Company or a third party.

(b)        Provision by Holders of Certain Information in Connection with the Shelf Registration Statement.  No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 days after receipt of a request therefor, the information specified in Item 507 or 508, as applicable, of Regulation S-K of the Act for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein.  No Holder of Transfer Restricted Securities shall be entitled to liquidated damages pursuant to Section 5 hereof unless and until such Holder shall have provided all such information.  Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading.

Section 5.  Liquidated Damages.  If (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline, (ii) any such Registration Statement has not been declared effective by the Commission on or prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not been Consummated on or prior to the Consummation Deadline or (iv) except as permitted under the last paragraph of Section 4(a), any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within 2 days by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective within 5 days of filing such post-effective amendment to such Registration Statement (each such event referred to in clauses (i) through (iv), a “Registration Default”), then the Company and the Guarantors hereby jointly and severally agree to pay to each Holder of Transfer Restricted Securities affected thereby, for each week or portion thereof that the Registration Default continues, liquidated damages in an amount equal to the product of $6,250 multiplied by a fraction, the numerator of which is the principal amount of Transfer Restricted Securities held by such Holder and the denominator of which is $15,000,000 (such affected Holder’s “Weekly Amount”); provided, that the maximum amount of liquidated damages payable to any such affected Holder shall be the product of (x) such affected Holder’s Weekly Amount and (y) 48; and provided, further that in no event shall liquidated damages accrue in respect of any Transfer Restricted Security for more than one Registration Default applicable to such Transfer Restricted Security at any given time.  Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or made usable in the case of (iv) above, the liquidated damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease to accrue.

All accrued liquidated damages shall be paid to the Holders entitled thereto, in the manner provided for the payment of interest in the Indenture, on each Interest Payment Date, as more fully

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set forth in the Indenture and the Notes.  Notwithstanding the fact that any securities for which liquidated damages are due cease to be Transfer Restricted Securities, all obligations of the Company and the Guarantors to pay liquidated damages with respect to securities shall survive until such time as such obligations with respect to such securities shall have been satisfied in full.

Section 6.  Registration Procedures.

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

(i)  If, following the date hereof there has been announced a change in Commission policy with respect to exchange offers such as the Exchange Offer, that in the reasonable opinion of counsel to the Company raises a substantial question as to whether the Exchange Offer is permitted by applicable federal law, the Company and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company to Consummate an Exchange Offer for such Transfer Restricted Securities.  The Company and the Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level.  In connection with the foregoing, the Company and the Guarantors hereby agree to take all such other actions as may be requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission, (B) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff; and

(ii)  As a condition to its participation in the Exchange Offer, each Holder of Transfer Restricted Securities (including, without limitation, any Holder who is a Broker-Dealer) shall furnish, upon the request of the Company, prior to the Consummation of the Exchange Offer, a written representation to the Company and the Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course of business.  As a condition to its participation in the Exchange Offer each Holder using the Exchange Offer to participate in a distribution of the Exchange Notes shall acknowledge and agree that, if the resales are of Exchange Notes obtained by such Holder in exchange for Notes acquired directly from the Company or an Affiliate thereof, it (1) could not, under Commission policy as in effect on the date of this Agreement, rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13,

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1988), as interpreted in the Commission’s letter to Shearman & Sterling (available July 2, 1993), and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K; and

(iii)  Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall provide a supplemental letter to the Commission (A) stating that the Company is registering the Exchange Offer in reliance on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988),  as interpreted in the Commission’s letter to Shearman & Sterling (available July 2, 1993), and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that neither the Company nor any Guarantor has entered into any arrangement or understanding with any Person to distribute the Exchange Notes to be received in the Exchange Offer and that, to the best of the Company’s and each Guarantor’s information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes received in the Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above, if applicable.

