EXHIBIT 10.28
EXECUTION COPY
 
INVESTMENT NUMBER 24052
RMB LOAN AGREEMENT
among
BEIJING UNITED FAMILY HEALTH CENTER
SHANGHAI UNITED FAMILY HOSPITAL, INC.
(as “Borrowers”)
and
INTERNATIONAL FINANCE CORPORATION
(as “Lender”)
Dated October 10, 2005
 

--------------------------------------------------------------------------------

 

 

TABLE OF CONTENTS

              Article/Section   Item   Page No.  
 
           
ARTICLE I
        1  
 
            Definitions and Interpretation     1  
 
                Section 1.01. Definitions     1       Section 1.02. Financial
Definitions     11       Section 1.03. Financial Calculations     20  
    Section 1.04. Interpretation     20  
 
           
ARTICLE II
        21  
 
            The Project     21  
 
                Section 2.01. The Project     21       Section 2.02. Project
Cost and Financial Plan     21  
 
           
ARTICLE III
        21  
 
            The Loan     21  
 
                Section 3.01. Amount     21       Section 3.02. Disbursement    
22       Section 3.03. Interest     22       Section 3.04. Default Penalty    
23       Section 3.05. Repayment     24       Section 3.06. Prepayment     24  
    Section 3.07. Fees     24       Section 3.08. Currency and Place of Payment
    25       Section 3.09. Taxes     25       Section 3.10. Business Day
Adjustment     25       Section 3.11. Allocation of Partial Payments     26  
    Section 3.12. Unwinding Costs     26       Section 3.13. Other Fees and
Expenses     26       Section 3.14. Joint and Several Obligations     27  
 
           
ARTICLE IV
        27  
 
            Representations and Warranties     27  
 
                Section 4.01. Representations and Warranties     27  
    Section 4.02. IFC Reliance     29  

--------------------------------------------------------------------------------

 

-ii-

              Article/Section   Item   Page No.  
 
           
ARTICLE V
        30  
 
            Conditions of Disbursement     30  
 
                Section 5.01. Conditions of Disbursement     30  
    Section 5.02. Conditions for IFC Benefit     32  
 
           
ARTICLE VI
        32  
 
            Particular Covenants     32  
 
                Section 6.01. Affirmative Covenants     32       Section 6.02.
Negative Covenants     36       Section 6.03. Reporting Requirements     41  
    Section 6.04. Insurance     43  
 
           
ARTICLE VII
        46  
 
            Events of Default     46  
 
                Section 7.01. Acceleration after Events of Default     46  
    Section 7.02. Events of Default     46       Section 7.03. Automatic
Acceleration upon Dissolution or Bankruptcy     50  
 
           
ARTICLE VIII
        50  
 
            Miscellaneous     50  
 
                Section 8.01. Saving of Rights     50       Section 8.02.
Notices     50       Section 8.03. English Language     53       Section 8.04.
Term of Agreement     53       Section 8.06. Disclosure of Information     56  
    Section 8.07. Successors and Assignees     57       Section 8.08.
Amendments, Waivers and Consents     57       Section 8.09. Counterparts     57
 

--------------------------------------------------------------------------------

 

-iii-

          Article/Section   Item     Page No.
ANNEX A
        59  
 
       
LIST OF AUTHORIZATIONS
    59
 
       
ANNEX B
        63  
 
       
MINIMUM INSURANCE REQUIREMENTS
    63
 
       
ANNEX C
        64  
 
       
EXCLUDED ACTIVITIES
    64  
 
       
SCHEDULE 1
        65  
 
       
FORM OF LOAN DISBURSEMENT REQUEST
    65  
 
       
SCHEDULE 2
        68  
 
       
FORM OF LOAN DISBURSEMENT RECEIPT
    68  
 
       
SCHEDULE 3
        69  
 
       
FORM OF CERTIFICATE OF INCUMBENCY AND AUTHORITY
    69  
 
       
SCHEDULE 4
        71  
 
       
FORM OF LETTER TO BORROWER’S AUDITORS
    71  
 
       
SCHEDULE 5
        73  
 
       
FORM OF BORROWERS’ CERTIFICATION ON DISTRIBUTION OF DIVIDENDS
    73  
 
       
SCHEDULE 6
        75  
 
       
INFORMATION TO BE INCLUDED IN ANNUAL REVIEW OF OPERATIONS
    75  
 
       
SCHEDULE 7
        78  
 
       
FORM OF SERVICE OF PROCESS LETTER
    78  

--------------------------------------------------------------------------------

 

RMB LOAN AGREEMENT
     AGREEMENT, dated October 10, 2005, between BEIJING UNITED FAMILY HEALTH
CENTER, a Sino-foreign joint venture company organized and existing under the
laws of the People’s Republic of China (“Borrower 1”), SHANGHAI UNITED FAMILY
HOSPITAL, INC, a Sino-foreign joint venture company organized and existing under
the laws of the People’s Republic of China (“Borrower 2”), and INTERNATIONAL
FINANCE CORPORATION (“IFC”), an international organization established by
Articles of Agreement among its member countries.
     Borrower 1 and Borrower 2 shall hereinafter collectively be referred to as
the “Borrowers” and individually as a “Borrower”. IFC and each of the Borrowers
shall hereinafter collectively be referred to as the “Parties” and individually
as a “Party”.
ARTICLE I
Definitions and Interpretation
     Section 1.01. Definitions. Wherever used in this Agreement, the following
terms have the meanings opposite them:

     
“Affiliate”
  any Person directly or indirectly controlling, controlled by or under common
control with, the Borrower (for the purposes of this definition, “control” means
the power to direct the management or policies of a Person, directly or
indirectly, whether through the ownership of shares or other securities, by
contract or otherwise, provided that the direct or indirect ownership of fifty
per cent (50%) or more of the voting share capital or equity interest (as the
case may be) of a Person is deemed to constitute control of that Person; and
“controlling” and “controlled” have corresponding meanings);
 
   
“Annual Monitoring Report”
 
the report to be submitted to IFC pursuant to Section 6.03(d) of this Agreement
from time to time;

--------------------------------------------------------------------------------

 

- 2 -

     
“Auditors”
  with respect to Borrower 1, Beijing Huasong Certified Public Accountants Co.
Ltd. or such other independent public accounting firm appointed by Borrower 1 as
its auditors and acceptable to IFC;
 
   
 
  with respect to Borrower 2, Shanghai JaHwa Certified Public Accountants Co.,
Ltd. or such other independent public accounting firm appointed by Borrower 2 as
its auditors and acceptable to IFC;
 
   
“Authority”
  any national, supranational, regional or local government, or governmental,
administrative or judicial department, commission, authority, tribunal, agency
or entity, or central bank (or any Person that exercises the functions of the
central bank, whether or not government owned and howsoever constituted or
called);
 
   
“Authorization”
  any license or approval (howsoever evidenced), registration, filing or
exemption from, by or with any Authority, and all corporate, creditors’ and
shareholders’ approvals or consents;
 
   
“Bank Account Charge Agreements”
 
the Chindex Account Charge Agreement and the Onshore Account Pledge Agreement;
 
   
“Business Day”
  a day, other than a Saturday or Sunday, on which commercial banks are open for
business in both Beijing and New York;
 
   
“China” or “PRC”
  the People’s Republic of China;
 
   
“Chindex”
  Chindex International, Inc., a NASDAQ listed company incorporated in Delaware
with its registered address at Chindex International, Inc. c/o National
Registered Agent, 160 Greentree Drive, Suite 101, Dover, DE 11904;
 
   
“Chindex Account Charge Agreement”
 
the agreement entitled “Chindex Account Charge Agreement” dated on or around the
date of this Agreement between Chindex and IFC creating a floating charge over
all of its bank accounts in favor of IFC, except for any such

--------------------------------------------------------------------------------

 

- 3 -

     
 
  accounts which have a pre-existing charge filed prior to the date of this
Agreement in favor of M&T Bank for the aggregate amount of US$1,900,060;  
“Clinics”
  means the following:

         
 
  (i)   the “Shunyi Clinic” located at No. 1 Lu, Nanxin Yuan, Likan Village,
Tianzhu Town, Shunyi District, Beijing, China;
 
       
 
  (ii)   the “Jianguomen Clinic” located at Sub-level 1, Apartment Building of
Beijing International Hotel Club, No. 21 Jianguomen Wai Street, Chaoyang
District, Beijing, China;
 
       
 
  (iii)   the “SRC Minhang Clinic” located at 555 Jinfeng Road, Minhang
District, Shanghai, China; and
 
       
 
  (iv)   any other medical clinic established or to be established by any of
entities within the Group;

     
“Contract Assignments”
 
the contractual assignment, by way of security in favor of IFC, of the rights
and benefits of the Borrowers and/or Chindex under the following commercial
contracts:

         
 
  (i)   the Lease Contracts; and
 
       
 
  (ii)   the Technology and Service Contracts;

     
“Country”
  the People’s Republic of China;
 
   
“Derivative Transaction”
 
any swap agreement, cap agreement, collar agreement, futures contract, forward
contract or similar arrangement with respect to interest rates, currencies or
commodity prices;
 
   
“Disbursement”
  the disbursement of the Loan;
 
   
“Environmental, Health and Safety Guidelines”
 

the following guidelines:

--------------------------------------------------------------------------------

 

- 4 -

         
 
  (i)   IFC Occupational Health and Safety Guidelines dated June 24, 2003;
 
       
 
  (ii)   World Bank Group General Environmental Guidelines dated July, 1998;
 
       
 
  (iii)   IFC Environmental and Social Guidelines for Health Care Facilities,
dated May 2003;
 
       
 
  (iv)   IFC Life and Fire Safety Guidelines, dated October 2002;
 
       
 
  (vi)   IFC Hazardous Materials Management Guidelines, dated December 2001;

     
 
  copies of which have been delivered to, and receipt of which have been
acknowledged by, the Borrowers by letter dated August 8, 2005;
 
   
“Environmental and Social Policies”
 
the following policies:

         
 
  (i)   IFC’s Operational Policy 4.01, Environmental Assessment (October 1998);
and
 
       
 
  (ii)   IFC Policy Statement on Child and Forced Labor (March 1998);
 
       
 
  (iii)   Involuntary Resettlement, OD 4.30, dated June 1990;
 
       
 
  (iv)   IFC’s Policy on Disclosure of Information, dated September 1998;

     
 
  copies of which have been delivered to, and receipt of which has been
acknowledged by, the Borrowers by letter dated August 8, 2005;

--------------------------------------------------------------------------------

 

- 5 -

     
“Equity Pledge Agreements”
 
means:
 
  (i) the agreement entitled “BUFH Pledge Agreement”; and
 
   
 
  (ii) the agreement entitled “SUFH Pledge Agreement”; each entered between
Chindex and IFC on or around the date of this Agreement creating a pledge in
favor of IFC over Chindex’s interest in the registered capital of Borrower 1 and
Borrower 2 respectively;
 
   
“ERS”
  the Environmental Review Summary prepared by IFC, approved by the Borrowers
and made available at the InfoShop of the World Bank Group offices in Washington
DC on August 9, 2005, as amended or supplemented from time to time as
appropriate in a manner consistent with the Environmental and Social Policies,
the Environmental, Health and Safety Guidelines, and other provisions of this
Agreement;
 
   
“Event of Default”
  any one of the events specified in Section 7.02 (Events of Default);
 
   
“Excluded Activities”
 
the list of activities described in Annex C attached hereto;
 
   
“Group”
  collectively, Chindex, Borrower 1, Borrower 2 and any of their present or
future Affiliates;
 
   
“Guarantee Agreement”
 
the agreement entitled “Guarantee Agreement” between Chindex and IFC dated on or
around the date of this Agreement pursuant to which Chindex shall guarantee the
payment obligations of the Borrowers hereunder;
 
   
“Interest Payment Date”
 
in any relevant calendar year, the date which is ten (10) Business Days
preceding any “Interest Payment Date” as defined in the terms and conditions of
the Reference Bond;
 
   
“Interest Period”
  each period of twelve (12) months commencing on an Interest Payment Date and
ending on the day immediately

--------------------------------------------------------------------------------

 

