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Exhibit 10.44
[Confidential Treatment Requested.  Confidential portions of this document have
been
redacted and have been separately filed with the Securities and Exchange
Commission]
 
 
 

AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT

between

NeoGenomics Laboratories, Inc., a Florida Corporation, as Borrower
 
and
 
NeoGenomics, Inc., a Nevada corporation, as Guarantor
 
and

CAPITALSOURCE FINANCE LLC

Dated as of

April 26, 2010
 

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TABLE OF CONTENTS

     
Page
     
1.
DEFINITIONS
2
 
1.1.
General Terms
2
 
1.2.
Definitions
3
     
2.
ADVANCES, PAYMENT AND INTEREST
18
 
2.1.
The Revolving Facility
18
 
2.2.
The Revolving Loans; Maturity
19
 
2.3.
Revolving Facility Disbursements; Requirement to Deliver Borrowing Certificate
19
 
2.4.
Promise to Pay; Manner of Payment
19
 
2.5.
Repayment of Excess Advances
19
 
2.6.
Payments by Lender
20
 
2.7.
Evidence of Loans
20
     
3.
INTEREST AND FEES
21
 
3.1.
Interest on the Revolving Facility
21
 
3.2.
Commitment Fee
21
 
3.3.
Unused Line Fee
21
 
3.4.
Collateral Management Fee
21
 
3.5.
Computation of Fees; Lawful Limits
21
 
3.6.
Default Rate of Interest
22
     
4.
GRANT OF SECURITY INTERESTS
22
 
4.1.
Security Interest; Collateral
22
 
4.2.
Power of Attorney
22
 
4.3.
Further Assurances
23
     
5.
ADMINISTRATION AND MAINTENANCE OF COLLATERAL
24
 
5.1.
Revolving Facility Collections; Repayment; Borrowing Availability and Lockbox
24
 
5.2.
Accounts
24
 
5.3.
Healthcare
25
 
5.4.
Medicare and Medicaid Account Debtors and Third-Party Payor Information
25
 
5.5.
Collateral Administration
26
     
6.
CONDITIONS PRECEDENT
27
 
6.1.
Conditions to Initial Advance and Closing
27
 
6.2.
Conditions to Each Advance
29
     
7.
REPRESENTATIONS AND WARRANTIES
29
 
7.1.
Organization and Authority
30
 
7.2.
Loan Documents
30
 
7.3.
Subsidiaries, Capitalization and Ownership Interests
30
 
7.4.
Properties
30
 
7.5.
Other Agreements
31
 
7.6.
Litigation
31
 
7.7.
Environmental Matters
31
 
7.8.
Potential Tax Liability; Tax Returns; Governmental Reports
32
 
7.9.
Financial Statements and Reports
33
 
7.10.
Compliance with Law
33
 
7.11.
Intellectual Property
34

 
 

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7.12.
Licenses and Permits; Labor
34
 
7.13.
No Default
34
 
7.14.
Disclosure
34
 
7.15.
Existing Indebtedness; Investments, Guarantees and Certain Contracts
35
 
7.16.
Other Agreements
35
 
7.17.
Insurance
35
 
7.18.
Names; Location of Offices, Records and Collateral
35
 
7.19.
Lien Perfection and Priority
36
 
7.20.
Investment Company Act
36
 
7.21.
Regulations T, U and X
36
 
7.22.
Survival
36
     
8.
AFFIRMATIVE COVENANTS
36
 
8.1.
Financial Statements, Borrowing Certificate, Financial Reports and Other
Information
37
 
8.2.
[Reserved]
39
 
8.3.
Conduct of Business and Maintenance of Existence and Assets
39
 
8.4.
Compliance with Legal and Other Obligations
40
 
8.5.
Insurance
40
 
8.6.
Books and Records
40
 
8.7.
Inspections; Periodic Audits and Reappraisals
41
 
8.8.
Further Assurances; Post-Closing
41
 
8.9.
Use of Proceeds
41
 
8.10.
[Reserved]
41
 
8.11.
[Reserved]
41
 
8.12.
Taxes and Other Charges
42
 
8.13.
Payroll Taxes
42
 
8.14.
New Subsidiaries
42
 
8.15.
[Reserved]
43
     
9.
NEGATIVE COVENANTS
43
 
9.1.
Financial Covenants
43
 
9.2.
Permitted Indebtedness
43
 
9.3.
Permitted Liens
43
 
9.4.
Investments; New Facilities or Collateral; Subsidiaries
43
 
9.5.
Dividends; Redemptions
44
 
9.6.
Transactions with Affiliates
44
 
9.7.
Charter Documents; Fiscal Year; Dissolution; Use of Proceeds
44
 
9.8.
Truth of Statements
45
 
9.9.
IRS Form 8821
45
 
9.10.
Transfer of Assets
45
 
9.11.
OFAC
46
 
9.12.
Payroll Accounts
46
     
10.
EVENTS OF DEFAULT
46
     
11.
RIGHTS AND REMEDIES AFTER DEFAULT
48
 
11.1.
Rights and Remedies
48
 
11.2.
Application of Proceeds
49
 
11.3.
Rights of Lender to Appoint Receiver
49
 
11.4.
Rights and Remedies not Exclusive
50

This Draft Credit Agreement is for discussion purposes only.  This is not a
commitment to extend credit in any form, and remains subject to credit committee
approval, due diligence, negotiation and documentation.  No oral communications
between the parties shall be deemed to indicate any commitment to extend credit
in any form.

 
APP- 2

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11.5.
Standards for Exercising Remedies
50
     
12.
WAIVERS AND JUDICIAL PROCEEDINGS
51
 
12.1.
Waivers
51
 
12.2.
Delay; No Waiver of Defaults
51
 
12.3.
Jury Waiver
51
 
12.4.
Cooperation in Discovery and Litigation
52
     
13.
EFFECTIVE DATE AND TERMINATION
52
 
13.1.
Termination and Effective Date Thereof
52
 
13.2.
Survival
53
       
14.
GUARANTY
 
53
 
14.1.
Guaranty
53
 
14.2.
Guaranty Absolute
53
 
14.3.
Subrogation
54
     
15.
MISCELLANEOUS
55
 
15.1.
Governing Law; Jurisdiction; Service of Process; Venue
55
 
15.2.
Successors and Assigns; Participations; New Lenders
55
 
15.3.
Application of Payments
56
 
15.4.
Indemnity
56
 
15.5.
Notice
57
 
15.6.
Severability; Captions; Counterparts; Facsimile Signatures
57
 
15.7.
Expenses
57
 
15.8.
Entire Agreement
58
 
15.9.
Lender Approvals
58
 
15.10.
Confidentiality and Publicity
58
 
15.11.
Release of Lender
59
 
15.12.
Agent
59
 
15.13.
[Reserved]
59
 
15.14.
Amendment and Restatement
59

 EXHIBITS
 
Exhibit A
Form of Borrowing Certificate
Exhibit B
Form of Compliance Certificate
Exhibit C
Form of Solvency Certificate
Exhibit D
Form of Officer’s Certificate

This Draft Credit Agreement is for discussion purposes only.  This is not a
commitment to extend credit in any form, and remains subject to credit committee
approval, due diligence, negotiation and documentation.  No oral communications
between the parties shall be deemed to indicate any commitment to extend credit
in any form.

 
APP- 3

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[EXECUTION COPY]

 
 

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AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT

THIS AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT (the
“Agreement”) dated as of April 26, 2010 is entered into between NeoGenomics
Laboratories, Inc., a Florida corporation (“Borrower”), NeoGenomics, Inc., a
Nevada corporation (“Guarantor”, together with Borrower, individually a “Credit
Party” and collectively, the “Credit Parties”) and CAPITALSOURCE FINANCE LLC, a
Delaware limited liability company (the “Lender”).
 
WHEREAS, Credit Parties and Lender are party to that certain Revolving Credit
and Security Agreement, dated as of February 1, 2008 (as in effect, together
with all amendments and modifications thereto, the “Original Credit Agreement”),
pursuant to which Lender, provided a revolving credit facility (the “Revolving
Facility”) in a maximum principal amount at any time outstanding of up to Three
Million ($3,000,000) Dollars and (the “Original Facility Cap”);
 
WHEREAS, the Credit Parties have requested that Lender continue to make
available to Borrowers the Revolving Facility  and extend term thereof and
increase the amount of the Original Facility Cap to an amount equal to Five
Million ($5,000,000) Dollars (such Original Facility Cap, as extended and
increased, the “Facility Cap”); and
 
WHEREAS, Lender is willing to continue to make the Revolving Facility available
to Borrower and to amend and restate the Original Credit Agreement upon the
terms and subject to the conditions set forth herein.
 
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which hereby are
acknowledged, and intending to be legally bound, Credit Parties and Lender
hereby agree as follows:
 
1.
DEFINITIONS

 
 
1.1.
General Terms

 
In addition to the definitions above and elsewhere in this Agreement, the terms
listed in Annex I hereto shall have the meanings given such terms in Annex I,
which are incorporated herein and made a part hereof.  All capitalized terms
used which are not specifically defined herein shall have meanings provided in
Article 9 of the UCC to the extent the same are used or defined therein.  Unless
otherwise specified herein or in Annex I, any agreement, contract or instrument
referred to herein or in Annex I shall mean such agreement, contract or
instrument as modified, amended, restated or supplemented from time to
time.  Unless otherwise specified, as used in the Loan Documents or in any
certificate, report, instrument or other document made or delivered pursuant to
any of the Loan Documents, all accounting terms not defined in Annex I or
elsewhere in this Agreement shall have the meanings given to such terms in and
shall be interpreted in accordance with GAAP.  References herein to “Eastern
Time” shall mean eastern standard time or eastern daylight savings time as in
effect on any date of determination in the eastern United States of
America.  The terms “herein”, “hereof” and similar terms refer to this Agreement
as a whole.  In the computation of periods of time from a specified date to a
later specified date in any Loan Document, the terms “from” means “from and
including” and the words “to” and “until” each mean “to but excluding” and the
word “through” means “to and including.”  In any other case, the term
“including” when used in any Loan Document means “including without
limitation.”  The term “documents” means all writings, however evidenced and
whether in physical or electronic form, including all documents, instruments,
agreements, notices, demands, certificates, forms, financial statements,
opinions and reports.  The term “incur” means incur, create, make, issue, assume
or otherwise become directly or indirectly liable in respect of or responsible
for, in each case whether directly or indirectly, and the terms "incurrence" and
"incurred" and similar derivatives shall have correlative meanings.  Unless
otherwise expressly indicated, the meaning of any term defined (including by
reference) in any Loan Document shall be equally applicable to both the singular
and plural forms of such term.

 
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In the event that any Accounting Change (as defined below) shall occur and such
change results in a change in the method of calculation of financial covenants,
standards or terms in this Agreement, then Borrower and Lender agree to enter
into good faith negotiations in order to amend such provisions of this Agreement
so as to equitably reflect such Accounting Change with the desired result that
the criteria for evaluating Borrower’s financial condition shall be the same
after such Accounting Change as if such Accounting Change had not been
made.  Until such time as such an amendment shall have been executed and
delivered by Borrower and Lender, all financial covenants, standards and terms
in this Agreement shall continue to be calculated or construed as if such
Accounting Change had not occurred.
 
 
1.2.
Definitions

 
“Acceptance Notice” shall have the meaning given such term in Section 8.11.
 
“Accounting Change” refers to changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants or, if applicable, the U.S. Securities and Exchange Commission.
 
“Accounts” shall mean “accounts” as defined in Section 9-102 of the UCC
(including Health Care Insurance Receivables).
 
“Account Debtor” shall mean “account debtor” as defined in Section 9-102 of the
UCC.
 
“Accumulated Distribution” shall have the meaning given to it in the definition
of “Permitted Distribution”.
 
“Accumulated Distribution Fiscal Quarter” shall have the meaning given to it in
the definition of “Permitted Distribution”.
 
“Advance” shall mean a borrowing under the Revolving Facility.  Any amounts paid
by Lender on behalf of Borrower or Guarantor under any Loan Document shall be an
Advance for purposes of the Agreement.
 
“Affiliate” shall mean, as to any Person (a) any other Person that, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such Person, (b) any other Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person, or (iii)
of any Person described in clause (a) above with respect to such Person, (c) any
other Person which, directly or indirectly through one or more intermediaries,
is the beneficial or record owner (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended, as the same is in effect on the date hereof)
of five percent (5%) or more of any class of the outstanding voting stock,
securities or other equity or ownership interests of such Person and (d) in the
case such Person is an individual, any other Person who is an immediate family
member, spouse or lineal descendant of individuals of such Person or any
Affiliate of such Person.  For purposes of this definition, the term “control”
(and the correlative terms, “controlled by” and “under common control with”)
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies, whether through ownership of
securities or other interests, by contract or otherwise.  “Affiliate” shall
include any Subsidiary.  Notwithstanding anything herein to the contrary, in no
event shall Lender be considered as “Affiliate” of Borrower or Guarantor.

 
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“Applicable Rate” shall mean the interest rate applicable from time to time to
Loans under the Agreement.
 
“Availability” shall mean the value, in U.S. Dollars of eighty-five percent
(85%) of the Borrowing Base minus, if applicable amounts reserved pursuant to
this Agreement.
 
“Borrowing Base” shall mean, as of any date of determination, the net
collectible Dollar value of Eligible Accounts, as determined with reference to
the most recent Borrowing Certificate and otherwise in accordance with the
Agreement; provided, however, that if as of such date the most recent Borrowing
Certificate is of a date more than four Business Days before or after such date,
the Borrowing Base shall be determined by Lender in its Permitted Discretion.
For purposes hereof, the net collectible Dollar value of Eligible Accounts is
the amount due to Borrower as a result of a contractual right of payment from
third-party payors less deductible obligations and contractual allowances as
determined and approved by Lender in its Permitted Discretion.
 
“Borrowing Certificate” shall mean a Borrowing Certificate substantially in the
form of Exhibit A attached hereto.
 
“Borrowing Date” shall the mean the date requested for an Advance by Borrower
pursuant to Section 2.3.
 
 “Business Day” shall mean any day other than a Saturday, Sunday or other day on
which the Federal Reserve or Lender is closed.
 
“Capital Expenditures” shall mean, for any Test Period, the sum (without
duplication) of all expenditures (whether paid in cash or accrued as
liabilities) during the Test Period that are or should be treated as capital
expenditures under GAAP.
 
“Capital Lease” shall mean, as to any Person, a lease of any interest in any
kind of property or asset by that Person as lessee that is, should be or should
have been recorded as a “capital lease” in accordance with GAAP.
 
“Capital Stock” shall mean any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.
 
“Capitalized Lease Obligations” shall mean all obligations of any Person under
Capital Leases, in each case, taken at the amount thereof accounted for as a
liability in accordance with GAAP.
 
 
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 “Change of Control” shall mean, with respect to Borrower or Guarantor, the
occurrence of any of the following:  (i) a merger, consolidation,
reorganization, recapitalization or share or interest exchange, sale or transfer
or any other transaction or series of transactions in which its stockholders,
managers, partners or interest holders immediately prior to such transaction or
series of transactions receive, in exchange for the stock or interests owned by
them, cash, property or securities of the resulting or surviving entity or any
Affiliate thereof, and, as a result thereof, Persons who, individually or in the
aggregate, were holders of fifty percent (50%) or more of its voting stock,
securities or equity, partnership or ownership interests immediately prior to
such transaction or series of transactions hold less than fifty percent (50%) of
the voting stock, securities or other equity, partnership or ownership interests
of the resulting or surviving entity or such Affiliate thereof, calculated on a
fully diluted basis, (ii) a direct or indirect sale, transfer or other
conveyance or disposition, in any single transaction or series of transactions,
of all or substantially all of its assets, (iii) the initial public offering of
its securities, (iv) any “change in/of control” or “sale” or “disposition” or
similar event as defined in any document governing indebtedness of such Person
which gives the holder of such indebtedness the right to accelerate or otherwise
require payment of such indebtedness prior to the maturity date thereof, or (v)
the replacement of a majority of the board of directors of Borrower over a
one-year period from the directors who constituted the board of directors of
such Borrower at the beginning of such period and such replacement shall not
have been approved by a vote of at least a majority of the board of directors of
such Borrower then still in office who either are members of such board of
directors at the beginning of such period or whose election as a member of such
board of directors was previously so approved.
 
“Chattel Paper” shall mean “chattel paper” as defined in Section 9-102 of the
UCC, whether tangible or electronic.
 
“Closing” shall mean the satisfaction, or written waiver by Lender, of all of
the conditions precedent set forth in the Agreement required to be satisfied
prior to the consummation of the transactions contemplated hereby to be
consummated following the amendment and restatement of the Original Credit
Agreement.
 
“Closing Date” shall mean the date upon which the Closing occurs.
 
“Collateral” shall mean all of the property described below in, to, or under
which a Borrower now has or hereafter acquires any right, title or interest,
whether present, future, or contingent, including any such property acquired by
assignment:
 
(a)           All of Borrower’s now-owned and hereafter acquired or arising
Accounts, accounts receivable and rights to payment of every kind and
description related to Accounts, and all of Borrower’s contract rights, chattel
paper, documents and instruments with respect to such Accounts and accounts
receivable, and all of Borrower’s rights, remedies, security and liens, in, to
and in respect of the Accounts, including, without limitation, rights of
stoppage in transit, replevin, repossession and reclamation and other rights and
remedies of an unpaid vendor, lienor or secured party, guaranties or other
contracts of suretyship with respect to the Accounts, deposits, Letters of
Credit, Supporting Obligations or other security for the obligation of any
Account Debtor, and credit and other insurance relating to such Accounts and
accounts receivable;
 
(b)           All of Borrower’s right, title and interest in, to and in respect
of all goods relating to, or which by sale have resulted in, Accounts,
including, without limitation, all goods described in invoices or other
documents or instruments with respect to, or otherwise representing or
evidencing, any Account, and all returned, reclaimed or repossessed goods;
 
(c)           All of Borrower’s now owned or hereafter acquired (i) Lockbox
Accounts (and the funds contained therein) and (ii) any deposit accounts (and
the funds contained therein), other than the Lockbox Accounts, into which
Accounts are deposited, to the extent Accounts are contained therein;
 
(d)           All of Borrower’s now owned and hereafter acquired or arising
general intangibles and other property of every kind and description with
respect to, evidencing or relating to its Accounts and other rights to payment,
including, but not limited to, all existing books and records, as the same
relate to the Accounts;

 
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(e)           The proceeds of all of the foregoing (including, without
limitation, insurance proceeds) related to losses with respect to Collateral
such as business interruption insurance or other insurance proceeds related
specifically to losses from the Collateral.
 
“Collateral Management Fee” shall mean a monthly fee to be paid by Borrower to
Lender in an amount equal to 0.0417% per month calculated on the basis of the
daily average amount of the balances under the Revolving Facility outstanding
during the preceding month.
 
“Commercial Tort Claims” shall mean “Commercial Tort Claims” as defined in
Section 9-102 of the UCC.
 
“Compliance Certificate” shall mean a compliance certificate substantially in
the form of Exhibit B attached hereto.
 
“Concentration Account” shall mean a depository account maintained by Lender or
an affiliate of Lender at such bank as Lender may communicate to Borrower from
time to time.
 
“Credit Party” shall have the meaning set forth in the first paragraph of this
Agreement.
 
“Debtor Relief Law” shall mean, collectively, the Bankruptcy Code of the United
States of America and all other applicable federal and state liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization or similar debtor relief laws from time to time in
effect affecting the rights of creditors generally, as amended and in effect
from time to time.
 
“Default” shall mean any event, fact, circumstance or condition that, with the
giving of applicable notice or passage of time or both, would constitute or be
or result in an Event of Default.
 
“Default Rate” shall mean at any time the Applicable Rate in effect at such time
plus three percent (3%) per annum.
 
“Denial Disclosure” shall have the meaning given to it in Section 7.18.
 
“Deposit Accounts” shall mean “deposit accounts” as defined in Section 9-102 of
the UCC.
 
“Distribution” shall mean any direct or indirect dividend, distribution or other
payment of any kind or character (whether in cash, securities or other property)
in respect of any equity interests.
 
“Documents” shall mean “documents” as defined in Section 9-102 of the UCC.
 
“Dollars” and the sign “$” each mean the lawful money of the United States of
America.
 
“Eligible Accounts” shall mean each Account arising in the ordinary course of
Borrower’s business from the sale or lease of goods or rendering of Services
which Lender, in its Permitted Discretion, deems an Eligible Account unless:
 
(a)           such Account is not subject to a valid perfected first priority
security interest in favor of Lender, subject to no other Lien;

 
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(b)           such Account is not evidenced by an invoice, statement or other
documentary evidence satisfactory to Lender;
 
(c)           such Account or any portion thereof (in which case only such
portion shall not be an Eligible Account) is payable by a beneficiary, recipient
or subscriber individually and not directly by a Medicaid/Medicare Account
Debtor or commercial medical insurance carrier, or client acceptable to Lender
in its Permitted Discretion;
 
(d)           such Account arises out of Services rendered or a sale or lease
made to, or out of any other transaction between Borrower or any of its
Subsidiaries and, one or more Affiliates of Borrower;
 
(e)           such Account remains unpaid for longer than (i) one hundred fifty
(150) calendar days after the applicable Services were rendered with respect to
Accounts payable by a Medicaid/Medicare Account Debtor or commercial medical
insurance carrier acceptable to Lender and (ii) one hundred twenty (120)
calendar days after the applicable Services were rendered with respect to all
other Account Debtors;
 
(f)            with respect to all Accounts owed by any particular Account
Debtor (other than Accounts from Medicaid/Medicare Account Debtors) or its
Affiliates, if more than twenty five percent (25%) of the aggregate balance of
all such Accounts owing from such Account Debtor and its Affiliates are
ineligible due to the requirements of clause (e) of this Section or such higher
threshold which may be agreed in writing by Lender for any specific Account
Debtor;
 
(g)           with respect to all Accounts owed by any particular Account Debtor
or its Affiliates, twenty-five percent (25%) or more of all such Accounts are
deemed not to be Eligible Accounts for any reason hereunder (which percentage
may, in Lender’s Permitted Discretion, be increased or decreased);
 
(h)           with respect to all Accounts owed by any particular Account Debtor
or its Affiliates (other than Medicaid/Medicare Account Debtors) if such
Accounts exceed twenty percent (20%) of the net collectible Dollar value of all
Eligible Accounts at any one time (including Accounts from Medicaid/Medicare
Account Debtors), then the amount by which such Accounts for that particular
Account Debtor or its Affiliates exceed twenty percent (20%) of the net
collectible Dollar value of all Eligible Accounts shall not be included as
Eligible Accounts;
 
(i)            any covenant, agreement, representation or warranty contained in
any Loan Document with respect to such Account has been breached and remains
uncured;
 
(j)            the Account Debtor for such Account has commenced a voluntary
case under any Debtor Relief Law or has made an assignment for the benefit of
creditors, or a decree or order for relief has been entered by a court having
jurisdiction in respect of such Account Debtor in an involuntary case under any
Debtor Relief Law, or any other petition or application for relief under any
Debtor Relief Law has been filed against such Account Debtor, or such Account
Debtor has failed, suspended business, ceased to be solvent, called a meeting of
its creditors, or has consented to or suffered a receiver, trustee, liquidator
or custodian to be appointed for it or for all or a significant portion of its
assets or affairs;
 
(k)           such Account arises from the sale or lease of property or Services
rendered to one or more Account Debtors outside the United States (including any
territory or possession of the United States that has adopted Article 9 of the
UCC) or that have their principal place of business or chief executive offices
outside the United States (including any territory or possession of the United
States that has adopted Article 9 of the UCC);

 
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(l)            such Account represents the sale or lease of goods or rendering
of Services to an Account Debtor on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or return
basis or is evidenced by Chattel Paper or an Instrument of any kind or has been
reduced to judgment;
 
(m)          the applicable Account Debtor for such Account is any Governmental
Authority (excluding Medicaid/Medicare Account Debtors), unless rights to
payment of such Account have been assigned to Lender pursuant to the Assignment
of Claims Act of 1940, as amended (31 U.S.C. Section 3727, et seq. and 41 U.S.C.
Section 15, et seq.), or otherwise only if all applicable statutes or
regulations respecting the assignment of Government Accounts have been complied
with as determined by Lender in its Permitted Discretion;
 
(n)           such Account is subject to any offset, credit (including any
resource or other income credit or offset) deduction, defense, discount,
chargeback, freight claim, allowance, adjustment, dispute or counterclaim (each
an “Adjustment”), or is contingent in any respect or for any reason; provided,
that, the discounted amount of such Account after giving effect to such
Adjustment will be considered an Eligible Account;
 
(o)           there is any agreement with an Account Debtor for any deduction
from such Account; provided, that, the discounted amount of such Account after
giving effect to such discounts and allowances shall be considered an Eligible
Account;
 
(p)           any return, rejection or repossession of goods or Services related
to it has occurred;
 
(q)           such Account is not payable to Borrower;
 
(r)           a Borrower has agreed to accept or has accepted any non-cash
payment for such Account;
 
(s)           with respect to any Account arising from the sale of goods, the
goods have not been shipped to the Account Debtor or its designee;
 
(t)           with respect to any Account arising from the performance of
Services, the Services have not been actually performed or the Services were
undertaken in violation of any law; or
 
(u)          such Account fails to meet such other specifications and
requirements which may from time to time be established by Lender or is not
otherwise satisfactory to Lender, as determined in Lender’s Permitted
Discretion.
 
“EMTALA” shall mean the Emergency Medical Treatment and Active Labor Act, as
amended, and the regulations thereunder.
 
“Environmental Laws” shall mean any and all laws, rules, orders, regulations,
statutes, ordinances, guidelines, codes, decrees, or other legally enforceable
requirements (including, without limitation, common law) of any international
authority, foreign government, the United States, or any state, local, municipal
or other governmental authority, regulating, relating to or imposing liability
or standards of conduct concerning protection of the environment, or protection
of human health or employee health and safety (as affected by the environment or
by any substance the exposure to which is reasonably suspected of causing harm
to human health), as has been, is now, or may at any time hereafter be, in
effect to which the Borrower is subject.

 
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“Equipment” shall mean “equipment” as defined in Section 9-102 of the UCC.
 
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
 
“Event of Default” shall mean the occurrence of any event set forth in
Article X.
 
“Excess Cash Flow” shall mean, for any fiscal year (or for such other period as
may be specifically provided for herein), as calculated for Borrowers and their
Subsidiaries on a consolidated basis, without duplication, an amount equal to
the sum of (a) Net Income (as defined in Annex I) for such period, plus (b) an
amount equal to the amount of depreciation expenses, amortization expense
(including the amortization of goodwill), accrued non-cash interest expense and
all other non-cash charges deducted in arriving at such Net Income, plus (c) an
amount equal to the aggregate Net Cash Proceeds of the sale, lease, transfer or
other disposition of assets by Borrowers during such period to the extent  not
required to be applied to mandatory prepayments or payments on the Loans,  plus
(d) an amount equal to the net loss on the sale, lease, transfer or other
disposition of assets by Borrowers during such period to the extent deducted in
arriving at such Net Income, plus (e) an amount equal to any tax refunds or
credits received by Borrowers during such period, plus (f) other extraordinary
or non-recurring charges that would not have otherwise been incurred in the
ordinary course of business, less (g) an amount equal to the unfinanced
permitted Capital Expenditures of Borrowers for such period, less (h) an amount
equal to the sum of all regularly scheduled payments (to the extent such
payments have not already been deducted in arriving at Net Income) and optional
and mandatory prepayments of principal on Indebtedness for money borrowed
actually made during such period to the extent permitted hereunder, less (i) an
amount equal to the net gain on the sale, lease, transfer or other disposition
of assets by Borrowers during such period to the extent included in arriving at
such Net Income, less (j) other extraordinary or non-recurring gains that would
not have otherwise been incurred in the ordinary course of business.
 