(b)        Shelf Registration Statement.  In connection with the Shelf Registration Statement, the Company and the Guarantors shall:

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

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

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

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(i)  other than, with respect to the Shelf Registration Statement, during any Blackout Periods, use its reasonable best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 of this Agreement, as applicable. Except as permitted under the last paragraph of Section 4(a), upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company shall promptly prepare and file an appropriate amendment to such Registration Statement or related Prospectus or any document incorporated therein by reference or file any other document curing such defect, and, if Commission review is required for an amendment to the Registration Statement, use its reasonable best efforts to cause such amendment to be declared effective as soon as practicable;

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

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

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withdrawal or lifting of such order at the earliest possible time;

(iv)  furnish to the Purchasers and, with respect to a Shelf Registration Statement, each selling Holder named in any Registration Statement or Prospectus in connection with such exchange or sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders in connection with such sale, if any, for a period of at least 3 Business Days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which such Holders shall reasonably object within 3 Business Days after the receipt thereof.  A Holder shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omits to state any material fact necessary to make the statements therein not misleading or fails to comply with the applicable requirements of the Act;

(v)  with respect to a Shelf Registration Statement, promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to each selling Holder, upon such Holder’s reasonable request, in connection with such exchange or sale, if any;

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

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

(viii) with respect to a Shelf Registration Statement, deliver to each Holder, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Guarantors hereby consent to the use (in accordance with law. rules, regulations and orders) of the Prospectus and any amendment or supplement thereto by each selling Holder in connection with the public offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto;

(ix)  prior to any public offering of Transfer Restricted Securities, cooperate with the

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selling Holders and their counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement; provided, however, that neither the Company nor any Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject;

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

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

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

(xiii)  otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) covering a twelve-month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act).

The Company and the Guarantors will be deemed not to have used reasonable best efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if the Company or any of the Guarantors voluntarily and knowingly takes any action that would, or omits to take any action which omission would, result in any such Registration Statement not being declared effective or in the Holders of Transfer Restricted Securities covered thereby not being able to exchange or offer and sell such Transfer Restricted Securities during that period as and to the extent contemplated hereby, unless (x) such action is required by applicable law or (y) such action is taken by the Company and the Guarantors in good faith and for valid business reasons (but not including avoidance of the Company’s or the Guarantors’, as applicable, obligations hereunder), including a material corporate transaction or other material corporate development.

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

Section 7.  Registration Expenses.  (a)  All expenses incident to the Company’s and the Guarantors’ performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company and, subject to Section 7(b) below, all reasonable fees and reasonable disbursements of one counsel for the Holders of Transfer Restricted Securities chosen by the Holders of a majority of the outstanding Transfer Restricted Securities; (v) all application and filing fees in connection with listing the Exchange Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent registered public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance).  Notwithstanding the foregoing, the holders of the Notes being registered shall pay any placement agency fees and commissions and underwriting discounts and commissions and transfer taxes attributable to the sale of such Notes and the fees and disbursements of any counsel or other advisors or experts retained by such holders (severally or jointly), other than the counsel specifically referred to above.

The Company will, in any event, bear its and the Guarantors’ internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Guarantors.

(b)        In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf

12

Registration Statement), the Company and the Guarantors will reimburse the Purchasers and the Holders of Transfer Restricted Securities who are tendering Notes into the Exchange Offer and/or selling Notes or Exchange Notes pursuant to the “Plan of Distribution” contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Milbank, Tweed, Hadley& McCloy LLP, unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared.

Section 8.  Indemnification.  (a)       The Company and the Guarantors agree, jointly and severally, to indemnify and hold harmless each Holder, its directors, officers and each Person, if any, who controls such Holder(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, liabilities, judgments, (including without limitation, any legal or other expenses incurred in connection with investigating or defending any matter, including any action that could give rise to any such losses, claims, damages, liabilities or judgments and any amount paid in settlement of any litigation or any investigation or proceeding by any governmental agency or body, to the extent such settlement amounts are indemnifiable pursuant to Section 8(c) below) arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto) provided by the Company or any Guarantor to any Holder or any prospective purchaser of Exchange Notes or registered Notes, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by an untrue statement or omission or alleged untrue state­ment or omission that is based upon information relating to any of the Holders furnished in writing to the Company by any of the Holders.