- 6 -

     
 
  before the next following Interest Payment Date, except that: (i) for the
first Interest Period, the period shall commence on the date of the
Disbursement; and (ii) for the last Interest Period, the period shall commence
on the Interest Payment Date immediately preceding the Repayment Date and end on
the day immediately preceding the Repayment Date;
 
   
“Interest Rate”
  the rate at which interest is payable on the Loan, as determined in accordance
with Section 3.03 (b) (Interest);
 
   
“Issue Date”
  the date of issue of the Reference Bond;
 
   
“Lease Contracts”
 
mean (i) the Building Lease Contract dated August 18, 2003 and any other
contracts between Beijing Post and Telecommunications Industrial School (as
lessor) and Borrower 1 (as lessee) for lease of the premises currently used by
Borrower 1 as its operation site and (ii) the Building Lease Contract dated
March 1, 2002 between Shanghai Municipal Changning District Centre Hospital (as
lessor) and US-China Industrial Exchange, Inc. (as lessee) for lease of the
premises currently used by Borrower 2 as its operation site;
 
   
“Lien”
  any mortgage, pledge, charge, assignment, hypothecation, security interest,
title retention, preferential right, trust arrangement, right of set-off,
counterclaim or banker’s lien, privilege or priority of any kind having the
effect of security, any designation of loss payees or beneficiaries or any
similar arrangement under or with respect to any insurance policy or any
preference of one creditor over another arising by operation of law;
 
   
“Loan”
  has the meaning set out in Section 3.01 (Amount);  
“Loan Currency”
  the lawful currency of the Country;  
“Material Adverse Effect”
 
a material adverse effect on:
 
   
 
  (i)           either of the Borrowers, their assets or properties;
 
   
 
  (ii)           either of the Borrowers’ business prospects or financial
condition;

--------------------------------------------------------------------------------

 

- 7 -

         
 
  (iii)   the implementation of the Project, the Financial Plan or the carrying
on of either of the Borrowers’ business or operations; or
 
       
 
  (iv)   the ability of either of the Borrowers to comply with their obligations
under this Agreement, any other Transaction Documents.

     
“Maturity Date”
  the “Maturity Date” as defined in the terms and conditions of the Reference
Bond;
 
   
“Mortgage Agreements”
 
agreements between each of the Borrowers and IFC, in form and substance
satisfactory to IFC providing for a first- ranking mortgage in favor of IFC on
the present and future machinery and equipment situated on the Project Sites;
 
   
“Official”
  any officer of a political party or candidate for political office in the
Country or any officer or employee (i) of the Government (including any
legislative, judicial, executive or administrative department, agency or
instrumentality thereof) or (ii) of a public international organization;
 
   
“Onshore Account Pledge Agreement”
 
the agreement entitled “Onshore Account Pledge Agreement” dated on or around the
date of this Agreement between Borrower 1 and/or Borrower 2 and IFC creating a
pledge over the Sinking Fund Account in favor of IFC;
 
   
“Person”
  any natural person, corporation, company, partnership, firm, voluntary
association, joint venture, trust, unincorporated organization, Authority or any
other entity whether acting in an individual, fiduciary or other capacity;
 
   
“Potential Event of Default”
 
any event or circumstance which would, with notice, lapse of time, the making of
a determination or any combination thereof, become an Event of Default;
 
   
“Prohibited Payments”
 
any offer, gift, payment, promise to pay or authorization of the payment of any
money or anything of value, directly or indirectly, to or for the use or benefit
of any Official

--------------------------------------------------------------------------------

 

- 8 -

     
 
  (including to or for the use or benefit of any other Person if a Borrower
knows, or has reasonable grounds for believing, that the other Person would use
such offer, gift, payment, promise or authorization of payment for the benefit
of any such Official), for the purpose of influencing any act or decision or
omission of any Official in order to obtain, retain or direct business to, or to
secure any improper benefit or advantage for, a Borrower, its Affiliates or any
other Person; provided that any such offer, gift, payment, promise or
authorization of payment shall not be considered a Prohibited Payment if, in
IFC’s reasonable opinion, it (i) is lawful under applicable written laws and
regulations or (ii) is made for the purpose of expediting or securing the
performance of a routine governmental action (as such term is construed under
applicable law);
 
   
“Project Sites”
  means the following sites:

         
 
  (i)   the hospital of Borrower 1 located at No. 2, Jiangtai Road, Chaoyang
District, Beijing, China; and
 
       
 
  (ii)   the hospital of Borrower 2 located at 1111 Xian Xia Road, Changning
District, Shanghai, China.;

     
“Reference Bond”
  IFC’s inaugural RMB bond to be issued and sold to the Chinese domestic markets
under the Administrative Regulations on the Issuance of Renminbi Denominated
Bonds of International Development Organizations jointly promulgated by the
People’s Bank of China, the Ministry of Finance, the National Development and
Reform Commission and China Securities Regulatory Commission on February 18,
2005;
 
   
“Reference Rate”
  the “all-in” interest costs per annum of the Reference Bond, inclusive of
annualized costs of issuance;
 
   
“Renminbi” or “RMB”
 
the lawful currency of China;
 
   
“Repayment Date”
  the date which is ten (10) Business Days immediately preceding the Maturity
Date;

--------------------------------------------------------------------------------

 

- 9 -

     
“Security”
  the security created pursuant to the Security Documents to secure all amounts
owing by the Borrowers to IFC under this Agreement;

         
“Security Documents”
  (i)  
the Mortgage Agreements;
 
       
 
  (ii)   the Contract Assignments;
 
       
 
  (iii)   the Guarantee Agreement;
 
       
 
  (iv)   the Equity Pledge Agreements; and
 
       
 
  (v)   the Bank Account Charge Agreements;

     
“Sinking Fund Account”
 
such bank account to be opened and maintained by Borrower 1 and/or Borrower 2
pursuant to Section 6.01 (d) with a bank in China acceptable to IFC;
 
   
“Subordination Agreement”
 
the agreement entitled “Subordination Agreement” between Chindex, the Borrowers
and IFC dated on or around the date of this Agreement pursuant to which Chindex
and the Borrowers agree to, inter alia, subordinate payments under certain
management and other contracts to the payments by the Borrowers to IFC under
this Agreement;
 
   
 
  The Subordination Agreement shall include but not limited to the following
terms:
 
   
 
  (i) The Borrowers shall retain a balance of RMB18 million in payables to
Chindex and Chindex affiliates
(other than any of the Borrowers or the Clinics). This amount may be paid by the
Borrower to Chindex and Chindex affiliates only if after giving effect of such
payment:

  (A)   the Current Ratio will be at least 1.8;     (B)   the Balance Sheet
Liabilities to Tangible Net Worth Ratio will be less than 1.4;     (C)   the
Peak Debt Service Coverage Ratio will not be less than 1.8; and

--------------------------------------------------------------------------------

 

- 10 -

  (D)   the balance of the Sinking Fund is at least RMB29.196 million.

     
 
  Provided, this retained amount may, by prior written notice to IFC, be
converted into Chindex’s equity in the Borrowers;
 
   
 
  (ii) An additional RMB18 million in payables to Chindex and Chindex affiliates
(other than any of the Borrowers or the Clinics) will be subject to the same
conditions for dividend payments as set out in Section 6.02(a);
 
   
 
  (iii) Principal payments on all loans and/or notes payable to Chindex and
Chindex affiliates and existing dividend payables to Chindex will be subject to
the same conditions for dividend payments as set out in Section 6.02(a);
 
   
 
  (iv) Payment of future management fees will be (a) capped at the lesser of
their current contractual amounts (adjusted in line with historical increases,
which are described in detail in Appendix 1 of the Subordination Agreement) or
actual and directly allocatible Chindex overhead costs incurred, as proven to
IFC’s satisfaction; provided after giving effect of such action:
 
   
 
  •           Current Ratio > 1.15
 
   
 
  •           Prospective Debt Service Coverage Ratio > 1.8
 
   
 
  Provided always, no payment of any principal, interests or fees of any kind
may be made by the Borrowers to Chindex or Chindex affiliates if an Event of
Default or Potential Event of Default has occurred and is continuing;

     
“Subsidiary”
  with respect to any Person, any entity:

  (i)   over 50% of whose capital is owned, directly or indirectly, by that
Person;     (ii)   for which that Person may nominate or appoint a majority of
the members of the board of directors or such other body performing similar
functions; or

--------------------------------------------------------------------------------

 

- 11 -

  (iii)   which is otherwise effectively controlled by that Person;

     
“Technology and Service Contracts”
 
(i) the Technology and Service Agreement effective on January 1, 2002 between
Chindex and Borrower 1, including any amendment thereof with IFC’s prior written
consent; and
 
   
 
  (ii) the Technology and Service Agreement to be entered into between Chindex
and Borrower 2, including any amendment thereof with IFC’s prior written
consent;
 
   

       
“Transaction Documents”
(i)   this Agreement;  
 
(ii)   the Security Documents;     (iii)   the Subordination Agreement;     (iv)
  the Technology and Service Contracts; and     (v)   the Lease Contracts;

     
“US Dollar” or “US$”
 
the lawful currency of the United States of America;
 
   
“World Bank”
  the International Bank for Reconstruction and Development, an international
organization established by Articles of Agreement among its member countries.

     Section 1.02. Financial Definitions (a) Wherever used in this Agreement,
unless the context otherwise requires, the following terms have the meanings
opposite them:

     
“Accounting Principles”
 
United States Generally Accepted Accounting Practices (“US GAAP”);

--------------------------------------------------------------------------------

 

- 12 -

     
“Annual Reviewed Combined Financial Statements”
 

the annual Combined Financial Statements for a 12 month period ending on the
same date in each year, reviewed by BDO Seidman, LLP or another internationally
reputable accounting firm acceptable to IFC;
 
   
“Balance Sheet Liabilities”
 
Liabilities reflected in the balance sheet of the Borrower;
 
   
“Balance Sheet Liabilities to Tangible Net Worth Ratio”
 

the result obtained by dividing Balance Sheet Liabilities by Tangible Net Worth.
For the purpose of this calculation, (i) the balance of the Sinking Fund Account
will be deducted from the IFC Loan amount outstanding for the purposes of the
Balance Sheet Liabilities calculation and the balance in the Sinking Fund
Account will be deducted from Tangible Net Worth in the Tangible Net Worth
calculation; and (ii) the payables to Chindex which will be subordinated
according to the terms of the Subordination Agreement shall be deducted from the
Balance Sheet Liabilities and added to Tangible Net Worth;
 
   
“Combined” or “Combined Basis”
 
treating two Borrowers as a single entity;
 
   
“Combined Financial Statements”
 
the financial position, results of operations and cash flows of the Borrowers
together as if they were a single entity; accordingly, the combined financial
statements are prepared in accordance with the accounting principles related to
consolidated financial statements but without identifying parent-subsidiary
relationships.
 
   
“Consolidated” or “Consolidated Basis”
 
has the meaning provided in Section 1.03 (b);
 
   
“Current Assets”
  the aggregate of the Borrower’s cash, investments classified as “held for
trading”, investments

--------------------------------------------------------------------------------

 

- 13 -

     
 
  classified as “available for sale”, trade and other receivables realizable
within one year, inventories and prepaid expenses which are to be charged to
income within one year;
 
   
“Current Liabilities”
  the aggregate of all liabilities of the Borrower falling due on demand or
within one year (including the portion of Long-term Debt falling due within one
year);
 
   
“Current Ratio”
  the result obtained by dividing Current Assets (less prepaid expenses) by
Current Liabilities. For the purposes of this ratio calculation, (i) the balance
in the Sinking Fund Account shall be deducted from Current Assets and any
payment due on the Sinking Fund Account within one year shall be added to
Current Liabilities; and (ii) the payables to Chindex which will be subordinated
according to the terms of the Subordination Agreement shall not be included as
Liabilities;
 
   
“EBITDA”
  for the year most recently ended for which Annual Reviewed Combined Financial
Statements are available, Net Income plus the sum of interest expense, income
taxes, extraordinary items, depreciation, amortization and any other non-cash
expenses (to the extent each was deducted in the calculation of Net Income);
 
   
“Financial Debt”
  any indebtedness of the Borrower for or in respect of:

  (i)   borrowed money;     (ii)   the outstanding principal amount of any
bonds, debentures, notes, loan stock, commercial paper, acceptance credits,
bills or promissory notes drawn, accepted, endorsed or issued by the Borrower;  
  (iii)   the deferred purchase price of assets or services (except trade
accounts that are payable in the ordinary course of business within 90 days of
the date they are incurred and which are not overdue);

--------------------------------------------------------------------------------

 

- 14 -

  (iv)   non-contingent obligations of the Borrower to reimburse any other
person for amounts paid by that person under a letter of credit or similar
instrument (excluding any letter of credit or similar instrument issued for the
benefit of the Borrower with respect to trade accounts that are payable in the
ordinary course of business within 90 days of the date of determination and
which are not overdue);     (v)   the amount of any liability in respect of any
Financial Lease;     (vi)   amounts raised under any other transaction having
the financial effect of a borrowing and which would be classified as a borrowing
(and not as an off-balance sheet financing) under the Accounting Principles;    
(vii)   the amount of the Borrower’s obligations under derivative transactions
entered into in connection with the protection against or benefit from
fluctuation in any rate or price (but only the net amount owing by the Borrower
after marking the relevant derivative transactions to market);     (viii)   any
premium payable on a redemption or replacement of any of the foregoing items;
and     (xi)   the amount of any liability in respect of any guarantee or
indemnity for any of the foregoing items incurred by any other person.