“Facility Cap” shall have the meaning given the term in the Recitals of this
Agreement.
 
“Federal Reserve” shall mean the Federal Reserve Bank of the United States.
 
“Fixtures” shall mean “fixtures” as defined in Section 9-102 of the UCC.
 
“GAAP” shall mean generally accepted accounting principles in the United States
as in effect on the Closing Date.
 
“General Intangibles” shall mean “general intangibles” as defined in Section
9-102 of the UCC.
 
“Goods” shall mean “goods” as defined in Section 9-102 of the UCC.
 
“Government Account” shall mean all Accounts arising out of or with respect to
any Government Contract.
 
“Government Contract” shall mean all contracts with any Governmental Authority.
 

 
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“Governmental Authority” shall mean any federal, state, municipal, national,
local or other governmental department, court, commission, board, bureau, agency
or instrumentality or political subdivision thereof, or any entity or officer
exercising executive, legislative or judicial, regulatory or administrative
functions of or pertaining to any government or any court, in each case, whether
of the United States or a state, territory or possession thereof, a foreign
sovereign entity or country or jurisdiction or the District of Columbia.
 
“Guaranteed Obligations” shall have the meaning given such term in Section 14.1
hereof.
 
“Guarantor” shall have the meaning set forth in the first paragraph of this
Agreement.
 
“Guaranty” shall mean, collectively and each individually, all guaranties
executed by Guarantor.
 
“Hazardous Substances” shall mean, without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, hazardous wastes, hazardous or toxic substances or related materials
as defined in or subject to any applicable Environmental Law.
 
“Healthcare Laws” shall mean all applicable statutes, laws, ordinances, rules
and regulations of any Governmental Authority with respect to regulatory matters
primarily relating to patient healthcare, healthcare providers and healthcare
services (including without limitation Section 1128B(b) of the Social Security
Act, as amended, 42 U.S.C. Section 1320a-7(b) (Criminal Penalties Involving
Medicare or State Health Care Programs), commonly referred to as the “Federal
Anti-Kickback Statute,” and the Social Security Act, as amended, Section 1877,
42 U.S.C. Section 1395nn (Prohibition Against Certain Referrals), commonly
referred to as “Stark Statute”), and 31 U.S.C. Section 3279 et seq. (the False
Claims Act) to which Borrower is subject.
 
“HIPAA” shall mean the Health Insurance Portability and Accountability Act of
1996 (Pub. L. No. 104-191) and the regulations promulgated thereunder.
 
“HUD Application” shall have the meaning given such term in Section 8.11.
 
“Indebtedness” of any Person shall mean, without duplication, (a) all
obligations for borrowed money, (b) all obligations evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit or bankers acceptances, (c) all
Capitalized Lease Obligations, (d) all obligations or liabilities of others
secured by a Lien on any asset of such Person or its Subsidiaries, irrespective
of whether such obligation or liability is assumed, (e) all obligations to pay
the deferred purchase price of assets (other than trade payables incurred in the
ordinary course of business and not outstanding more than one hundred twenty
(120) calendar days after the date such payable was created) or such longer
period as shall be agreed in writing by Lender and Borrower, (f) all net
obligations owing to counterparties under Hedging Agreements, (g) all
obligations with respect to redeemable Capital Stock or repurchase obligations
under any Capital Stock issued by such Person, (h) the present value of future
rental payments under all synthetic leases (excluding specifically any operating
leases or real estate leases) and (i) any obligation guaranteeing or intended to
guarantee (whether directly or indirectly guaranteed, endorsed, co-made,
discounted, or sold with recourse) any obligation of any other Person that
constitutes Indebtedness under any of clauses (a) through (h) above.

“Indemnified Person” shall have the meaning given such term in Section 15.4.

“Initial Advance” shall mean the initial Advance.

 
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“Instrument” shall mean “instrument” as defined in Section 9-102 of the UCC.

“Insured Event” shall have the meaning given such term in Section 15.4.
“Insurer” shall mean a Person that insures another Person against any costs
incurred in the receipt by such other Person of Services, or that has an
agreement with Borrower to compensate it for providing Services to such Person.

“Intellectual Property” shall mean all patents, patent applications, trademarks,
trademark applications, service marks, registered copyrights, copyright
applications, copyrights, trade names, trade secrets and software and all rights
in the foregoing.

“Inventory” shall mean “inventory” as defined in Section 9-102 of the UCC.
 
“Investment Property” shall mean “investment property” as defined in Section
9-102 of the UCC.
 
 “Landlord Waiver and Consent” shall mean a waiver/consent from the
owner/lessor/mortgagee of any premises either owned or occupied by Borrower at
which any of the Collateral is now or hereafter located for the purpose of
providing Lender access to such Collateral, in each case as such may be
modified, amended or supplemented from time to time.
 
“Letter of Credit Rights” shall mean “letter of credit rights” as defined in
Section 9-102 of the UCC, whether or not the letter of credit is evidenced by a
writing.
 
“Liability Event” shall mean any event, fact, condition or circumstance (i) in
or for which Borrower becomes liable or otherwise responsible for any amount
over $50,000 owed or owing to any Medicaid,  Medicare or CHAMPUS/TRICARE program
by a provider under common ownership with such Borrower or any provider owned by
such Borrower pursuant to any applicable law, ordinance, rule, decree, order or
regulation of any Governmental Authority after the failure of any such provider
to pay any such amount when owed or owing, (ii) in which Medicaid, Medicare or
CHAMPUS/TRICARE payments to Borrower are lawfully set-off against payments to
such Borrower to satisfy any liability of or for any amounts over $50,000 owed
or owing to any Medicaid, Medicare or CHAMPUS/TRICARE program by a provider
under common ownership with such Borrower or any provider owned by such Borrower
pursuant to any applicable law, ordinance, rule, decree, order or regulation of
any Governmental Authority, or (iii) any of the foregoing under clauses (i) or
(ii) in each case pursuant to statutory or regulatory provisions that are
similar to any applicable law, ordinance, rule, decree, order or regulation of
any Governmental Authority referenced in clauses (i) and (ii) above or successor
provisions thereto.
 
  “LIBOR” shall mean a rate of interest equal to the rate per annum (rounded
upwards to the nearest 1/100th of 1%) at which Dollar deposits for a period of
one month are offered in the London interbank eurodollar market as displayed in
the Bloomberg Financial Markets system (or as otherwise determined by Lender in
its sole discretion) as of 11:00 A.M. (London time) on the applicable date of
determination.
 
“Lien” shall mean any mortgage, pledge, security interest, encumbrance,
restriction, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof), or any other arrangement pursuant to which title
to the property is retained by or vested in some other Person for security
purposes.

 
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 “Liquidity Factors” shall mean percentages which Lender, in its credit
judgment, may apply to Eligible Accounts by payor class based upon Borrower’s
actual recent collection history for each such payor class (i.e. Medicare,
Medicaid, commercial insurance, etc.) in a manner consistent with Lender’s
underwriting practices and procedures, including, without limitation, Lender’s
review and analysis of, among other things, Borrower’s historical returns,
rebates, discounts, credits and allowances, to adjust the Availability.
 
“Loan” or “Loans” shall mean, individually and collectively, all Advances.
 
“Loan Documents” shall mean, collectively and each individually, this Agreement
and all other agreements, documents, instruments and certificates heretofore or
hereafter executed or delivered to, or on behalf of, Lender in connection with
this Agreement or the Loans, as the same may be amended, modified or
supplemented from time to time.
 
Lockbox Accounts” shall mean, collectively and each individually, the Deposit
Accounts maintained by Borrower at the Lockbox Banks into which all collections
or payments on Borrower’s Accounts and other Collateral are paid and which
Accounts and other Collateral are subject to Lender’s security interest granted
by a Borrower.
 
“Lockbox Agreement” shall mean an agreement among Lender, Borrower who has
granted a security interest in a Deposit Account and any of the Lockbox Banks
governing the Lockbox Accounts, in form and substance satisfactory to Lender.
 
“Lockbox Banks” shall  mean, collectively and each individually, the federally
insured banks acceptable to Lender where Borrower who have granted security
interests in a Lockbox Account shall maintain the Lockbox Accounts.
 
 “Management or Service Fee” shall mean any management, service or related or
similar fee paid by Borrower to any Person with respect to any facility owned,
operated or leased by Borrower.
 
“Material Adverse Change” shall mean any event, condition or circumstance or set
of events, conditions or circumstances or any change(s) which (i) has, had or
would reasonably be likely to have any material adverse effect upon or change in
the validity or enforceability of any Loan Document, (ii) has been or would
reasonably be expected to be adverse to the value of any material portion of the
Collateral, or to the priority of Lender’s security interest in any portion of
the Collateral, (iii) has been or would reasonably be expected to be materially
adverse to the business, operations, prospects, properties, assets, liabilities
or financial condition of any Credit Party, either individually or taken as a
whole, or (iv) has materially impaired or would reasonably be likely to
materially impair the ability of any Borrower to pay any portion of the
Obligations or otherwise perform the Obligations or to consummate the
transactions under the Loan Documents executed by such Person.
 
“Materials of Environmental Concern” shall mean  any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, urea-formaldehyde insulation, asbestos, pollutants,
contaminants, radioactivity, and any other substances or forces of any kind,
whether or not any such substance or force is defined as hazardous or toxic
under any Environmental Law, that is regulated pursuant to or would reasonably
be expected to give rise to liability under any Environmental Law.
 
“Medicaid/Medicare Account Debtor” shall mean any Account Debtor which is (i)
the United States of America acting under the Medicaid or Medicare program
established pursuant to the Social Security Act or any other federal healthcare
program, including, without limitation, TRICARE (f/k/a CHAMPUS), (ii) any state
or the District of Columbia acting pursuant to a health plan adopted pursuant to
Title XIX of the Social Security Act or any other state health care program, or
(iii) any agent, carrier, administrator or intermediary for any of the
foregoing.

 
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“Minimum Termination Fee” shall mean (for the time period indicated) the amount
equal to (i) 3.0% of the Facility Cap, if the Revolver Termination is at any
time before February 1, 2011; (ii) 2.0% of the Facility Cap, if the Revolver
Termination is after February 1, 2011 but before February 1, 2012; and (iii)
1.0% of the Facility Cap, if the Revolver Termination is on or after February 1,
2012.  There shall be no Minimum Termination Fee if the Revolver Termination
occurs within five (5) days of the end of the Term.

“Net Cash Proceeds” shall mean, with respect to any sale, lease, transfer or
other disposition of assets by any Person, the amount of cash received (directly
or indirectly) from time to time (whether as initial consideration or through
the payment or disposition of deferred consideration) by or on behalf of such
Person in connection therewith after deducting therefrom (A) the amount of any
Permitted Indebtedness secured by any Permitted Lien on such property which is
required to be, and is, repaid in connection with such disposition, (B)
reasonable expenses related thereto incurred by such Person in connection
therewith, (C) transfer taxes paid to any taxing authorities by such Person in
connection therewith, (D) net income taxes to be paid in connection with such
disposition and (E) with respect to any lease, the cost of any tenant
improvements paid by Borrower in connection therewith.

“Note” or “Notes” shall mean any promissory note or notes issued pursuant to
Section 2.7.
 
“Obligations” shall mean all present and future obligations, Indebtedness and
liabilities of Borrower or Guarantor to Lender at any time and from time to time
of every kind, nature and description, direct or indirect, secured or unsecured,
joint and several, absolute or contingent, due or to become due, matured or
unmatured, now existing or hereafter arising, contractual or tortious,
liquidated or unliquidated, (whether or not evidenced by a Note), including,
without limitation, all principal, interest, applicable fees, charges and
expenses and all amounts paid or advanced by Lender on behalf of or for the
benefit of Borrower or Guarantor for any reason at any time, including in each
case obligations of performance as well as obligations of payment and interest
that accrue after the commencement of any proceeding under any Debtor Relief Law
by or against any such Person.
 
“OFAC” shall mean the U.S. Department of Treasury’s Office of Foreign Assets
Control.
 
“Organizational and Good Standing Documents” shall mean, for any Person (i) a
copy of the certificate of incorporation or formation (or other like
organizational document) certified as of a date satisfactory to Lender before
the Closing Date by the applicable Governmental Authority of the jurisdiction of
incorporation or organization of such Person, (ii) a copy of the bylaws or
similar organizational documents of certified as of a date satisfactory to
Lender before the Closing Date by the corporate secretary or assistant secretary
of such Person, (iii) an original certificate of good standing as of a date
acceptable to Lender issued by the applicable Governmental Authority of the
jurisdiction of incorporation or organization of such Person and of every other
jurisdiction in which such Person has an office or conducts business or is
otherwise required to be in good standing, and (iv) copies of the resolutions of
the board of directors or managers (or other applicable governing body) and, if
required, stockholders, members or other equity owners authorizing the
execution, delivery and performance of the Loan Documents to which such Person
is a party, certified by an authorized officer of such Person as of the Closing
Date.

 
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“Paid in Full” and “Payment in Full” mean, with respect to the Obligations, all
amounts owing with respect thereto (including any interest accruing thereon
after the commencement of any proceeding under any Debtor Relief Law by or
against Borrower, whether or not allowed as a claim against such Borrower in
such proceeding, but excluding as yet unasserted contingent obligations), have
been fully, finally and completely paid in cash.
 
“Parent Indebtedness” shall mean Indebtedness incurred by Borrower from
Guarantor, provided, that, such Indebtedness shall be (i) up to $2,000,000
outstanding in the aggregate at any time, (ii) on an unsecured basis, (iii)
subordinated in remedies to all of the Obligations and to all of Lender’s rights
in form and substance satisfactory to Lender and (iv) be subordinate in right of
payment to the Obligations and shall only be repaid pursuant to a Permitted
Distribution until the Obligations are Paid in Full; provided, that, at the
request of Lender, the terms of the provisions of (iii) and (iv) shall be
contained in a written subordination agreement between Lender and Parent
acknowledged and agreed by Borrower, in form and substance satisfactory to
Lender.
 
“Patriot Act” shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, P.L.
107-56, as amended.
 
“Payment Intangible” shall mean “payment intangible” as defined in Section 9-102
of the UCC.
 
“Payment Office” shall mean initially the address set forth beneath Lender’s
name on the signature page of the Agreement, and thereafter, such other office
of Lender, if any, which it may designate by notice to Borrower to be the
Payment Office.
 
“Permit” shall mean collectively all licenses, leases, powers, permits,
franchises, certificates, authorizations, approvals, certificates of need,
provider numbers and other rights.
 
“Permitted Acquisition” shall mean any acquisition by Borrower, whether through
a purchase of stock, membership interests or otherwise or the purchase of assets
or through a merger, consolidation or amalgamation, of another Person, or the
assets constituting an entire or any portion of any business or operating
business unit or division of another Person or securities of such other Person
that satisfies the requirements set forth in Sections 8.14 and 9.4 hereof.
 
“Permitted Discretion” shall mean a determination or judgment made by Lender in
good faith in the exercise of reasonable (from the perspective of a secured
lender) business judgment.

 
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“Permitted Distributions” shall mean Distributions to Guarantor for the purpose
of making principal payments on the Parent Indebtedness and/or as periodic cash
distributions to Guarantor as a shareholder of Borrower, provided, that (i) such
Permitted Distributions are made no more than once per fiscal quarter thereafter
and (ii) all of the following conditions are satisfied with respect to each such
Distribution: (a) no Default or Event of Default has occurred and is continuing
or would arise as a result of such Distribution, (b) after giving effect to such
Distribution, Borrower is in compliance on a pro forma basis with the financial
covenants set forth in Annex 1 (recomputed for the most recent three month
period for which monthly financial statements have been delivered in accordance
with the terms hereof after giving effect thereto); provided, however, that in
situations where there is an Accumulated Distribution (as defined below) being
made with respect to any Accumulated Distribution Fiscal Quarters, only that
portion of the Distribution that is not related to the Accumulated Distributions
shall be included in Fixed Charges for the purpose of calculating the pro forma
Fixed Charge Coverage Ratio in Annex I for the most recent three-month period),
(c) the aggregate amount of such Distributions shall not exceed fifty percent
(50%) of undistributed Excess Cash Flow for the three month period immediately
preceding such distribution, as determined pursuant to the Distribution Notice,
(d) Lender shall have received written notice (the “Distribution Notice”) from
Borrower, of Borrower’s intention to make such Distribution at least five (5)
Business Days prior to the date of such proposed Distribution, which such notice
shall include a detailed calculation satisfactory to Lender in its Permitted
Discretion evidencing Excess Cash Flow for such three month period (except that
for any amounts included in such Distribution that are a result of Accumulated
Distributions, in which case, the Excess Cash Flow so measured shall be
applicable to the appropriate Accumulated Distribution Fiscal Quarters to which
they relate), as applicable, (e) Lender shall have consented in writing to such
Distribution Notice prior to the making of such proposed Distribution, such
consent not to be unreasonably withheld, and (g) until such time as the Parent
Indebtedness is paid in full in cash, any such Distribution payable to Guarantor
shall be utilized by Guarantor solely to repay the Parent Indebtedness;
provided, that, if Borrower chooses not to make a Permitted Distribution (the
“Accumulated Distribution”) in any fiscal quarter (the “Accumulated Distribution
Fiscal Quarter”) Borrower may make such Accumulated Distribution in any of the
subsequent three consecutive fiscal quarters following the Accumulated
Distribution Fiscal Quarter; provided, that, Borrower provides Lender with
Evidence of Compliance with the criteria set forth in the definition of
Permitted Distribution for the Accumulated Distribution as of the end of the
Accumulated Distribution Fiscal Quarter, except, that, the Distribution Notice
shall not have been made in the Accumulated Distribution Fiscal Quarter but
rather shall be made (5) Business Days prior to the date the Accumulated
Distribution is to be distributed.
 
“Permitted Indebtedness” shall mean any of the following: (i) Indebtedness under
the Loan Documents, (ii) any Indebtedness set forth on Schedule 9.2, (iii)
Capitalized Lease Obligations and Indebtedness incurred to purchase Goods and
secured by purchase money Liens constituting Permitted Liens: (A) in aggregate
amount outstanding at any time not to exceed (1) $6,000,000 at any time before
February 1, 2011, (2) $9,000,000 on or after February 1, 2011 but before
February 1, 2012, and (3) $12,000,000 on or after February 1, 2012, in each of
(1), (2) and (3) less the outstanding amount of such Indebtedness identified on
Schedule 9.2 upon the incurrence of such Indebtedness and after giving effect
thereto no Default or Event of Default shall exist and be continuing and (B) in
an aggregate amount in excess of any of the thresholds specified in subparagraph
(A), provided, that, (1) ten (10) Business Days prior to the incurrence of such
Indebtedness Borrower shall have provided pro forma financial statements along
with any other supporting documentation required by Lender evidencing that
Borrower would have been in compliance with the financial covenants set forth on
Annex 1 hereto for the immediately preceding Test Period (as defined on Annex 1
hereto), if such Indebtedness had been incurred on the first day of such Test
Period, (2) prior to the incurrence of such Indebtedness Borrower shall have
received Lender’s written confirmation of its agreement with such pro forma
financial statements; and (3) upon the incurrence of such Indebtedness and after
giving effect thereto no Default or Event of Default shall exist and be
continuing, (iv) the accounts payable set forth on Schedule 1.2 and accounts
payable to trade creditors and current operating expenses (other than for
borrowed money) which are not aged more than one hundred twenty calendar days
from the date such payable was created or such longer period as shall be agreed
in writing by Lender, except, in each case incurred in the ordinary course of
business and paid within such time period, unless the same are being contested
in good faith and by appropriate and lawful proceedings and such reserves, if
any, with respect thereto as are required by GAAP shall have been reserved, (v)
borrowings incurred in the ordinary course of business and not exceeding
$2,000,000 individually or in the aggregate outstanding at any one time;
provided, however, that such Indebtedness (A) shall not be secured by
Collateral, any cash, money, Investment Property or Deposit Accounts; (B) the
debt service for such Indebtedness shall not exceed $400,000 for any twelve (12)
month period; (C)  ten (10) Calendar Days prior to the incurrence of such
Indebtedness Borrower shall have provided pro forma financial statements along
with any other supporting documentation required by Lender evidencing that
Borrower would have been in compliance with the financial covenants set forth on
Annex 1 hereto for the immediately preceding Test Period (as defined on Annex 1
hereto), if such Indebtedness had been incurred on the first day of such Test
Period, (D) prior to the incurrence of such Indebtedness Borrower shall have
received Lender’s written confirmation of its agreement with such pro forma
financial statements (which confirmation or denial shall be promptly provided by
Lender to Borrower within ten (10) calendar days of Lender’s receipt of such
financial statements); (E) upon the incurrence of such Indebtedness and after
giving effect thereto no Default or Event of Default shall exist and be
continuing, (F) such Indebtedness shall be subordinated in right of repayment
and remedies to all of the Obligations and to all of Lender’s rights pursuant to
a written agreement among Lender, Borrower and the lender with respect to such
Indebtedness, in form and substance satisfactory to Lender and (vi) Parent
Indebtedness.

 
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“Permitted Liens” shall mean with respect to the Borrower any of the following:
(i) Liens under the Loan Documents or otherwise arising in favor of Lender, (ii)
Liens imposed by law for taxes (other than payroll taxes), assessments or
charges of any Governmental Authority for claims not yet due or which are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are being maintained by such
Person in accordance with GAAP to the satisfaction of Lender in its Permitted
Discretion, (iii) (A) statutory Liens of landlords (provided, that, with respect
to Required Locations any such landlord has executed a Landlord Waiver and
Consent in form and substance satisfactory to Lender) and of carriers,
warehousemen, mechanics, materialmen, and (B) other Liens imposed by law or that
arise by operation of law in the ordinary course of business from the date of
creation thereof, in each case only for amounts not yet due or which are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are being maintained by such
Person in accordance with GAAP to the satisfaction of Lender in its Permitted
Discretion, (iv) Liens (A) incurred or deposits made in the ordinary course of
business (including, without limitation, surety bonds and appeal bonds) in
connection with workers’ compensation, unemployment insurance and other types of
social security benefits or to secure the performance of tenders, bids, leases,
contracts (other than for the repayment of Indebtedness), statutory obligations
and other similar obligations, or (B) arising as a result of progress payments
under government contracts, (v) purchase money Liens (A) securing the type of
Permitted Indebtedness set forth under clause (iii) of the definition of
“Permitted Indebtedness”, or (B) in connection with the purchase by such Person
of equipment in the normal course of business, provided, that, such payables
shall not exceed any limits on Indebtedness provided for herein and shall
otherwise be Permitted Indebtedness hereunder; (iv) liens securing the
Indebtedness set forth in clause (v) of Permitted Indebtedness on assets other
than: (A) the Collateral, (B) cash or other money of Borrower, (C) Deposit
Accounts of Borrower and (D) Investment Property of Borrower; and (vii) Liens
disclosed on Schedule 7.4B and Schedule 9.3.
 
 “Person” shall mean an individual, a partnership, a corporation, a limited
liability company, a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture, a Governmental Authority or any
other entity of whatever nature.
 
“Pledge Agreement” shall mean that certain negative Pledge Agreement by and
between Guarantor and Lender executed in connection herewith, as such may be
modified, amended, restated or supplemented from time to time.
 
“Receipt” shall have the meaning given such term in Section 15.5.
 
“Required Locations” shall mean collectively: (a) the leased premises located at
12701 Commonwealth Drive, Suite 9, Fort Myers, Florida 33913, and (b) any
location leased by Borrowers at which books and records relating to Accounts are
kept of which duplicates are not kept at the location identified in (a) above.
 
“Released Parties” shall have the meaning given such term in Section 15.11.
 
“Releasing Parties” shall have the meaning given such term in Section 15.11.

 
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“Revolver Termination” shall mean the termination of the Revolving Facility for
any reason whatsoever.
 
“Revolving Loan Obligations” shall mean all of the Obligations related to the
Revolving Facility.
 
“Services” shall mean medical and health care services provided to a Person,
including, but not limited to, medical and health care services (including
diagnostic testing and other testing services) which are covered by a policy of
insurance issued by an Insurer, physician services, nurse and therapist
services, dental services, hospital services, skilled nursing facility services,
comprehensive outpatient rehabilitation services, home health care services,
residential and out-patient behavioral healthcare services.
 
“Software” shall mean “software” as defined in Section 9-102 of the UCC.
 
“Solvency Certificate” shall mean a Solvency Certificate substantially in the
form of Exhibit C attached hereto.
 
“Subsidiary” shall mean, (i) as to Borrower, any Person in which more than fifty
percent (50%) of all equity, membership, partnership or other ownership
interests is owned directly or indirectly by such Borrower or one or more of its
Subsidiaries, and (ii) as to any other Person, any Person in which more than
fifty percent (50%) of all equity, membership, partnership or other ownership
interests is owned directly or indirectly by such Person or by one or more of
such Person’s Subsidiaries.
 
“Supporting Obligations” shall mean “supporting obligations” as defined in
Section 9-102 of the UCC.
 
“Term” shall mean the period commencing on the Closing Date and ending on
February 1, 2013.
 
“Termination Date” shall mean the date of termination of this Agreement set
forth in any notice of termination delivered by Borrower in accordance with
Section 13.1(a).
 
“Transaction” shall have the meaning given such term in Section 8.11.
 
“Transferee” shall have the meaning given such term in Section 15.2.
 
“UCC” shall mean the Uniform Commercial Code as in effect in the State of
Maryland from time to time.
 
“Unused Line Fee” shall mean a fee to be paid by Borrower to Lender on a monthly
basis in an amount equal to  0.0417% (per month) of the difference derived by
subtracting (i) the daily average amount of the balances under the Revolving
Facility outstanding during the preceding month, from (ii) the Facility Cap.
 
“US Labs Award” shall mean any award in connection with the litigation between
Borrower and Accupath Diagnostic Laboratories, Inc. described on Schedule 7.6.

 
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2.
ADVANCES, PAYMENT AND INTEREST

 
 
2.1.
The Revolving Facility

 
(a)           Subject to the provisions of this Agreement, Lender shall make
Advances to Borrower under the Revolving Facility from time to time during the
Term, unless this Agreement is terminated earlier, provided that,
notwithstanding any other provision of this Agreement to the contrary, the
aggregate amount of all Advances at any one time outstanding under the Revolving
Facility shall not exceed the lesser of (a) the Facility Cap, and (b) the
Availability.  The Revolving Facility is a revolving credit facility, which may
be drawn, repaid and redrawn, from time to time as permitted under this
Agreement.  Any determination as to whether there is Availability for Advances
shall be made by Lender in its Permitted Discretion and is final and binding
upon Borrower.  Unless otherwise permitted by Lender, each Advance shall be in
an amount of at least $1,000.  Subject to the provisions of this Agreement,
Borrower may request Advances under the Revolving Facility up to and including
the value, in Dollars, of the Availability.  Advances under the Revolving
Facility shall automatically be made for the payment of interest on the Loans
and other Obligations on the date when due to the extent available and as
provided for herein.
 
(b)           Lender in its Permitted Discretion may further adjust the
Availability and the advance rate by applying Liquidity Factors.  The Liquidity
Factors and the advance rate for Availability may be adjusted by Lender
throughout the Term as warranted by Lender’s underwriting practices and
procedures in its credit judgment.  Also, Lender shall have the right to
establish from time to time, in its Permitted Discretion, reserves against the
Borrowing Base, which reserves shall have the effect of reducing the amounts
otherwise eligible to be advanced to Borrower under the Revolving Facility
pursuant to this Agreement.
 