(b)        Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantors, and their respective directors and officers, and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company or the Guarantors to the same extent as the foregoing indemnity from the Company and the Guarantors set forth in Section 8(a) above, but only with reference to information relating to such Holder furnished in writing to the Company by such Holder ex­pressly for use in any Registration Statement.  In no event shall any Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the net proceeds received by such Holder in connection with the sale of Transfer Restricted Securities pursuant to a Registration Statement, less the aggregate amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay pursuant to this Section 8 by reason of such untrue or alleged untrue statement or omission or alleged omission.

(c)        In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the “indemnified party”), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the “indemnifying party”) in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all reasonable fees and expenses of such counsel, as incurred (except that in the

13

case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holder).  Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party within a reasonable period of time after notification by the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party).  In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred.  Such firm shall be designated in writing by a majority of the outstanding principal amount of Transfer Restricted Securities (excluding Transfer Restricted Securities held by the Company or its Affiliates), in the case of the parties indemnified pursuant to Section 8(a), and by the Company and Guarantors, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, but if a proceeding for which indemnification is provided hereunder is settled with such consent or if there be a final non-appealable judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment.  No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party.

(d)        To the extent that the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or judgments, in such proportion as is appropriate to reflect the relative fault of the Company and the Guarantors, on the one hand, and of the Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations.  The relative fault of the Company and the Guarantors, on the one hand, and of the Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a

14

material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or such Guarantor, on the one hand, or by the Holder, on the other hand, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and judgments referred to above shall be deemed to include, subject to the limitations set forth in the second and third sentences of Section 8(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim.

The Company, the Guarantors and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of alloca­tion which does not take account of the equita­ble considerations referred to in the immedi­ately preceding paragraph.  The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preced­ing paragraph shall be deemed to include, sub­ject to the limitations set forth above, any legal or other expenses incurred by such indemnified party in connection with in­vestigating or defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments.  Notwithstanding the provisions of this Section 8, no Holder, its directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the aggregate, any amount in excess of the net proceeds received by such Holder in connection with the sale of Transfer Restricted Securities pursuant to a Registration Statement, less the aggregate amount of any damages which such Holder has otherwise been required to pay pursuant to this Section 8 by reason of such untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresen­tation.  The Holders’ obligations to con­tribute pursuant to this Section 8(d) are sev­eral in proportion to the respective principal amount of Transfer Restricted Securities held by each Holder hereunder and not joint.

Section 9.  Rule 144A and Rule 144.  The Company and each Guarantor agree with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144.

Section 10.  Miscellaneous.    (a)    Remedies. The Company and the Guarantors acknowledge and agree that any failure by the Company and/or the Guarantors to comply with their respective obligations under Sections 3 and 4 hereof may result in material irreparable injury to the Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, any Purchaser or any Holder may seek such relief as may be required to specifically enforce the

15

Company’s and the Guarantors’ obligations under Sections 3 and 4 hereof.  The Company and the Guarantors further agree to waive the defense in any action for specific performance that a remedy at law would be adequate.

(b)        No Inconsistent Agreements.  Neither the Company nor any Guarantor will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.  The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company’s securities under any agreement in effect on the date hereof.  The Holders hereby acknowledge that the registration rights agreement to be entered into by and among Holdings and certain equity holders of Holdings as of the Consummation Date will not conflict with this Section 10(b).

(c)        Amendments and Waivers.  The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 10(c), the Company has obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities (excluding Transfer Restricted Securities held by the Company or its Affiliates).  Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose Transfer Restricted Securities are being tendered pursuant to the Exchange Offer, and that does not affect directly or indirectly the rights of other Holders whose Transfer Restricted Securities are not being tendered pursuant to such Exchange Offer, may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer.

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

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

(ii)  if to the Company or any Guarantor:

InSight Health Services Corp.

26250 Enterprise Court

Suite 100

Lake Forest, CA 92630

Facsimile: (949) 462-3703

Attention: General Counsel

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With a copy to:

Kaye Scholer LLP

425 Park Avenue

New York, NY 10022

Facsimile: (212) 836-8689

Attention:  Stephen C. Koval, Esq. and Mark S. Kingsley, Esq.

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

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

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

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

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

(h)        Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.