     
“Financial Lease”
  any lease or hire purchase contract which would, under the Accounting
Principles, be treated as a finance or capital lease;
 
   
“Liabilities”
  the aggregate of all obligations (actual or contingent) of the Borrower to pay
or repay money, including, without limitation:

--------------------------------------------------------------------------------

 

- 15 -

  (i)   Financial Debt;     (ii)   the amount of all liabilities of the Borrower
(actual or contingent) under any conditional sale or a transfer with recourse or
obligation to repurchase, including, without limitation, by way of discount or
factoring of book debts or receivables;     (iii)   taxes (included deferred
taxes liabilities);     (iv)   trade accounts that are payable in the ordinary
course of business (including letters of credit or similar instruments issued
for the benefit of the Borrower in respect of such trade accounts);     (v)  
accrued expenses, including wages and other amounts due to employees and other
services providers;     (vi)   the amount of all liabilities of the Borrower
howsoever arising to redeem any of its shares; and     (vii)   to the extent not
included in the definition of Financial Debt, the amount of all liabilities of
any person to the extent the Borrower guarantees them or otherwise obligates
itself to pay them.

     
“Long-term Debt”
  that part of Financial Debt the final maturity of which, by its terms or the
terms of any agreement relating to it, falls due more than one year after the
date of its incurrence;
 
   
“Net Income”
  for any financial year, the excess (if any) of gross income over total
expenses (provided that income taxes shall be treated as part of total expenses)
appearing in the audited financial statements for such financial year;
 
   
“Non-Cash Items”
  for any financial year, the net aggregate amount (which may be a positive or
negative number) of all

--------------------------------------------------------------------------------

 

- 16 -

     
 
  non-cash expenses and non-cash credits which have been subtracted or, as the
case may be, added in calculating Net Income during that financial year,
including, without limitation, depreciation, amortization, deferred taxes,
provisions for severance pay of staff and workers, provisions for bad debt, bad
debt write off and credits resulting from revaluation of the assets’ book value;
 
   
“Peak Debt Service Coverage Ratio”
 
the ratio obtained by dividing:

  (i)   the aggregate, for the financial year most recently ended prior to the
relevant date of calculation for which Annual Reviewed Combined Financial
Statements are available, of (A)Net Income for that financial year, (B) Non-Cash
Items and (C) the amount of all payments that were due during that financial
year on account of interest and other charges on Financial Debt (to the extent
deducted from Net Income);     by         (ii)   the aggregate of (A) the
highest aggregate amount, in any financial year after the financial year
described in clause (i) above until the final scheduled maturity of the IFC
Loan, of all scheduled payments (including, in the case of the IFC Loan,
payments to be made to the Sinking Fund Account pursuant to Section 6.01(d) of
this agreement and the difference between the final balloon payment the
scheduled balance in the Sinking Fund Account) falling due on account of
principal of Long-term Debt and interest and other charges on all Financial Debt
and (B) without double counting any payment already counted in the preceding
sub-clause (A), any payment required to be made to any debt service account in
such

--------------------------------------------------------------------------------

 

- 17 -

     
 
  financial year under the terms of any agreement providing for Financial Debt;

     
 
  where, for the purposes of clause (ii) above:

  (x)   subject to sub-clause (y), for the computation of interest payable
during any period for which the applicable rate is not yet determined, that
interest shall be computed at the rate in effect at the time of the relevant
date of calculation;     (y)   interest on Short-term Debt in such financial
year shall be computed by reference to the aggregate amount of interest thereon
paid during the financial year in which the relevant date of calculation falls
up to the end of the period covered by the latest quarterly financial statements
prepared by the Borrower multiplied by a factor of 4, 2 or 4/3 depending on
whether the computation is made by reference to the financial statements for the
first quarter, the first two quarters or the first three quarters, respectively;

     
“PRC GAAP”
  the Generally Accepted Accounting Principles of the PRC;

     
“Prospective Debt Service Coverage Ratio”
 

the ratio obtained by dividing:

  (i)   the aggregate, for the financial year most recently ended prior to the
relevant date of calculation for which Annual Reviewed Combined Financial
Statements are available, of (A) Net Income for that financial year, (B)
Non-Cash Items and (C) the amount of all payments that were due during that
financial year on account of

--------------------------------------------------------------------------------

 

- 18 -

      interest and other charges on Financial Debt (to the extent deducted from
Net Income);   by         (ii)   the aggregate of (A) all scheduled payments
(including, in the case of the IFC Loan, payments to be made to the Sinking Fund
Account pursuant to Section 6.01(d) of this agreement and the difference between
the final balloon payment the scheduled balance in the Sinking Fund Account)
that fall due during the financial year in which the relevant date of
calculation falls on account of principal of Long-term Debt and interest and
other charges on all Financial Debt and (B) without double counting any payment
already counted in the preceding sub-clause (A), any payment made or required to
be made to any debt service account under the terms of any agreement providing
for Financial Debt;         where, for the purposes of clause (ii) above:

  (x)   subject to sub-clause (y) below, for the computation of interest payable
during any period for which the applicable rate is not yet determined, that
interest shall be computed at the rate in effect at the time of the relevant
date of calculation; and     (y)   interest on Short-term Debt payable in the
financial year in which the relevant date of calculation falls shall be computed
by reference to the aggregate amount of interest thereon paid during that
financial year up to the end of the period covered by the latest quarterly
financial statements prepared by the Borrower multiplied by a factor of 4, 2 or
4/3 depending on whether the computation is made

--------------------------------------------------------------------------------

 

- 19 -

      by reference to the financial statements for the first quarter, the first
two quarters or the first three quarters, respectively;

     
“Short-term Debt”
  all Financial Debt other than Long-term Debt; and
 
   
“Tangible Net Worth”
 
the aggregate of:

             
 
  (i)   (A)   the amount paid up on the share capital of the Borrower; and
 
           
 
      (B)   the amount standing to the credit of the reserves of the Borrower
(including, without limitation, any share premium account, capital redemption
reserve funds and any credit balance on the accumulated profit and loss
account);

     after deducting from that aggregate:

  (x)   any debit balance on the profit and loss account or impairment of the
issued share capital of the Borrower (except to the extent that deduction with
respect to that debit balance or impairment has already been made);     (y)  
amounts set aside for dividends or taxation (including deferred taxation); and  
  (z)   amounts attributable to capitalized items such as goodwill, trademarks,
deferred charges, licenses, patents and other intangible assets; and

         
 
  (ii)   if applicable, that part of the net results of operations and the net
assets of any subsidiary of the Borrower attributable to interests that are not
owned, directly or indirectly, by the Borrower.

--------------------------------------------------------------------------------

 

- 20 -
     Section 1.03. Financial Calculations. (a) All financial calculations to be
made under, or for the purposes of, this Agreement shall be determined on a
Combined Basis and in accordance with the Accounting Principles and, except as
otherwise required to conform to any provision of this Agreement, be calculated
from the then most recent quarterly financial statements delivered under Section
6.03 (Reporting Requirements) or, where those statements are with respect to the
last quarter of a financial year then, at IFC’s option, from the audited
financial statements for the relevant financial year. Any Material Adverse
Effect that occurs after the end of the period covered by the financial
statements used to make the relevant financial calculations shall also be taken
into account in calculating the relevant figures.
     (b) If a financial calculation is to be made under or for the purposes of
this Agreement or any other Transaction Document on a Consolidated Basis, that
calculation shall be made by reference to the sum of all amounts of similar
nature reported in the relevant financial statements of each of the entities
whose accounts are to be consolidated with the accounts of each of the Borrowers
plus or minus the consolidation adjustments customarily applied to avoid double
counting of transactions among any of those entities, including the Borrower.
     (c) For the purpose of financial calculations requiring Annual Reviewed
Combined Financial Statements preceding calendar year 2005, audited financial
statements of Borrower 1 will be used instead.
     Section 1.04. Interpretation. In this Agreement, unless the context
otherwise requires:
     (a) a reference to an Annex, Article, party, Schedule or Section is a
reference to that Article or Section of, or that Annex, party or Schedule to,
this Agreement;
     (b) words importing the singular include the plural and vice versa; and
     (c) a reference to a document includes an amendment or supplement to, or
replacement or novation of, that document but disregarding any amendment,
supplement, replacement or novation made in breach of this Agreement.

 

--------------------------------------------------------------------------------

 

- 21 -
ARTICLE II
The Project
     Section 2.01. The Project. The Project consists of the upgrade and
expansion of the Borrowers’ hospital operations in Beijing and Shanghai
respectively.
     Section 2.02. Project Cost and Financial Plan. The total estimated cost of
the Project is one hundred and sixty four million eight hundred and seventy six
thousand Renminbi (RMB164,876,000), and the proposed sources of financing are as
follows:

              RMB million     equivalent
Equity
       
Chindex
    34.19
Cash generation
    50.12
Total Equity
    84.31
 
       
Loans
       
Chindex
    11.83
Equipment Financing
    3.86
IFC
    64.88
Total Loans
    80.57
TOTAL FINANCING
  164.88 million

ARTICLE III
The Loan
     Section 3.01. Amount. Subject to the terms and conditions of this
Agreement, IFC agrees to lend to the Borrowers and the Borrowers agree to borrow
on a joint and several basis, the sum of sixty-four million eight hundred and
eighty thousand Renminbi (RMB64,880,000) (the “Loan”). As agreed between the
Borrowers, RMB21,198,000 of the Loan will be allocated to Borrower 1 and
RMB43,682,000 of the Loan will be allocated to Borrower 2. The agreement on such
allocation between the Borrowers, however, shall not release either of the
Borrowers from its joint and several obligations towards IFC hereunder.