(c)           Borrower shall at all times, from and after the Closing Date,
maintain a minimum outstanding principal balance under the Revolving Facility of
at least $2,000,000 (the “Minimum Revolving Facility Balance”).  If Borrower
fails to maintain the Minimum Revolving Facility Balance at any time, such
failure shall not be deemed a Default or Event of Default; however, in
consideration and as a result of such failure Lender shall be entitled to charge
and collect interest and all applicable fees on such Minimum Revolving Facility
Balance (calculated in accordance with the terms of this Agreement for Advances
under the Revolving Facility) as if such Minimum Revolving Facility Balance were
outstanding at such time, and Borrower shall pay such interest and applicable
fees thereon in accordance with the terms of this Agreement (and any failure by
Borrower to timely pay such interest shall be deemed an Event of Default under
Section 10(a)).  Lender agrees that in the event that the outstanding principal
balance under the Revolving Facility falls below the Minimum Revolving Facility
Balance at any time.  Lender will within twenty four (24) hours, without the
necessity of receiving written request from the Borrower, provide an Advance to
the Borrower in an amount equal to the difference between the Minimum Revolving
Facility Balance and the amount of the principal amount then outstanding under
the Revolving Facility; provided, however, Lender shall not be obligated to make
such automatic Advances if Borrower has not met the conditions to funding
Advances set forth in this Agreement (except for the requirement for the
delivery of a Borrowing Certificate as set forth in Section 6.2(a)).  For the
avoidance of doubt, the foregoing requirement for Borrower to maintain the
Minimum Revolving Facility Balance shall not be construed to obligate Lender to
fund such minimum amount or otherwise limit any of Lender’s rights set forth
herein, including any of Lender’s rights to determine, apply or adjust the
Availability, the Liquidity Factors or the Borrowing Base.

 
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2.2.
The Revolving Loans; Maturity

 
All of the Revolving Loan Obligations shall be due and payable in full in cash,
if not earlier in accordance with this Agreement, on the last day of the Term.
 
 
2.3.
Revolving Facility Disbursements; Requirement to Deliver Borrowing Certificate

 
So long as no Default or Event of Default shall have occurred and be continuing,
Borrower may give Lender irrevocable written notice requesting an Advance under
the Revolving Facility by delivering to Lender not later than 12:00 p.m.
(Eastern Time) at least one but not more than four Business Days before the
proposed Borrowing Date of such requested Advance, a completed Borrowing
Certificate and relevant supporting documentation satisfactory to Lender.  Each
time a request for an Advance is made, and, in any event and regardless of
whether an Advance is being requested, on Tuesday of each week during the Term
(and more frequently if Lender shall so request) until the Obligations are Paid
in Full and fully performed and this Agreement is terminated, Borrower shall
deliver to Lender a Borrowing Certificate accompanied by a separate detailed
aging and categorizing of Borrower’s accounts receivable and such other
supporting documentation as Lender shall reasonably request from time to
time.  On each Borrowing Date, Borrower irrevocably authorizes Lender to
disburse the proceeds of the requested Advance to the appropriate Borrower’s
account(s) as set forth on Schedule 2.3, in all cases for credit to the
appropriate Borrower (or to such other account as to which the appropriate
Borrower shall instruct Lender in writing) via Federal funds wire transfer no
later than 4:00 p.m. (Eastern Time).
 
 
2.4.
Promise to Pay; Manner of Payment

 
The Borrower absolutely and unconditionally promises to pay principal, interest
and all other Obligations payable hereunder, or under any other Loan Document,
without any defense, right of rescission and without any deduction whatsoever,
including any deduction for any setoff, counterclaim or recoupment, and
notwithstanding any damage to, defects in or destruction of the Collateral or
any other event, including obsolescence of any property or improvements.  All
payments made by the Borrower (other than payments automatically paid through
Advances under the Revolving Facility as provided herein), shall be made only by
wire transfer on the date when due in Dollars, in immediately available funds to
such account as may be indicated in writing by Lender to the Borrower from time
to time.  Any such payments received after 4:00 p.m. (Eastern Time) on the date
when due shall be deemed received on the following Business Day.  Whenever any
payment hereunder shall be stated to be due or shall become due and payable on a
day other than a Business Day, the due date thereof shall be extended to, and
such payment shall be made on, the next succeeding Business Day, and such
extension of time in such case shall be included in the computation of payment
of any interest (at the interest rate then in effect during such extension) and
fees, as the case may be.
 
 
2.5.
Repayment of Excess Advances

 
Any balance of Advances under the Revolving Facility outstanding at any time in
excess of either the Facility Cap or the Availability shall be immediately due
and payable by Borrower without the necessity of any demand, at the Payment
Office.
 
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2.6.
Payments by Lender

If the Borrower fails to make any payment required under any Loan Document as
and when due and within any applicable grace period, Lender may make such
payment, which payment shall be an Advance as of the date such payment is due
notwithstanding the Availability, and the Borrower irrevocably authorizes
disbursement of any such funds to Lender by way of direct payment of the
relevant amount.   No payment or prepayment of any amount by Lender or any other
Person shall entitle any Person to be subrogated to the rights of Lender under
any Loan Document unless and until all of the Obligations have been fully
performed Paid in Full and this Agreement has been terminated.  Any sums
expended by Lender in its Permitted Discretion as a result of Borrower’s or
Guarantor’s failure to pay, perform or comply with any Loan Document or any of
the Obligations may be charged to Borrower’s account as an Advance under the
Revolving Facility.
 
 
2.7.
Evidence of Loans

 
(a)           Lender shall maintain, in accordance with its usual practice,
electronic or written records evidencing the Indebtedness and Obligations to
Lender resulting from each Loan made by Lender from time to time, including
without limitation, the amounts of principal and interest payable and paid to
Lender from time to time under this Agreement.
 
(b)           The entries made in the electronic or written records maintained
pursuant to subsection (a) of this Section 2.7 (the “Register”) shall be prima
facie evidence of the existence and amounts of the Obligations and Indebtedness
therein recorded; provided, however, that the failure of Lender to maintain such
records or any error therein shall not in any manner affect obligations of the
Borrower to repay the Loans or Obligations in accordance with their terms.
 
(c)           Lender will account to Borrower monthly with a statement of
Advances under the Revolving Facility, and any charges and payments made
pursuant to this Agreement, and in the absence of manifest error, such
accounting rendered by Lender shall be deemed final, binding and conclusive
unless Lender is notified by Borrower in writing to the contrary within fifteen
calendar days of Receipt of such accounting, which notice shall be deemed an
objection only to items specifically objected to therein.
 
(d)           Borrower agrees that:
 
 (i)           upon written notice by Lender to Borrower that a Note or other
evidence of Indebtedness is requested by Lender to evidence the Loans and other
Obligations owing or payable to, or to be made by, Lender, Borrower shall
promptly (and in any event within three (3) Business Days of any such request)
execute and deliver to Lender an appropriate Note or Notes in form and substance
reasonably acceptable to Lender and Borrower;
 
 (ii)           all references to Notes in the Loan Documents shall mean Notes,
if any, to the extent issued (and not returned to the Borrower for cancellation)
hereunder, as the same may be amended, modified, divided, supplemented or
restated from time to time; and
 
 (iii)          upon Lender’s written request, and in any event within three (3)
Business Days of any such request, Borrower shall execute and deliver to Lender
new Notes and divide the Notes in exchange for then existing Notes in such
smaller amounts or denominations as Lender shall specify in its sole and
absolute discretion; provided, that, the aggregate principal amount of such new
Notes shall not exceed the aggregate principal amount of the Notes outstanding
at the time such request is made; and provided, further, that such Notes that
are to be replaced shall then be deemed no longer outstanding hereunder and
replaced by such new Notes and returned to Borrower within a reasonable period
of time after Lender’s receipt of the replacement Notes.

 
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3.
INTEREST AND FEES

 
 
3.1.
Interest on the Revolving Facility

 
Commencing May 1, 2010, and continuing until the later of the expiration of the
Term and the Payment in Full and full performance of all of the Obligations and
termination of this Agreement, interest on outstanding Advances under the
Revolving Facility shall be payable monthly in arrears on the first day of each
calendar month at an annual rate of LIBOR plus 4.25% in accordance with the
procedures provided for in Section 2.4 and Section 5.1; provided, however, that,
notwithstanding any provision of any Loan Document, for the purpose of
calculating interest at any time hereunder, the LIBOR shall be not less than
2.0%, in each case calculated on the basis of a 360-day year and for the actual
number of calendar days elapsed in each interest calculation period.
 
 
3.2.
Commitment Fee

 
On or before the Closing Date, Borrower shall pay to Lender $33,500 as a
nonrefundable commitment fee which shall be fully earned on the date
paid.  Lender hereby acknowledges receipt of $25,000 of such commitment fee on
March 26, 2010 which amount was received by Lender as an amendment fee in
connection with the Third Amendment to Revolving Credit and Security Agreement
dated March 26, 2010, which amount will be credited as a portion of the
commitment fee upon the Closing.
 
 
3.3.
Unused Line Fee

 
Borrower shall pay Lender the Unused Line Fee monthly in arrears on the first
day of each calendar month (starting with the calendar month immediately
following the calendar month in which the Closing Date occurs).
 
 
3.4.
Collateral Management Fee

 
Borrower shall pay Lender as additional interest the Collateral Management
Fee.  The Collateral Management Fee shall be payable monthly in arrears on the
first day of each calendar month (starting with the calendar month immediately
following the calendar month in which the Closing Date occurs).
 
 
3.5.
Computation of Fees; Lawful Limits

 
All fees hereunder shall be computed on the basis of a year of three hundred and
sixty days and for the actual number of days elapsed in each calculation period,
as applicable.  In no contingency or event whatsoever, whether by reason of
acceleration or otherwise, shall the interest and other charges paid or agreed
to be paid to Lender for the use, forbearance or detention of money hereunder
exceed the maximum rate permissible under applicable law which a court of
competent jurisdiction shall, in a final determination, deem applicable
hereto.  If, due to any circumstance whatsoever, fulfillment of any provision
hereof, at the time performance of such provision shall be due, shall exceed any
such limit, then, the obligation to be so fulfilled shall be reduced to such
lawful limit, and, if Lender shall have received interest or any other charges
of any kind which might be deemed to be interest under applicable law in excess
of the maximum lawful rate, then such excess shall be applied first to any
unpaid fees and charges hereunder, then to unpaid principal balance owed by
Credit Parties hereunder, and if the then remaining excess interest is greater
than the previously unpaid principal balance, Lender shall promptly refund such
excess amount to Borrower and the provisions hereof shall be deemed amended to
provide for such permissible rate.  The terms and provisions of this Section 3.6
shall control to the extent any other provision of any Loan Document is
inconsistent herewith.  All fees hereunder shall be non-refundable and deemed
fully earned when due and payable.

 
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3.6.
Default Rate of Interest

 
Upon the occurrence and during the continuation of an Event of Default, Lender
may increase the Applicable Rate of interest in effect at such time with respect
to the Obligations, without notice, to the Default Rate which Default Rate shall
continue post-judgment and subsequent to the date that the provisions of any
applicable Debtor Relief Law are exercised by or against a Borrower unless the
statutory post-judgment rate of interest is higher in which case such statutory
rate shall apply.
 
4.
GRANT OF SECURITY INTERESTS

 
 
4.1.
Security Interest; Collateral

 
(a)           To secure the payment and performance in full of the Obligations,
Borrower (or if referring to another Person, such Person) hereby grants to
Lender a continuing security interest in and Lien upon, and pledges and assigns
to Lender, all of its right, title and interest in and to the Collateral,
wherever located, whether now owned or hereafter acquired or arising;
 
(b)           Borrower hereby ratifies its authorization for Lender to have
filed in any UCC jurisdiction any initial financing statements or amendments
thereto indicating that those assets described in the definition of “Collateral”
hereunder are pledged to the Lender.
 
(c)           If Borrower shall at any time hold or acquire a Commercial Tort
Claim that arises out of Borrower’s Accounts or account receivable or would
otherwise become part of the collateral under the definition of Collateral,
Borrower shall immediately notify Lender in a writing signed by Borrower of the
particulars thereof and grant to Lender in such a writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance satisfactory to Lender.
 
 
4.2.
Power of Attorney

 
(a)           Borrower hereby irrevocably constitutes and appoints Lender and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorneys-in-fact with full irrevocable power and authority in the place
and stead of such Borrower or in Lender’s own name, for the purpose of carrying
out the terms of this Agreement and the grant of the security interests
hereunder and under the other Loan Documents, and without limiting the
generality of the foregoing, hereby gives said attorneys the power and right, on
behalf of such Borrower (without requiring Lender to act as such, and without
notice to or assent by such Borrower) to do the following: (i) upon the
occurrence and during the continuance of an Event of Default, to receive, open
and dispose of all mail addressed to any such Person and to endorse the name of
any such Person upon any and all checks, drafts, money orders, and other
instruments for the payment of money that are payable to such Person and
constitute collections on its or their Accounts; (ii) execute in the name of
such Person any financing statements, schedules, assignments, instruments,
documents, and statements that it is or they or are obligated to give Lender
under any of the Loan Documents; and (iii) do such other and further acts and
deeds in the name of such Person that Lender may deem necessary or desirable to
enforce any Account or other Collateral or to perfect Lender’s security interest
or Lien in any Collateral.  In addition, if any such Person breaches its
obligation hereunder to direct payments of Accounts or the proceeds of any other
Collateral to the appropriate Lockbox Account, Lender, as the irrevocably made,
constituted and appointed true and lawful attorney for such Person pursuant to
this paragraph, may, by the signature or other act of any of Lender’s officers
or authorized signatories (without requiring any of them to do so), direct any
federal, state or private payor or fiscal intermediary to pay proceeds of
Accounts or any other Collateral to the appropriate Lockbox Account.

 
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(b)           To the extent permitted by law, each Credit Party hereby ratifies
all that said attorneys shall lawfully do or cause to be done by virtue
hereof.  This power of attorney is a power coupled with an interest and is
irrevocable.
 
(c)           The powers conferred on Lender pursuant to this Section 4.2 are
solely to protect its interests in the Collateral and shall not impose any duty
upon it to exercise any such powers.  Lender shall be accountable only for the
amounts that it actually receives as a result of the exercise of such powers,
and neither it nor any of its officers, directors, employees or agents shall be
responsible to Credit Party for any act or failure to act, except for Lender’s
own gross negligence or willful misconduct.
 
 
4.3.
Further Assurances

 
Borrower agrees, upon request of Lender, to take any and all other actions as
Lender may determine to be necessary or appropriate for the attachment,
perfection maintaining of the first priority security interest of, and for the
ability of Lender to enforce, Lender’s security interest in any and all of the
Collateral, including, without limitation, (i) executing, obtaining, delivering,
filing, registering and recording any and all financing statements, continuation
statements, stock powers, instruments and other documents, or causing the
execution, filing, registration, recording or delivery of any and all of the
foregoing, that are necessary or required under law or otherwise or reasonably
requested by Lender to be executed, filed, registered, obtained, delivered or
recorded to create, maintain, perfect, preserve, validate or otherwise protect
the pledge of the Collateral to Lender and Lender’s perfected first priority
Lien on the Collateral (and Borrower irrevocably grants Lender the right, at
Lender's option, to file any or all of the foregoing), (ii) immediately upon
learning thereof, report to Lender any reclamation, return or repossession of
goods in excess of $50,000.00 that are part of the Collateral (individually or
in the aggregate), (iii) defend the Collateral and Lender’s perfected first
priority Lien thereon against all claims and demands of all Persons at any time
claiming the same or any interest therein adverse to Lender, and pay all
reasonable costs and expenses (including, without limitation, allocable costs of
staff counsel, and diligence fees and reasonable attorneys’ fees and expenses,
provided, that, the payment of staff counsel and reasonable attorneys’ fees
shall be subject to the provisions of Section 15.7(b)) in connection with such
defense, which may at Lender’s discretion be added to the Obligations, (iv)
comply with any provision of any statute, regulation or treaty of any
Governmental Authority as to any Collateral if compliance with such provision is
a condition to attachment, perfection or priority of, or ability of Lender to
enforce, Lender’s security interest in such Collateral and (v) obtain
governmental and other third party waivers, consents and approvals in form and
substance satisfactory to Lender, including any consent of any licensor, lessor
or other Person obligated on Collateral and any party or parties whose consent
is required for the security interest of Lender to attach under Section 4.1.
 
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5.
ADMINISTRATION AND MAINTENANCE OF COLLATERAL

 
 
5.1.
Revolving Facility Collections; Repayment; Borrowing Availability and Lockbox

Borrower shall maintain one or more Lockbox Accounts with the Lockbox Banks, and
shall execute with each of the Lockbox Banks a Lockbox Agreement, and such other
agreements related thereto as Lender may require.  Borrower shall ensure that
all collections of their respective Accounts and all other cash payments
received by Borrower are paid and delivered directly from Account Debtors and
other Persons into the appropriate Lockbox Account.  The Lockbox Agreements
shall provide that the Lockbox Banks immediately will transfer all funds paid
into the Lockbox Accounts into the Concentration Account.  Notwithstanding and
without limiting any other provision of any Loan Document, Lender shall apply,
on a daily basis, all funds transferred into the Concentration Account pursuant
to the Lockbox Agreement and this Section 5.1 in such order and manner as
determined by Lender.  To the extent that any Accounts are collected by Borrower
or any other cash payments received by Borrower are not sent directly to the
appropriate Lockbox Account but are received by Borrower or any of their
Affiliates, such collections and proceeds shall be held in trust for the benefit
of Lender and immediately remitted (and in any event within three (3) Business
Days from receipt thereof), in the form received, to the appropriate Lockbox
Account for immediate transfer to the Concentration Account.  Borrower
acknowledges and agrees that compliance with the terms of this Section 5.1 is an
essential term of this Agreement.  All funds transferred to the Concentration
Account for application to the Obligations under the Revolving Facility shall be
applied to reduce the Obligations under the Revolving Facility, but, for
purposes of calculating interest hereunder, shall be subject to a three Business
Day clearance period.  If as the result of collections of Accounts and any other
cash payments received by Borrower pursuant to this Section 5.1 a credit balance
exists with respect to the Concentration Account, such credit balance shall not
accrue interest in favor of a Borrower.  If at any time there is a credit
balance in excess of $100,000, in the Concentration Account, Lender agrees to
automatically wire transfer (without Borrower’s written request) all of such
credit balance to the Borrower’s operating account specified on Schedule 2.3
within one Business Day of such credit balance reaching $100,000, provided,
however, Lender shall not be required to make such “no-notice” transfer more
frequently than once per week. Notwithstanding the foregoing, upon the written
request of Borrower, Lender shall wire transfer any credit balance in the
Concentration Account to Borrower’s operating account specified in Schedule
2.3., provided, that if Lender receives the written request of Borrower no later
than 12:00 p.m. (Eastern Time), then Lender shall make such transfer the
following Business Day and if Lender receives the written request of Borrower
after 12:00 p.m. (Eastern time), then Lender shall make such transfer within two
(2) Business Days from the date of receipt of such written notice.   If
applicable, at any time prior to the execution of all or any of the Lockbox
Agreements and operation of all or any of the Lockbox Accounts, Borrower and
their Affiliates shall direct all collections or proceeds it receives on
Accounts or from other Collateral to the Concentration Account.
 
 
5.2.
Accounts

 
In determining which Accounts are Eligible Accounts, Lender may rely on all
statements and representations made by Borrower with respect to any
Account.  Unless otherwise indicated in writing to Lender, each Account of
Borrower (i) is genuine and in all respects what it purports to be and is not
evidenced by a judgment, (ii) arises out of a completed, bona fide sale and
delivery of goods or rendering of Services by a Borrower in the ordinary course
of business and in accordance with the terms and conditions of all purchase
orders, contracts, certifications, participations, certificates of need and
other documents relating thereto or forming a part of the contract between a
Borrower and the Account Debtor, (iii) is for a liquidated amount (less any
contractual allowances) maturing as stated in a claim or invoice covering such
sale of goods or rendering of Services, a copy of which has been furnished or is
available to Lender, (iv) together with Lender’s security interest therein, is
not and will not be in the future (by willful act or omission by Borrower),
subject to any offset, lien, deduction, defense, dispute, counterclaim or other
adverse condition, is absolutely owing to Borrower and is not contingent in any
respect or for any reason (except Accounts owed or owing by Medicaid/Medicare
Account Debtors that may be subject to offset or deduction under applicable
law), and (v) has been billed and forwarded to the Account Debtor for payment in
accordance with applicable laws and is in compliance and conformance with any
requisite procedures, requirements and regulations governing payment by such
Account Debtor with respect to such Account, and, if due from a
Medicaid/Medicare Account Debtor, is properly payable directly to a Borrower.

 
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5.3.
Healthcare

 
(a)           Borrower has obtained from (i) the Medicare program, approval to
receive the provider numbers which will permit Borrower to bill the Medicare
program with respect to covered services rendered to patients insured under the
Medicare program, (ii) the applicable Medicaid programs, approval to receive the
provider numbers/in-patient service contracts which will permit Borrower to bill
the Medicaid program with respect to covered services rendered to patients
insured under the Medicaid programs, and (iii) the CHAMPUS/TRICARE program,
approval to receive the provider numbers which will permit Borrower to bill the
CHAMPUS/TRICARE program with respect to covered services rendered to patients
insured under the CHAMPUS/TRICARE program.  Borrower is in compliance with the
conditions of participation in the Medicare, Medicaid and CHAMPUS/TRICARE
programs.
 
(b)           There is no pending nor to the knowledge of Borrower, threatened,
proceeding or investigation of Borrower relative to EMTALA nor are there any
investigations or proceedings pending, or to the knowledge of Borrower,
threatened by any Governmental Authority with respect to the Medicare, Medicaid
or CHAMPUS/TRICARE programs with respect to the operations of Borrower, except
as set forth on Schedule 5.3A hereto.  Without limiting or being limited by any
other provision of any Loan Document, Borrower has timely filed or caused to be
filed all cost and other reports of every kind required by law, agreement or
otherwise.  Subject to the last sentence of Section 7.18, there are no claims,
actions or appeals pending (and Borrower has not filed any claims or reports
which could reasonably result in any such claims, actions or appeals) before any
commission, board or agency or other Governmental Authority, including, without
limitation, any intermediary or carrier, the Provider Reimbursement Review Board
or the Administrator of the Centers of Medicare and Medicaid Services, with
respect to any state or federal Medicare or Medicaid or CHAMPUS/TRICARE cost
reports or claims filed by Borrower, or any disallowance by any commission,
board or agency or other Governmental Authority in connection with any audit of
such cost reports or claims.  No validation review or program integrity review
related to Borrower or the consummation of the transactions contemplated herein
or to the Collateral have been conducted by any commission, board or agency or
other Governmental Authority in connection with the Medicare or Medicaid
programs, and to the knowledge of Borrower, no such reviews are scheduled,
pending or threatened against or affecting any of the providers, any of the
Collateral or the consummation of the transactions contemplated hereby.  Neither
Credit Parties nor any of their respective officers, directors, or managing
employees, employees or agents are, or while this Agreement shall remain in
effect shall be, excluded from participation in, or sanctioned or convicted of a
crime under or with respect to the Medicare, Medicaid or CHAMPUS/TRICARE
programs, nor to the best of Credit Parties’ knowledge, is any such exclusion
threatened.  Borrower has not received any notice from any of the Medicare,
Medicaid or CHAMPUS/TRICARE programs, or any other third party payor programs,
of any pending or threatened investigations, reviews or surveys of Borrower, its
directors, officers or managing employees, and Borrower has no actual knowledge
that any such investigation, reviews or surveys are pending or threatened.
 
(c)           As of the Closing Date, Borrower has third party contracts with
each of the third-party payors listed on Schedule 5.3B (unless noted otherwise),
which constitutes (as indicated) each of the payors representing at least five
percent (5%) of Borrower’s historic third-party payor cash receipts for the
twelve month period ended December 31, 2009.
 
 
5.4.
Medicare and Medicaid Account Debtors and Third-Party Payor Information

 
Borrower (a) shall maintain applicable Medicare and Medicaid provider numbers,
(b) shall maintain applicable CHAMPUS/TRICARE provider numbers, if applicable,
and (c) to the extent Borrower shall enter into any other arrangements with
non-governmental third-party payors, Borrower shall use commercially reasonable
efforts to enter into agreements with such third-party payors in form and
substance satisfactory to Lender.

 
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5.5.
Collateral Administration

 
(a)           All Collateral (except proceeds of Accounts which shall be
deposited with the Lockbox Banks) and records supporting the Collateral will at
all times be kept by Borrower at the locations set forth on Schedule 7.18B
hereto and shall not, without thirty calendar days prior written notice to
Lender, be moved therefrom, and in any case shall not be moved outside the
continental United States.
 
(b)           Borrower shall keep accurate and complete records of its Accounts
and all payments and collections thereon and shall submit such records to Lender
on such periodic bases as Lender may request.  In addition, if Accounts of
Borrower in an aggregate face amount in excess of $100,000.00 become ineligible
because they fall within one of the specified categories of ineligibility set
forth in the definition of Eligible Accounts, Borrower shall notify Lender of
such occurrence within two Business Days following the discovery of such
occurrence or upon any submission to Lender of a Borrowing Certificate and the
Borrowing Base shall thereupon be adjusted to reflect such occurrence.
 
(c)           Whether or not an Event of Default has occurred, any of Lender’s
officers, employees, representatives or agents shall have the right, at any time
during normal business hours upon reasonable notice, in the name of Lender, any
designee of Lender or Borrower, to verify the validity, amount or any other
matter relating to any Collateral.  Notwithstanding the foregoing, so long as no
Default or Event of Default has occurred and is continuing, Lender agrees to
give Borrower at least seven (7) business days’ written notice of such visit to
Borrower’s offices.  Borrower shall cooperate fully with Lender in an effort to
facilitate and promptly conclude such verification process.
 
(d)           Borrower shall endeavor in the first instance to make collection
of its Accounts for Lender.  Lender shall have the right at all times after the
occurrence and during the continuance of an Event of Default to notify
(i) Account Debtors owing Accounts to Borrower other than Medicaid/Medicare
Account Debtors that their Accounts have been assigned to Lender and to collect
such Accounts directly in its own name and to charge collection costs and
expenses, including reasonable attorney’s fees, to Borrower, and
(ii) Medicaid/Medicare Account Debtors that Borrower has waived any and all
defenses and counterclaims they may have or could interpose in any such action
or procedure brought by Lender to obtain a court order recognizing the
collateral assignment or security interest and Lien of Lender in and to any
Account or other Collateral and that Lender is seeking or may seek to obtain a
court order recognizing the collateral assignment or security interest and Lien
of Lender in and to all Accounts and other Collateral payable by
Medicaid/Medicare Account Debtors.
 
(e)           As and when determined by Lender in its Permitted Discretion,
Lender will perform the searches described in clauses (i), (ii) and (iii) below
against Borrower and Guarantor (the results of which are to be consistent with
Borrower’s representations and warranties under this Agreement), all at
Borrower’s expense: (i) UCC searches with the Secretary of State of the
jurisdiction of organization of Borrower and Guarantor and, if deemed necessary
by Lender, the Secretary of State and local filing offices of each jurisdiction
where Borrower or Guarantor maintain their respective executive offices, a place
of business or assets; (ii) Lien searches with the United States Patent and
Trademark Office and the United States Copyright Office; and (iii) judgment,
federal, state and local tax lien searches, in each jurisdiction searched under
clause (i) above.

 
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(f)           Borrower (i) shall provide prompt written notice to its current
bank to transfer all items, collections and remittances to the Concentration
Account, (ii) shall direct each Account Debtor to make payments to the
appropriate Lockbox Account, and Borrower hereby authorizes Lender, upon any
failure to send such notices and directions within ten calendar days after the
Closing Date (or ten calendar days after the Person becomes an Account Debtor),
to send any and all similar notices and directions to such Account Debtors, and
(iii) shall do anything further that may be lawfully required by Lender to
create and perfect Lender’s Lien on any Collateral and effectuate the intentions
of the Loan Documents.  At Lender’s request, Borrower shall immediately deliver
to Lender all Collateral for which Lender must receive possession to obtain a
perfected security interest.
 