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

(j)         Entire Agreement.  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein

17

with respect to the registration rights granted with respect to the Transfer Restricted Securities.  This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

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

INSIGHT HEALTH SERVICES CORP.
By:	/s/ Mitch C. Hill
Name:	Mitch C. Hill
Title:	Executive Vice President and Chief
	Financial Officer
INSIGHT HEALTH SERVICES HOLDINGS CORP.
By:	/s/ Mitch C. Hill
Name:	Mitch C. Hill
Title:	Executive Vice President and Chief
	Financial Officer
WILKES-BARRE IMAGING, L.L.C.
By:  InSight Health Corp., as the sole member and sole manager
By:	/s/ Mitch C. Hill
Name:	Mitch C. Hill
Title:	Executive Vice President and Chief
	Financial Officer
MRI ASSOCIATES, L.P.
By:  InSight Health Corp., as the general partner
By:	/s/ Mitch C. Hill
Name:	Mitch C. Hill
Title:	Executive Vice President and Chief
	Financial Officer
	[Signatures continued on following page]

19

VALENCIA MRI, LLC
ORANGE COUNTY REGIONAL PET CENTER- IRVINE, LLC
SAN FERNANDO VALLEY REGIONAL PET CENTER, LLC
By: InSight Health Corp., as the sole member
By:	/s/ Mitch C. Hill
Name:	Mitch C. Hill
Title:	Executive Vice President and Chief
	Financial Officer
PARKWAY IMAGING CENTER, LLC
By:	/s/ Mitch C. Hill
Name:	Mitch C. Hill
Title:	Manager
	[Signatures continued on following page]

20

INSIGHT HEALTH CORP.
OPEN MRI, INC.
MAXUM HEALTH CORP.
RADIOSURGERY CENTERS, INC.
DIAGNOSTIC SOLUTIONS CORP.
MAXUM HEALTH SERVICES OF NORTH TEXAS, INC.
MAXUM HEALTH SERVICES OF DALLAS, INC.
NDDC, INC.
SIGNAL MEDICAL SERVICES, INC.
INSIGHT IMAGING SERVICES CORP.
COMPREHENSIVE MEDICAL IMAGING, INC.
COMPREHENSIVE MEDICAL IMAGING CENTERS, INC.
COMPREHENSIVE MEDICAL IMAGING- BILTMORE, INC.
COMPREHENSIVE OPEN MRI-EAST MESA, INC.
TME ARIZONA, INC.
COMPREHENSIVE MEDICAL IMAGING- FREMONT, INC.
COMPREHENSIVE MEDICAL IMAGING- SAN FRANCISCO, INC.
COMPREHENSIVE OPEN MRI- GARLAND, INC.
IMI OF ARLINGTON, INC.
COMPREHENSIVE MEDICAL IMAGING- FAIRFAX, INC.
IMI OF KANSAS CITY, INC.
COMPREHENSIVE MEDICAL IMAGING- BAKERSFIELD, INC.
MAXUM HEALTH SERVICES CORP.
By:	/s/ Mitch C. Hill
Name:	Mitch C. Hill
Title:	Executive Vice President and Chief
	Financial Officer
	[Signatures continued on following page]

21

COMPREHENSIVE OPEN MRI- CARMICHAEL/FOLSOM, LLC
SYNCOR DIAGNOSTICS SACRAMENTO, LLC
SYNCOR DIAGNOSTICS BAKERSFIELD, LLC
By: Comprehensive Medical Imaging, Inc. and Comprehensive Medical Imaging Centers, Inc., as the partners
By:	/s/ Mitch C. Hill
Name:	Mitch C. Hill
Title:	Executive Vice President and Chief
	Financial Officer
PHOENIX REGIONAL PET CENTER-
THUNDERBIRD, LLC
By: Comprehensive Medical Imaging Centers, Inc., as the sole member
By:	/s/ Mitch C. Hill
Name:	Mitch C. Hill
Title:	Executive Vice President and Chief
	Financial Officer
	[Signatures continued on following page]