 

--------------------------------------------------------------------------------

 

- 22 -
     Section 3.02. Disbursement. (a) Provided IFC is satisfied that all
conditions of disbursement set forth in Section 5.01 (Conditions of
Disbursement) are satisfied, IFC shall make one (1) Disbursement of the Loan on
or as soon as practicable following the Issue Date. The Disbursement shall be
made in the Loan Currency to the credit of the Borrowers (or either of the
Borrowers) at a bank in the Country. The Borrowers shall notify IFC of the bank
no later than two (2) Business Days prior to the Issue Date.
     (b) The Borrowers shall deliver to IFC a receipt, substantially in the form
of Schedule 2, within five (5) Business Days following the Disbursement.
     (c) IFC may, by written notice to the Borrowers, suspend or cancel the
right of the Borrowers to the Disbursement, with immediate effect: (i) if any
Event of Default has occurred and is continuing or if the Event of Default
specified in Section 7.02 (d) (Events of Default) is, in the reasonable opinion
of IFC, imminent; (ii) if any event or condition has occurred which has or can
reasonably be expected to have a Material Adverse Effect; or (iii) on or after
September 30, 2005. Upon any cancellation, the Borrowers shall, subject to
paragraph (d) of this Section 3.02, pay to IFC all fees and other amounts
accrued (whether or not then due and payable) under this Agreement up to the
date of that cancellation.
     (d) Notwithstanding anything contained in this Agreement, IFC may, at any
time after the Issue Date, in its discretion and without request by the
Borrowers, disburse the Loan on the terms set out in this Agreement, by
delivering to the Borrowers notice of such intent at least ten (10) Business
Days prior to the Disbursement date.
     Section 3.03. Interest. Subject to Section 3.04 (Default Penalty), the
Borrowers shall pay interest on the principal amount of Loan in accordance with
this Section 3.03:
     (a) Interest on the Loan shall accrue from day to day, be prorated on the
basis of a 360-day year, for the actual number of days in the relevant Interest
Period and be payable in arrears on the Interest Payment Date immediately
following that Interest Period; provided that if the Disbursement is made less
than fifteen (15) days before the first Interest Payment Date, interest in
respect of the first Interest Period shall be payable commencing on the second
Interest Payment Date following the date of the Disbursement.
     (b) Subject to subsection (c) below, the Interest Rate for any Interest
Period shall be the rate which is the sum of:
          (i) the loan spread 3.25%; and

 

--------------------------------------------------------------------------------

 

- 23 -
          (ii) the Reference Rate.
     (c) After IFC has received each bank statement indicating the Borrowers
have deposited funds in the Sinking Fund Account in accordance with
Section 6.01(d), with respect to only the outstanding amount of the Loan which
is equal to the aggregate balance in the Sinking Fund Account, the Interest Rate
for such amount for each Interest Period following IFC receipt of such bank
statement shall be the rate which is the sum of:
          (i) the loan spread 0.75%; and
          (ii) the Reference Rate;
provided that no Event of Default has occurred and is continuing on the date IFC
determines the Interest Rate pursuant to this Section 3.03(c). For avoidance of
doubt, this Section 3.03 (c) is not applicable if at any time an Event of
Default has occurred and is continuing, and in which situation, the Interest
Rate for the entire amount of the Loan shall be determined in accordance with
Section 3.03(b) from and after the date on which IFC notifies the Borrowers of
the existence of such Event of Default.
     Section 3.04. Default Penalty. (a) Without limiting the remedies available
to IFC under this Agreement or otherwise, if the Borrowers fail to make any
payment of principal or interest (including interest payable pursuant to this
Section) or any other payment when due:

  (i)   the Borrowers shall pay interest on the amount of that payment due and
unpaid, at the rate which shall be the sum of two per cent (2.0%) per annum and
the interest rate determined in accordance with Section 3.03 (Interest); and
that interest shall accrue from the date the relevant payment became due until
the date of actual payment (as well after as before judgment), and shall be
payable on demand or, if not demanded, on each Interest Payment Date thereafter;
and     (ii)   in addition to the default rate interest payable by the Borrowers
in Section 3.04(i) above, the Borrowers shall pay all costs and expenses
incurred by IFC with respect to the funding of IFC’s payment obligations to
holders of the Reference Bond, including, but not limited, to any U.S. Dollar or
Renminbi borrowing costs and the costs of any hedging arrangements (in case that
such costs were incurred in U.S. Dollar or any currency other than the Loan

 

--------------------------------------------------------------------------------

 

- 24 -

      Currency, the payment shall be made in the Loan Currency).

     (b) If the Borrowers breach their obligation to fund and maintain the
Sinking Fund Account pursuant to Section 6.01(d) below, the Borrowers shall pay
to IFC, a penalty of two per cent (2.0%) per annum on the outstanding principal
of the Loan (“Sinking Fund Penalty”). The Sinking Fund Penalty shall accrue from
the date on which such breach occurred until the date on which such breach is
rectified. The Sinking Fund Penalty shall be payable annually with the first
payment due on the first Interest Payment Date immediately following the breach.
     Section 3.05. Repayment. The Borrowers shall repay to IFC the full amount
of the Loan in one installment on the Repayment Date.
     Section 3.06. Prepayment. The Borrowers agree not to prepay the Loan.
     (b) In the event the Borrowers breach their obligation as set forth in
Section 3.06(a) above, the Borrowers shall pay to IFC the following:

  (i)   on the date of any such prepayment, a prepayment penalty equal to the
product of: (x) the amount of the Loan prepaid; (y) the Reference Rate; and
(y) the remaining number of years from the date of prepayment to the final
maturity of the Loan; and provided that for any period less than one year, the
prepayment penalty shall be pro-rated on the basis of a 360-day year for the
actual number of days in such period; and     (ii)   within thirty (30) days of
IFC’s written request, the Borrowers shall reimburse IFC for all costs and
expenses incurred by IFC, including, but not limited to, legal fees and
appraisal fees, in connection with the re-lending of amounts prepaid to other
borrowers in China prior to the Repayment Date.

     (c) Notwithstanding the foregoing, the parties agree to meet by end of 2011
to discuss options for the penalty free retirement of the debt of the Borrowers
including the redeployment of the Borrowers’ debt and whether IFC bonds can be
purchased for early retirement of the debt without penalty.
     Section 3.07. Fees. The Borrowers shall pay to IFC the following amounts in
the Loan Currency:

 

--------------------------------------------------------------------------------

 

- 25 -
     (a) a front-end fee of nine hundred seventy-three thousand two hundred
Renminbi (RMB973,200), representing one point five per cent (1.5%) of the
principal amount of the Loan, to be paid upon the earlier of (x) the date which
is thirty (30) days after the date of this Agreement or (y) the Business Day
before the date of the Disbursement;
     (b) a commitment fee at the rate of the Reference Rate on the full amount
of the Loan, which shall begin to accrue from the Issue Date and cease to accrue
on the date of Disbursement; and further shall be calculated on the basis of a
360-day year, and the actual number of days from the Issue Date to the date of
Disbursement (“Commitment Fee”). The Commitment Fee shall be paid one
(1) Business Day immediately following the date of Disbursement, provided
however, that if any Interest Payment Date occurs before the date of
Disbursement, the Commitment Fee shall be payable on such Interest Payment Date;
and
     (c) on each Interest Payment Date, a monitoring and supervision fee of
eighty one thousand one hundred Renminbi (RMB81,100).
     Section 3.08. Currency and Place of Payment. (a) The Borrowers shall make
all payments of principal and interest due to IFC under this Agreement in the
Loan Currency, in same day funds, to such bank account as may be designated by
IFC.
     (b) The payment obligations of the Borrowers under this Agreement shall be
discharged or satisfied only to the extent that (and as of the date when) IFC
actually receives funds in the Loan Currency in the account referred to in
Section 3.08 (a), notwithstanding the tender or payment (including by way of
recovery under a judgment) of any amount in any currency other than the Loan
Currency.
     Section 3.09. Taxes. The Borrowers shall pay or cause to be paid all, and
make all payments under this Agreement without deducting any, present and future
taxes whatsoever by whomsoever levied or imposed in connection with the payment
of any amount under this Agreement; provided that, if the Borrowers are
prevented from making payments without deduction, the Borrowers shall, in each
case, pay an increased amount such that, after deduction, IFC receives the full
amount it would have received had that payment been made without deduction.
     Section 3.10. Business Day Adjustment. If the due date for any payment
under this Agreement would otherwise fall on a day which is not a Business Day,
that payment shall be due on the next succeeding Business Day, and interest,
fees and charges, if any, on the amount of that payment shall continue to accrue
to that next succeeding Business Day.

 

--------------------------------------------------------------------------------

 

- 26 -
     Section 3.11. Allocation of Partial Payments. If IFC at any time receives
less than the full amount then due and payable under this Agreement, IFC may
allocate and apply the amount received as IFC solely determines, despite any
instruction of the Borrowers to the contrary.
     Section 3.12. Unwinding Costs. If IFC incurs any cost, expense or loss in
unwinding its funding arrangements (including any premium, penalty or expense
incurred to liquidate or obtain third party deposits or borrowings in order to
make, maintain or fund all or any part of the Loan) as a result of (i) the
Borrowers’ failure to borrow in accordance with Section 3.02 (Disbursement) or
to prepay in accordance with a notice of prepayment or (ii) the Borrowers’
prepayment of any part of the Loan other than on an Interest Payment Date, the
Borrowers shall, on IFC’s demand, pay to IFC the amount of any such cost,
expense or loss that IFC notifies to the Borrowers.
     Section 3.13. Other Fees and Expenses. (a) The Borrowers shall pay, or
reimburse IFC any amount paid by IFC on account of, all taxes (including stamp
taxes), duties, fees or other charges payable on or in connection with the
execution, issue, delivery, registration or notarization of the Transaction
Documents and any other documents related to them.
     (b) The Borrowers shall pay to IFC or as IFC may direct:

  (i)   the fees and expenses of IFC’s counsel in the Country incurred in
connection with:

  (A)   the preparation of the investment by IFC provided for under this
Agreement and any other Transaction Document;     (B)   the preparation and/or
review, execution and, where appropriate, translation and registration of the
Transaction Documents and any other documents related to them;     (C)   the
giving of any legal opinions required by IFC under this Agreement and any other
Transaction Document;     (D)   the administration by IFC of the investment
provided for in this Agreement or otherwise in connection with any amendment,
supplement or

 

--------------------------------------------------------------------------------

 

- 27 -

      modification to, or waiver under, any of the Transaction Documents;    
(E)   the registration (where appropriate) and the delivery of the evidences of
indebtedness relating to the Loan and its disbursement;     (F)   the occurrence
of any Event of Default or Potential Event of Default;

  (d)   the costs and expenses incurred by IFC in relation to efforts to enforce
or protect its rights under any Transaction Document, or the exercise of its
rights or powers consequent upon or arising out of the occurrence of any Event
of Default or Potential Event of Default, including legal and other professional
consultants’ fees on a full indemnity basis.

     Section 3.14. Joint and Several Obligations. Notwithstanding anything in
this Agreement to the contrary, the obligations of the Borrowers under this
Agreement (including, without limitation, for repayment of the Loan to IFC) are
joint and several, and each Borrower is jointly and severally liable for the
obligations of the other Borrower hereunder and thereunder. Failure of either
Borrower to carry out its obligations under this Agreement will not relieve the
other Borrower of its obligations hereunder or thereunder.
ARTICLE IV
Representations and Warranties
     Section 4.01. Representations and Warranties. Each of the Borrowers
represents and warrants in respect of itself that:
     (a) it is duly incorporated and validly existing under the laws of the PRC
and has the corporate power, and has obtained all required Authorizations, to
own its assets, conduct its business as presently conducted and to enter into,
and fulfill its obligations under, this Agreement;
     (b) this Agreement has been duly authorized and executed by it and
constitutes its valid and legally binding obligation, enforceable in accordance
with its terms;

 

--------------------------------------------------------------------------------

 

- 28 -
     (c) neither the making of any Transaction Document to which it is a party
nor (when all the Authorizations referred to in Section 5.01(d) (Conditions of
Disbursement) have been obtained) the compliance with its terms will conflict
with or result in a breach of any of the terms, conditions or provisions of, or
constitute a default or require any consent under, any indenture, mortgage,
agreement or other instrument or arrangement to which it is a party or by which
it is bound, or violate any of the terms or provisions of its organizational
documents or any Authorization, judgment, decree or order or any statute, rule
or regulation applicable to it;
     (d) to the best of the Borrower’s knowledge after due inquiry:

  (i)   the Authorizations specified in Annex A are all the Authorizations
(other than Authorizations that are of a routine nature and are obtained in the
ordinary course of business) needed by the Borrower to conduct its business,
carry out the Project and execute, and comply with its obligations under, this
Agreement and each of the other Transaction Documents to which it is a party;  
  (ii)   all Authorizations specified in Section (1) of Annex A have been
obtained and are in full force and effect; and     (iii)   the Borrower has
applied (or is making arrangements to apply) for all Authorizations specified in
Section (2) of Annex A, and has no reason to believe that it will not obtain
those Authorizations in a timely manner;

     (e) it has good and marketable title to all of the assets purported to be
owned by it and possesses a valid leasehold interest in all assets which it
purports to lease, in all cases free and clear of all Liens, and no conditional
or unconditional arrangements exist for the creation by it of any Lien, except
for the Security;
     (f) to the best of the Borrower’s understanding, the provisions of the
Transaction Documents are effective to create in favor of IFC, legal, valid and
enforceable Liens on or in all of the Security;
     (g) to the extent possible under the applicable law, all necessary consents
have been obtained and all other actions have been taken for creating and
perfecting the Security;
     (h) to the best of its knowledge and belief after due inquiry, it is not in
violation of any statute or regulation of any Authority, and is not engaged in
nor