6.
CONDITIONS PRECEDENT

 
 
6.1.
Conditions to Initial Advance and Closing

 
The obligations of Lender to consummate the transactions contemplated herein and
to make the Initial Advance are subject to the satisfaction, in the sole
judgment of Lender, of the following:
 
(a)           Lender shall have received information and responses to its due
diligence requests, and completed examinations related to the Collateral, the
financial statements and the books, records, business, obligations, financial
condition and operational state of each Credit Party and any other information
reasonably requested by Lender, and all such information and responses as well
as the results of such examinations and each Credit Party shall demonstrate to
Lender’s satisfaction that  (i) its operations comply, in all respects deemed
material by Lender, in its sole judgment, with all applicable federal, state,
foreign and local laws, statutes and regulations, (ii) its operations are not
the subject of any governmental investigation, evaluation or any remedial action
which could result in any expenditure or liability deemed material by Lender, in
its sole judgment, and (iii) it has no liability (whether contingent or
otherwise) that is deemed material by Lender, in its sole judgment;
 
(b)           (i) Borrower shall have delivered to Lender (A) the Loan Documents
to which Borrower is a party, each duly executed by an authorized officer of
such Borrower and the other parties thereto, (B) a Borrowing Certificate for the
Initial Advance under the Revolving Facility executed by an authorized officer
of Borrower and (C) (1) audited annual consolidated and consolidating financial
statements of Borrower for Borrower’s most recently ended fiscal year, including
notes thereto, consisting of a balance sheet at the end of such completed fiscal
year and the related statements of income, retained earnings, cash flows and
owner's equity for such completed fiscal year, which financial statements shall
be prepared and certified without qualification by an independent certified
public accounting firm reasonably satisfactory to Lender/in accordance with GAAP
consistently applied with prior periods (except for changes in accounting
methodology specified in such financial statements); and (2) unaudited
consolidated and consolidating financial statements of Borrower consisting of a
balance sheet and statements of income, retained earnings, cash flows and
owner's equity for the period from the beginning of the current fiscal year
through the end of the most recently ended calendar month, which financial
statements shall be prepared in accordance with GAAP consistently applied with
prior periods (except for changes in accounting methodology which have been
enacted since such prior periods), (ii) Borrower shall have established and
maintained the Lockbox Accounts and have entered into Lockbox Agreements, all as
contemplated in Section 5.1; and (iii) Guarantor shall have delivered to Lender
the Loan Documents to which such Guarantor is a party, each duly executed and
delivered by such Guarantor or an authorized officer of such Guarantor, as
applicable, and the other parties thereto;
 
(c)           all in form and substance satisfactory to Lender in its Permitted
Discretion, Lender shall have received (i) a report of Uniform Commercial Code
financing statement, tax and judgment lien searches performed with respect to
Borrower and Guarantor in each jurisdiction determined by Lender in its sole
discretion, and such report shall show no Liens on the Collateral (other than
Permitted Liens), (ii) each document (including, without limitation, any Uniform
Commercial Code financing statement) required by any Loan Document or under law
or requested by Lender to be filed, registered or recorded to create in favor of
Lender, a perfected first priority security interest upon the Collateral, and
(iii) evidence of each such filing, registration or recordation and of the
payment by Borrower of any necessary fee, tax or expense relating thereto;

 
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(d)           Lender shall have received (i) the Organizational and Good
Standing Documents of each Credit Party, all in form and substance acceptable to
Lender, (ii) a certificate of the corporate secretary or assistant secretary of
each Credit Party dated the Closing Date, as to the incumbency and signature of
the Persons executing the Loan Documents, in form and substance acceptable to
Lender, and (iii) the written legal opinion of counsel for Credit Parties, in
form and substance satisfactory to Lender;
 
(e)           Lender shall have received (i) a Solvency Certificate executed by
the chief financial officer (or, in the absence of a chief financial officer,
the chief executive officer) of Borrower and Guarantor, in form and substance
satisfactory to Lender and (ii) an officer’s certificate in the form attached
hereto as Exhibit D, executed by the chief executive officer or President of
Borrower;
 
(f)            Lender shall have completed examinations, the results of which
shall be satisfactory in form and substance to Lender, of the Collateral, the
financial statements and the books, records, business, obligations, financial
condition and operational state of Borrower and Guarantor, and each such Person
shall have demonstrated to Lender’s satisfaction that (i) its operations comply,
in all respects deemed material by Lender, in its sole judgment, with all
applicable federal, state, foreign and local laws, statutes and regulations,
(ii) its operations are not the subject of any governmental investigation,
evaluation or any remedial action which could result in any expenditure or
liability deemed material by Lender, in its sole judgment, and (iii) it has no
liability (whether contingent or otherwise) that is deemed material by Lender,
in its sole judgment;
 
(g)           Lender shall have received all fees, charges and expenses payable
to Lender on or prior to the Closing Date pursuant to the Loan Documents;
 
(h)           all in form and substance satisfactory to Lender in its Permitted
Discretion, Lender shall have received such consents, approvals and agreements,
including, without limitation, any applicable Landlord Waivers and Consents with
respect to any and all leases set forth on Schedule 7.4A, from such third
parties as Lender shall determine are necessary or desirable with respect to (i)
the Loan Documents and the transactions contemplated thereby, and (ii) claims
against Borrower or Guarantor or the Collateral;
 
(i)            Borrower shall be in compliance with Section 8.5, and Lender
shall have received copies of all insurance policies or binders, original
certificates of all insurance policies of Borrower confirming that they are in
effect and that the premiums due and owing with respect thereto have been paid
in full and endorsements of such policies issued by the applicable Insurers and
naming Lender as loss payee or additional insured on those policies specified in
Section 8.5;
 
(j)            all corporate and other proceedings, documents, instruments and
other legal matters in connection with the transactions contemplated by the Loan
Documents (including, but not limited to, those relating to corporate and
capital structures of Borrower) shall be satisfactory to Lender;
 
(k)           Lender shall have received, in form and substance satisfactory to
Lender, release and termination of any and all Liens, security interest and
Uniform Commercial Code financing statements in, on, against or with respect to
any of the Collateral (other than Permitted Liens);
 
(l)            Borrower shall have executed and delivered to Lender an IRS Form
8821;

 
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(m)           Lender shall be satisfied that there are no material defaults in
any of Borrower’s obligations under any contract required for the operation of
its business;
 
(n)           Lender shall have received the Pledge Agreement, in form and
substance satisfactory to Lender, as duly authorized, executed and delivered by
the parties thereto; and
 
(o)           Lender shall have received such other documents, certificates,
information or legal opinions as Lender may reasonably request, all in form and
substance reasonably satisfactory to Lender.
 
 
6.2.
Conditions to Each Advance

 
The obligations of Lender to make any Advance, including, without limitation,
the Initial Advance, (or otherwise extend credit hereunder) are subject to the
satisfaction, in the sole judgment of Lender, of the following additional
conditions precedent:
 
(a)           Borrower shall have delivered to Lender a Borrowing Certificate
for the Advance executed by an authorized officer of Borrower, which shall
constitute a representation and warranty by Borrower as of the Borrowing Date of
such Advance that the conditions contained in this Section 6.2 have been
satisfied; provided however, that any determination as to whether to fund
Advances or extensions of credit shall be made by Lender in its Permitted
Discretion;
 
(b)           each of the representation and warranties made by Credit Parties
in or pursuant to this Agreement, or under the other Loan Documents or which are
contained in any certificate, document or financial or other statement furnished
in connection herewith, shall be true and correct, before and after giving
effect to such Advance;
 
(c)           no Default or Event of Default shall have occurred or be
continuing or would exist after giving effect to the Advance on such date;
 
(d)           immediately after giving effect to the requested Advance, the
aggregate outstanding principal amount of Advances shall not exceed the lesser
of the Availability and the Facility Cap;
 
(e)           at the time of making such requested Advance, no Material Adverse
Change has occurred or is continuing; and
 
(f)            Lender shall have received all fees, charges and expenses payable
to Lender on or prior to such date pursuant to the Loan Documents.
 
7.
REPRESENTATIONS AND WARRANTIES

 
Credit Parties, jointly and severally, represent and warrant as of the date
hereof, the Closing Date and each Borrowing Date.
 
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7.1.
Organization and Authority

Each Credit Party is a corporation duly organized, validly existing and in good
standing under the laws of its state of formation.  Each Credit Party (i) has
all requisite corporate or entity power and authority to own its properties and
assets and to carry on its business as now being conducted and as contemplated
in the Loan Documents, (ii) is duly qualified to conduct business in every
jurisdiction in which failure so to qualify would reasonably be likely to result
in a Material Adverse Change, and (iii) has all requisite power and authority
(A) to execute, deliver and perform the Loan Documents to which it is a party,
(B) to borrow hereunder, (C) to consummate the transactions contemplated under
the Loan Documents, and (D) to grant the Liens with regard to the Collateral
pursuant to the Loan Documents to which it is a party.
 
 
7.2.
Loan Documents

 
The execution, delivery and performance by each Credit Party of the Loan
Documents to which it is a party, and the consummation of the transactions
contemplated thereby, (i) have been duly authorized by all requisite action of
each such Person and have been duly executed and delivered by or on behalf of
each such Person; (ii) do not violate any provisions of (A) applicable law,
statute, rule, regulation, ordinance or tariff, (B) any order of any
Governmental Authority binding on any such Person or any of their respective
properties, or (C) the certificate of incorporation or bylaws (or any other
equivalent governing agreement or document) of any such Person, or any agreement
between any such Person and its respective stockholders, members, partners or
equity owners or among any such stockholders, members, partners or equity
owners; (iii) are not in conflict with, and do not result in a breach or default
of or constitute an event of default, or an event, fact, condition or
circumstance which, with notice or passage of time, or both, would constitute or
result in a conflict, breach, default or event of default under, any indenture,
agreement or other instrument to which any such Person is a party, or by which
the properties or assets of such Person are bound; (iv) except as set forth
therein, will not result in the creation or imposition of any Lien of any nature
upon any of the properties or assets of any such Person, and (v) except as set
forth on Schedule 7.2, do not require the consent, approval or authorization of,
or filing, registration or qualification with, any Governmental Authority or any
other Person.  When executed and delivered, each of the Loan Documents to which
any Credit Party is a party will constitute the legal, valid and binding
obligation of Credit Party, enforceable against such Credit Party in accordance
with its terms.
 
 
7.3.
Subsidiaries, Capitalization and Ownership Interests

 
Except as listed on Schedule 7.3, no Credit Party has any
Subsidiaries.  Schedule 7.3 states the authorized and issued capitalization of
each Credit Party, the number and class of equity securities and/or ownership,
voting or partnership interests issued and outstanding of each Credit Party and
the record and beneficial owners thereof (including options, warrants and other
rights to acquire any of the foregoing).  The ownership or partnership interests
of each Credit Party that is a limited partnership or a limited liability
company are not certificated, the documents relating to such interests do not
expressly state that the interests are governed by Article 8 of the Uniform
Commercial Code, and the interests are not held in a securities
account.  Schedule 7.3 sets forth a complete and accurate list of the directors,
members, managers and/or partners of each Credit Party.  Except as listed on
Schedule 7.3, no Credit Party owns an interest in, participates in or engages in
any joint venture, partnership or similar arrangements with any Person.
 
 
7.4.
Properties

 
Each Credit Party (i) is the sole owner and has good, valid and marketable title
to, or a valid leasehold interest in, all of its properties and assets,
including the Collateral, whether personal or real, subject to no transfer
restrictions or Liens of any kind except for Permitted Liens, and (ii) is in
compliance in all material respects with each lease to which it is a party or
otherwise bound.  Schedule 7.4A lists all real properties (and their locations)
owned or leased by or to, and all other material assets or property that are
leased or licensed by, any Credit Party and all warehouses, fulfillment houses
or other locations at which any of any Credit Party’s Inventory is
located.  Each Credit Party enjoys peaceful and undisturbed possession under all
such leases and such leases are all the leases necessary for the operation of
such properties and assets, are valid and subsisting and are in full force and
effect.  Schedule 7.4B lists all Deposit Accounts and investment accounts (and
their locations) owned by any Credit Party, and all such Deposit Accounts and
investment accounts are subject to no Liens of any kind except as expressly set
forth on Schedule 7.4B, all of which Liens constitute Permitted Liens.

 
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7.5.
Other Agreements

 
No Credit Party is (i) a party to any judgment, order or decree or any
agreement, document or instrument, or subject to any restriction, which would
affect its ability to execute and deliver, or perform under, any Loan Document
or to pay the Obligations, (ii) in default in the performance, observance or
fulfillment of any obligation, covenant or condition contained in any agreement,
document or instrument to which it is a party or to which any of its properties
or assets are subject, which default, if not remedied within any applicable
grace or cure period would reasonably be likely to result in a Material Adverse
Change, nor is there any event, fact, condition or circumstance which, with
notice or passage of time or both, would constitute or result in a conflict,
breach, default or event of default under, any of the foregoing which, if not
remedied within any applicable grace or cure period would reasonably be likely
to result in a Material Adverse Change; (iii) a party or subject to any
agreement, document or instrument with respect to, or obligation to pay any,
Management or Service Fee with respect to, the ownership, operation, leasing or
performance of any of its business or any facility, nor is there any manager
with respect to any such facility; or (iv) a party to any contract with any
Affiliate other than as set forth on Schedule 7.5, except for employment
agreements, option agreements, confidentiality agreements,
non-solicitation/non-competition agreements and other compensation, severance or
consulting arrangements with directors or officers in the ordinary course of
business that are on terms at least as favorable to such Credit Party as would
be the case in an arm’s length transaction between unrelated parties of equal
bargaining power and under which payments due from Credit Parties are not more
than $500,000 per annum per arrangement.
 
 
7.6.
Litigation

 
There is no action, suit, proceeding or investigation pending or, to the
knowledge of any Credit Party, threatened against any Credit Party (i) that
challenges the validity of any of the Loan Documents, or to enjoin the right of
any Credit Party to enter into any Loan Document or to consummate the
transactions contemplated thereby, (ii) that would reasonably be likely to be or
have, either individually or in the aggregate, any Material Adverse Change, or
(iii) that would reasonably be likely to result in any Change of
Control.  Except as set forth on Schedule 7.6, no Credit Party is a party or
subject to any order, writ, injunction, judgment or decree of any Governmental
Authority.  Except as set forth on Schedule 7.6, there is no action, suit,
proceeding or investigation initiated by any Credit Party currently pending.
 
 
7.7.
Environmental Matters

 
Other than exceptions to any of the following that could not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Change:
 
(a)           Each Credit Party and its Subsidiaries:  (i) are, and within the
period of all applicable statutes of limitation have been, in compliance with
all applicable Environmental Laws; (ii) hold all environmental Permits (each of
which is in full force and effect) required for any of their current or intended
operations or for any property owned, leased, or otherwise operated by any of
them; (iii) are, and within the period of all applicable statutes of limitation
have been, in compliance with all of their environmental Permits; and (iv)
reasonably believe that:  each of their environmental Permits will be timely
renewed and complied with, without material expense; any additional
environmental Permits that may be required of any of them will be timely
obtained and complied with, without material expense; and compliance with any
Environmental Law that is or is expected to become applicable to any of them
will be timely attained and maintained, without material expense.

 
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(b)           To the knowledge of each Credit Party and its Subsidiaries, no
Materials of Environmental Concern (i) are present at, on, under, in, or about
any real property now owned, leased or operated by such Credit Party or any of
its Subsidiaries, or (ii) were present at any formerly owned, leased or operated
property during the period of such ownership, lease or operation by such Credit
Party or its Subsidiaries or (iii) are present at any other location (including,
without limitation, any location to which Materials of Environmental Concern
have been sent for re-use or recycling or for treatment, storage, or disposal)
which, in the case of any of clauses (i), (ii) or (iii), would reasonably be
expected to (A) give rise to liability of such Credit Party or any of its
Subsidiaries under any applicable Environmental Law or otherwise result in costs
to such Credit Party or any of its Subsidiaries, (B) interfere with the
continued operations of such Credit Party or any of its Subsidiaries, or (C)
impair the fair saleable value of any real property owned or leased by such
Credit Party or any of its Subsidiaries.
 
(c)           There is no judicial, administrative, or arbitral proceeding
(including any notice of violation or alleged violation) under or relating to
any Environmental Law to which any Credit Party or any of such Credit Party’s
Subsidiaries is, or to the knowledge of such Credit Party or any of its
Subsidiaries will be, named as a party that is pending or, to the knowledge of
such Credit Party or any of its Subsidiaries, threatened.
 
(d)           No Credit Party, nor any of Credit Parties’ Subsidiaries, has
received any written request for information, or been notified that it is a
potentially responsible party under or relating to the federal Comprehensive
Environmental Response, Compensation, and Liability Act or any similar
Environmental Law, or with respect to any Materials of Environmental Concern.
 
(e)           No Credit Party, nor any of Credit Parties’ Subsidiaries, has
entered into or agreed to any consent decree, order, or settlement or other
agreement, or is subject to any judgment, decree, or order or other agreement,
in any judicial, administrative, arbitral, or other forum for dispute
resolution, relating to compliance with or liability under any Environmental
Law.
 
(f)            No Credit Party, nor any of Credit Parties’ Subsidiaries, has
assumed or retained, by contract or operation of law, any liabilities of any
kind, fixed or contingent, known or unknown, under any Environmental Law or with
respect to any Material of Environmental Concern.
 
 
7.8.
Potential Tax Liability; Tax Returns; Governmental Reports

 
(a)           Except as disclosed in Schedule 7.8, no Credit Party (i) has
received any oral or written communication from any taxing authority with
respect to any investigation or assessment relating to such Credit Party
directly, or relating to any consolidated tax return which was filed on behalf
of such Credit Party, (ii) is aware of any year which remains open pending tax
examination or audit by any taxing authority, and (iii) is aware of any
information that could give rise to any  tax liability or assessment.
 
(b)           Each Credit Party (i) has filed all federal, state, foreign (if
applicable) and local tax returns and other reports which are required by law to
be filed by such Credit Party, and (ii) has paid all taxes, assessments, fees
and other governmental charges, including, without limitation, payroll and other
employment related taxes, in each case that are due and payable, except only for
items that such Credit Party is currently contesting in good faith with adequate
reserves under GAAP, which contested items are described on Schedule 7.8.

 
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7.9.
Financial Statements and Reports

 
All financial statements and financial information relating to Credit Parties
that have been or may hereafter be delivered to Lender by Credit Parties are
accurate and complete (as of the date they were prepared) and all financial
statements have been prepared in accordance with GAAP consistently applied with
prior periods except for any normal quarter and year-end adjustments which may
be applied in future periods and for any changes in accounting methodology that
may have been applied since any prior period.  Credit Parties have no material
obligations or liabilities of any kind not disclosed in such financial
information or statements, and since the date of the most recent financial
statements submitted to Lender, there has not occurred any Material Adverse
Change or Liability Event or, to Credit Parties’ knowledge, any other event or
condition that could reasonably be expected to have a Material Adverse Change or
Liability Event.
 
 
7.10.
Compliance with Law

 
(a)           Each Credit Party has been and is currently in compliance, and is
presently taking and will continue to take all actions necessary to assure that
it shall, on or before each applicable compliance date and continuously
thereafter, comply with HIPAA.  Borrower has not received any notice from any
Governmental Authority that such Governmental Authority has imposed or intends
to impose any enforcement actions, fines or penalties for any failure or alleged
failure to comply with HIPAA or its implementing regulations. Each Credit Party
(i) is in compliance with all laws, statutes, rules, regulations, ordinances and
tariffs of any Governmental Authority applicable to such Credit Party and such
Credit Party’s business, assets or operations, including, without limitation,
ERISA and Healthcare Laws, and (ii) is not in violation of any order of any
Governmental Authority or other board or tribunal, except where noncompliance or
violation could not reasonably be expected to result in a Material Adverse
Change.  There is no event, fact, condition or circumstance which, with notice
or passage of time, or both, would constitute or result in any noncompliance
with, or any violation of, any of the foregoing, in each case except where
noncompliance or violation could not reasonably be expected to result in a
Material Adverse Change.  No Credit Party has received any notice that such
Credit Party is not in compliance in any respect with any of the requirements of
any of the foregoing.  No Credit Party has (a) engaged in any Prohibited
Transactions as defined in Section 406 of ERISA and Section 4975 of the Internal
Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder, (b) failed to meet any applicable minimum funding requirements under
Section 302 of ERISA in respect of its plans and no funding requirements have
been postponed or delayed, (c) any knowledge of any event or occurrence which
would cause the Pension Benefit Guaranty Corporation to institute proceedings
under Title IV of ERISA to terminate any of the employee benefit plans, (d) any
fiduciary responsibility under ERISA for investments with respect to any plan
existing for the benefit of Persons other than its employees or former
employees, or (e) withdrawn, completely or partially, from any multi-employer
pension plans so as to incur liability under the MultiEmployer Pension Plan
Amendments of 1980.  With respect to each Credit Party, there exists no event
described in Section 4043 of ERISA, excluding Subsections 4043(b)(2) and
4043(b)(3) thereof, for which the required thirty (30) day notice period has not
been waived.  Each Credit Party has maintained in all material respects all
records required to be maintained by the Joint Commission on Accreditation of
Healthcare Organizations, the Food and Drug Administration, Drug Enforcement
Agency and State Boards of Pharmacy and the federal and state Medicare and
Medicaid programs as required by the Healthcare Laws and, to the best knowledge
of each Credit Party, there are no presently existing circumstances which likely
would result in material violations of the Healthcare Laws.

 
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(b)           No Credit Party (i)  is a Person whose property or interest in
property is blocked or subject to blocking pursuant to Section  1 of Executive
Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg.
49079 (2001)), (ii) engages in any dealings or transactions prohibited by
Section 2 of such executive order, or is otherwise associated with any such
Person in any manner violative of such Section 2, or (iii) is a Person on the
list of Specially Designated Nationals and Blocked Persons or subject to the
limitations or prohibitions under any other OFAC regulation or executive order.
 
(c)           Each Credit Party is in compliance, in all material respects, with
the Patriot Act.
 
 
7.11.
Intellectual Property

 
Schedule 7.11 lists, as of the Closing Date, all (a) registered Intellectual
Property (including applications for registration) owned by Borrower and (b)
licenses of rights in Intellectual Property (other than non-customized mass
market licenses of rights in Intellectual Property) pursuant to which Borrower
licenses rights in Intellectual Property either from or to another Person,
whether on an exclusive or non-exclusive basis.
 
 
7.12.
Licenses and Permits; Labor

 
Each Credit Party is in compliance with and has all Permits and Intellectual
Property necessary or required by applicable law or Governmental Authority for
the operation of its businesses as currently conducted.  All of the foregoing is
in full force and effect and not in known conflict with the rights of
others.  No Credit Party is (i) in breach of or default under the provisions of
any of the foregoing, nor is there any event, fact, condition or circumstance
which, with notice or passage of time or both, would constitute or result in a
conflict, breach, default or event of default under, any of the foregoing which,
if not remedied within any applicable grace or cure period could reasonably be
expected to result in a Material Adverse Change, (ii) a party to or subject to
any agreement, instrument or restriction that is so unusual or burdensome that
it might have a Material Adverse Change, and/or (iii) and has not been, involved
in any labor dispute, strike, walkout or union organization which could
reasonably be expected to result in a Material Adverse Change.  Borrower has
obtained, and currently has, all Permits necessary in the generation of each
Account.
 
 
7.13.
No Default

 
There does not exist any Default or Event of Default.
 
 
7.14.
Disclosure

 
No Loan Document nor any other agreement, document, certificate, or statement
furnished to Lender by or on behalf of any Credit Party in connection with the
transactions contemplated by the Loan Documents, nor any representation or
warranty made any by Credit Party in any Loan Document, contains any untrue
statement of material fact or omits to state any fact necessary to make the
statements therein not materially misleading as of the date such statements were
delivered.  There is no fact known to any Credit Party which has not been
disclosed to Lender in writing which could reasonably be expected to result in a
Material Adverse Change.
 
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7.15.
Existing Indebtedness; Investments, Guarantees and Certain Contracts

Except as contemplated by the Loan Documents or as otherwise set forth on
Schedule 7.15A, no Credit Party (i) has any outstanding Indebtedness other than
Permitted Indebtedness, (ii) is not subject or party to any mortgage, note,
indenture, indemnity or guarantee of, with respect to or evidencing any
Indebtedness of any other Person, or (iii) owns or holds any equity or long-term
debt investments in, and has any outstanding advances to or any outstanding
guarantees for the obligations of, or any outstanding borrowings from, any
Person.  Each Credit Party has performed all material obligations required to be
performed by such Credit Party pursuant to or in connection with any items
listed on Schedule 7.15A and there has occurred no breach, default or event of
default under any document evidencing any such items or any fact, circumstance,
condition or event which, with the giving of notice or passage of time or both,
would constitute or result in a breach, default or event of default
thereunder.  Schedule 7.15B sets forth all Indebtedness with a maturity date
during the Term, and identifies such maturity date. No Credit Party has any
existing accrued and unpaid Indebtedness owing to any Governmental Authority or
any other governmental payor.
 
 
7.16.
Other Agreements

 
Except as set forth on Schedule 7.16, (i)there are no existing or proposed
agreements,  arrangements, understandings or transactions between any Credit
Party and any of such Credit Party’s officers, members, managers, directors,
stockholders, partners, other interest holders, employees or Affiliates or any
members of their respective immediate families, other than employment
agreements, option agreements, confidentiality agreements,
non-solicitation/non-competition agreements and other compensation, severance or
consulting arrangements with directors or officers in the ordinary course of
business that are on terms at least as favorable to such Credit Party as would
be the case in an arm’s length transaction between unrelated parties of equal
bargaining power and under which payments due from Credit Parties are not more
than $500,000 per annum per arrangement, (ii) none of the foregoing Persons are
directly or indirectly, indebted to or have any direct or indirect ownership,
partnership or voting interest in, to such  Credit Party’s knowledge, any
Affiliate of such Credit Party or any Person that competes with such Credit
Party (except that any such Persons may own stock in, but not exceeding two
percent (2%) of the outstanding capital stock of, any publicly traded company
that may compete with such Credit Party (iii) no director or officer of any
Credit Party has received any compensation of any kind in consideration or
otherwise of such Credit Party entering into this Agreement, and (iv) neither
Lender nor any of its Affiliates has paid or offered to pay any compensation to
any director or officer of any Credit Party in consideration of such Credit
Party’s entering into the Loan Documents.
 
 
7.17.
Insurance

 
Credit Parties have in full force and effect such insurance policies as are
customary in its industry and as may be required pursuant to Section 8.5
hereof.  All such insurance policies are listed and described on Schedule 7.17.
 