22

MESA MRI
MOUNTAIN VIEW MRI
LOS GATOS IMAGING CENTER
WOODBRIDGE MRI
JEFFERSON MRI-BALA
JEFFERSON MRI
By: Comprehensive Medical Imaging, Inc. and Comprehensive Medical Imaging Centers, Inc., as the members
By:	/s/ Mitch C. Hill
Name:	Mitch C. Hill
Title:	Executive Vice President and Chief
	Financial Officer
	[Signatures continued on following page]

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PURCHASERS:
J.P. MORGAN SECURITIES INC.
By:	/s/ John Abate
Name:	John Abate
Title:	Managing Director
J.P. MORGAN VENTURES CORPORATION
By:	/s/ Keith J. Stephen
Name:	Keith J. Stephen
Title:	Vice President As Authorized Signatory
BDCM OPPORTUNITY FUND II, L.P.
By: BDCM Opportunity Fund II Adviser, L.L.C.,
its Investment Manager
By:	/s/ Stephen H. Deckoff
Name:	Stephen H. Deckoff
Title:	Managing Principal
HIGHLAND CREDIT STRATEGIES MASTER FUND, L.P.
By: Highland General Partner, L.P., its General Partner
By: Highland GP Holdings LLC, its General Partner
By: Highland Capital Management, LP, its Sole Member
By: Strand Advisors, Inc., its General Partner
By:	/s/ Mark K. Okada
Name:	Mark K. Okada
Title:	Executive Vice President Strand Advisors, Inc., General Partner of Highland Capital Management, L.P.

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SCHEDULE A

Subsidiary Guarantors

Subsidiary Guarantor Jurisdiction of Organization

25

EX-10.9

Exhibit 10.9

INSIGHT HEALTH SERVICES HOLDINGS CORP.

INSIGHT HEALTH SERVICES CORP.

INDEMNIFICATION AGREEMENT

This INDEMNIFICATION AGREEMENT (this “Agreement”) is made as of August 1, 2007, by and among InSight Health Services Holdings Corp., a Delaware corporation (“Holdings”), and InSight Health Services Corp, a Delaware corporation (“InSight,” and together with Holdings, the “Company”), and                        (the “Indemnitee”).

RECITALS:

A.            The Company recognizes that competent and experienced persons are increasingly reluctant to serve or to continue to serve as directors or officers of corporations unless they are protected by comprehensive liability insurance or indemnification, or both, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such directors and officers;

B.            The statutes and judicial decisions regarding the duties of directors and officers are often difficult to apply, ambiguous, or conflicting, and therefore fail to provide such directors and officers with adequate, reliable knowledge of legal risks to which they are exposed or information regarding the proper course of action to take;

C.            The Company and Indemnitee recognize that plaintiffs often seek damages in such large amounts and the costs of litigation may be so enormous (whether or not the case is meritorious), that the defense and/or settlement of such litigation is often beyond the personal resources of directors and officers;

D.            The Company believes that it is unfair for its directors and officers to assume the risk of huge judgments and other expenses which may occur in cases in which the director or officer received no personal profit and in cases where the director or officer was not culpable;

E.             The Company, after reasonable investigation, has determined that the liability insurance coverage presently available to the Company may be inadequate in certain circumstances to cover all possible exposure for which Indemnitee should be protected.  The Company believes that the interests of the Company and its stockholders would best be served by a combination of such insurance and the indemnification by the Company of the directors and officers of the Company;

F.             The certificates of incorporation of each of Holdings and InSight require that Holdings and InSight indemnify their directors and officers to the fullest extent permitted by the Delaware General Corporation Law (the “DGCL”);

G.            Section 145 of the DGCL (“Section 145”), under which Holdings and InSight are organized, empowers Holdings and InSight to indemnify their officers, directors, employees and

agents by agreement and to indemnify persons who serve, at the request of Holdings or InSight, as the directors, officers, employees or agents of other corporations or enterprises, and expressly provides that the indemnification provided by Section 145 is not exclusive;

H.            Section 102(b)(7) of the DGCL allows a corporation to include in its certificate of incorporation a provision limiting or eliminating the personal liability of a director for monetary damages in respect of claims by stockholders and corporations for breach of certain fiduciary duties, and Holdings and InSight have so provided in their respective certificates of incorporation that each director shall be exculpated from such liability to the maximum extent permitted by law;

I.              The Board of Directors has determined that contractual indemnification as set forth herein is not only reasonable and prudent but also promotes the best interests of the Company and its stockholders; and

J.             The Company desires and has requested Indemnitee to serve or continue to serve as a director or officer of the Company free from undue concern for unwarranted claims for damages arising out of or related to such services to the Company.