 

--------------------------------------------------------------------------------

 

- 29 -
threatened by any litigation, arbitration or administrative proceedings, the
outcome of which could reasonably be expected to have a Material Adverse Effect;
no judgment or order has been issued which has or may reasonably be expected to
have a Material Adverse Effect;
     (i) since December 31, 2004 it has not suffered any change that has a
Material Adverse Effect or incurred any substantial loss or liability;
     (j) it is not a party to, or committed to enter into, any contract which
would or would be reasonable likely to have a Material Adverse Effect;
     (k) its financial statements for the period ending on December 31, 2004
have been prepared in accordance with the Accounting Principles, and give a true
and fair view of its financial condition as of that date and the results of its
operations during the period then ended;
     (l) except as identified in the ERS:

  (i)   to the best of its knowledge and belief after due inquiry, none of the
Borrowers are in violation of any of the Environmental and Social Policies or
any of the Environmental, Health and Safety Guidelines;     (ii)   the Borrowers
have not received nor are aware of any existing or threatened complaint, order,
directive, claim, citation or notice from any Authority or any material written
communication from any Person with respect to any aspect of the compliance with
any matter covered by the Environmental and Social Policies or the
Environmental, Health and Safety Guidelines by each of the Borrowers; and

     (m) none of the Borrowers, none of their Affiliates, or any Person acting
on its or their behalf, has made, with respect to the Project or any transaction
contemplated by this Agreement, any Prohibited Payment;
     (n) none of the representations and warranties in this Section 4.01 omits
any matter the omission of which makes any of such representations and
warranties misleading.
     Section 4.02. IFC Reliance. The Borrowers acknowledge that they make the
representations and warranties in Section 4.01 (Representations and Warranties)
with the intention of inducing IFC to enter into this Agreement and that IFC
enters into this Agreement in full reliance on each of them.

 

--------------------------------------------------------------------------------

 

- 30 -
ARTICLE V
Conditions of Disbursement
     Section 5.01. Conditions of Disbursement. The obligation of IFC to make the
Disbursement is subject to the fulfillment prior to or concurrently with the
making of the Disbursement of the following conditions:
     (a) the Transaction Documents, each in form and substance satisfactory to
IFC, have been entered into by all parties to them and have become (or, as the
case may be, remain) unconditional and fully effective in accordance with their
respective terms (except for this Agreement having become unconditional and
fully effective, if that is a condition of any of those agreements), and IFC has
received a copy of each of those agreements to which it is not a party:
     (b) the Reference Bond has been issued and is outstanding;
     (c) [not used];
     (d) the Borrowers have delivered to IFC copies of all Authorizations listed
in Section (2) of Annex A and such other Authorizations that are or become
necessary for the Loan and the execution of, and performance under, this
Agreement and each Transaction Document; and all those Authorizations are in
full force and effect;
     (e) IFC has received a legal opinion, in form and substance satisfactory to
it, of counsel acceptable to IFC, covering such matters relating to the
transactions contemplated in the Transaction Documents as IFC may reasonably
request;
     (f) the Borrowers’ organizational documents are in form and substance
satisfactory to IFC;
     (g) arrangements are in place for the prepayment of the Borrowers’ existing
debt from HSBC in form and substance satisfactory to IFC;
     (h) IFC has received from each of the Borrowers: (i) a certificate of
incumbency and authority in the form attached as Schedule 3; and (ii) a copy of
a letter in the form attached as Schedule 4, authorizing its Auditors to
communicate directly with IFC and provide any information regarding the
financial condition of the Borrower as IFC may from time to time request;

 

--------------------------------------------------------------------------------

 

- 31 -
     (i) IFC has received the request for Disbursement substantially in the form
attached hereto in Schedule 1, and the Borrowers’ certifications set out in
paragraph 3 of Schedule 1 are true and accurate;
     (j) each of the Borrowers has delivered to IFC evidence, substantially in
the form of Schedule 7, of appointment of an agent for service of process in New
York, New York;
     (k) the Borrower and IFC have agreed on the form of the Annual Monitoring
Report;
     (l) no Event of Default and no Potential Event of Default has occurred and
is continuing;
     (m) the proceeds of the Disbursement are, at the date of the relevant
request, needed by the Borrowers for the purpose of the Project, or will be
needed for that purpose within three (3) months of that date;
     (n) since the date of this Agreement nothing has occurred which has or can
reasonably be expected to have a Material Adverse Effect;
     (o) since December 31, 2004 the Borrowers have not incurred any material
loss or liability (except such liabilities as may be incurred in accordance with
Section 6.02 (Negative Covenants));
     (p) the representations and warranties made in Article IV are true and
correct in all material respects on and as of the date of that Disbursement with
the same effect as if those representations and warranties had been made on and
as of the date of that Disbursement (but in the case of Section 4.01(c)
(Representations and Warranties), without the words in parentheses);
     (q) the proceeds of that Disbursement are not in reimbursement of, or to be
used for, expenditures in the territories of any country which is not a member
of the World Bank or for goods produced in or services supplied from any such
country;
     (r) after giving effect to that Disbursement, neither of the Borrowers
would be in violation of:

  (i)   its Articles of Association;     (ii)   any provision contained in any
document to which it is a party (including this Agreement) or by which the
Borrower is bound; or

 

--------------------------------------------------------------------------------

 

- 32 -

  (iii)   any law, rule, regulation, Authorization or agreement or other
document binding on the Borrower directly or indirectly limiting or otherwise
restricting the Borrower’s borrowing power or authority or its ability to
borrow; and

     (s) if IFC so requires, IFC has received the reimbursement of all invoiced
fees and expenses of IFC’s counsel as provided in Section 3.13 (b) (i) (Other
Fees and Expenses) or confirmation that those fees and expenses have been paid
directly to that counsel;
     (t) IFC has received copies of insurance policies covering business
interruption and a certification of the Borrowers’ insurers or insurance agents
confirming that those policies are in full force and effect and all premiums
then due and payable under those policies have been paid; and
     (w) IFC has received the front-end fee provided in Section 3.07(a).
Section 5.02. Conditions for IFC Benefit. The conditions in Section 5.01
(Conditions of Disbursement) are for the benefit of IFC and may be waived only
by IFC in its sole discretion.
ARTICLE VI
Particular Covenants
Section 6.01. Affirmative Covenants. Unless IFC otherwise agrees, the Borrowers
shall:
     (a) within fifteen (15) days following the date of the Disbursement pay IFC
all relevant fees set out in Section 3.13 (Other Fees and Expenses), and all
other amounts then due under this Agreement including but not limited to,
reimbursement of all invoiced fees and expenses of IFC’s counsel;
     (b) within thirty (30) days following the date of the Disbursement,
irrevocably authorize, in the form of Schedule 4, the Auditors (whose fees and
expenses shall be for the account of the individual Borrowers) to communicate
directly with IFC at any time regarding the Borrowers’ accounts and operations,
and provide to IFC a copy of that authorization; and no later than thirty
(30) days after any change in Auditors, issue a similar authorization to the new
Auditors and provide a copy thereof to IFC;
     (c) within sixty (60) days following the date of the Disbursement:

 

--------------------------------------------------------------------------------

 

- 33 -

  (i)   deliver to IFC copies of all Authorizations listed in Section (3) of
Annex A and such other Authorizations that are or become necessary in order to
perfect the Security, and to otherwise ensure that all of the Transaction
Documents become effective and are enforceable; and     (ii)   deliver to IFC
copies of all insurance policies required to be obtained pursuant to
Section 6.04 (Insurance) and Annex B , and a certification of the Borrower’s
insurers or insurance agents confirming that those policies are in full force
and effect and all premiums then due and payable under those policies have been
paid;

     (d) establish and maintain the Sinking Fund Account in accordance with the
following terms:

  (A)   establish and open the Sinking Fund Account with a bank in China
acceptable to IFC by the earlier of (i) January 1, 2009 or (ii) the first
payment to the Sinking Fund Account pursuant to Section 6.02(a);     (B)  
deposit on or before each Interest Payment Date starting in 2009 an amount
necessary to maintain at all times a minimum balance in the Sinking Fund set out
in Table 1:

    Table 1

          Year of Interest   Minimum Balance Payment Date   after Each Interest
Payment Date     (RMB)
2009
    6,488,000  
2010
    12,976,000  
2011
    19,464,000  
2012
    29,196,000  
2013
    38,928,000  
2014
    51,904,000  
2015
    64,880,000  

      Provided, however, if immediately prior to the Interest Payment Date in
2009, all of the following ratios shall have been met based on the most recent
Annual Reviewed Combined Financial Statements, i.e.:

 

--------------------------------------------------------------------------------

 

- 34 -

  (i)   the Current Ratio is at least 1.8;     (ii)   the Balance Sheet
Liabilities to Tangible Net Worth Ratio is less than 1.4;     (iii)   the Peak
Debt Service Coverage Ratio is not less than 1.8; and     (iv)   Prospective
Debt Service Coverage Ratio will be greater than 2.0

      then, the Borrowers’ obligation to deposit funds in the Sinking Fund
Account will be extended to start from the Interest Payment Date in 2010, and
the required minimum balance in the Sinking Fund Account shall be determined in
accordance with Table 2:         Table 2

          Year of Interest   Minimum Balance Payment Date   after Each Interest
Payment Date     (RMB)
2010
    6,488,000  
2011
    12,976,000  
2012
    25,952,000  
2013
    38,928,000  
2014
    51904000  
2015
    64,880,000  

  (C)   ensure that all funds in the Sinking Fund Account shall be held in:

  (i)   PRC Government treasury bonds and/or treasury bills;     (ii)   fixed
deposit certificates; or     (iii)   such other instruments as are acceptable to
IFC;

     (e) maintain a minimum cash balance at all times of not less than 3% of the
Borrowers’ annual net revenues per the most recent Annual Reviewed Combined
Financial Statements;
     (f) maintain its existence, comply with its Articles of Association and
other constitutive documents, carry out the Project and conduct its business
with due diligence and efficiency and in accordance with sound engineering,
financial and business practices;

 

--------------------------------------------------------------------------------

 

- 35 -
     (g) cause the financing specified in the Financial Plan to be applied
exclusively to the Project;
     (h) maintain an accounting and control system, management information
system and books of account and other records, which together adequately reflect
truly and fairly the financial condition of the Borrower and the results of its
operations in conformity with the Accounting Principles;
     (i) appoint and maintain at all times a firm of recognized independent
public accountants acceptable to IFC as Auditors of the Borrower;
     (j) upon IFC’s request, such request to be made with reasonable prior
notice to such Borrower (except no such reasonable prior notice shall be
necessary if an Event of Default or Potential Event of Default is continuing or
if special circumstances so require), permit representatives of IFC, during
normal office hours, to:

  (i)   visit any of the sites and premises where the business of the Borrower
is conducted;     (ii)   inspect any of the Borrower’s sites, facilities, plants
and equipment;     (iii)   have access to the Borrower’s books of account and
all records; and     (iv)   have access to those employees, agents, contractors
and subcontractors of the Borrower who have or may have knowledge of matters
with respect to which IFC seeks information;

     (k) through its employees, agents, contractors and subcontractors, design,
construct, operate, maintain and monitor all of its sites, plants, equipment and
facilities:

  (i)   in accordance with the Environmental and Social Policies and the
Environmental, Health and Safety Guidelines;     (ii)   in compliance with the
ERS; and     (iii)   in compliance with applicable environmental, involuntary
resettlement, occupational health and safety requirements, and any child labor
and forced labor laws, rules and

 

--------------------------------------------------------------------------------

 

- 36 -

      regulations, including any international treaty obligations of the
Government of the Country and the local authorities;

     (l) make the ERS, or, as appropriate, information contained in the ERS,
available to all those who request it from the Borrower;
     (m) periodically review the form of the Annual Monitoring Report and advise
IFC as to whether modification of the form is necessary based on any changes in
the Project, and revise the form as agreed with IFC;