 
7.18.
Names; Location of Offices, Records and Collateral

 
During the preceding five years, Borrower has not conducted business under,
filed any tax return under, or used any name (whether corporate, partnership or
assumed) other than as shown on Schedule 7.18A.  Borrower is the sole owner of
all of its names listed on Schedule 7.18A, and any and all business done and
invoices issued in such names are Borrower’s sales, business and invoices.  Each
trade name of Borrower represents a division or trading style of
Borrower.  Borrower maintains its places of business and chief executive offices
only at the locations set forth on Schedule 7.18B, and all Accounts of Borrower
arise, originate and are located, and all of the Collateral and all books and
records in connection therewith or in any way relating thereto or evidence the
Collateral are located and shall be only, in and at such locations.  All of the
Collateral is located only in the continental United States.  There are no
facts, events or occurrences which in any way impair the validity or
enforceability thereof or tend to reduce the amount payable thereunder from the
face amount of the claim or invoice and statements delivered to Lender with
respect thereto.  To the best of Credit Parties’ knowledge, (A) the Account
Debtor thereunder had the capacity to contract at the time any contract or other
document giving rise thereto was executed, (B) such Account Debtor is solvent,
and, (C) subject to the final sentence of this Section 7.18, there are no
proceedings or actions which are threatened or pending against any Account
Debtor thereunder which might result in any Material Adverse Change in such
Account Debtor’s financial condition or the collectability thereof.  Borrower
has obtained and currently has all Permits necessary in the generation of each
Account of Borrower and Borrower has disclosed to Lender on each Borrowing
Certificate (a “Denial Disclosure”) the amount of all Accounts of Borrower for
which Medicare is the Account Debtor and for which payment has been denied and
subsequently appealed pursuant to the procedure described in the definition of
Eligible Accounts hereof, and Borrower is pursuing all available appeals in
respect of such Accounts, provided, that, Borrower shall not be required to make
a Denial Disclosure for up to $50,000 in the aggregate that remain uncorrected
at any time for claims denied due to coding and clerical errors for the period
covered by such Borrowing Certificate.

 
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7.19.
Lien Perfection and Priority

 
Upon the execution and delivery of this Agreement, and upon the proper filing of
the necessary financing statements without any further action, Lender will have
a good, valid and perfected first priority Lien and security interest in the
Collateral, subject to no transfer or other restrictions or Liens of any kind in
favor of any other Person except for Permitted Liens.  No financing statement
relating to any of the Collateral is on file in any public office except those
(i) on behalf of Lender, and (ii) in connection with Permitted Liens.
 
 
7.20.
Investment Company Act

 
No Credit Party is required to register as an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.
 
 
7.21.
Regulations T, U and X

 
No Credit Party is engaged in the business of extending credit for the purpose
of purchasing or carrying any “margin stock” or “margin security” (within the
meaning of Regulations T, U or X issued by the Board of Governors of the Federal
Reserve System), and no proceeds of the Loans will be used to purchase or carry
any margin stock or margin security or to extend credit to others for the
purpose of purchasing or carrying any margin stock or margin security.
 
 
7.22.
Survival

 
Each Credit Party makes the representations and warranties contained herein with
the knowledge and intention that Lender is relying and will rely thereon.  All
such representations and warranties will survive the execution and delivery of
this Agreement and the making of the Advances under the Revolving Facility.
 
8.
AFFIRMATIVE COVENANTS

 
Each Credit Party, jointly and severally, covenants and agrees that, until all
of the Obligations have been fully performed and Paid in Full, and this
Agreement has terminated:
 
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8.1.
Financial Statements, Borrowing Certificate, Financial Reports and Other
Information

(a)           Financial Reports.  Credit Parties shall furnish to Lender (i) as
soon as available and in any event when submitted to the Securities and Exchange
Commission but no later than one hundred and five (105) calendar days after the
end of each fiscal year of Credit Parties, audited annual consolidated and
consolidating financial statements of Credit Parties, including the notes
thereto, consisting of a consolidated and consolidating balance sheet at the end
of such completed fiscal year and the related consolidated and consolidating
statements of income, retained earnings, cash flows and owners’ equity for such
completed fiscal year, which financial statements shall be prepared by an
independent certified public accounting firm satisfactory to Lender and
accompanied by related management letters, if available; provided that no going
concern opinion shall be issued in connection with such financial statements,
(ii) as soon as available and in any event within thirty calendar days after the
end of each calendar month (fifty calendar days after the end of any month which
coincides with the end of a fiscal quarter and sixty days after the end of any
month which coincides with the end of a fiscal year), unaudited financial
statements of Credit Parties consisting of a balance sheet and statements of
income and cash flows as of  the end of the immediately preceding calendar
month. Monthly financial statements provided to the Lender which have been
internally prepared by Borrower for any month which corresponds with the end of
a fiscal quarter or fiscal year will be subject to further adjustments by the
Credit Parties’ outside auditors before being finalized.  All such financial
statements shall be prepared in accordance with GAAP consistently applied with
prior periods except for any normal quarter and year-end adjustments which may
be applied in future periods and for any changes in accounting methodology that
may have been applied since any prior period.  With each such financial
statement, Credit Parties shall also deliver a certificate of its chief
financial officer or principal accounting officer in substantially the form of
Exhibit B hereto (a “Compliance Certificate”) stating that (A) such person has
reviewed the relevant terms of the Loan Documents and the condition of Credit
Parties, (B) no Default or Event of Default has occurred or is continuing, or,
if any of the foregoing has occurred or is continuing, specifying the nature and
status and period of existence thereof and the steps taken or proposed to be
taken with respect thereto, and (C) Credit Parties are in compliance with all
financial covenants attached as Annex I hereto.  Such certificate shall be
accompanied by the calculations necessary to show compliance with the financial
covenants in a form satisfactory to Lender and (iii) simultaneously with the
delivery of monthly financial statements for any given month, an accounts
payable aging schedule showing a reconciliation to the amounts reported in the
monthly financial statements.
 
(b)           Other Materials.  Credit Parties shall furnish to Lender as soon
as available, and in any event within ten calendar days after the preparation or
issuance thereof or at such other time as set forth below:  (i) copies of such
financial statements (other than those required to be delivered pursuant to
Section 8.1(a)) prepared by, for or on behalf of Credit Parties and any other
notes, reports and other materials related thereto, including, without
limitation, any pro forma financial statements, (ii) any reports, returns,
information, notices and other materials that any Credit Party shall send to its
stockholders, members, partners or other equity owners at any time unless such
materials are publicly available at www.sec.gov, (iii) all Medicare and Medicaid
cost reports and other documents and materials filed by Borrower and any other
reports, materials or other information regarding or otherwise relating to
Medicaid or Medicare prepared by, for or on behalf of Borrower other than
internal working analyses, (iv) simultaneously with the provision of any monthly
financial statements provided pursuant to Section 8(a) above to the extent such
information has not been already reflected in a Borrowing Certificate submitted
to Lender: (A) a report of the status of all payments, denials and appeals of
all Medicare and Medicaid Accounts (unless such denials were due to clerical
errors in an amount which does not require a Denial Disclosure, and (B) a sales
and collection report and accounts receivable aging schedule, including a report
of sales, credits issued and collections received, all such reports showing a
reconciliation to the amounts reported in the monthly financial statements, (v)
promptly upon receipt thereof, copies of any reports submitted to a Borrower by
its independent accountants in connection with any interim audit of the books of
such Person or any of its Affiliates and copies of each management control
letter provided by such independent accountants, (vi) within thirty (30)
calendar days after the execution thereof, a copy of any contracts with the
federal government or with a Governmental Authority in the State of New York,
Vermont or Washington and (vii) such additional information, documents,
statements, reports and other materials as Lender may reasonably request from a
credit or security perspective or otherwise from time to time.

 
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(c)           Notices.  Credit Parties shall promptly, and in any event within
four calendar days after Borrower or any authorized officer of Borrower obtains
knowledge thereof, notify Lender in writing of (i) any pending or threatened
litigation, suit, investigation, arbitration, dispute resolution proceeding or
administrative proceeding brought against or initiated by Borrower or otherwise
affecting or involving or relating to Borrower or any of its property or assets
to the extent (A) the amount in controversy exceeds $125,000.00, or (B) to the
extent any of the foregoing seeks injunctive relief (except for actions in which
Borrower is seeking injunctive relief against former employees of Borrower in
order to enforce a confidentiality, non-solicitation, non-competition agreement
or other similar agreement), (ii) any Default or Event of Default, which notice
shall specify the nature and status thereof, the period of existence thereof and
what action is proposed to be taken with respect thereto, (iii) any other
development, event, fact, circumstance or condition that would reasonably be
expected to result in a Material Adverse Change, in each case describing the
nature and status thereof and the action proposed to be taken with respect
thereto, (iv) any notice received by a Borrower from any payor of a claim, suit
or other action such payor has, claims or has filed against such Borrower, (v)
any matter(s) affecting the value, enforceability or collectability of any of
the Collateral, including, without limitation, claims or disputes in the amount
of $100,000.00 or more, singly or in the aggregate, in existence at any one
time, (vi) any notice given by Borrower to any other lender of such Borrower and
shall furnish to Lender a copy of such notice, (vii) receipt of any notice or
request from any Governmental Authority or governmental payor regarding any
liability or claim of liability in excess of $100,000.00 singly or in the
aggregate, (viii) receipt of any notice by Borrower regarding termination of any
manager of any facility owned, operated or leased by such Borrower, (ix) if any
Account becomes evidenced or secured by an Instrument or Chattel Paper and (x)
any pending, threatened or actual investigation or survey of Borrower, its
directors, officers or managing employees by any of the Medicare, Medicaid or
CHAMPUS/TRICARE programs, or any other third party payor programs, (xi) Borrower
becoming a party to a Corporate Integrity Agreement with the Office of Inspector
General of the Department of Health and Human Services, (xii) Borrower becoming
subject to reporting obligations pursuant to any settlement agreement entered
into with any Governmental Authority, (xiii) Borrower becoming the subject of
any government payor program investigation conducted by any federal or state
enforcement agency, (xiv) Borrower becoming a defendant in any qui tam/False
Claims Act litigation, (xv) Borrower being served with or received any search
warrant, subpoena, civil investigative demand or contact letter by or from any
federal or state enforcement agency relating to an investigation or (xvi)
Borrower becoming subject to any written complaint filed with or submitted to
any Governmental Authority having jurisdiction over such Borrower or filed with
or submitted to such Borrower pursuant to such Borrower’s policies relating to
the filing or submissions of such types of complaints, from employees,
independent contractors, vendors, physicians, or any other person that would
indicate that such Borrower has violated any law, regulation or law.
 
(d)           Consents.  Credit Parties shall use their best efforts to obtain
and deliver from time to time all required consents, approvals and agreements
from such third parties as Lender shall determine are necessary or desirable in
its Permitted Discretion, each of which must be satisfactory to Lender in its
Permitted Discretion and acceptable to such third party, with respect to (i) the
Loan Documents and the transactions contemplated thereby, (ii) claims against a
Borrower or the Collateral, and/or (iii) any agreements, consents, documents or
instruments to which Borrower is a party or by which any properties or assets of
Borrower or any of the Collateral is or are bound or subject, including, without
limitation, Landlord Waivers and Consents with respect to leases.

 
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(e)           Operating Budget.  Credit Parties shall furnish to Lender on or
prior to the Closing Date and for each fiscal year of Credit Parties prior to
the commencement of such fiscal year, a draft of consolidated and consolidating
month by month projected operating budgets, annual projections, profit and loss
statements, balance sheets and cash flow reports of and for Credit Parties for
such upcoming fiscal year (including an income statement for each month and a
balance sheet as at the end of the last month in each fiscal quarter), in each
case prepared in accordance with GAAP consistently applied with prior periods,
provided, that, (A) such Budget as submitted to the Board of Directors of
Borrower for approval shall be provided to Lender by Borrower not less than
sixty (60) days after commencement of such fiscal year and (B) a final version
of the budget as approved by the Board of Directors of Borrower for each fiscal
year shall be provided to Lender by Borrower not less than ten (10) calendar
days after the approval of such budget or any revision thereof by the Board of
Directors.
 
(f)           Ancillary Materials to be Furnished Upon Request.  Upon written
request by Lender, Credit Parties shall use its best efforts to furnish to
Lender within ten (10) calendar days after the request therefore the following
kinds of information: (1) any other reports, materials or other information
regarding or otherwise relating to Medicaid or Medicare prepared by, for, or on
behalf of, Borrower or any of its Subsidiaries, including, without limitation,
(A) copies of licenses and permits required by any applicable federal, state,
foreign or local law, statute, ordinance or regulation or Governmental Authority
for the operation of its business (B) Medicare and Medicaid provider numbers and
agreements, (C) state surveys pertaining to any healthcare facility operated or
owned or leased by Borrower or any of its Affiliates or Subsidiaries, (D)
participating agreements relating to medical plans (ii) copies of material
licenses and permits required by applicable federal, state, foreign or local
law, statute, ordinance or regulation or Governmental Authority for the
Operation of Borrower’s business.
 
 
8.2.
[Reserved]

 
 
8.3.
Conduct of Business and Maintenance of Existence and Assets

 
Borrower shall (i) conduct its business in accordance with good business
practices customary to the industry, (ii) engage principally in the same or
similar lines of business substantially as heretofore conducted, (iii) collect
its Accounts in the ordinary course of business, (iv) maintain all of its
material properties, assets and equipment used or useful in its business in good
repair, working order and condition (normal wear and tear excepted and except as
may be disposed of in the ordinary course of business and in accordance with the
terms of the Loan Documents and otherwise as determined by such Borrower using
commercially reasonable business judgment), (v) from time to time to make all
necessary or desirable repairs, renewals and replacements thereof, as determined
by such Borrower using commercially reasonable business judgment, (vi) maintain
and keep in full force and effect its existence and all material Permits and
qualifications to do business and good standing in each jurisdiction in which
the ownership or lease of property or the nature of its business makes such
Permits or qualification necessary and in which failure to maintain such Permits
or qualification could reasonably be expected to result in a Material Adverse
Change; and (vii) remain in good standing and maintain operations in all
jurisdictions in which currently located.
 
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8.4.
Compliance with Legal and Other Obligations

Each Credit Party shall (i) comply with all laws, statutes, rules, regulations,
ordinances and tariffs of all Governmental Authorities applicable to it or its
business, assets or operations, including applicable requirements which where
promulgated pursuant to HIPAA (ii) pay all taxes, assessments, fees,
governmental charges, claims for labor, supplies, rent and all other obligations
or liabilities of any kind, except liabilities being contested in good faith and
against which adequate reserves have been established, (iii) perform in
accordance with its terms each contract, agreement or other arrangement  to
which it is a party or by which it or any of the Collateral is bound, except
where the failure to comply, pay or perform could not reasonably be expected to
result in a Material Adverse Change, (iv) maintain and comply with all Permits
necessary to conduct its business and comply with any new or additional
requirements that may be imposed on it or its business, and (v) properly file
all Medicaid, Medicare and CHAMPUS/TRICARE cost reports.  Without limiting the
foregoing, Borrower is, and while this Agreement shall remain in effect shall
remain, qualified for participation in the Medicare, Medicaid and
CHAMPUS/TRICARE programs; Borrower has, and while this Agreement shall remain in
effect shall maintain, a current and valid provider contract with such programs;
Borrower is, and while this Agreement shall remain in effect shall remain, in
compliance with the conditions of participation in such programs; and Borrower
has, and while this Agreement shall remain in effect shall maintain, all
approvals or qualification necessary for capital reimbursement for any facility
operated by Borrower.  While this Agreement shall remain in effect, all billing
practices of Borrower with respect to any facility operated by Borrower and all
third party payors, including the Medicare, Medicaid and CHAMPUS/TRICARE
programs and private insurance companies, shall remain in compliance with all
applicable laws, regulations and policies of such third party payors and the
Medicare, Medicaid and CHAMPUS/TRICARE programs. 
 
 
8.5.
Insurance

 
Borrower shall keep (i) all of its insurable properties and assets adequately
insured in all material respects against losses, damages and hazards as are
customarily insured against by businesses engaging in similar activities or
owning similar assets or properties and at least the minimum amount required by
applicable law, including, without limitation, medical malpractice and
professional liability insurance, as applicable; (ii) maintain general public
liability insurance at all times against liability on account of damage to
persons and property having such limits, deductibles, exclusions and
co-insurance and other provisions as are customary for a business engaged in
activities similar to those of Credit Parties; and (iii) maintain insurance
under all applicable workers’ compensation laws; all of the foregoing insurance
policies to (A) be satisfactory in form and substance to Lender, (B) expressly
provide that they cannot be amended to reduce coverage or canceled without
thirty (30) calendar days prior written notice to Lender and that they inure to
the benefit of Lender notwithstanding any action or omission or negligence of or
by such Credit Party or any insured thereunder.  With respect to property
insurance covering business interruption, accounts receivable and the books and
records in connection therewith, Lender shall be named as loss payee and
additional insured and with respect to general liability insurance Lender shall
be named as additional insured.
 
 
8.6.
Books and Records

 
Each Credit Party shall (i) keep complete and accurate books of record and
account in accordance with commercially reasonable business practices in which
true and correct entries are made of all of its and their dealings and
transactions in all material respects; and (ii) set up and maintain on its books
such reserves as may be required by GAAP with respect to doubtful accounts and
all taxes, assessments, charges, levies and claims and with respect to its
business, and include such reserves in its quarterly as well as year end
financial statements.
 
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8.7.
Inspections; Periodic Audits and Reappraisals

Each Credit Party shall permit the representatives of Lender, at the expense of
Credit Parties, from time to time during normal business hours, but no more
frequently than three times per year so long as no Default or Event of Default
occurs and is continuing upon reasonable notice, to (i) visit and inspect any of
its offices or properties or any other place where Collateral is located to
inspect the Collateral and/or to examine or audit all of its books of account,
records, reports and other papers, (ii) make copies and extracts therefrom, and
(iii) discuss its business, operations, prospects, properties, assets,
liabilities, condition and/or Accounts with its officers and independent public
accountants (and by this provision such officers and accountants are authorized
to discuss the foregoing) upon seven (7) Business Days prior written notice;
provided, however, that (A) Borrower shall not be obligated to reimburse Lender
for more than three (3) visits, inspections, examinations and audits under the
foregoing clause (i) conducted during any fiscal year while no Default or Event
of Default exists at a cost of $850 per auditor per day plus all out-of-pocket
expenses of Lender (it being agreed and understood that the Borrower shall be
Obligated to reimburse Lender for all such visits, inspections, examinations and
audits conducted while any Default or Event of Default exists); and (B) no
notice shall be required to do any of the foregoing if any Event of Default has
occurred and is continuing.
 
 
8.8.
Further Assurances; Post-Closing

 
At Credit Parties’ cost and expense, each Credit Party shall (i) within five
Business Days after Lender’s request, take such further actions, obtain such
consents and approvals and duly execute and deliver such further agreements,
assignments, instructions or documents as Lender may deem necessary in its
Permitted Discretion with respect to furtherance of the purposes, terms and
conditions of the Loan Documents and the consummation of the transactions
contemplated thereby, whether before, at or after the performance or
consummation of the transactions contemplated hereby or the occurrence of a
Default or Event of Default, (ii) without limiting and notwithstanding any other
provision of any Loan Document, execute and deliver, or cause to be executed and
delivered, such agreements and documents, and take or cause to be taken such
actions, and otherwise perform, observe and comply with such obligations, as are
set forth on Schedule 8.8, and (iii) upon the exercise by Lender or any of its
Affiliates of any power, right, privilege or remedy pursuant to any Loan
Document or under applicable law or at equity which requires any consent,
approval, registration, qualification or authorization of any Governmental
Authority, execute and deliver, or cause the execution and delivery of, all
applications, certificates, instruments and other documents requested by Lender
in its Permitted Discretion that may be so required for such consent, approval,
registration, qualification or authorization.  Without limiting the foregoing,
upon the exercise by Lender or any of its Affiliates of any right or remedy
under any Loan Document which requires any consent, approval or registration
with, consent, qualification or authorization by, any Person, Credit Parties
shall execute and deliver, or cause the execution and delivery of, all
applications, certificates, instruments and other documents that Lender or its
Affiliate may be required to obtain for such consent, approval, registration,
qualification or authorization.
 
 
8.9.
Use of Proceeds

 
Borrower shall use the proceeds from the Revolving Facility only for the
purposes set forth in the first “WHEREAS” clause of this Agreement.
 
 
8.10.
[Reserved]

 
 
8.11.
[Reserved]

 
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8.12.
Taxes and Other Charges

 
(a)           All payments and reimbursements to Lender made under any Loan
Document shall be free and clear of and without deduction for all taxes, levies,
imposts, deductions, assessments, charges or withholdings, and all liabilities
with respect thereto of any nature whatsoever, excluding taxes to the extent
imposed on Lender’s net income.  If any Credit Party shall be required by law to
deduct any such amounts from or in respect of any sum payable under any Loan
Document to Lender, then the sum payable to Lender shall be increased as may be
necessary so that, after making all required deductions, Lender receives an
amount equal to the sum it would have received had no such deductions been
made.  Notwithstanding any other provision of any Loan Document, if at any time
after the Closing (i) any change in any existing law, regulation, treaty or
directive or in the interpretation or application thereof, (ii) any new law,
regulation, treaty or directive enacted or any interpretation or application
thereof, or (iii) compliance by Lender with any new request or new directive
(whether or not having the force of law) from any Governmental Authority after
the date of Closing:  (A) subjects Lender to any tax, levy, impost, deduction,
assessment, charge or withholding of any kind whatsoever directly arising from
any Loan Document or from payments directly received by the Lender from any
Credit Party pursuant to the Loan Documents (except for net income taxes,
franchise taxes imposed in lieu of net income taxes, and any other taxes on the
general affairs of the Lender which may be imposed generally by federal, state
or local taxing authorities with respect to interest or commitment fees or other
fees payable hereunder or changes in the rate of tax on the overall net income
of Lender), or (B) imposes on Lender any other condition or increased cost
directly in connection with the transactions contemplated thereby or
participations therein (specifically excluding any general costs imposed on
Lender by any government entity that are not directly related to the obligations
hereunder); and the result of any of the foregoing is to directly increase the
cost to Lender of making or continuing any Loan hereunder or to reduce any
amount receivable hereunder, then, in any such case, Credit Parties shall
promptly, and in any event within ten (10) Business days of Credit Party’s
receipt of notice from Lender, pay to Lender any additional amounts necessary to
compensate Lender, on an after-tax basis, for such additional cost or reduced
amount as determined by Lender.  If Lender becomes entitled to claim any
additional amounts pursuant to this Section 8.12 it shall promptly notify Credit
Parties of the event by reason of which Lender has become so entitled and
contain a calculation of such additional amounts that are proposed to be due and
payable and shall answer any questions and provide any explanation reasonably
requested by Borrower in good faith to understand the nature and purported
reason for such additional amounts.
 
(b)           Credit Parties shall promptly, and in any event within five
Business Days after any Credit Party or any authorized officer of any Credit
Party obtains knowledge thereof, notify Lender in writing of any oral or written
communication from any taxing authority or otherwise with respect to any (i) tax
investigations, relating to such Credit Party directly, or relating to any
consolidated tax return which was filed on behalf of such Credit Party, (ii)
notices of tax assessment or possible tax assessment, (iii) years that are
designated open pending tax examination or audit, and (iv) information that
could give rise to any tax liability or assessment.
 
 
8.13.
Payroll Taxes

 
Without limiting or being limited by any other provision of any Loan Document,
each Credit Party at all times shall retain and use a Person acceptable to
Lender to process, manage and pay its payroll taxes and shall cause to be
delivered to Lender within ten calendar days after the end of each calendar
month a report of its payroll taxes for the immediately preceding calendar month
and evidence of payment thereof.  Notwithstanding the foregoing, being copied on
Borrower’s payroll reports within the period specified in the preceding sentence
shall satisfy this requirement; provided that such payroll report sets forth the
status of payroll taxes.
 
 
8.14.
New Subsidiaries

 
If at any time after the Closing Date Borrower shall form or acquire any new
Subsidiary, Borrower shall promptly, and in any event not later than fifteen
calendar days after the creation or acquisition of such Subsidiary or such
longer period as Lender may determine in writing, execute, and cause such new
Subsidiary to execute, and deliver to Lender such joinder agreements and
amendments to this Agreement and the other Loan Documents, including executing
and delivering allonges to any Notes to the extent issued hereunder in form and
substance satisfactory to Lender and providing such other documentation as
Lender may reasonably request, including, without limitation, UCC searches, as
applicable, and filings, legal opinions and corporate authorization
documentation, and to take such other actions in each case as Lender deems
necessary or advisable to (a) join and make such new Subsidiary a co-Borrower
hereunder and thereunder, subject to all the rights and benefits and obligations
and burdens of a Borrower hereunder, (b) grant to Lender a perfected first
priority security interest in the Collateral of such new Subsidiary subject to
no Liens other than the Permitted Liens.
 
 
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8.15.
[Reserved]

 
9.
NEGATIVE COVENANTS

 
Each Credit Party, jointly and severally, covenants and agrees that, until the
indefeasible payment in full in cash, and the full performance of all, of the
Obligations and termination of this Agreement:
 
 
9.1.
Financial Covenants

 
Borrower shall not violate the financial covenants set forth on Annex I to this
Agreement, which is incorporated herein and made a part hereof.
 
 
9.2.
Permitted Indebtedness

 
Borrower shall not create, incur, assume or suffer to exist any Indebtedness,
other than Permitted Indebtedness.  Borrower shall not make prepayments on any
existing or future Indebtedness to any Person other than to Lender or to the
extent specifically permitted by this Agreement or any subsequent agreement
between Borrower and Lender.
 
 
9.3.
Permitted Liens

 
Borrower shall not create, incur, assume or suffer to exist any Lien upon, in or
against, or pledge of, any of the Collateral or any of its other properties or
assets of Borrower including but not limited to Deposit Accounts, cash or other
money and Investment Property, whether now owned or hereafter acquired, except
Permitted Liens.
 
 
9.4.
Investments; New Facilities or Collateral; Subsidiaries

 
Except as set forth on Schedule 9.4, Borrower shall not, directly or indirectly,
enter into any agreement to, (i) purchase, own, hold, invest in or otherwise
acquire obligations or stock or securities of, or any other interest in, or all
or substantially all of the assets of, any Person or any joint venture, or
(ii) make or permit to exist any loans, advances or guarantees to or for the
benefit of any Person or assume, guarantee, endorse, contingently agree to
purchase or otherwise become liable for or upon or incur any obligation of any
Person (other than those created by the Loan Documents and Permitted
Indebtedness and other than (A) trade credit extended in the ordinary course of
business, (B) advances for business travel and similar temporary advances made
in the ordinary course of business to officers, directors and employees, (C)
investments in Cash Equivalents and (D) the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business).  Borrower shall not, directly or indirectly, purchase, own,
operate, hold, invest in or otherwise acquire any facility, property or assets
or any Collateral that is not located at the locations set forth on Schedule
7.18B unless Borrower shall provide to Lender at least ten (10) Business Days
prior written notice.  Borrower shall not have any Subsidiaries other than those
Subsidiaries, if any, existing at Closing and set forth on Schedule 7.3., unless
Borrower and new Subsidiary fully complies with Section 8.14 hereof.
 
Notwithstanding the foregoing, Borrower shall be permitted to make Permitted
Acquisitions with Lender’s prior written consent; provided, however, that the
consent of Lender shall not be required if the cash consideration paid in
respect of the Permitted Acquisition does not exceed $1,000,000 per acquisition
or $2,000,000 in the aggregate during the Term and Borrower fully complies with
Section 8.14 hereof.
 

 
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9.5.
Dividends; Redemptions

 
Borrower shall not (i) declare, pay or make any Distribution, (ii) apply any of
its funds, property or assets to the acquisition, redemption or other retirement
of any Capital Stock, (iii) otherwise make any payments or Distributions to any
stockholder, member, partner or other equity owner in such Person’s capacity as
such, or (iv) make any payment of any Management or Service Fee; provided
however, that absent the occurrence and continuation of a Default or Event of
Default, and if a Default or Event of Default would not arise therefrom,
Borrower may: (x) make Permitted Distributions, (y) declare, pay or make
Distributions payable in its stock, or split-ups or reclassifications of its
stock; and (z) redeem its capital stock from terminated employees pursuant to,
but only to the extent required under, the terms of the related employment
agreements.
 