The Company and Indemnitee, intending to be legally bound, hereby agree as follows:

1.             INDEMNIFICATION.

(a)           Third Party Proceedings.  The Company shall indemnify Indemnitee if Indemnitee was or is a party to or witness in or is threatened to be made a party to or witness in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by Indemnitee in connection with such action, suit or proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful.  The termination of any action or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that (i) Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and (ii) with respect to any criminal action or proceeding, Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(b)           Proceedings By or in the Right of the Company.  The Company shall indemnify Indemnitee if Indemnitee was or is a party to or witness in or is threatened to be made a party to or witness in any threatened, pending or completed action or suit by or in the right of the Company or any subsidiary of the Company to procure a judgment in its favor by reason of the

2

fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such action or suit if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Company, or any subsidiary of the Company, unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit is or was pending shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for expenses and then only to the extent that the court shall deem proper.

(c)           Successful Defense.  To the extent Indemnitee has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1(a) or (b) hereof, Indemnitee shall be indemnified against expenses (including attorney fees) actually and reasonably incurred by Indemnitee in connection therewith.

2.             EXPENSES; INDEMNIFICATION PROCEDURE.

(a)           Advancement of Expenses.  The Company shall advance all expenses incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any civil or criminal action or proceeding referenced in Section 1(a) or (b) hereof (but not amounts actually paid in settlement of any such action or proceeding).  Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company as authorized hereby.  The advances to be made hereunder shall be paid by the Company to Indemnitee within twenty (20) days following delivery of a written request therefor by Indemnitee to the Company, accompanied by such supporting documentation as may be reasonably requested by the Company.

(b)           Notice/Cooperation by Indemnitee.  Indemnitee shall, as a condition precedent to his or her right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement.  In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.

(c)           Procedure.  Any indemnification provided for in Section 1 shall be made no later than forty-five (45) days after receipt of the written request of Indemnitee made following final disposition of the action or proceeding to which such indemnification relates.  If a claim by Indemnitee under this Agreement, under any statute, or under any provision of the Company’s Certificate of Incorporation or Bylaws providing for indemnification, is not paid in full by the Company within forty-five (45) days after a written request for payment thereof has first been

3

received by the Company, Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 12 hereof, Indemnitee shall also be entitled to be paid for the expenses (including reasonable attorneys’ fees) of bringing such action.  It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any action or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Company, and Indemnitee shall be entitled to receive interim payments of expenses pursuant to Section 2(a) hereof unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists.  It is the parties’ intention that if the Company contests Indemnitee’s right to indemnification, the question of Indemnitee’s right to indemnification shall be for the court to decide, and neither the failure of the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel or its stockholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel or its stockholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct.

(d)           Notice to Insurers.  If, at the time of the receipt of a notice of a claim pursuant to Section 2(b) hereof, the Company has director and officer liability insurance that may cover the claim in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies.  The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies in partial or complete satisfaction of the Company’s obligations hereunder.

(e)           Selection of Counsel.  In the event the Company shall be obligated under Section 2(a) hereof to pay the expenses of any proceeding against Indemnitee, the Company shall be entitled to assume the defense of such proceeding, with counsel approved by Indemnitee, which approval shall not be unreasonably withheld, upon the delivery to Indemnitee of written notice of its election so to do.  After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that (i) Indemnitee shall have the right to employ his or her own counsel in any such proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or (C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company.

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3.             ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.

(a)           Scope.  Notwithstanding any other provision of this Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by the Delaware General Corporation Law (other than Section 145(f) thereof or any successor non-exclusivity provision), notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Certificate of Incorporation, the Company’s Bylaws or by statute.  In the event of any change, after the date of this Agreement, in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its Board of Directors or an officer, such changes shall be, ipso facto, within the purview of Indemnitee’s rights and the Company’s obligations, under this Agreement.  In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its Board of Directors, such changes, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement shall have no effect on this Agreement or the parties’ rights and obligations hereunder.