             
 
  (n)   (A)   obtain and maintain in force (and where appropriate, renew in a
timely manner) all Authorizations, including without limitation the
Authorizations specified in Annex A, which are necessary for the implementation
of the Project, the carrying out of the Borrower’s business and operations
generally and the compliance by the Borrower with all its obligations under the
Transaction Documents; and
 
           
 
      (B)   comply with all the conditions and restrictions contained in, or
imposed on the Borrower by, those Authorizations;

     (o) from time to time, execute, acknowledge and deliver or cause to be
executed, acknowledged and delivered such further instruments as may reasonably
be requested by IFC for perfecting or maintaining in full force and effect the
Security or for re-registering the Security or otherwise to enable the Borrower
to comply with its obligations under the Transaction Documents; and
     (p) ensure that: (i) all dividends and distributable profits of the Clinics
are, to the extent not payable to relevant domestic joint venture partners or
domestic co-investors, distributed directly or indirectly through an Affiliate
to the relevant Borrower and not other Person; and (ii) all income from any
clinic management or technology services contracts (in whatever name) with
Chindex or any other company affiliated with Chindex are paid directly or
indirectly to the relevant Borrower and not any other Person or entity within
the Group.
     Section 6.02. Negative Covenants. Unless IFC otherwise agrees, each of the
Borrowers shall not:
     (a) declare or pay any dividend to Chindex (or its successor) or make any
distribution on its share capital (other than dividends or distributions payable
in shares of such Borrower), or purchase, redeem or otherwise acquire any shares
of such Borrower or any option over them unless the proposed payment or
distribution is out of retained earnings, not greater than previous year’s net
income, and the Borrower, no earlier than sixty (60) days nor later than thirty
(30)

 

--------------------------------------------------------------------------------

 

- 37 -
days prior to doing so, certifies to IFC in writing, in the form attached as
Schedule 5, that:

  (i)   no Event of Default or Potential Event of Default has occurred and is
continuing; and     (ii)   after giving effect to any such action:

  (A)   the Current Ratio will be at least 1.5     (B)   the Balance Sheet
Liabilities to Tangible Net Worth Ratio will be less than 2.0;     (C)   the
Peak Debt Service Coverage Ratio will not be less than 1.3; and     (D)   the
Prospective Debt Service Coverage Ratio will not be less than 2.0.

      provided always that:

  (A)   the retained earnings out of which any of the payments or distributions
referred to in this sub- section may be made should in no event include any
amount resulting from the revaluation of any of such Borrower’s assets;     (B)
  such Borrower shall not make any payments or distributions of the type
referred to in this sub- section if, after giving effect to it, the Borrowers
could not certify the matters referred to in Section 6.02 (a) (i) and (ii);    
(C)   no dividend payment or distribution in whatever form may be made under
this Section 6.02(a) before December 31, 2007;     (D)   from January 1, 2008
till the Interest Payment Date in 2009, no dividend payment or distribution in
whatever form may be made under this Section 6.02(a) unless the Borrowers shall
have deposited at least an equal amount in the Sinking Fund Account, and

 

--------------------------------------------------------------------------------

 

- 38 -

  (E)   after giving effect to any form of dividend payment or distribution
under this Section 6.02(a), the Borrowers shall have adequate funds to meet
their obligations with respect to the Sinking Fund Account provided in
Section 6.02(d);

     (b) on a Combined Basis, incur expenditures or commitments for expenditures
for fixed or other non-current assets, other than those required for carrying
out the Project in an aggregate amount not exceed 50% of EBITDA in any
consecutive four financial quarters based on the Annual Reviewed Combined
Financial Statements, provided that the foregoing exception shall not apply if
an Event of Default or Potential Event of Default has occurred and is
continuing;
     (c) incur, assume or permit to exist any Debt except:

  (i)   the Loan;     (ii)   other Debt specified in the Financial Plan;    
(iii)   on a Combined Basis, Short-term Debt incurred in the ordinary course of
business which, when aggregated with contingent liabilities arising from the
discounting of trade receivables, would not exceed at any one time outstanding
the equivalent of RMB4,000,000.

     (d) on a Combined Basis and except for the Lease Contracts, enter into any
agreement or arrangement to lease any property or equipment of any kind, except
leases with respect to which the aggregate lease payments do not exceed the
equivalent of RMB2,500,000 in any Financial Year;
     (e) enter into any Derivative Transaction or assume the obligations of any
party to any Derivative Transaction;
     (f) enter into any agreement or arrangement to guarantee or, in any way or
under any condition, assume or become obligated for all or any part of any
financial or other obligation of another Person;
     (g) create or permit to exist any Lien on any property, revenues or other
assets, present or future, of the Borrower, except for:

  (i)   the Security;     (ii)   the naming of IFC as loss payee under the
Borrower’s insurance policies, as per Section 6.04(b)(iv) ;

 

--------------------------------------------------------------------------------

 

- 39 -

  (iii)   the existing Lien in favor of Siemens A G for its financing in an
aggregate amount equivalent to RMB6,581,546 for the machinery and equipment of
the Borrowers;     (iv)   any Lien arising from any tax, assessment or other
governmental charge or other Lien arising by operation of law, in each case if
the obligation underlying any such Lien is not yet due or, if due, is being
contested in good faith by appropriate proceedings so long as:

  (A)   those proceedings do not involve any substantial danger of the sale,
forfeiture or loss of any part of the Project, title thereto or any interest
therein, nor interfere in any material respect with the use or disposition
thereof or the implementation of the Project or the carrying on of the business
of such Borrower; and     (B)   such Borrower has set aside adequate reserves
sufficient to promptly pay in full any amounts that the Borrower may be ordered
to pay on final determination of any such proceedings;

     (h) enter into any transaction except in the ordinary course of business on
the basis of arm’s-length arrangements (including, without limitation,
transactions whereby such Borrower might pay more than the ordinary commercial
price for any purchase or might receive less than the full ex-works commercial
price (subject to normal trade discounts) for its products);
     (i) establish any sole and exclusive purchasing or sales agency;
     (j) enter into any partnership, profit-sharing or royalty agreement or
other similar arrangement whereby such Borrower’s income or profits are, or
might be, shared with any other Person;
     (k) enter into any management contract or similar arrangement whereby its
business or operations are managed by any other Person; the foregoing is not
intended to prevent the Borrowers from outsourcing departmental functions which
are common practice for the type of business carried out by the Borrowers;
     (l) form or have any Subsidiary except for the clinics that are or will
become part of the hospital network of the Borrowers;

 

--------------------------------------------------------------------------------

 

- 40 -
     (m) make or permit to exist loans or advances to, or deposits (except
commercial bank deposits in the ordinary course of business) with, other Persons
or investments in any Person or enterprise other than short-term investment
grade marketable securities acquired solely to give temporary employment to its
idle funds;
     (n) change its Articles of Association in any manner which would be
inconsistent with the provisions of any Transaction Document;
     (o) change its Financial Year;
     (p) change the nature or scope of the Project or change the nature of its
present business or operations;
     (q) sell, transfer, lease or otherwise dispose of all or a substantial part
of its assets, other than inventory, whether in a single transaction or in a
series of transactions, related or otherwise;
     (r) undertake or permit any merger, spin-off, consolidation or
reorganization;
     (s) prepay (whether voluntarily or involuntarily) or repurchase any
Long-term Debt pursuant to any provision of any agreement or note with respect
to that Long-term Debt unless that Long-term Debt is refinanced using new Long-
term Debt on terms and conditions (as to interest rate, other costs and tenor)
at least as favorable to the Borrower as those of the Long-term Debt being
refinanced; or
     (t) use the proceeds of the Disbursement in the territories of any country
which is not a member of the World Bank or for reimbursements of expenditures in
those territories or for goods produced in or services supplied from any such
country; or
     (u) amend the ERS without IFC’s consent, unless the amendment is consistent
the Environmental and Social Policies, the Environmental, Health and Safety
Guidelines, and other provisions of this Agreement;
     (v) make (and shall not authorize or permit any Affiliate or any other
Person acting on its behalf to make) with respect to the Project or any
transaction contemplated by this Agreement, any Prohibited Payment. The
Borrowers further covenant that should IFC notify the Borrowers of their
concerns that there has been a violation of the provisions of this Section or of
Section 6.01(p) of this Agreement, it shall cooperate in good faith with IFC and
its representatives in

 

--------------------------------------------------------------------------------

 

- 41 -
determining whether such a violation has occurred, and shall respond promptly
and in reasonable detail to any notice from IFC, and shall furnish documentary
support for such response upon IFC’s request;
     (w) substantially amend the terms of, or grant any waivers in respect of
any Lease Contract or the Technology and Service Contracts;
     (y) carry out any of the Excluded Activities;
     (z) withdraw any fund from the Sinking Fund Account; or
     (aa) make any payment directly or indirectly to Chindex except under the
terms of the Subordination Agreement.
     Section 6.03. Reporting Requirements. Unless IFC otherwise agrees, each of
the Borrowers shall:
     (a) as soon as available but in any event within sixty (60) days after the
end of each quarter of each Financial Year, deliver to IFC:

  (i)   two (2) copies of such Borrower’s complete financial statements for such
quarter prepared, on a Consolidated Basis, in accordance with the Accounting
Principles;     (ii)   a report containing the information specified in the form
attached as Schedule 6, including any factors that have or could reasonably be
expected to have a Material Adverse Effect; and     (iii)   a statement of all
transactions during that quarter between the Borrower and each of its
Affiliates, if any, and a certification by an Authorized Representative that
those transactions were on the basis of arm’s-length arrangements;

     (b) as soon as available but in any event within one hundred and twenty
(120) days after the end of each Financial Year, deliver to IFC:

  (i)   two (2) copies of its complete and audited financial statements for that
Financial Year (which are in agreement with its books of account and prepared,
on an Consolidated Basis, in accordance with the Accounting Principles, together
with the Auditors’ audit report on them, all in form satisfactory to IFC;

 

--------------------------------------------------------------------------------

 

- 42 -

  (ii)   a management letter and such other communication from the Auditors
commenting, with respect to that Financial Year, on, among other things, the
adequacy of the Borrower’s financial control procedures, accounting systems and
management information system;     (iii)   a report by the Auditors certifying
that, on the basis of its financial statements, the Borrower was in compliance
with the covenants contained in Section 6.02 (Negative Covenants) as of the end
of that Financial Year or, as the case may be, detailing any non-compliance;    
(iv)   a statement by the Borrower of all transactions between such Borrower and
each of its Affiliates, if any, during that Financial Year, and a certification
by an Authorized Representative that those transactions were on the basis of
arm’s-length arrangements; and     (v)   Annual Reviewed Combined Financial
Statements;

     (c) deliver to IFC, promptly following receipt, a copy of any management
letter or other communication sent by the Auditors (or any other accountants
retained by the Borrower) to the Borrower or its management in relation to the
Borrower’s financial, accounting and other systems, management or accounts, if
not provided pursuant to Section 6.03 (b) (ii);
     (d) within ninety (90) days after the end of each Financial Year, deliver
to IFC an annual monitoring report in a form consistent with Sections 5.01(k)
and 6.01(m), confirming compliance with the Environmental and Social Policies,
the Environmental, Health and Safety Guidelines, the ERS, the applicable
national and local requirements, and Section 6.01(k) or, as the case may be,
detailing any non-compliance, and setting out the action being taken to ensure
compliance;
     (e) as soon as possible but no later than three (3) days after its
occurrence, notify IFC of any incident or accident within the Project area or
areas otherwise within the Borrower’s management or control, which has or may
reasonably be expected to have a material adverse effect on the environment,
health or safety, including, without limitation, explosions, spills or workplace
accidents which result in death, serious or multiple injury or major pollution,
specifying, in each case, the nature of the incident or accident, the on-site
and off- site impacts arising or likely to arise therefrom and the measures such
Borrower is

 

--------------------------------------------------------------------------------

 

- 43 -
taking or plans to take to address those impacts; and keep IFC informed of the
on- going implementation of those measures;
     (f) give notice to IFC, concurrently with such Borrower’s notification to
its shareholders, of any meeting of its shareholders, such notice to include the
agenda of the meeting; and, as soon as available, deliver to IFC two (2) copies
of:

  (i)   all notices, reports and other communications of the Borrower to its
shareholders, whether any such communication has been made on an individual
basis or by way of publication in a newspaper or other communication medium; and
    (ii)   the minutes of all shareholders’ meetings;

     (g) promptly notify IFC of any proposed change in the nature or scope of
the Project or the business or operations of the Borrower and of any event or
condition which has or may reasonably be expected to have a Material Adverse
Effect;
     (h) promptly upon becoming aware of any litigation or administrative
proceedings before any Authority or arbitral body which has or may reasonably be
expected to have a Material Adverse Effect, notify IFC by facsimile of that
event specifying the nature of that litigation or those proceedings and the
steps such Borrower is taking or proposes to take with respect thereto;
     (i) promptly upon the occurrence of an Event of Default or Potential Event
of Default, notify IFC by facsimile specifying the nature of that Event of
Default or Potential Event of Default and any steps the Borrower is taking to
remedy it;
     (j) provide to IFC, in a timely manner, the insurance certificates and
other information referred to in Section 6.04 (d) (Insurance);
     (k) promptly provide to IFC such other information as IFC from time to time
requests about the Borrower, its assets and the Project; and
     (l) provide or cause to be provided to IFC all the bank statement of the
Sinking Fund Account within 10 days from the date of the relevant statement.
     Section 6.04. Insurance.
     (a) Insurance Requirements and Borrower’s Undertakings.