 
9.6.
Transactions with Affiliates

 
Except as set forth on Schedule 9.6, Borrower shall not enter into or consummate
any transaction of any kind with any of its Affiliates or Guarantor or any of
their respective Affiliates other than: (i) salary, bonus, severance, employee
stock option and other compensation, consulting and employment arrangements with
directors or officers in the ordinary course of business, provided, that, no
payment of any cash bonus or severance shall be permitted if a Default or Event
of Default has occurred and remains in effect or would be caused by or result
from such payment, and no payment of any severance shall be made, individually
or in the aggregate, in excess of $500,000 in any twelve (12) month period, (ii)
Distributions permitted pursuant to Section 9.5, and (iii) the making of
payments permitted under and pursuant to a written agreement entered into by and
between Borrower and one or more of its Affiliates that reflects and constitutes
a transaction on overall terms at least as favorable to Borrower as would be the
case in an arm’s-length transaction between unrelated parties of equal
bargaining power; provided, that, notwithstanding the foregoing Borrower shall
not (Y) enter into or consummate any transaction or agreement pursuant to which
it becomes a party to any mortgage, note, indenture or guarantee evidencing any
Indebtedness of any of its Affiliates or otherwise to become responsible or
liable, as a guarantor, surety or otherwise, pursuant to agreement for any
Indebtedness of any such Affiliate, or (Z) make any payments to any of its
Affiliates in excess of $100,000 in the aggregate during any consecutive twelve
calendar month period without the prior written consent of Lender (other than
payments permitted pursuant to clause (i) or (ii) above).
 
 
9.7.
Charter Documents; Fiscal Year; Dissolution; Use of Proceeds

 
No Credit Party shall (i) amend, modify, restate or change its certificate of
incorporation or formation or bylaws or similar charter documents without the
prior written consent of the Lender, which consent shall not be unreasonably
withheld, (ii) change its fiscal year unless such Credit Party demonstrates to
Lender’s satisfaction compliance with the covenants contained herein for both
the fiscal year in effect prior to any change and the new fiscal year period by
delivery to Lender of appropriate interim and annual pro forma, historical and
current compliance certificates for such periods and such other information as
Lender may reasonably request, (iii) amend, alter or suspend or terminate or
make provisional in any material way, any material Permit without the prior
written consent of Lender, which consent shall not be unreasonably
withheld.  Notwithstanding the foregoing, the Lender acknowledges that the
following will not be deemed to be a violation of this covenant: (A) any
suspension of any license or Permit in any state caused by the departure of any
scientific or medical personnel, and (B) any amendment of a license or permit in
the ordinary course of business to enable Borrower to pursue additional
opportunities; provided that neither (A) nor (B) shall result in the impairment
of Borrower’s ability to collect any Account or account receivable, (iv) wind
up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer
any proceedings seeking or that would result in any of the foregoing, (v) use
any proceeds of any Advance for “purchasing” or “carrying” “margin stock” as
defined in Regulations U, T or X of the Board of Governors of the Federal
Reserve System, or (vi) without providing at least thirty calendar days prior
written notice to Lender, change its name or organizational identification
number, if it has one.
 

 
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9.8.
Truth of Statements

 
No Credit Party shall (a) furnish to Lender any certificate or other document
created or produced by Borrower that contains any untrue statement of a material
fact or that omits to state a material fact necessary to make it not misleading
in light of the circumstances under which it was furnished as of the date it was
provided to Lender; and (b) furnish any document created or produced by a third
party that Borrower knows (A) contains any untrue statement of a material fact
or (B) omits to state a material fact necessary to make it not misleading in
light of the circumstances under which it was furnished.
 
 
9.9.
IRS Form 8821

 
No Credit Party shall alter, amend, restate, or otherwise modify, or withdraw,
terminate or re-file the IRS Form 8821 required to be delivered pursuant to the
Conditions Precedent in Section 6.1 hereof.
 
 
9.10.
Transfer of Assets

 
Notwithstanding any other provision of this Agreement or any other Loan
Document, Borrower shall not, nor shall it permit any of its Subsidiaries to,
sell, lease, transfer, assign or otherwise dispose of any interest in any
properties or assets (other than obsolete fixed assets or excess fixed assets no
longer needed in the conduct of the business in the ordinary course of business
and sales of Inventory in the ordinary course of business), or agree to do any
of the foregoing at any future time, except that:
 
(a)           Borrower may lease or sublease (as lessor or sub-lessor) real or
personal property  pursuant to a true lease not constituting Indebtedness and
not entered into as part of a sale and leaseback transaction, in each case in
the ordinary course of business and which could not reasonably be expected to
result in a Material Adverse Effect.
 
(b)           Borrower may arrange for warehousing, fulfillment or storage of
Inventory at locations not owned or leased by Borrower, in each case in the
ordinary course of business;
 
(c)           Borrower may license or sublicense Intellectual Property to third
parties in the ordinary course of business; provided, that, such licenses or
sublicenses shall not interfere with the business or other operations of
Borrower; and
 
(d)           Borrower may consummate such other sales or dispositions of
property or assets in excess of $50,000 (including any sale or transfer or
disposition of all or any part of its assets and thereupon and within one year
thereafter rent or lease the assets so sold or transferred) only to the extent
prior written notice has been given to Lender and to the extent Lender has given
its prior written consent thereto, subject in each case to such conditions as
may be set forth in such consent.
 

 
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9.11.
OFAC

 
(a)           No Credit Party nor any Subsidiary of any Credit Party (i) will be
or become a Person whose Property or interests in Property are blocked or
subject to blocking pursuant to Section  1 of Executive Order 13224 of September
23, 2001 Blocking property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit or Support Terrorism (66 Fed. Reg. 49079(2001), (ii) will
engage in any dealings or transactions prohibited by Section 2 of such executive
order, or otherwise be associated with any such Person in any manner violative
of Section 2 of such executive order, or (iii) otherwise will become a Person on
the list of Specially Designated Nationals and Blocked Persons or subject to the
limitations or prohibitions under any other OFAC regulation or executive order.
 
 
9.12.
Payroll Accounts

 
Borrower shall not maintain a greater balance in any payroll account than is
necessary to support Borrower’s current payroll and payroll for one additional
payroll cycle (bi-monthly or weekly as applicable).
 
10.
EVENTS OF DEFAULT

 
The occurrence of any one or more of the following shall constitute an “Event of
Default:”
 
(a)           any Credit Party shall fail to pay any amount on the Obligations
when due (whether on any payment date, at maturity, by reason of acceleration,
by notice of intention to prepay, by required prepayment or otherwise);
 
(b)           any representation, statement or warranty made or deemed made by
any Credit Party in any Loan Document or in any other certificate, document or
report delivered in conjunction with any Loan Document, shall not be true and
correct in all material respects or shall have been false or misleading in any
material respect on the date when made or deemed to have been made;
 
(c)           any Credit Party or other party thereto other than Lender shall be
in violation, breach or default of, or shall fail to perform, observe or comply
with any covenant, obligation or agreement set forth in, any Loan Document and
such violation, breach, default or failure shall not be cured within the
applicable period set forth in the applicable Loan Document; provided that, with
respect to the affirmative covenants set forth in Article VIII (other than
Sections 8.1(c), 8.3, 8.8, 8.9, for which there shall be no cure period and
Section 8.5 for which there shall be a five (5) Business Day cure period), there
shall be a thirty calendar day cure period commencing from the earlier of
(i) Receipt by such Person of written notice of such breach, default, violation
or failure, and (ii) the time at which such Person or any authorized officer
thereof knew or became aware, or should have known or been aware, of such
failure, violation, breach or default, but no Advances will be made during the
cure period;
 
(d)           (i) any of the Loan Documents ceases to be in full force and
effect, or (ii) any Lien created thereunder ceases to constitute a valid
perfected first priority Lien on the Collateral in accordance with the terms
thereof, or Lender ceases to have a valid perfected first priority security
interest in any of the Collateral pledged to Lender pursuant to the Loan
Documents; provided, that, with respect to non-material breaches or violations
that constitute Events of Default under clause (ii) of this Section 10(d), there
shall be a five (5) Business Day cure period commencing from the earlier of
(A) Receipt by the applicable Person of written notice of such breach or
violation or of any event, fact or circumstance constituting or resulting in any
of the foregoing, and (B) the time at which such Person or any authorized
officer thereof knew or became aware, or should have known or been aware, of
such breach or violation and resulting Event of Default or of any event, fact or
circumstance constituting or resulting in any of the foregoing;
 
 
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(e)           one or more tax judgments, decrees, arbitrations or other binding
award is rendered against any Credit Party in an amount in excess of $25,000
individually or $75,000 in the aggregate in any consecutive 12-month period,
which is/are not satisfied, stayed, vacated or discharged of record within
thirty calendar days of being rendered but no Advances will be made before the
judgment is stayed, vacated or discharged unless otherwise agreed to in writing
by Lender except for the US Labs Award;
 
(f)           (i) any default occurs, which is not cured or waived, (x) in the
payment when due of any amount with respect to any Indebtedness (other than the
Obligations) of any Credit Party having an aggregate principal balance of at
least $100,000, (y) in the performance, observance or fulfillment of any
provision contained in any agreement, contract, document or instrument to which
any Credit Party is a party or to which any of their properties or assets are
subject or bound under or pursuant to which any Indebtedness having an aggregate
principal balance of at least $100,000 was issued, created, assumed, guaranteed
or secured and such default continues for more than any applicable grace period
or permits the holder of any Indebtedness to accelerate the maturity thereof, or
(ii) any Indebtedness of any Credit Party is declared to be due and payable or
is required to be prepaid (other than by a regularly scheduled payment) prior to
the stated maturity thereof, or any obligation of such Person for the payment of
Indebtedness (other than the Obligations) is not paid when due or within any
applicable grace period, or any such obligation becomes or is declared to be due
and payable before the expressed maturity thereof, or there occurs an event
which, with the giving of notice or lapse of time, or both, would cause any such
obligation to become, or allow any such obligation to be declared to be, due and
payable;
 
(g)           any Credit Party shall (i) be unable to pay its debts generally as
they become due, (ii) make a general assignment for the benefit of its
creditors, (iii) commence, or consent to, a proceeding for the appointment of a
receiver, trustee, liquidator or conservator of itself or of the whole or any
substantial part of its property, or (iv) file a petition seeking reorganization
or liquidation or similar relief under any Debtor Relief Law;
 
(h)           a court of competent jurisdiction shall (A) enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator or
conservator of any Credit Party or the whole or any substantial part of any such
Person’s properties, which shall continue unstayed and in effect for a period of
sixty calendar days, (B) shall approve a petition filed against any Credit Party
seeking reorganization, liquidation or similar relief under the any Debtor
Relief Law, which is not dismissed within sixty calendar days or, (C) under the
provisions of any Debtor Relief Law, assume custody or control of any Credit
Party or of the whole or any substantial part of any such Person’s properties,
which is not irrevocably relinquished within sixty calendar days, or (ii) there
is commenced against any Credit Party any proceeding or petition seeking
reorganization, liquidation or similar relief under any Debtor Relief Law and
either (A) any such proceeding or petition is not unconditionally dismissed
within sixty calendar days after the date of commencement, or (B) any Credit
Party takes any action to indicate its approval of or consent to any such
proceeding or petition, but no Advances will be made before any such order,
judgment or decree described above is stayed, vacated or discharged, any such
petition described above is dismissed, or any such custody or control described
above is relinquished;
 
(i)           (i) any Change of Control occurs or any binding agreement (that
does not require Lender’s consent as a condition to closing) to cause or that
may result in any such Change of Control is entered into, (ii) any Material
Adverse Change occurs or is reasonably expected to occur, (iii) any Liability
Event occurs or is reasonably expected to occur, or (iv) any Credit Party ceases
any material portion of its business operations as currently conducted;
 
 
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(j)           Lender receives any indication or evidence that (i) any Credit
Party may have directly or indirectly been engaged in any type of activity,
which, in Lender’s Permitted Discretion, might result in forfeiture of any
property with a value in excess of $50,000 to any Governmental Authority which
shall have continued unremedied for a period of ten calendar days after written
notice from Lender (but no Advances will be made before any such activity
ceases) or (ii) any Credit Party or any of their respective directors or senior
officers is criminally indicted or convicted under any law that could lead to a
forfeiture of any Collateral;
 
(k)           uninsured damage to, or loss, theft or destruction of, any portion
of the Collateral occurs that exceeds $50,000 in the aggregate;
 
(l)           the issuance of any process for levy, attachment or garnishment or
execution upon or prior to any judgment against any Credit Party or any of their
property or assets in excess of $100,000.
 
Upon the occurrence of an Event of Default, notwithstanding any other provision
of any Loan Document, Lender may, without notice or demand, do any of the
following: (i) terminate its obligations to make Advances hereunder and (ii) all
or any of the Loans and/or Notes, all interest thereon and all other Obligations
shall automatically, without any further action by Lender, be due and payable
immediately (except in the case of an Event of Default under Section 10(d), (g),
or (h), in which event all of the foregoing shall automatically and without
further act by Lender be due and payable), and (ii) prohibit any action
permitted to be taken under Article IX hereof, in each case without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by Credit Parties.
 
11.
RIGHTS AND REMEDIES AFTER DEFAULT

 
 
11.1.
Rights and Remedies

 
(a)           In addition to the acceleration provisions set forth in Article X
above, upon the occurrence and continuation of an Event of Default, Lender shall
have the right to exercise any and all rights, options and remedies provided for
in any Loan Document, under the UCC or at law or in equity, including, without
limitation, the right to (i) at Credit Parties’ expense, require that all or any
part of the Collateral be assembled and made available to Lender at any place
designated by Lender, (ii) reduce or otherwise change the Facility Cap, and/or
(iii) relinquish or abandon any Collateral or any Lien thereon.  Notwithstanding
any provision of any Loan Document, Lender, in its sole discretion, shall have
the right, at any time that Credit Parties fail to do so, and from time to time,
without prior notice, to: (i) obtain insurance covering any of the Collateral to
the extent required hereunder; (ii) pay for the performance of any of
Obligations; (iii) discharge taxes or Liens on any of the Collateral that are in
violation of any Loan document unless Credit Parties are in good faith with due
diligence by appropriate proceedings contesting those items; and (iv) pay for
the maintenance and preservation of the Collateral.  Such expenses and advances
shall be added to the Obligations until reimbursed to Lender and shall be
secured by the Collateral, and such payments by Lender shall not be construed as
a waiver by Lender of any Event of Default or any other rights or remedies of
Lender.  Credit Parties hereby waive any and all rights that they may have to a
judicial hearing in advance of the enforcement of any of Lender’s rights and
remedies hereunder, including, without limitation, its right following the
occurrence of an Event of Default  to take immediate possession of the
Collateral and to exercise its rights and remedies with respect thereto.
 
 
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(b)           Credit Parties agrees that notice received by it at least fifteen
calendar days before the time of any intended public sale, or the time after
which any private sale or other disposition of Collateral is to be made, shall
be deemed to be reasonable notice of such sale or other disposition.  If
permitted by applicable law, any perishable Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold
immediately by Lender without prior notice to Credit Parties.  At any sale or
disposition of Collateral, Lender may (to the extent permitted by applicable
law) purchase all or any part thereof free from any right of redemption by any
Credit Party which right is hereby waived and released.  Credit Parties covenant
and agree not to, and not to permit or cause any of their Subsidiaries to,
interfere with or impose any obstacle to Lender’s exercise of its rights and
remedies with respect to the Collateral.  Lender, in dealing with or disposing
of the Collateral or any part thereof, shall not be required to give priority or
preference to any item of Collateral or otherwise to marshal assets or to take
possession or sell any Collateral with judicial process.
 
 
11.2.
Application of Proceeds

 
In addition to any other rights, options and remedies Lender has under the Loan
Documents, the UCC, at law or in equity, all dividends, interest, rents, issues,
profits, fees, revenues, income and other proceeds collected or received from
collecting, holding, managing, renting, selling, or otherwise disposing of all
or any part of the Collateral or any proceeds thereof upon exercise of its
remedies hereunder shall be applied in the following order of
priority:  (i) first, to the payment of all costs and expenses of such
collection, storage, lease, holding, operation, management, sale, disposition or
delivery and of conducting Credit Parties’ business and of maintenance, repairs,
replacements, alterations, additions and improvements of or to the Collateral,
and to the payment of all sums which Lender may be required or may elect to pay,
if any, for taxes, assessments, insurance and other charges upon the Collateral
or any part thereof, and all other payments that Lender may be required or
authorized to make under any provision of this Agreement (including, without
limitation, in each such case, in-house documentation and diligence fees and
legal expenses, search, audit, recording, professional and filing fees and
expenses and reasonable attorneys' fees and all expenses, liabilities and
advances made or incurred in connection therewith); (ii) second, to the payment
of all other Obligations in such order or preference as Lender may determine;
and (iii) third, to the payment of any surplus then remaining to Credit Parties,
unless otherwise provided by law or directed by a court of competent
jurisdiction; provided, that, Credit Parties shall be liable for any deficiency
if such proceeds are insufficient to satisfy the Obligations or any of the other
items referred to in this section.
 
 
11.3.
Rights of Lender to Appoint Receiver

 
Without limiting and in addition to any other rights, options and remedies
Lender has under the Loan Documents, the UCC, at law or in equity, upon the
occurrence and continuation of an Event of Default, Lender shall have the right
to apply for and have a receiver appointed by a court of competent jurisdiction
in any action taken by Lender to enforce its rights and remedies in order to
manage, protect, preserve, sell or dispose the Collateral and continue the
operation of the business of Credit Parties and to collect all revenues and
profits thereof and apply the same to the payment of all expenses and other
charges of such receivership including the compensation of the receiver and to
the payments as aforesaid until a sale or other disposition of such Collateral
shall be finally made and consummated.  To the extent not prohibited by
applicable law, each Credit Party hereby irrevocably consents to and waives any
right to object to or otherwise contest the appointment of a receiver as
provided above.  Each Credit Party (i) grants such waiver and consent knowingly
after having discussed the implications thereof with counsel, (ii) acknowledges
that (A) the uncontested right to have a receiver appointed for the foregoing
purposes is considered essential by Lender in connection with the enforcement of
its rights and remedies hereunder and under the other Loan Documents and (B) the
availability of such appointment as a remedy under the foregoing circumstances
was a material factor in inducing Lender to make the Loans to such Credit Party
and (iii) to the extent not prohibited by applicable law, agrees to enter into
any and all stipulations in any legal actions, or agreements or other
instruments required or reasonably appropriate in connection with the foregoing,
and to cooperate fully with Lender in connection with the assumption and
exercise of control by any receiver over all or any portion of the Collateral.
 
 
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11.4.
Rights and Remedies not Exclusive

 
Lender shall have the right in its sole discretion to determine which rights,
Liens and remedies Lender may at any time pursue, relinquish, subordinate or
modify, and such determination will not in any way modify or affect any of
Lender’s rights, Liens or remedies under any Loan Document, applicable law or
equity.  The enumeration of any rights and remedies in any Loan Document is not
intended to be exhaustive, and all rights and remedies of Lender described in
any Loan Document are cumulative and are not alternative to or exclusive of any
other rights or remedies which Lender otherwise may have.  The partial or
complete exercise of any right or remedy shall not preclude any other further
exercise of such or any other right or remedy.
 
 
11.5.
Standards for Exercising Remedies

 
To the extent that applicable law imposes duties on Lender to exercise remedies
in a commercially reasonably manner, Credit Parties hereby acknowledge and agree
that it is not commercially unreasonable for Lender (a) to fail to incur
expenses reasonably deemed significant by Lender to prepare Collateral for
disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (b) to fail to obtain
third-party consents for access to Collateral to be disposed of, or to obtain
or, if not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or
disposed of, (c) to fail to exercise collection remedies against account debtors
or other persons obligated on Collateral or to remove Liens against Collateral,
(d) to exercise collection remedies against account debtors and other persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (e) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (f) to contact other persons, whether or
not in the same business as Credit Parties, for expressions of interest in
acquiring all or any portion of the Collateral, (g) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the Collateral is of a specialized nature, (h) to dispose of Collateral by
utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (i) to dispose of assets in
wholesale rather than retail markets, (j) to disclaim disposition warranties,
(k) to purchase insurance or credit enhancements to insure Lender against risks
of loss, collection or disposition of Collateral or to provide to Lender a
guaranteed return from the collection or disposition of Collateral or (l) to the
extent deemed appropriate by Lender, to obtain the services of brokers,
investment bankers, consultants or other professionals to assist Lender in the
collection or disposition of any of the Collateral.  Credit Parties further
acknowledge that the purpose of this Section 11.5 is to provide non-exhaustive
indications of what acts or omissions by Lender would not be commercially
unreasonable in Lender’s exercise of remedies against the Collateral and that
other acts or omissions by Lender shall not be deemed commercially unreasonable
solely on account of not being indicated in this Section 11.5.  Without
limitation upon the foregoing, nothing contained in this Section 11.5 shall be
construed to grant any rights to Credit Parties or to impose any duties upon
Lender that would not have been granted or imposed by this Agreement or by
applicable law in the absence of this Section 11.5.

 
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12.
WAIVERS AND JUDICIAL PROCEEDINGS

 
 
12.1.
Waivers

 
Except as expressly provided for herein, Credit Parties hereby waive setoff,
counterclaim, demand, presentment, protest, all defenses with respect to any and
all instruments and all notices and demands of any description, and the pleading
of any statute of limitations as a defense to any demand under any Loan
Document.  Credit Parties hereby waive any and all defenses and counterclaims
they may have or could interpose in any action or procedure brought by Lender to
obtain an order of court recognizing the assignment of, or Lien of Lender in and
to, any Collateral, whether or not payable by a Medicaid/Medicare Account
Debtor.   With respect to any action hereunder, Lender conclusively may rely
upon, and shall incur no liability to Credit Parties in acting upon, any request
or other communication that Lender reasonably believes to have been given or
made by a person authorized on Credit Parties’ behalf, whether or not such
person is listed on the incumbency certificate delivered pursuant to Section 6.1
hereof.  In each such case, Credit Parties hereby waive the right to dispute
Lender's action based upon such request or other communication, absent manifest
error.  Without limiting the generality of the foregoing, Borrower expressly
waives all rights, benefits and defenses, if any, applicable or available to
Borrower under either California Code of Civil Procedure Sections 580a or 726,
which provide, among other things, that the amount of any deficiency judgment
which may be recovered following either a judicial or nonjudicial foreclosure
sale is limited to the difference between the amount of any indebtedness owed
and the greater of the fair value of the security or the amount for which the
security was actually sold.  Without limiting the generality of the foregoing,
Borrower further expressly waives all rights, benefits and defenses, if any,
applicable or available to Borrower under either California Code of Civil
Procedure Sections 580b, providing, generally, that no deficiency may be
recovered on a real property purchase money obligation, or 580d, providing,
generally, that no deficiency may be recovered on a note secured by a deed of
trust on real property if the real property is sold under a power of sale
contained in the deed of trust.
 
 
12.2.
Delay; No Waiver of Defaults

 
No course of action or dealing, renewal, release or extension of any provision
of any Loan Document, or single or partial exercise of any such provision, or
delay, failure or omission on Lender’s part in enforcing any such provision
shall affect the liability of any Credit Party or operate as a waiver of such
provision or affect the liability of any Credit Party or preclude any other or
further exercise of such provision.  No waiver by any party to any Loan Document
of any one or more defaults by any other party in the performance of any of the
provisions of any Loan Document shall operate or be construed as a waiver of any
future default, whether of a like or different nature, and each such waiver
shall be limited solely to the express terms and provisions of such
waiver.  Notwithstanding any other provision of any Loan Document, by completing
the Closing under this Agreement and/or by making Advances, Lender does not
waive any breach of any representation or warranty under any Loan Document, and
all of Lender’s claims and rights resulting from any such breach or
misrepresentation are specifically reserved.
 
 
12.3.
Jury Waiver

 
EACH PARTY TO THIS AGREEMENT HEREBY KNOWINGLY AND VOLUNTARILY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING UNDER THE LOAN
DOCUMENTS OR IN ANY WAY CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES WITH RESPECT TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE.  EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY,
AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY
OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE
PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.
 
 
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12.4.
Cooperation in Discovery and Litigation

 
In any litigation, arbitration or other dispute resolution proceeding relating
to any Loan Document, Borrower waives any and all defenses, objections and
counterclaims it may have or could interpose with respect to (i) any of its
directors, officers, employees or agents being deemed to be employees or
managing agents of Borrower for purposes of all applicable law or court rules
regarding the production of witnesses by notice for testimony (whether in a
deposition, at trial or otherwise), (ii) Lender’s counsel examining any such
individuals as if under cross-examination and using any discovery deposition of
any of them as if it were an evidence deposition, and (iii) using commercially
reasonable efforts to produce in any such dispute resolution proceeding,  all
Persons, documents (whether in tangible, electronic or other form) and other
things under its control that properly relate to any matters in
dispute.  Notwithstanding the foregoing, Credit Parties (A) do not waive any
rights of any directors, officers, employees or agents that such Persons may
have individually, (B) do not agree that any alternative dispute resolution
procedures other than a court trial will be automatically applicable to the
situation at hand in the event of a dispute and will only agree to such
alternative dispute resolution procedures at such time after the facts and
circumstances are known, and (C) with respect to item (iii) do not agree to
engage in any electronic discovery procedures unless agreed to at such time in
the future and at the expense of someone other than the Borrower.
 
13.
EFFECTIVE DATE AND TERMINATION

 
 
13.1.
Termination and Effective Date Thereof

 
(a)           Subject to Lender’s right to cease making Advances pursuant to
Section 2.1 or upon or after any Event of Default, this Agreement shall continue
in full force and effect until the Obligations are Paid in Full, unless
terminated sooner as provided in this Section 13.1(a).  Borrower may terminate
this Agreement at any time upon not less than thirty calendar days’ prior
written notice to Lender and upon full performance and indefeasible Payment in
Full of all Obligations after Receipt by Lender of such written notice.  All of
the Obligations shall be immediately due and payable upon any termination by
Borrower pursuant to this Section 13.1(a) on the Termination Date which shall be
the first Business Day after the thirty (30) day notice period has elapsed, on
which the Obligations have fully performed and indefeasibly Paid in Full.  Upon
such full performance and Payment in full of the Obligations Lender shall not
unreasonably delay the filing of a release of its liens.  Notwithstanding any
other provision of any Loan Document, no termination of this Agreement shall
affect Lender’s rights or any of the Obligations existing as of the effective
date of such termination, and the provisions of the Loan Documents shall
continue to be fully operative until the Obligations have been fully performed
and Paid in Full.  The Liens granted to Lender under the Loan Documents and the
financing statements filed pursuant thereto and the rights and powers of Lender
shall continue in full force and effect notwithstanding the fact that Borrower’s
borrowings hereunder may from time to time be in a zero or credit position until
all of the Obligations have been fully performed and indefeasibly Paid in Full.
 
(b)           Upon the occurrence of a Revolver Termination, Credit Parties
shall immediately pay Lender (in addition to the then outstanding principal,
accrued interest and other Obligations relating to the Revolving Facility
pursuant to the terms of this Agreement and any other Loan Document), as yield
maintenance for the loss of bargain and not as a penalty, an amount equal to the
applicable Minimum Termination Fee.
 
 
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13.2.
Survival

 
All obligations, covenants, agreements, representations, warranties, waivers and
indemnities made by Credit Parties in any Loan Document shall survive the
execution and delivery of the Loan Documents, the Closing, the making of the
Advances and any termination of this Agreement until all Obligations are fully
performed and indefeasibly paid in full in cash.  The obligations and provisions
of Sections 3.6, 12.1, 12.3, 12.4, 13.1, 13.2, 15.4, 15.7 and 15.10 shall
survive termination of the Loan Documents and any payment, in full or in part,
of the Obligations.
 