(b)           Nonexclusivity.  The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s Certificate of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested directors, the Delaware General Corporation Law or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while holding such office.  The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though he or she may have ceased to serve in such capacity at the time of any action or other covered proceeding.

4.             PARTIAL INDEMNIFICATION.   If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by Indemnitee in connection with an action, suit or proceeding described in Section 1(a), but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement to which Indemnitee is entitled.

5.             MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge that in certain instances, Federal law or applicable public policy may prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise.  Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.

6.             SEVERABILITY. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law.  The Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement

5

shall be severable as provided in this Section 6.  If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.

7.             EXCEPTIONS. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

(a)           Excluded Acts.  To indemnify Indemnitee for any acts or omissions or transactions from which a director may not be relieved of liability under the Delaware General Corporation Law; or

(b)           Claims Initiated by Indemnitee.  To indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145 of the Delaware General Corporation Law, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors has approved the initiation or bringing of such suit; or

(c)           Lack of Good Faith.  To indemnify Indemnitee for any expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, to the extent that a court of competent jurisdiction determines that the material assertions made by Indemnitee in such proceeding were not made in good faith or were frivolous; or

(d)           Insured Claims.  To indemnify Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, Employee Retirement Income Security Act of 1974 excise taxes or penalties, and amounts paid in settlement) which have been paid directly to Indemnitee by an insurance carrier under a policy of directors’ and officers’ liability insurance maintained by the Company or its affiliates; or

(e)           Claims Under Section 16(b).  To indemnify Indemnitee for expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

8.             EFFECTIVENESS OF AGREEMENT. To the extent that the indemnification permitted under the terms of certain provisions of this Agreement exceeds the scope of the indemnification provided for in the Delaware General Corporation Law, such provisions shall not be effective unless and until the Company’s Certificate of Incorporation authorizes such additional rights of indemnification.  In all other respects, the balance of this Agreement shall be effective as of the date set forth on the first page hereof and may apply to acts or omissions of Indemnitee which occurred prior to such date if Indemnitee was an officer, director, employee or other agent of the Company, or was serving at the request of the Company as a director, officer,

6

employee or agent of another corporation, partnership, joint venture, trust or other enterprise, at the time such act or omission occurred.

9.             CONSTRUCTION OF CERTAIN PHRASES.

(a)           Company.  For purposes of this Agreement, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that if Indemnitee is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

(b)           Other Enterprise, etc.  For purposes of this Agreement, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on Indemnitee with respect to any employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries.

10.          COUNTERPARTS. This Agreement may be executed in two (2) or more counterparts, each of which shall constitute an original.

11.          SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the Company and its successors and assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, and shall inure to the benefit of Indemnitee and Indemnitee’s estate, heirs, legal representatives and assigns.  The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part of the business or assets of the Company, by written agreement in form and substance reasonably satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

12.          ATTORNEYS’ FEES.  In the event that any action is instituted by Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee with respect to such action, except to the extent that, as a part of such action, the court of competent jurisdiction determines that the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous.  In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee in defense of such action

7

(including with respect to Indemnitee’s counterclaims and cross claims made in such action), except to the extent that, as a part of such action, the court determines that Indemnitee’s material defenses to such action were made in bad faith or were frivolous.

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

(i)if to the Indemnitee, at the address set forth on the signature page of this Agreement, or as subsequently modified by written notice; and

(ii)if to Holdings and InSight:

InSight Health Services Holdings Corp.

InSight Health Services Corp.

26250 Enterprise Court

Suite 100

Lake Forest, CA 92630

Facsimile: (949) 462-3703

Attention: General Counsel

With a copy to:

Facsimile:

Attention:

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

14.          CONSENT TO JURISDICTION.  The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in the state courts of the State of Delaware.

15.          CHOICE OF LAW.  This Agreement shall be governed by and its provisions construed in accordance with the laws of the State of Delaware as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.