 

--------------------------------------------------------------------------------

 

- 44 -
Unless IFC otherwise agrees, the Borrower shall:-

  (i)   insure and keep insured, with financially sound and reputable insurers,
all its assets and business against all insurable losses to include the
insurances specified in Annex B and any insurance required by law;     (ii)  
punctually pay any premium, commission and any other amounts necessary for
effecting and maintaining in force each insurance policy;     (iii)   promptly
notify the relevant insurer of any claim by the Borrower under any policy
written by that insurer and diligently pursue that claim;     (iv)   comply with
all warranties under each policy of insurance;     (v)   not do or omit to do,
or permit to be done or not done, anything which might prejudice the Borrower’s,
or, where IFC is a loss payee or an additional named insured, IFC’s right to
claim or recover under any insurance policy; and     (vi)   not vary, rescind,
terminate, cancel or cause a material change to any insurance policy;

          provided always that if at any time and for any reason any insurance
required to be maintained hereunder shall not be in full force and effect, then
IFC shall thereupon or at any time while the same is continuing be entitled (but
have no such obligation) on its own behalf to procure such insurance at the
expense of the Borrower and to take all such steps to minimize hazard as IFC may
consider expedient or necessary.

(b)   Policy Provisions

          Each insurance policy required to be obtained pursuant to this Section
shall be on terms and conditions acceptable to IFC, and shall contain provisions
to the effect that:

  (i)   no policy can expire nor can it be canceled or suspended by the Borrower
or the insurer for any reason (including failure to renew the policy or to pay
the premium or any other amount) unless IFC and, in the case of expiration or if
cancellation or suspension is initiated by the insurer, the Borrower receive at
least thirty (30) days notice (or such lesser period as IFC may agree in respect
of cancellation, suspension or termination in the event of war and

 

--------------------------------------------------------------------------------

 

- 45 -

      kindred peril) prior to the effective date of termination, cancellation or
suspension;     (ii)   IFC is named as additional named insured on all liability
policies;     (iii)   where relevant, all its provisions (except those relating
to limits of liability) shall operate as if they were a separate policy covering
each insured party; and     (iv)   on every insurance policy on the Borrower’s
assets which are the subject of the IFC Security and for business interruption,
IFC is named as loss payee for any claim of, or any series of claims arising
with respect to the same event whose aggregate amount is, the equivalent of one
million US Dollars (US$1,000,000) or more.

(c)   Application of Proceeds

  (i)   At its discretion, IFC may remit the proceeds of any insurance paid to
it to the Borrower to repair or replace the relevant damaged assets or may apply
such proceeds towards any amount payable to IFC under this Agreement, including
to repay or prepay all or any part of the Loan in accordance with Section 3.06
(Prepayment);     (ii)   The Borrower shall use any insurance proceeds it
receives (whether from IFC or directly from the insurers) for loss of or damage
to any asset solely to replace or repair that asset.

(d)   Reporting Requirements       Unless IFC otherwise agrees, the Borrower
shall provide to IFC the following:-

  (i)   as soon as possible after its occurrence, notice of any event which
entitles the Borrower to claim for an aggregate amount exceeding the equivalent
of five hundred thousand US Dollars (US$500,000) under any one or more insurance
policies;     (ii)   within thirty (30) days after any insurance policy is
issued to the Borrower, a copy of that policy incorporating any loss payee
provisions required under Section 6.04 (b) (iv) (unless that policy has already
been provided to IFC pursuant to Section 5.01 (t));     (iii)   not less than
ten (10) days prior to the expiry date of any insurance policy (or, for
insurance with multiple renewal dates, not less than

 

--------------------------------------------------------------------------------

 

- 46 -

      ten (10) days prior to the expiry date of the policy on the principal
asset), a certificate of renewal from the insurer, insurance broker or agent
confirming the renewal of that policy and the renewal period, the premium, the
amounts insured for each asset or item and any changes in terms or conditions
from the policy’s issue date or last renewal, and confirmation from the insurer
that provisions naming IFC as loss payee or additional named insured, as
applicable, remain in effect;     (iv)   such evidence of premium payment as IFC
may from time to time request; and     (v)   any other information or documents
on each insurance policy as IFC requests from time to time.

ARTICLE VII
Events of Default
     Section 7.01. Acceleration after Events of Default. If any Event of Default
occurs and is continuing (whether it is voluntary or involuntary, or results
from operation of law or otherwise), IFC may, by notice to the Borrowers,
require the Borrowers to repay the Loan as specified in that notice. On receipt
of any such notice, the Borrowers shall immediately repay the Loan and all
accrued interest on it, the prepayment fees specified in Section 3.06
(Prepayment) on the amount of the Loan whose payment is accelerated and any
other amounts payable under this Agreement. The Borrowers waive any right that
they might have to further notice, presentment, demand or protest for that
demand for immediate payment;
     Section 7.02. Events of Default. It shall be an Event of Default if:
     (a) either of the Borrowers fail to pay when due any principal of, interest
on, or other amounts due in respect of, the Loan and such failure continues for
five (5) days;
     (b) either of the Borrowers fails to pay when due any part of the principal
of, or interest on, any loan from IFC to the Borrower other than the Loan and
any such failure continues for the relevant period of grace provided for in the
agreement providing for that loan;

 

--------------------------------------------------------------------------------

 

- 47 -
     (c) either of the Borrowers fails to maintain the minimum balance in the
Sinking Fund Account pursuant to Section 6.01(d) and such failure constitutes
for five (5) days;
     (d) either of the Borrowers fail to comply with any of their obligations
under this Agreement or any other Transaction Document or any other agreement
between the Borrowers and IFC (other than for payment of the principal of, or
interest on, the Loan or any other loan from IFC to the Borrowers) and such
failure continues for a period of thirty (30) days after the date on which IFC
notifies the Borrowers of such failure;
     (e) any party to a Transaction Document (other than IFC or the Borrowers)
fails to observe or perform any of its obligations under that Transaction
Document, and any such failure continues for a period of thirty (30) days after
the date on which IFC notifies the Borrowers of that failure;
     (f) any representation or warranty made in Article IV or in connection with
the execution of, or any request (including request for disbursement) under,
this Agreement, or any Transaction is found to be incorrect in any material
respect;
     (g) any Authority condemns, nationalizes, seizes, expropriates or otherwise
assumes custody or control of, all or any substantial part of business,
operations, property or other assets of the either of the Borrowers or of their
share capital, or takes any action for the dissolution of either of the
Borrowers or any action that would prevent either of the Borrowers or its
officers from carrying on all or a substantial part of its business or
operations;
     (h) a decree or order by a court is entered against either of the
Borrowers:

  (i)   adjudging such Borrower bankrupt or insolvent;     (ii)   approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of, or with respect to, such Borrower under any applicable law;    
(iii)   appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Borrower or of any substantial part of its
property or other assets; or     (iv)   ordering the winding up or liquidation
of its affairs;

 

--------------------------------------------------------------------------------

 

- 48 -
or any petition is filed seeking any of the above and is not dismissed within
thirty (30) days;
     (i) either of the Borrowers:

  (i)   requests a moratorium or suspension of payment of debts from any court;
    (ii)   institutes proceedings or takes any form of corporate action to be
liquidated, adjudicated bankrupt or insolvent;     (iii)   consents to the
institution of bankruptcy or insolvency proceedings against it;     (iv)   files
a petition or answer or consent seeking reorganization or relief under any
applicable law, or consents to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of such Borrower or of any substantial part of its property;  
  (v)   makes a general assignment for the benefit of creditors; or     (vi)  
admits in writing its inability to pay its debts generally as they become due or
otherwise becomes insolvent;

     (j) an attachment or analogous process is levied or enforced upon or issued
against any of the assets of either of the Borrowers for an amount in excess of
the equivalent of US$750,000 and is not discharged within thirty (30) days;
     (k) any other event occurs which under any applicable law would have an
effect analogous to any of those events listed in Section 7.02 (g) through
Section 7.02 (j);
     (l) either of the Borrowers fails to pay any Liabilities (other than the
Loan or any other loan from IFC to the Borrowers) or to perform any of its
obligations under any agreement pursuant to which there is outstanding any Debt,
and any such failure continues for more than any applicable period of grace or
any such Debt becomes prematurely due and payable or is placed on demand;
     (m) any Authorization necessary for either of the Borrowers to perform and
observe their obligations under any Transaction Document, or to carry out the
Project, is not obtained when required or rescinded, terminated, lapses or
otherwise ceases to be in full force and effect, including with respect to the

 

--------------------------------------------------------------------------------

 

- 49 -
remittance to IFC or its assignees, in the Loan Currency, of any amounts payable
under any Transaction Document, and is not restored or reinstated within thirty
(30) days of notice by IFC to the Borrower requiring that restoration or
reinstatement ;
     (n) any Security Document or any of its provisions:

  (i)   is revoked, terminated or ceases to be in full force and effect or
ceases to provide the security intended, without, in each case, the prior
consent of IFC;     (ii)   becomes unlawful or is declared void; or     (iii)  
is repudiated or its validity or enforceability is challenged by any Person and
any such repudiation or challenge continues for a period of thirty (30) days and
during which period such repudiation or challenge has no effect;

     (o) any Transaction Document (other than a Security Document) or any of its
provisions:

  (i)   is revoked, terminated or ceases to be in full force and effect without,
in each case, the prior consent of IFC, and such event, if capable of being
remedied, is not remedied to the satisfaction of IFC within thirty (30) days of
IFC’s notice to the Borrowers; or     (ii)   becomes unlawful or is declared
void;

     (p) any Transaction Document (other than a Security Document) is repudiated
or the validity or enforceability of any of its provisions at any time is
challenged by any Person and such repudiation or challenge is not withdrawn
within thirty (30) days of IFC’s notice to the Borrower requiring that
withdrawal; provided that no such notice shall be required or, as the case may
be, the notice period shall terminate if and when such repudiation or challenge
becomes effective;
     (q) any of the Lease Contracts or the Technology and Service Contracts

  (i)   is breached by any party to it and that breach has or could reasonably
be expected to have a Material Adverse Effect; or

 

--------------------------------------------------------------------------------

 

- 50 -

  (ii)   is revoked, terminated or ceases to be in full force and effect without
the prior consent of IFC, or performance of any of the material obligations
under any such agreement becomes unlawful or any such agreement is declared to
be void or is repudiated or its validity or enforceability at any time is
challenged by any party to it;

     (r) any of the events listed in Section 7.02 (g) through Section 7.02 (j)
occurs to Chindex or any of its Subsidiaries; or
     (s) the joint venture term for business operation of Borrower 1 is expired
and not renewed or extended.
     Section 7.03. Automatic Acceleration upon Dissolution or Bankruptcy. If
either of the Borrowers commence winding up proceedings, is dissolved, or is
declared bankrupt or insolvent, the Loan and all other amounts payable under
this Agreement shall become immediately due without any presentment, demand,
protest or notice of any kind, all of which the Borrowers waive.
ARTICLE VIII
Miscellaneous
     Section 8.01. Saving of Rights. (a) The rights and remedies of IFC in
relation to any misrepresentation or breach of warranty on the part of the
Borrowers shall not be prejudiced by any investigation by or on behalf of IFC
into the affairs of either of the Borrowers, by the execution or the performance
of this Agreement or by any other act or thing by or on behalf of IFC which
might, apart from this Section, prejudice such rights or remedies.
     (b) No course of dealing and no failure or delay by IFC in exercising any
power, remedy, discretion, authority or other right under this Agreement or any
other agreement shall impair, or be construed to be a waiver of or an
acquiescence in, that or any other power, remedy, discretion, authority or right
under this Agreement, or in any manner preclude its additional or future
exercise.
     Section 8.02. Notices. Any notice, request or other communication to be
given or made under this Agreement to IFC or to the Borrowers shall be in
writing and shall be deemed to have been duly given or made when it is delivered
by hand, airmail, established courier service or facsimile to the party to which
it is required or permitted to be given or made at such party’s address
specified below or at such other address as such party has designated by notice
to the other party hereto.