14.
GUARANTY

 
 
14.1.
Guaranty

 
Guarantor hereby unconditionally and irrevocably guarantees the punctual payment
when due, whether at stated maturity, by acceleration or otherwise, of all
Obligations of each Credit Party, including, without limitation, Credit Parties,
now or hereafter existing under any Loan Document, whether for principal,
interest (including, without limitation, all interest that accrues after the
commencement of any proceeding of Borrower or any other Credit Party under any
Debtor Relief Laws), fees, commissions, expense reimbursements, indemnifications
or otherwise (such obligations, to the extent not paid by Borrower, the
“Guaranteed Obligations”), and agrees to pay any and all costs, fees and
expenses (including reasonable counsel fees and expenses) incurred by Lender in
enforcing any rights under the guaranty set forth in this Article XIV.  Without
limiting the generality of the foregoing, Guarantor’s liability shall extend to
all amounts that constitute part of the Guaranteed Obligations and would be owed
by Borrower or any other Credit Party to Lender under any Loan Document, but for
the fact that they are unenforceable or not allowable due to the existence of
any proceeding under any Debtor Relief Laws involving Borrower or any other
Credit Party.
 
 
14.2.
Guaranty Absolute

 
Guarantor guarantees that the Guaranteed Obligations will be paid strictly in
accordance with the terms of the Loan Documents, regardless of any law
regulation or order now or hereafter in effect in any jurisdiction affecting any
such terms or the rights of Lender with respect thereto.  The obligations of
Guarantor under this Article XIV are independent of the Guaranteed Obligations,
and a separate action or actions may be brought and prosecuted against any other
guarantor to enforce such obligations, irrespective of whether any action is
brought against any Credit Party or whether any Credit Party is joined in any
such action or actions.  The liability of Guarantor under this Article XIV shall
be irrevocable, absolute and unconditional irrespective of, and, in
consideration of the direct and indirect benefits from the financing
arrangements contemplated herein enjoyed by such Guarantor. Guarantor hereby
irrevocably waives any defenses it may now or hereafter have in any way relating
to, any or all of the following: (a) any lack of validity or enforceability of
any Loan Document or any agreement or instrument relating thereto; (b) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Guaranteed Obligations, or any other amendment or waiver of or any
consent to departure from any Loan Document, including, without limitation, any
increase in the Guaranteed Obligations resulting from the extension of
additional credit to any Credit Party or otherwise; (c) any taking, exchange,
release or non-perfection of any Collateral, or any taking, release or amendment
or waiver of or consent to departure from any other guaranty, for all or any of
the Guaranteed Obligations; (d) any change, restructuring or termination of the
corporate, limited liability company or partnership structure or existence of
any Credit Party; (e) promptness, diligence, notice of acceptance and any other
notice with respect to any of the Guaranteed Obligations and this Article XIV
and any requirement that Lender exhaust any right or take any action against any
other Credit Party or any other Person or any Collateral; or (f) any other
circumstance (including, without limitation, any statute of limitations) or any
existence of or reliance on any representation by Lender that might otherwise
constitute a defense available to, or a discharge of, any Credit Party or any
other guarantor or surety, other than the defense of payment.
 
 
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This Article XIV is a continuing guaranty and shall (a) remain in full force and
effect until the indefeasible cash payment in full of the Guaranteed Obligations
and all other amounts payable under this Article XIV and irrevocable termination
of the Loan Agreement in accordance with its terms, (b) be binding upon
Guarantor, its successors and assigns and (c) inure to the benefit of, and be
enforceable by, Lender and its successors, assigns, pledgees, transferees.  This
Article XIV shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any of the Guaranteed Obligations is rescinded or
must otherwise be returned to Lender or any other Person upon the insolvency,
bankruptcy or reorganization of Borrower or any other Credit Party or otherwise,
all as though such payment had not been made.  Guarantor hereby waives any right
to revoke this Article XIV, and acknowledges that this Article XIV is continuing
in nature and applies to all Guaranteed Obligations, whether existing now or in
the future.
 
 
14.3.
Subrogation

 
Guarantor will not exercise any rights that it may now or hereafter acquire
against any other Credit Party or any other guarantor or that arise from the
existence, payment, performance or enforcement of its respective obligations
under this Article XIV, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of Lender against any other Credit Party or
any other guarantor or any Collateral, whether or not such claim, remedy or
right arises in equity or under contract, statute or common law including,
without limitation, the right to take or receive from any other Credit Party or
any other guarantor, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment or security solely on account of such
claim, remedy or right, unless and until all of the Guaranteed Obligations and
all other amounts payable under this Article XIV shall have been indefeasibly
paid in full in cash and all commitments to lend hereunder shall have
terminated.  Guarantor agrees that any payment of any Indebtedness of Borrower
now or hereafter held by such Guarantor is hereby subordinated in right of
payment to the irrevocable and indefeasible payment in full in cash of the
Guaranteed Obligations unless otherwise agreed to in writing by Lender or
provided for in this agreement. If any amount shall be paid to a Guarantor in
violation of the immediately preceding sentences, such amount shall be held in
trust for the benefit of Lender and shall forthwith be paid to Lender to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Article XIV, whether matured or unmatured, in accordance with the
terms of this Agreement, or to be held as Collateral for any Guaranteed
Obligations or other amounts payable under this Article XIV thereafter
arising.  If (i) a Guarantor shall make payment to Lender of all or any part of
the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other
amounts payable under this Article XIV shall be indefeasibly paid in full in
cash and (iii) Lender’s commitment to lend hereunder shall have been terminated,
Lender will, at such Guarantor’s request and expense, execute and deliver to
such Guarantor appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer by subrogation to
such Guarantor of an interest in the Guaranteed Obligations resulting from such
payment by such Guarantor
 
 
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15.
MISCELLANEOUS

 
 
15.1.
Governing Law; Jurisdiction; Service of Process; Venue

 
The Loan Documents shall be governed by and construed in accordance with the
internal laws of the State of Maryland without giving effect to its choice of
law provisions.  Any judicial proceeding against Credit Parties with respect to
the Obligations, any Loan Document or any related agreement may be brought in
any federal or state court of competent jurisdiction located in the State of
Maryland.  By execution and delivery of each Loan Document to which it is a
party, each Credit Party (i) accepts the non-exclusive jurisdiction of the
aforesaid courts and irrevocably agrees to be bound by any judgment rendered
thereby, (ii) waives personal service of process, (iii) agrees that service of
process upon it may be made by certified or registered mail, return receipt
requested, pursuant to Section 15.5 hereof, (iv) waives any objection to
personal jurisdiction and venue of any action instituted hereunder and agrees
not to assert any defense based on lack of jurisdiction, venue or convenience,
and (v) agrees that this loan was made in Maryland, that Lender has accepted in
Maryland Loan Documents executed by such Credit Party and has disbursed Advances
under the Loan Documents in Maryland.  Nothing shall affect the right of Lender
to serve process in any manner permitted by law or shall limit the right of
Lender to bring proceedings against such Credit Party in the courts of any other
jurisdiction having jurisdiction, including any jurisdiction in which Collateral
is located for purposes of exercising rights and remedies with respect to such
Collateral.  Any judicial proceedings against Lender involving, directly or
indirectly, the Obligations, any Loan Document or any related agreement shall be
brought only in a federal or state court located in the State of Maryland.  All
parties acknowledge that they participated in the negotiation and drafting of
this Agreement, that the parties were represented by counsel of their choice in
connection with the negotiation and drafting of this Agreement, that the parties
to this Agreement are sophisticated parties entering into a commercial
transaction, and that, accordingly, no party shall move or petition a court
construing this Agreement to construe it more stringently against one party than
against any other.
 
 
15.2.
Successors and Assigns; Participations; New Lenders

 
The Loan Documents shall inure to the benefit of Lender, Transferees and all
future holders of the Loan, any Note, the Obligations and/or any of the
Collateral, and each of their respective successors and assigns.  Each Loan
Document shall be binding upon the Persons’ other than Lender that are parties
thereto and their respective successors and assigns, and no such Person may
assign, delegate or transfer any Loan Document or any of its rights or
obligations thereunder without the prior written consent of Lender.  No rights
are intended to be created under any Loan Document for the benefit of any third
party donee, creditor or incidental beneficiary of any Credit Party.  Nothing
contained in any Loan Document shall be construed as a delegation to Lender of
any other Person’s duty of performance.  CREDIT PARTIES ACKNOWLEDGE AND AGREE
THAT LENDER AT ANY TIME AND FROM TIME TO TIME MAY (I) DIVIDE AND RESTATE ANY
NOTE, AND/OR (II) SELL, ASSIGN OR GRANT PARTICIPATING INTERESTS IN OR TRANSFER
ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER ANY LOAN DOCUMENT, LOANS, ANY
NOTE, THE OBLIGATIONS AND/OR THE COLLATERAL TO OTHER PERSONS (EACH SUCH
TRANSFEREE, ASSIGNEE OR PURCHASER, A “TRANSFEREE”).  Each Transferee shall have
all of the rights and benefits with respect to the Loans, Obligations, any
Notes, Collateral and/or Loan Documents held by it as fully as if the original
holder thereof, and either Lender or any Transferee may be designated as the
sole agent to manage the transactions and obligations contemplated
therein.  Notwithstanding any other provision of any Loan Document, Lender may
disclose to any Transferee all information, reports, financial statements,
certificates and documents obtained under any provision of any Loan
Document.  In the event of any transfer of any portion of Lender’s right and
interest in the Obligations of this Agreement, Lender agrees to so notify the
Borrower of such transfer and include such transferee’s name and contact
information, except if such transfer is to an Affiliate of Lender or any of
Lender’s financing sources.
 
 
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15.3.
Application of Payments

 
To the extent that any payment made or received with respect to the Obligations
is subsequently invalidated, determined to be fraudulent or preferential, set
aside or required to be repaid to a trustee, debtor in possession, receiver,
custodian or any other Person under any Debtor Relief Law, common law or
equitable cause or any other law, then the Obligations intended to be satisfied
by such payment shall be revived and shall continue as if such payment had not
been received by Lender.  Any payments with respect to the Obligations received
shall be credited and applied in such manner and order as Lender shall decide in
its sole discretion.
 
 
15.4.
Indemnity

 
Each Credit Party jointly and severally shall indemnify Lender, its Affiliates
and its and their respective managers, members, officers, employees, Affiliates,
agents, representatives, successors, assigns, accountants and attorneys
(collectively, the “Indemnified Persons”) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, reasonable fees and disbursements of counsel, allocable
costs of in-house counsel, and in-house diligence fees and expenses, subject to
the provisions governing payment of in-house counsel and outside counsel fees
set forth in Section 15.7(b)) which may be imposed on, incurred by or asserted
against any Indemnified Person with respect to or arising out of, or in any
litigation, proceeding or investigation instituted or conducted by any Person
with respect to any aspect of, or any transaction contemplated by or referred to
in, or any matter related to, any Loan Document or any agreement, document or
transaction contemplated thereby, whether or not such Indemnified Person is a
party thereto, except to the extent that any of the foregoing results directly
from the gross negligence or willful misconduct of such Indemnified Person as
determined by a final non-appealable judgment entered by a court of competent
jurisdiction, in which case, any previously made reimbursements made pursuant to
this indemnification clause for claims which were due to such gross negligence
or willful misconduct shall be immediately recoverable from such Indemnified
Person.  If any Indemnified Person uses in-house counsel for any purpose for
which any Credit Party is responsible to pay or indemnify, each Credit Party
expressly agrees that its indemnification obligations include reasonable charges
for the costs allocable for such work of such in-house counsel, subject to the
provisions governing payment of in-house counsel and outside counsel fees set
forth in Section 15.7(b).  Lender agrees to give Credit Parties reasonable
notice of any event of which Lender becomes aware for which indemnification may
be required under this Section 15.4, and Lender may elect (but is not obligated)
to direct the defense thereof, provided that the selection of counsel shall be
subject to Credit Parties’ consent, which consent shall not be unreasonably
withheld or delayed.  Any Indemnified Person may, in its reasonable discretion,
take such actions as it deems necessary and appropriate to investigate or defend
any event or take other remedial or corrective actions with respect thereto as
may be necessary for the protection of such Indemnified Person or the
Collateral.  Notwithstanding the foregoing, if any insurer agrees to undertake
the defense of an event (an “Insured Event”), Lender agrees not to exercise its
right to select counsel to defend the event if that would cause any Credit
Party’s insurer to deny coverage; provided, however, that Lender reserves the
right to retain counsel to represent any Indemnified Person with respect to an
Insured Event at its sole cost and expense.  To the extent that Lender obtains
recovery from a third party other than an Indemnified Person of any of the
amounts that any Credit Party has paid to Lender pursuant to the indemnity set
forth in this Section 15.4, then Lender shall promptly pay to such Credit Party
the amount of such recovery.

 
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15.5.
Notice   

 
Any notice or request under any Loan Document shall be given to any party to
this Agreement at such party’s address set forth beneath its signature on the
signature page to this Agreement, or at such other address as such party may
hereafter specify in a notice given in the manner required under this Section
15.5.  Any notice or request hereunder shall be given only by, and shall be
deemed to have been received upon (each, a “Receipt”):  (i) registered or
certified mail, return receipt requested, on the date on which received as
indicated in such return receipt, (ii) delivery by a nationally recognized
overnight courier, one Business Day after deposit with such courier, or (iii)
facsimile transmission upon sender’s receipt of confirmation of proper
transmission, as applicable.
 
 
15.6.
Severability; Captions; Counterparts; Facsimile Signatures

 
If any provision of any Loan Document is adjudicated to be invalid under
applicable laws or regulations, such provision shall be inapplicable to the
extent of such invalidity without affecting the validity or enforceability of
the remainder of the Loan Documents which shall be given effect so far as
possible.  The captions in the Loan Documents are intended for convenience and
reference only and shall not affect the meaning or interpretation of the Loan
Documents.  The Loan Documents may be executed in one or more counterparts
(which taken together, as applicable, shall constitute one and the same
instrument) and by facsimile transmission, which facsimile signatures shall be
considered original executed counterparts.  Each party to this Agreement agrees
that it will be bound by its own facsimile signature and that it accepts the
facsimile signature of each other party.
 
 
15.7.
Expenses

 
(a)           Credit Parties shall pay, whether or not the Closing occurs, all
costs and expenses incurred by Lender and/or its Affiliates, including, without
limitation, documentation and diligence fees and expenses, all search, audit,
appraisal, recording, professional and filing fees and expenses and all other
out-of-pocket charges and expenses (including, without limitation, UCC and
judgment and tax lien searches and UCC filings and fees for post-Closing UCC and
judgment and tax lien searches and wire transfer fees and audit expenses), and
reasonable attorneys’ fees and expenses, (i) in any effort to enforce, protect
or collect payment of any Obligation or to enforce any Loan Document or any
related agreement, document or instrument, (ii) in connection with entering
into, negotiating, preparing, reviewing and executing the Loan Documents and/or
any related agreements, documents or instruments, (iii) arising in any way out
of administration of the Obligations, (iv) in connection with instituting,
maintaining, preserving, enforcing and/or foreclosing on Lender’s Liens in any
of the Collateral or securities pledged under the Loan Documents, whether
through judicial proceedings or otherwise, (v) in defending or prosecuting any
actions, claims or proceedings arising out of or relating to Lender’s
transactions with Credit Parties, (vi) in seeking, obtaining or receiving any
advice with respect to its rights and obligations under any Loan Document and
any related agreement, document or instrument, and/or (vii) in connection with
any modification, restatement, supplement, amendment, waiver or extension of any
Loan Document and/or any related agreement, document or instrument.  All of the
foregoing shall be charged to Credit Parties’ account and shall be part of the
Obligations, and each such amount so charged shall be deemed an Advance under
the Revolving Facility and added to the Obligations, regardless of whether a
Revolver Termination has occurred.  Lender agrees that, upon written request of
Borrower, it will provide a summary description of any legal matters which were
charged to the account of the Borrower.
 
(b)           If Lender or any of its Affiliates uses in-house counsel for any
purpose under any Loan Document for which Credit Parties are responsible to pay
or indemnify, Credit Parties expressly agree that their Obligations include
reasonable charges for such work commensurate with the allocable costs of such
in-house counsel.  Notwithstanding anything to the contrary contained in this
Agreement, so long as no Default or Event of Default has occurred and is
continuing, Borrower shall not be required to pay or indemnify Lender for the
allocable cost of the work of staff counsel if Lender has engaged outside
counsel for the same work.

 
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15.8.
Entire Agreement

 
This Agreement and the other Loan Documents to which Credit Parties are a party
constitute the entire agreement between Credit Parties and Lender with respect
to the subject matter hereof and thereof, and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof or thereof.  Any
promises, representations, warranties or guarantees not herein contained and
hereinafter made shall have no force and effect unless in writing signed by
Credit Parties and Lender.  No provision of this Agreement may be changed,
modified, amended, restated, waived, supplemented, discharged, canceled or
terminated orally or by any course of dealing or in any other manner other than
by an agreement in writing signed by Lender and Credit Parties.  Each party
hereto acknowledges that it has been advised by counsel in connection with the
negotiation and execution of this Agreement and is not relying upon oral
representations or statements inconsistent with the terms and provisions hereof.
 
 
15.9.
Lender Approvals

 
Unless expressly provided herein to the contrary, any approval, consent, waiver
or satisfaction of Lender with respect to any matter that is subject of any Loan
Document may be granted or withheld by Lender in its sole and absolute
discretion.
 

 
15.10.
Confidentiality and Publicity

 
(a)           Lender understands and acknowledges that this Agreement is a
material obligation of the Credit Parties, and as such, must be filed with the
Securities and Exchange Commission (“SEC”) and through such action will become
publicly available.  Credit Parties agree to submit to Lender and Lender
reserves the right to review and approve all materials that Credit Parties or
any of their Affiliates prepares that contain Lender’s name or describe or refer
to any Loan Document, any of the terms thereof or any of the transactions
contemplated thereby.  Notwithstanding the foregoing, Lender acknowledges and
agrees that that a description of the principle terms of this Agreement will be
required to be stated in the Guarantor’s quarterly and annual reports filed with
the SEC, and Guarantor and its counsel shall have the final authority in any
wording so disclosed; provided, however, that Guarantor will attempt to clear
such language with the Lender prior to any filing.  Lender further acknowledges
and agrees that once such language in any SEC filings has been finalized, it can
continue to appear in subsequent SEC filings without any further review by
Lender.  Credit Parties shall not, and shall not permit any of their Affiliates
to, use Lender’s name (or the name of any of Lender’s Affiliates) in connection
with any of its business operations, including without limitation, advertising,
marketing or press releases or such other similar purposes, without Lender’s
prior written consent.  Lender similarly agrees that it shall not, and shall not
permit any of its Affiliates to, use Credit Parties names or logos (or the names
of any Credit Parties’ Affiliates) in any advertising, marketing or press
releases or such similar purposes, without Credit Parties prior written
consent.  Nothing contained in any Loan Document is intended to permit or
authorize Credit Parties or any of their Affiliates to contract on behalf of
Lender.
 
(b)           Credit Parties hereby agree that Lender or any Affiliate of Lender
may disclose any and all information concerning the Loan Documents, as well as
any information regarding Credit Party and its operations, received by Lender in
connection with the Loan Documents to its lenders or funding or financing
sources.

 
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15.11.
Release of Lender

 
Notwithstanding any other provision of any Loan Document, each Credit Party
voluntarily, knowingly, unconditionally and irrevocably, with specific and
express intent, for and on behalf of itself,  its managers, members, directors,
officers, employees, stockholders, Affiliates, agents, representatives,
accountants, attorneys, successors and assigns and their respective Affiliates
(collectively, the “Releasing Parties”), hereby fully and completely releases
and forever discharges the Indemnified Parties and any other Person or Insurer
which may be responsible or liable for the acts or omissions of any of the
Indemnified Parties, or who may be liable for the injury or damage resulting
therefrom (collectively, with the Indemnified Parties, the “Released Parties”),
of and from any and all actions, causes of action, damages, claims, obligations,
liabilities, costs, expenses and demands of any kind whatsoever, at law or in
equity, matured or unmatured, vested or contingent, that any of the Releasing
Parties has against any of the Released Parties as of the date of the
Closing.  Each Credit Party acknowledges that the foregoing release is a
material inducement to Lender’s decision to extend to such Credit Party the
financial accommodations hereunder and has been relied upon by Lender in
agreeing to make the Loans.
 

 
15.12.
Agent

 
Lender and its successors and assigns hereby (i) designate and appoint
CapitalSource Finance LLC, a Delaware limited liability company, and its
successors and assigns ("CapitalSource"), to act as agent for Lender and its
successors and assigns under this Agreement and all other Loan Documents, (ii)
irrevocably authorize CapitalSource to take all actions on its behalf under the
provision of this Loan Agreement and all other Loan Documents, and (iii) to
exercise all such powers and rights, and to perform all such duties and
obligations hereunder and thereunder.  CapitalSource, on behalf of Lender, shall
hold all Collateral, payments of principal and interest, fees, charges and
collections received pursuant to this Agreement and all other Loan Documents. 
Each Credit Party acknowledges that Lender and its successors and assigns
transfer and assign to CapitalSource the right to act as Lender's agent to
enforce all rights and perform all obligations of Lender contained herein and in
all of the other Loan Documents.  Credit Parties shall within ten Business Days
after Lender's reasonable request, take such further actions, obtain such
consents and approvals and duly execute and deliver such further agreements,
amendments, assignments, instructions or documents as Lender may request to
evidence the appointment and designation of CapitalSource as agent for Lender
and other financial institutions from time to time party hereto and to the other
Loan Documents.
 

 
15.13.
[Reserved] 

 

 
15.14.
Amendment and Restatement

 
This Agreement amends and restates in its entirety the Original Credit
Agreement.  This Agreement and the other Loan Documents govern the present
relationship between the Credit Parties and the Lender.  With respect to matters
relating to the period prior to the Closing Date, all of the provisions of the
Original Credit Agreement and the security agreements, pledge agreements,
guarantees, and other documents, instruments and agreements executed in
connection therewith, are each ratified and confirmed and shall remain in full
force and effect.  This Agreement, however, is in no way intended, nor shall it
be construed, to affect, replace, impair or extinguish the creation, attachment,
perfection or priority of the security interests in, and other Liens on, the
Collateral, which security interests and other Liens each of the Credit Parties,
by this Agreement, acknowledges, reaffirms and confirms to the Lender.  In
addition, except as otherwise provided herein, all obligations and liabilities
and indebtedness created or existing under, pursuant to, or as a result of, the
Original Credit Agreement shall continue in existence within the definition of
“Obligations” under this Agreement, which obligations, liabilities and
indebtedness the Credit Parties, by this Agreement, acknowledge, reaffirm and
confirm.  Credit Parties agree that any outstanding commitment or other
obligation to make advances or otherwise extend credit or credit support to any
Credit Party pursuant to the Original Credit Agreement is superseded by, and
renewed and consolidated under, this Agreement.  Credit Parties represent and
warrant that none of them have assigned or otherwise transferred any rights
arising under the Original Credit Agreement.  In order to induce the Lender to
enter into this Agreement on the Closing Date, each Credit Party hereby
represents, warrants and covenants to Lenders that it has determined that each
Credit Party will benefit specifically and materially from the amendment and
restatement of the Original Credit Agreement pursuant to this Agreement on the
Closing Date.

 
59

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[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

 
60

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IN WITNESS WHEREOF, each of the parties has duly executed this Amended and
Restated Revolving Credit and Security Agreement as of the date first written
above.
  
BORROWER:
 
NEOGENOMICS LABORATORIES, INC.,
a Florida corporation
   
By:
/s/ George Cardoza
Name: 
George Cardoza
Its:
CFO
   
GUARANTOR:
 
NEOGENOMICS, INC.,
a Nevada corporation
   
By:
/s/ George Cardoza
Name: 
George Cardoza
Its:
CFO

       
Attention:
 
Telephone:  
 
Facsimile:
 
E-Mail:
 

LENDER:
   
CAPITALSOURCE FINANCE LLC
   
By:
/s/ Arturo Velez
Name: 
Arturo Velez
Its:
Authorized signatory

 
4445 Willard Avenue, 12th Floor
Chevy Chase, MD  20815
Attention:  Healthcare Finance Group, Portfolio Manager
Telephone: 
(301) 841-2700
Facsimile:
(301) 841-2340
E-Mail:
 

 
 
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SCHEDULES
 
Schedule 2.3
 
Borrower’s Accounts
     
Schedule 5.3A
 
Proceedings or Investigations
     
Schedule 5.3B
 
Third-Party Contracts
     
Schedule 7.11
 
Intellectual Property
     
Schedule 7.15A
 
Existing Indebtedness, Investments, Guarantees and Certain Contracts
     
Schedule 7.15B
 
Indebtedness with a Maturity Date During the Term
     
Schedule 7.16
 
Other Agreements
     
Schedule 7.17
 
Insurance
     
Schedule 7.18A
 
Borrower’s Names
     
Schedule 7.18B
 
Places of Business and Chief Executive Offices
     
Schedule 7.18B
 
Borrower’s Locations
     
Schedule 7.2
 
Consents, Approvals or Authorizations
     
Schedule 7.3
 
Capitalization; List of Subsidiaries
     
Schedule 7.4A
 
Leases
     
Schedule 7.4B
 
Deposit Accounts and Investment Accounts
     
Schedule 7.5
 
Affiliate Contracts/Agreements
     
Schedule 7.6
 
Litigation
     
Schedule 7.8
 
Tax Matters
     
Schedule 8.8
 
Post-Closing Matters
     
Schedule 9.2
 
Indebtedness
     
Schedule 9.3
  
Liens

 
 

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

 
 
ANNEX I
 
FINANCIAL COVENANTS
 
1.           Minimum Fixed Charge Coverage Ratio (Adjusted EBITDA/Fixed Charges)
 
For the Test Period ending on the last day of each calendar month the Fixed
Charge Coverage Ratio shall not be less than 1.25 to 1.0.
 
2.           Minimum Cash Velocity
 
For each Test Period, measured as of the last day of each calendar month ending
after March 31, 2010, Collections of Accounts of Borrowers collectively shall
not be less than 87.5% of Borrowers’ net revenue for the Revenue Period less the
bad debt expense recognized on the income statement for such Revenue Period.
 
For purposes of the covenants set forth in this Annex I, the terms listed below
shall have the following meanings:

“Adjusted EBITDA” shall mean, for any period, the sum, without duplication, of
the following for Borrower collectively on a consolidated basis:  Net Income,
plus, (a) Interest Expense, (b) taxes on income, whether paid, payable or
accrued, (c) depreciation expense, (d) amortization expense, (e) all other
non-cash, recurring charges and expenses, excluding accruals for cash expenses
made in the ordinary course of business, (f) loss from any sale of assets, other
than sales in the ordinary course of business, (g) non-cash stock option and
warrant based compensation expense  and (h) other extraordinary or non-recurring
charges that would not have otherwise been incurred in ordinary course of
business as determined in accordance to GAAP, including but not limited to,
severance payments up to the amounts permitted in Section 9.6, minus (a) gains
from any sale of assets, other than sales in the ordinary course of business and
(b) other extraordinary or non-recurring gains, in each case determined in
accordance with GAAP.
 