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

	INSIGHT HEALTH SERVICES HOLDINGS CORP.
	By:
		Name:
		Title:
	INSIGHT HEALTH SERVICES CORP.
	By:
		Name:
		Title:
AGREED TO AND ACCEPTED:
INDEMNITEE:
Name:
Address:

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EX-21.1

Exhibit 21.1

September 21, 2007

NAME OF SUBSIDIARY	STATE OF ORGANIZATION
Asheville Mobile MRI Services, LLC	North Carolina
Berwyn Magnetic Resonance Center, L.L.C.	Illinois
Comprehensive Medical Imaging, Inc.	Delaware
Comprehensive Medical Imaging Centers, Inc.	Delaware
Comprehensive Medical Imaging-Fairfax, Inc.	Delaware
Comprehensive OPEN MRI-Carmichael/Folsom, LLC	California
Dublin Diagnostic Imaging, LLC	Ohio
Encinitas Imaging Center, LLC	California
East Bay Medical Imaging, LLC	California
Garfield Imaging Center, Ltd.	California
InSight Health Corp.	Delaware
InSight Health Services Corp.	Delaware
InSight-Premier Health, LLC	Maine
InSight ProScan, LLC	Ohio
Jefferson MRI	Texas
Jefferson MRI-Bala	Texas
Kessler Imaging Associates, LLC	New Jersey
Lockport MRI, LLC	New York
Los Gatos Imaging Center	Texas
Maxum Health Corp.	Delaware
Maxum Health Services Corp.	Delaware
Maxum Health Services of Dallas, Inc.	Texas
Maxum Health Services of North Texas, Inc.	Texas
Mesa MRI	Texas
Mountain View MRI	Texas
MRI Associates, L.P.	Indiana
NDDC, Inc.	Texas
Open MRI, Inc.	Delaware
Orange County Regional PET Center-Irvine, LLC	California
Parkway Imaging Center, LLC	Nevada
Phoenix Regional PET Center-Thunderbird, LLC	Arizona
Rainbow Imaging, LLC	New York
San Fernando Valley Regional PET Center, LLC	California
Signal Medical Services, Inc.	Delaware
St. John’s Regional Imaging Center, LLC	California
Syncor Diagnostics Bakersfield, LLC	California
Syncor Diagnostics Sacramento, LLC	California
TME Arizona, Inc	Texas
Valencia MRI, LLC	California
Wilkes-Barre Imaging, LLC	Pennsylvania
Woodbridge MRI	Texas

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO
RULE 15d-14
OF THE SECURITIES EXCHANGE ACT OF 1934

I, Bret W. Jorgensen, certify that:

1.I have reviewed this annual report on Form 10-K for the fiscal year ended June 30, 2007 of InSight Health Services Holdings Corp.:

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)[Omitted in reliance on SEC Release No. 33-8238; 34-47986 Section III.E.]

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  September 21, 2007

/s/ Bret W. Jorgensen

Bret W. Jorgensen

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO
RULE 15d-14
OF THE SECURITIES EXCHANGE ACT OF 1934

I, Mitch C. Hill, certify that:

1.I have reviewed this annual report on Form 10-K for the fiscal year ended June 30, 2007 of InSight Health Services Holdings Corp.:

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)[Omitted in reliance on SEC Release No. 33-8238; 34-47986 Section III.E.]

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  September 21, 2007

/s/ Mitch C. Hill

Mitch C. Hill

Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 10-K of InSight Health Services Holdings Corp. (the “Company”) for the fiscal year ended June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “report”), I, Bret W. Jorgensen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)the report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Bret W. Jorgensen

Bret W. Jorgensen

President and Chief Executive Officer

September 21, 2007

The foregoing certification is being furnished solely to accompany the report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 10-K of InSight Health Services Holdings Corp. (the “Company”) for the fiscal year ended June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “report”), I, Mitch C. Hill, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)the report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Mitch C. Hill

Mitch C. Hill

Executive Vice President and Chief Financial Officer

September 21, 2007

The foregoing certification is being furnished solely to accompany the report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.