 

--------------------------------------------------------------------------------

 

- 51 -
For Borrower 1:
BEIJING UNITED FAMILY HEALTH CENTER
No. 2 Jiangtai Road, Chaoyang District
Beijing, China 100016
Attention: General Manager
Alternative address for communications by facsimile:
(8610) 6431-5836
For Borrower 2:
SHANGHAI UNITED FAMILY HOSPITAL INC.
1111 Xian Xia Road, Changming District
Shanghai, China 200336
Attention: General Manager
Alternative address for communications by facsimile:
(8621) 5133-1919
With a copy sent to the attention of Vice President, Finance and
Health Care Services Division, Chindex International, Inc. at:
Facsimile: (301) 215-7719
For IFC:
International Finance Corporation
2121 Pennsylvania Ave., N.W.
Washington, D.C. 20433
United States of America
Attention: Director, Global Manufacturing and Services Department
Alternative address for communications by facsimile:
(202) 974-4792

 

--------------------------------------------------------------------------------

 

- 52 -
With a copy (in the case of communications relating to payments) sent to the
attention of the Senior Manager, Financial Operations Unit, at:
Facsimile: (202) 974-4371
     Section 8.03. English Language. (a) All documents to be provided or
communications to be given or made under this Agreement shall be in the English
language.
     (b) To the extent that the original version of any document to be provided,
or communication to be given or made, to IFC under this Agreement or any other
Transaction Document is in a language other than English, that document or
communication shall, where appropriate, be accompanied by an English
translation.
     Section 8.04. Term of Agreement. This Agreement shall continue in force
until all monies payable under it have been fully paid in accordance with its
provisions.
     Section 8.05. Applicable Law and Jurisdiction. (a) This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
United States of America.
     (b) Without limitation to any other rights or remedies afforded to IFC
under this Agreement, at IFC’s option, any dispute, controversy or claim arising
out of or relating to this Agreement or its breach, termination or invalidity
(each a “Dispute”) which cannot be settled amicably may be finally and
conclusively settled by arbitration under the Rules of Conciliation and
Arbitration (the “ICC Rules”) of the International Chamber of Commerce (“ICC”).
The arbitral award shall be final and binding. The parties expressly waive their
right to any form of appeal or recourse from or against such arbitral
proceedings or arbitral award to any judicial authority, except as provided by
the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of
June 10, 1958, and acknowledge that any arbitral award rendered as provided in
this Section shall be subject to such Convention. The arbitral tribunal shall
not be authorized to take or provide, and the Borrowers shall not be authorized
to seek from any judicial authority, any interim or conservative measures or
pre-award relief against IFC. Each party shall bear its own expenses, including
costs of experts that it retains, travel expenses and legal fees; provided that,
in apportioning costs under Article 31 of the ICC Rules, if the arbitral
tribunal finds that any party shall have acted in bad faith or caused
unnecessary expenses to be incurred by the other party in the arbitration, it
may, in its discretion, award all or a part of such expenses of

 

--------------------------------------------------------------------------------

 

- 53 -
another party against any party that has so acted, and shall, in addition, take
such conduct into account in apportioning the other costs of the arbitration.
     (c) The arbitral tribunal shall consist of one (1) arbitrator appointed by
the Court of International Arbitration of the ICC, in accordance with the ICC
Rules.
     (d) If any Dispute raises issues which are substantially the same as or
connected with issues raised in a Dispute which has already been referred to
arbitration (an “Existing Dispute”), or arises out of substantially the same
facts as are the subject of an Existing Dispute (a “Related Dispute”), the
arbitrator appointed or to be appointed in respect of any such Existing Dispute
shall, upon request of IFC, also be appointed as the arbitrator in respect of
any Related Dispute. If requested by a party, the arbitral tribunal shall
decide, finally, whether the issues meet the criteria set forth herein.
     (e) Upon the request of IFC, the arbitral tribunal shall join any party to
this Agreement to any reference to arbitration proceedings in relation to a
Dispute and may make a single, final award determining all Disputes between or
among them. The Borrowers hereby consent to be joined in any reference to
arbitration proceedings in relation to any Dispute at the request of IFC.
     (f) Unless otherwise agreed by the parties to the arbitration, the place of
arbitration shall be in New York, New York. The language of the arbitration and
all pleadings, written statements, documents and decisions shall be English. Any
award shall be made and paid in Dollars.
     (g) Notwithstanding Section 8.05(b), for the exclusive benefit of IFC, the
Borrowers irrevocably agree that any legal action, suit or proceeding arising
out of or relating to this Agreement may be brought in the courts of the United
States of America located in the Southern District of New York or in the courts
of the State of New York located in the Borough of Manhattan. By the execution
of this Agreement, the Borrowers irrevocably submit to the jurisdiction of any
such court in any such action, suit or proceeding. Final judgment against the
Borrowers in any such action, suit or proceeding shall be conclusive and may be
enforced in any other jurisdiction, including the Country, by suit on the
judgment, a certified or exemplified copy of which shall be conclusive evidence
of the judgment, or in any other manner provided by law.
     (h) Nothing in this Agreement shall affect the right of IFC to commence
legal proceedings or otherwise sue the Borrowers (or any one of them) in the
Country or any other appropriate jurisdiction, or concurrently in more than one
jurisdiction, or to serve process, pleadings and other legal papers upon the

 

--------------------------------------------------------------------------------

 

- 54 -
Borrowers (or any one of them) in any manner authorized by the laws of any such
jurisdiction.
     (i) Each of the Borrowers hereby irrevocably designates, appoints and
empowers Gary Simon, Esq., with offices currently located at Hughes Hubbard &
Reed, LLP, 1 Battery Park Plaza, New York, NY 1004-1481, as its authorized agent
solely to receive for and on its behalf service of any summons, complaint or
other legal process in any action, suit or proceeding IFC may bring in the State
of New York in respect of this Agreement.
     (j) As long as this Agreement remains in force, each of the Borrowers shall
maintain a duly appointed and authorized agent to receive for and on its behalf
service of any summons, complaint or other legal process in any action, suit or
proceeding IFC may bring in New York, New York, United States of America, with
respect to this Agreement. The Borrowers shall keep IFC advised of the identity
and location of such agent.
     (k) Each of the Borrowers also irrevocably consents, if for any reason its
authorized agent for service of process of summons, complaint and other legal
process in any action, suit or proceeding is not present in New York, New York,
to the service of such papers being made out of the courts of the United States
of America located in the Southern District of New York and the courts of the
State of New York located in the Borough of Manhattan by mailing copies of the
papers by registered United States air mail, postage prepaid, to the Borrowers,
at their addresses specified pursuant to Section 8.02 (Notices). In such a case,
IFC shall also send by facsimile, or have sent by facsimile, a copy of the
papers to the Borrowers.
     (l) Service in the manner provided in Sections 8.05(i), (j) and (k) in any
action, suit or proceeding will be deemed personal service, will be accepted by
the Borrowers as such and will be valid and binding upon the Borrowers for all
purposes of any such action, suit or proceeding.
     (m) Each of the Borrowers irrevocably waives to the fullest extent
permitted by applicable law:

  (i)   any objection which it may have now or in the future to the laying of
the venue of any action, suit or proceeding in any court referred to in this
Section;     (ii)   any claim that any such action, suit or proceeding has been
brought in an inconvenient forum;

 

--------------------------------------------------------------------------------

 

- 55 -

  (iii)   its right of removal of any matter commenced by IFC in the courts of
the State of New York to any court of the United States of America; and     (iv)
  any and all rights to demand a trial by jury in any such action, suit or
proceeding brought against such party by IFC.

     (n) To the extent that either of the Borrowers may be entitled in any
jurisdiction to claim for itself or its assets immunity in respect of its
obligations under this Agreement or any Transaction Document from any suit,
execution, attachment (whether provisional or final, in aid of execution, before
judgment or otherwise) or other legal process or to the extent that in any
jurisdiction that immunity (whether or not claimed) may be attributed to it or
its assets, such Borrower irrevocably agrees not to claim and irrevocably waives
such immunity to the fullest extent permitted now or in the future by the laws
of such jurisdiction.
     (o) The Borrowers hereby acknowledge that IFC shall be entitled under
applicable law, including the provisions of the International Organizations
Immunities Act, to immunity from a trial by jury in any action, suit or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby brought against IFC in any court of the United States of
America. The Borrowers hereby waive any and all rights to demand a trial by jury
in any action, suit or proceeding arising out of or relating to this Agreement
or the transactions contemplated by this Agreement, brought against IFC in any
forum in which IFC is not entitled to immunity from a trial by jury.
     (p) To the extent that the Borrowers may, in any action, suit or proceeding
brought in any of the courts referred to in Section 8.05 (g) or a court of the
Country or elsewhere arising out of or in connection with this Agreement or any
Transaction Document be entitled to the benefit of any provision of law
requiring IFC in such action, suit or proceeding to post security for the costs
of either of the Borrowers, or to post a bond or to take similar action, the
Borrowers hereby irrevocably waive such benefit, in each case to the fullest
extent now or in the future permitted under the laws of the Country or, as the
case may be, the jurisdiction in which such court is located.
     Section 8.06. Disclosure of Information. IFC may, notwithstanding the terms
of any other agreement between the Borrowers and IFC, disclose any documents or
records or information about any Transaction Document, or the assets, business
or affairs of the Borrowers to (i) its outside counsel, auditors and rating
agencies, and (ii) any other person as IFC may deem appropriate for the

 

--------------------------------------------------------------------------------

 

- 56 -
purpose of exercising any power, remedy, right, authority, or discretion
relevant to any Transaction Document.
     Section 8.07. Successors and Assignees. This Agreement shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto,
except that neither of the Borrowers may assign or otherwise transfer all or any
part of their rights or obligations under this Agreement without the prior
written consent of IFC.
     Section 8.08. Amendments, Waivers and Consents. Any amendment or waiver of,
or any consent given under, any provision of this Agreement shall be in writing
and, in the case of an amendment, signed by the parties.
     Section 8.09. Counterparts. This Agreement may be executed in several
counterparts, each of which is an original, but all of which constitute the same
agreement.
[signatures on following page]

 

--------------------------------------------------------------------------------

 

- 57 -
     IN WITNESS WHEREOF, the parties hereto, acting through their duly
authorized representatives, have caused this Agreement to be signed in their
respective names as of the date first above written.

                  BEIJING UNITED FAMILY HEALTH CENTER    
 
           
 
  By:   /s/ Roberta Lipson    
 
     
 
Authorized Representative         Name (print): Roberta Lipson         Title:
Board Chair    
 
                SHANGHAI UNITED FAMILY HOSPITAL, INC.    
 
           
 
  By:   /s/ Roberta Lipson    
 
     
 
Authorized Representative         Name (print): Roberta Lipson         Title:
Board Chair    
 
                INTERNATIONAL FINANCE CORPORATION    
 
           
 
  By:   /s/ Karin Finkelston    
 
     
 
Authorized Representative         Name (print): Karin Finkelston         Title:
Associate Director