“Cash Equivalents” shall mean, as of any date of determination, (a) securities
issued, or directly and fully guaranteed or insured, by the United States or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States is pledged in support thereof) having maturities of not more
than six months from the date of acquisition, (b) U.S. dollar denominated time
deposits, certificates of deposit and bankers’ acceptances of (i) any domestic
commercial bank of recognized standing having capital and surplus in excess of
$500,000,000, or (ii) any bank (or the parent company of such bank) whose
short-term commercial paper rating from Standard & Poor’s Ratings Services
(“S&P”) is at least A-2 or the equivalent thereof or from Moody’s Investors
Service, Inc. (“Moody’s”) is at least P-2 or the equivalent thereof in each case
with maturities of not more than six months from the date of acquisition (any
bank meeting the qualifications specified in clauses (b)(i) or (ii), an
“Approved Bank”), (c) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (a), above,
entered into with any Approved Bank, (d) commercial paper issued by any Approved
Bank or by the parent company of any Approved Bank and commercial paper issued
by, or guaranteed by, any industrial or financial company with a short-term
commercial paper rating of at least A-2 or the equivalent thereof by S&P or at
least P-2 or the equivalent thereof by Moody’s, or guaranteed by any industrial
company with a long term unsecured debt rating of at least A or A2, or the
equivalent of each thereof, from S&P or Moody’s, as the case may be, and in each
case maturing within six months after the date of acquisition and (e)
investments in money market funds substantially all of whose assets are
comprised of securities of the type described in clauses (a) through (d) above.

 

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

 
 
“Fixed Charge Coverage Ratio” shall mean, as of any date of determination, for
Borrower collectively on a consolidated basis, the ratio of (a) the sum of
Adjusted EBITDA for the Test Period ended as of such date plus an amount equal
to the sum of unrestricted cash on hand, unrestricted Cash Equivalents and
unused Availability as of the last day of the Test Period ended as of such date,
to (b) Fixed Charges for the Test Period ended as of such date.
 
 “Fixed Charges” shall mean, for any period, the sum of the following for
Borrower collectively on a consolidated basis for such period:  (a) Total Debt
Service, (b) un-financed Capital Expenditures paid in cash, (c) income taxes
paid in cash or accrued, and (d) dividends and Distributions paid or accrued or
declared (except for Accumulated Distributions from previous Accumulated
Distribution Fiscal Quarters); reduced by the amount of any equity contributions
received by the Borrower in cash during such period; provided that the amount of
such reduction shall not exceed the amount of unfinanced Capital Expenditures
paid for by Borrower in cash during such period.
 
“Interest Expense” shall mean, for any period, for Borrower collectively on a
consolidated basis for such period: (a) total interest expense (including
without limitation attributable to Capital Leases in accordance with GAAP), (b)
financing fees with respect to all outstanding Indebtedness excluding
amortization of capitalized financing fees associated with the initial closing
of this Agreement to interest expense in accordance with GAAP, and commissions,
discounts and other fees owed with respect to letters of credit and bankers’
acceptance financing and net costs under Interest Rate
Agreements.   Notwithstanding the foregoing Interest Expense shall not include
any amortization of non-cash warrant compensation that may be a result of
warrants attached to any debt instrument.
 
“Interest Rate Agreement” shall mean any interest rate swap, cap or collar
agreement or other similar agreement or arrangement designed to hedge the
position with respect to interest rates.
 
“Net Income” shall mean, for any period, the net income (or loss) of Borrower
collectively on a consolidated basis determined in accordance with GAAP;
provided, however, that there shall be excluded (i) the income (or loss) of any
Person in which any other Person (other than Borrower) has a joint interest,
except to the extent of the amount of dividends or other distributions actually
paid to a Borrower by such Person, (ii) the income (or loss) of any Person
accrued prior to the date it becomes a Borrower or is merged into or
consolidated with a Borrower or that Person’s assets are acquired by a Borrower,
(iii) the income of any Subsidiary of Borrower to the extent that the
declaration or payment of dividends or similar distributions of that income by
that Subsidiary is not at the time permitted by operation of the terms of the
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary, (iv) compensation expense
resulting from the issuance of capital stock, warrants, stock options or stock
appreciation rights issued to former or current employees or consultants,
including officers, of a Borrower, or the exercise of such options or rights, in
each case to the extent the obligation (if any) associated therewith is not
expected to be settled by the payment of cash by a Borrower or any affiliate
thereof, and (v) compensation expense resulting from the repurchase of capital
stock, options and rights described in clause (iv) of this definition of Net
Income.
 
“Revenue Period” shall mean, for any Test Period, the three calendar month
period (taken as one accounting period) commencing the first day of the calendar
month of the second month immediately preceding the first month of the Test
Period.  By way of example, the Revenue Period for the Test Period ending June
30, 2010 shall consist of the three calendar months ending February 28, 2010,
March 31, 2010 and April 30, 2010.
 
“Test Period” shall mean the three most recent calendar months then ended (taken
as one accounting period), or such other period as specified in the Agreement or
any Annex thereto.
 
 
ii

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

 
 
“Total Debt Service” shall mean, for any period, the sum of the following for
Borrower collectively on a consolidated basis: (i) payments of principal on
Indebtedness for such period, plus (ii) Interest Expense for such period.

 
iii

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AMENDED AND RESTATED SCHEDULES
 
Schedule 1.2 
Accounts Payable Over 120 Days That Are Permitted Indebtedness:

 
Aspen Capital Advisors not to exceed $65,000
K&L Gates, LLP not to exceed $500,000
HCSS, LLC dba Bridge Labs not to exceed $40,000

Schedule 2.3 
Borrower’s Operating Account for Disbursements

 
[***]

Schedule 5.3B 
Third-Party Contracts With Payor’s Representing at Least 5% of Cash Receipts

 
Medicare
United Healthcare
Blue Cross/Blue Shield of Florida 7/1/2009

Schedule 7.3 
Subsidiaries of NeoGenomics, Inc., a Nevada Corporation (Holding Company)

 
NeoGenomics Laboratories, Inc., a Florida Corporation
NeoGenomics California Laboratories, LLC, a California limited liability company
(currently inactive)
 
Subsidiaries of NeoGenomics Laboratories, Inc., a Florida Corporation (Operating
Company)
 
None
 
Capitalization of NeoGenomics, Inc, a Nevada Corporation
 
Common Shares Authorized:
100,000,000
Common Stock Outstanding (as of 4/14/10):
 37,278,668
 
 
Preferred Stock Authorized:
 10,000,000
Preferred Stock Outstanding (as of 4/14/10):
 None
 
 
Warrants Outstanding (as of 4/14/10):
 5,876,750
Options Outstanding (as of 4/14/10):
 5,019,002

 
This Schedule 7.3 dealing with the Capitalization of the Guarantor shall be
deemed to be automatically updated by any disclosures which appear in the
Guarantor’s public filings with the Securities and Exchange Commission.
 
Capitalization of NeoGenomics Laboratories, Inc, a Florida Corporation
 
Common Shares Authorized:
100
Common Sock Outstanding:
100

 
[***] Information redacted pursuant to a confidential treatment request.  An
unredacted version of this Agreement has been filed separately with the
Securities and Exchange Commission.
 
iv

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Board of Directors of NeoGenomics, Inc, a Nevada
Corporation                                    
 

Michael T. Dent, M.D. George G. O’Leary
Robert P. Gasparini
Peter M. Peterson
Marvin E. Jaffe, M.D.
William J. Robison
Steven C. Jones
Douglas M. VanOort

Board of Directors of NeoGenomics Laboratories, Inc, a Florida Corporation
 
Douglas M. VanOort
Michael T. Dent, M.D.
Robert P. Gasparini

Schedule 7.4A 
Locations of Leased Properties

 
12701 Commonwealth Drive, Suites 1-9
Fort Myers, FL 33913

618 Grassmere Park Drive, Suite 20
Nashville, TN 37211

6 Morgan Street, Suite’s 116,130 and 150
Irvine, CA 92618

9548 Topanga Canyon Blvd.
Chatsworth, CA 91311

Schedule 7.4B 
 

 
[***]
 
 
[***] Information redacted pursuant to a confidential treatment request.  An
unredacted version of this Agreement has been filed separately with the
Securities and Exchange Commission.
 
 
v

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Schedule 7.5 
Affiliate Contracts

 
HCSS, LLC and PathCenter Inc.
 
On March 11, 2005, we entered into an agreement with HCSS, LLC and eTelenext,
Inc. to enable NeoGenomics to use eTelenext, Inc’s Accessioning Application, AP
Anywhere Application and CMQ Application. HCSS, LLC is a holding company created
to build a small laboratory network for the 50 small commercial genetics
laboratories in the United States. HCSS, LLC is owned 66.7% by Dr. Michael T.
Dent, a member of our Board of Directors. George O’Leary, a member of our board
of directors is Chief Financial Officer of HCSS, LLC.
 
On June 18, 2009, we entered into a Software Development, License and Support
Agreement with HCSS, LLC and eTelenext, Inc. to upgrade the Company’s laboratory
information system to APvX. . The estimated costs for the development and
migration phase are anticipated to be approximately $75,000 and are expected to
be completed in April 2010. This agreement has an initial term of 5 years from
the date of acceptance and calls for monthly fees of $8,000-$12,000 during the
term. During the years ended December 31, 2009 and 2008, HCSS earned
approximately $87,675 and approximately $99,900, respectively, for transaction
fees related to completed tests.
 
During 2009 eTelenext and HCSS were merged to form PathCenter, Inc. Dr. Michael
T. Dent and Mr. George O’Leary have beneficial ownership of 12.2% and 4.6%,
respectively of PathCenter, Inc.
 
Certain Consulting Agreements with Board Members
 
The Company has consulting arrangements with two members of its Board of
Directors, Mr. Steven Jones and Mr. George O’Leary, to provide various
consulting services. Although there are no written agreements, per se, each of
these arrangements has been approved by the Company’s Board of Directors. Mr.
Jones receives approximately $150/hour and is paid through Aspen Capital
Advisors. Mr. O’leary receives approximately $1,000/day and is paid through SKS
Consulting. The maximum amounts payable by the Company under the consulting
agreements referenced in this paragraph will not exceed $500,000 per fiscal
year.
 
 
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Certain Leasing Arrangements with Gulf Pointe Capital, LLC
 
On September 30, 2008, the Borrower entered into a Master Lease Agreement (the
“Master Lease”) with Gulfpointe Capital, LLC which allows the Borrower to obtain
operating lease capital from time to time. Three members of the Guarantor’s
Board of Directors Steven Jones, Peter Petersen and Marvin Jaffe, are affiliated
with Gulfpointe Capital, LLC. On September 30, 2008, the Borrower also entered
into the first lease schedule under the Master Lease Agreement which provided
for a sale leaseback on approximately $130,000 of used laboratory equipment
(“Lease Schedule #1”). This sale/leaseback transaction was entered into after it
was determined that Leasing Technologies International Inc., the Borrower’s
primary source of operating lease funds, was unable to consummate this
transaction under their lease line with the Borrower. Messrs Jones, Peterson and
Jaffe recused themselves from all aspects of both sides of this transaction. The
lease has a 30 month term and a lease rate factor of 0.039683/month, which
equates to monthly payments of $5,154.88 during the term. Gulfpointe Capital LLC
(“Gulfpointe”) also received warrants to purchase 32,475 shares of the
Guarantor’s common stock with an exercise price of $1.08/share and a five year
term. At the end of the term, the Borrower’s options are as follows:
 

 
a.)
Purchase not less than all of the equipment for its then fair market value not
to exceed 15% of the original equipment cost.

 

 
b.)
Extend the lease term for a minimum of six months.

 

 
c.)
Return not less than all the equipment at the conclusion of the lease term.

 
On February 9, 2009, the Borrower entered into a second schedule under the
Master Lease for the sale leaseback and purchase of approximately $118,000 of
used laboratory equipment (“Lease Schedule #2”). This sale/leaseback transaction
was entered into after it was determined that Leasing Technologies International
Inc., the Borrower’s primary source of operating lease funds, was unable to
consummate this transaction under their lease line with the Borrower. Messrs.
Jones, Peterson and Jaffe recused themselves from all aspects of both sides of
this transaction. The lease has a 30 month term at the same lease rate factor
per month as Lease Schedule #1, which equates to monthly payments of $4,690.41
during the term. As part of Lease Schedule #2, on February 9, 2009, the
Guarantor and Gulfpointe terminated their original warrant agreement, dated
September 30, 2008, and replaced it with a new warrant to purchase 83,333 shares
of the Guarantor’s common stock. Such new warrant has a five year term and an
exercise price of $0.75/share. The Borrower’s options at the end of the term of
Lease Schedule #2 are the same as for Lease Schedule #1.
 
Certain Stock and Warrant Agreements with Douglas M. VanOort
 
On March 16, 2009, the Guarantor entered into a subscription agreement with the
Douglas M. VanOort Living Trust for the purchase of 625,000 shares of common
stock at a purchase price of $0.80/share, which resulted in gross proceeds to
the Guarantor of $500,000. Also on March 16, 2009, the Guarantor entered into a
warrant agreement with Douglas M. VanOort granting him the rights to purchase
625,000 shares of common stock at a purchase price of $1.05/share. Such warrant
has a five year term and is subject to certain vesting requirements specified in
the warrant.

 
vii

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Strategic Supply Agreement
 
On July 24, 2009, NeoGenomics Laboratories, Inc. and Abbott Molecular Inc., a
Delaware corporation (“Abbott Molecular”), entered into a Strategic Supply
Agreement (the “Supply Agreement”).  The Supply Agreement, among other things,
provides for Abbott Molecular to supply materials with which NeoGenomics
Laboratories intends to develop its own FISH (fluorescence in situ
hybridization)-based test for the diagnosis of malignant melanoma in skin biopsy
specimens (excluding subtyping) (the “Melanoma LDT”).
 
Common Stock Purchase Agreement and Registration Rights Agreement

On July 24, 2009, NeoGenomics, Inc. entered into a Common Stock Purchase
Agreement (the “Common Stock Purchase Agreement”) with Abbott Laboratories, an
Illinois corporation (“Abbott”), and consummated the issuance and sale to
Abbott, for an aggregate purchase price of $4,767,000, of 3,500,000 shares of
common stock, $0.001 par value per share (the “Shares”).  Pursuant to the terms
of the Common Stock Purchase Agreement, Abbott is prohibited from selling or
otherwise transferring the Shares until January 20, 2010.

On July 24, 2009, NeoGenomics, Inc. and Abbott also entered into a Registration
Rights Agreement that, among other things, grants certain demand and piggyback
registration rights to Abbott with respect to the Shares.

Research DX, LLC

During 2009 we began to use Research DX, LLC. to perform clinical trial
management services and Cytogenetics testing for us on an overflow basis. The
expense for these services is between $15,000 and $25,000 on a monthly basis. We
also receive clinical trial testing work from this entity which could be as much
as $600,000 in revenue to NeoGenomics Laboratories, Inc. during FY 2010. Our
Vice President of Research Mat Moore has a 50 % ownership in Research DX which
was formed in November 2008.
 
Schedule 7.6 
Litigation

 
PENDING AND THREATENED LITIGATION:
 
Katherine Elias

On April 8, 2010, the Company was served with a complaint by Ms. Katherine
Elias, a former sales representative of the Company who was employed from
October 2007 – February 2009. The suit, which was filed in the Circuit Court for
the Twentieth Judicial District in and for Lee County Florida (the “Court”),
seeks, among other items, an accounting of all commissions which may be due and
owing to Ms. Elias and alleges that NeoGenomics owes Ms. Elias approximately
$96,000 in unpaid commissions. The Company believes that this is a frivolous
lawsuit by a disgruntled former employee and intends to vigorously pursue its
defense of this matter. A motion to dismiss this case is in the process of being
prepared and no hearings have been scheduled as of yet.

 
viii

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Potential Qui Tam Complaint

On November 9th, 2009, the Company was notified by the Civil Division of the
U.S. Department of Justice (“DOJ”) that a “Qui Tam” Complaint (“Complaint”) had
been filed under seal by a private individual against a number of health care
companies, including the Company. The Complaint is an action to recover damages
and civil penalties arising from alleged false or fraudulent claims and
statements submitted or caused to be submitted by the defendants to Medicare.
The DOJ has not made any decision whether to join the action. The Company
believes the allegations in the Complaint are without merit and intends to
vigorously defend itself if required to do so.

Thomas Schofield

On January 16, 2009, the Borrower initiated litigation against Thomas Schofield,
who had served as the Borrower’s Director of Operations from June 2005 until his
resignation in late December 2008. The suit, which was filed in the Circuit
Court for the Twentieth Judicial District in and for Lee County Florida (the
“Court”), sought the enforcement of Mr. Schofield’s Confidentiality,
Non-Solicitation and Non-Competition Agreement. An emergency trial was held on
January 28, 2009 in Fort Myers, FL. At such trial the judge affirmed in part and
denied in part the Borrower’s request for a preliminary injunction against Mr.
Schofield and his new employer, Laboratory Corporation of America (Lab Corp.).
On April 2, 2009, the Court issued a written ruling with the specific
injunction. The injunction enjoins Mr. Schofield from working in any management
capacity other than as Director of Logistics for Lab Corp within 1,000 miles of
the Borrower’s main headquarter facility in Fort Myers. The order also enjoins
Mr. Schofield from soliciting any of the Borrowers customers either individually
or in concert with Lab Corp.

Dr. Peter Kohn

In October 2004, Dr. Peter Kohn resigned as Lab Director of NeoGenomics. His
employment contract with the Company ended September 30, 2004 and was not
renewed. There was communication between Mr. Thomas White, former CEO and Dr.
Kohn in October regarding health coverage and unused vacation time stemming from
his first contract with the Company that expired in September 2003 and was
superseded with a second contract. On January 12, 2005, the Company received a
complaint filed in the Circuit Court for Seminole County, Florida by its former
Laboratory Director, Dr. Peter Kohn, which was then amended three times. The
complaint alleged that the Company owed Dr. Kohn approximately $22,000 in back
vacation pay and other unspecified damages. The Company believes that it owed
Dr. Kohn no more than approximately $12,352 in unused vacation time, which it
paid to Dr. Kohn.
 
In March 2007, the Company filed a motion to dismiss most of the third amended
complaint, except for the count dealing with the unused vacation pay from the
second contract, which the Company has acknowledged that it owed to Dr. Kohn. On
May 1, 2007, the judged dismissed two of the four counts that the Company had
requested be dismissed. There was no meaningful activity on this case from the
summer of 2007 until October 2009. In October 2009, as the deadline drew near
for proceeding with the case or having the court abandon it for lack of
prosecution, Dr. Koh’s attorney filed a motion to strike certain affirmative
defenses which motion had been filed back in 2007, and a hearing was held on
November 24, 2009. At this hearing, the Court granted in part and denied in part
the motion to strike certain affirmative defenses and allowed Neogenomics to
serve amended affirmative defenses, which it did on January 6, 2010. There has
been no litigation activity since that time.
 
ix

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

The Company continues to believe that Dr. Kohn’s claims are baseless and that
Dr. Kohn’s lawyer is keeping the case alive only in the hopes of settling the
case for accrued but unpaid legal fees (unpaid by Dr. Kohn). Should Dr. Kohn
continue to pursue this action, the Company intends to vigorously pursue its
defense of this matter. If the Company were found liable for Dr. Kohn’s claims,
the Company does not believe the amounts in question would be material to the
ongoing operations of the Company.
 
Other Litigation in the Normal Course of Business

From time to time the Credit Parties are also subject to legal proceedings,
claims and litigation arising in the ordinary course of business where (a) the
amount in controversy does not exceed $125,000 and (b) no injuctive relief is
being sought by the parties. We do not expect the ultimate costs to resolve
these matters to have a material adverse effect on our consolidated financial
position, results of operations or cash flows.

CLOSED, SETTLED OR ABANDONED LITIGATION:

US Labs

On October 26, 2006, US Labs filed a complaint in the Superior Court of the
State of California for the County of Los Angeles (entitled Accupath Diagnostics
Laboratories, Inc. v. NeoGenomics, Inc., et al., Case No. BC 360985) (the
“Lawsuit”) against the Company and Robert Gasparini, as an individual, and
certain other employees and non-employees of NeoGenomics (the “Defendants”) with
respect to claims arising from discussions with current and former employees of
US Labs.  On March 18, 2008, we reached a preliminary agreement to settle US
Labs’ claims, and in accordance with SFAS No. 5, Accounting For Contingencies,
as of December 31, 2007 we accrued a $375,000 loss contingency, which consisted
of $250,000 to provide for the Company’s expected share of this settlement, and
$125,000 to provide for the Company’s share of the estimated legal fees.
 
On April 23, 2008, the Company and US Labs entered into the Settlement
Agreement; whereby, both parties agreed to settle and resolve all claims
asserted in and arising out of the aforementioned lawsuit. Pursuant to the
Settlement Agreement, the Defendants are required to pay $500,000 to US Labs, of
which $250,000 was paid on May 1, 2008 with funds from the Company’s insurance
carrier. The remaining $250,000 was paid by the Company on the last day of each
month in equal installments of $31,250 commencing on May 31, 2008. All payments
had been made to US Labs under the Settlement Agreement and the case is closed.

x

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

 
FCCI Commercial Insurance Company

A civil lawsuit was pending between the Company and its liability insurer, FCCI
Commercial Insurance Company ("FCCI") in the 20th Judicial Circuit Court in and
for Lee County, Florida (Case No. 07-CA-017150). FCCI filed the suit on December
12, 2007 in response to the Company's demands for insurance benefits with
respect to an underlying action involving US Labs (a settlement agreement has
since been reached in the underlying action, and thus that case has now
concluded). Specifically, the Company maintains that the underlying plaintiff's
allegations triggered the subject insurance policy's personal and advertising
injury coverage. In the lawsuit, FCCI sought a court judgment that it owes no
obligation to the Company regarding the underlying action (FCCI does not seek
monetary damages). A hearing was held on November 9, 2009 and the Court issued a
ruling in favor of FCCI on January 25, 2010. No monetary damages were sought or
awarded and the case is now closed.

Schedule 7.11 
Intellectual Property

 
The Company has received a registered trademark for the name “NeoGenomics” for
use in the business in which it currently operates and related businesses. The
Company has also trademarked the brand names “MelanoSITE” and  “DermFISH”.

Schedule 7.15A 
Existing Indebtedness, Investments, Guarantees and Certain Contracts

Existing Indebtedness of Guarantor

Existing Indebtedness and Contracts for Indebtedness by Borrower

 
xi

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Amount of
         
Term
       
Balance
 
#
 
Lender
 
Asset Description
 
lease
 
Start date
 
Term
 
Date
 
Payment
   
3/31/10
                                       
1
 
US Express Lease
 
Computer Equipment
  $ 11,204  
Mar-07
    36  
Mar-10
    413.29       -  
2
 
Balboa Capital
 
Furniture & fixtures
  $ 19,820  
Apr-07
    60  
Mar-12
    440.82       9,238.79  
3
 
VAR 222707 - PC Connections
 
Computer Equipment
  $ 6,245  
Feb-07
    36  
Jan-10
    372.41       -  
4
 
VAR res 13107 - PC Connections
 
Computer Equipment
  $ 3,554  
Feb-07
    36  
Jan-10
    299.32       -  
5
 
California Beckman
 
Cytomics PC 500
  $ 136,118  
Mar-07
    60  
Feb-12
    2,791.77       68,131.53  
6
 
Baytree
 
BMC Software/customer svc
  $ 15,783  
Mar-07
    36  
Mar-10
    551.70       -  
7
 
Royal bank of america
 
Abbott molecular Thermobrite
  $ 80,936  
Feb-07
    48  
Jan-11
    2,289.39       19,281.66  
8
 
Beckman Coulter Lease
 
Flow Cytometer
  $ 125,064  
Apr-06
    60  
Mar-11
    2,691.14       29,177.96  
9
 
Marlin Lease
 
Ikonisys comupter support equip
  $ 48,230  
Sep-06
    60  
Aug-11
    1,201.35       16,867.66  
10
 
B of A Lease
 
Computer hardware & servers
  $ 98,405  
Sep-06
    60  
Aug-11
    2,366.25       34,334.35  
11
 
AEL Lease
 
IkoniScope
  $ 100,170  
Sep-06
    60  
Aug-11
    2,315.93       35,565.48  
12
 
GE Capital Corp
 
IkoniScope
  $ 100,170  
Sep-06
    60  
Aug-11
    2,105.47       31,750.71  
13
 
Beckman Coulter
 
Coulter Hematology Analyzer
  $ 18,375  
Nov-06
    60  
Oct-11
    760.79       7,046.20  
14
 
Bank of America
 
Computer hardware & servers
  $ 8,954  
Nov-06
    60  
Oct-11
    228.23       3,605.69  
15
 
Royal Bank (BMT) 24K Lease
 
Computer hardware & servers
  $ 23,494  
Dec-06
    48  
Nov-10
    718.38       5,092.11  
16
 
Royal Bank (BMT) 18K Lease
 
Computer hardware & servers
  $ 17,661  
Dec-06
    48  
Nov-10
    549.26       3,879.92  
17
 
Toshiba Lease
 
Phone system
  $ 42,784  
Jan-07
    60  
Dec-11
    997.75       18,295.89  
18
 
Key Equipment
 
Genetic imaging system
  $ 124,820  
Aug-07
    60  
Jul-12
    3,089.94       72,523.17  
19
 
Great America
 
Genetic imaging system
  $ 55,920  
Aug-07
    60  
Jul-12
    1,391.68       31,979.91  
20
 
Bank of America
 
Seacoast billing software
  $ 74,788  
Sep-07
    36  
Aug-10
    3,124.95       14,316.53  
21
 
DDI Leasing
 
Iloniscope, great plains etc
  $ 13,671  
Feb-08
    35  
Dec-10
    474.35       4,040.35  
22
 
Var Resources
 
Computer HW
  $ 27,712  
Dec-07
    35  
Oct-10
    972.87       6,496.03  
23
 
Beckman Coulter Capital
 
Lab Equipment
  $ 128,819  
Dec-07
    60  
Nov-12
    2,642.07       75,424.88  
24
 
GE Capital
 
Lab Equipment
  $ 66,978  
Feb-08
    35  
Dec-10
    2,479.34       20,969.78  
25
 
DeLange Landen
 
Lab Equipment
  $ 76,502  
May-08
    58  
Feb-13
    1,937.86       53,059.83  
26
 
DDI Leasing
 
Lab Furntiure
  $ 70,524  
Apr-08
    35  
Feb-11
    2,266.00       23,477.13  
27
 
DDI Leasing
 
Furniture & fixtures
  $ 10,726  
May-08
    35  
Mar-11
    376.71       4,153.61  
28
 
Direct Capital Lease
 
Computer HW and Software
  $ 62,250  
Jul-08
    36  
Jun-11
    2,504.04       30,368.91  
29
 
Baytree Leasing Company, LLC
 
Lab Equipment
  $ 82,537  
Oct-08
    58  
Jul-13
    2,128.50       63,942.41  
30
 
Butler Capital
 
Lab Equipment
  $ 114,427  
Oct-08
    34  
Jul-11
    4,098.13       59,485.84  
31
 
Butler Capital
 
Lab Equipment
  $ 13,851  
Oct-08
    34  
Jul-11
    524.36       7,400.44  
32
 
Gulf Pointe Capital, LLC
 
Lab Equipment, computer hW
  $ 124,747  
Oct-08
    29  
Feb-11
    5,154.88       52,671.27  
33
 
Royal Bank
 
Lab Equipment
  $ 60,744  
Jan-09
    36  
Dec-11
    2,357.43       40,376.53  
34
 
Court Square (First Credit Corp)
 
Lab Equipment
  $ 35,675  
Jan-09
    58  
Oct-13
    1,022.32       29,807.57  
35
 
LTI
 
Lab Equipment
  $ 421,851  
Feb-09
    34  
Nov-11
    15,282.00       269,218.16  
36
 
Becman Coulter
 
Flow Cytometer
  $ 125,362  
Jan-09
    60  
Dec-13
    2,552.37       98,634.76  
37
 
Credential Leasing
 
Computer Hardware
  $ 63,849  
Feb-09
    46  
Nov-12
    2,099.86       51,027.76  
38
 
Gulf Pointe Capital, LLC
 
Lab Equipment
  $ 118,192  
Apr-09
    30  
Sep-11
    4,864.45       76,801.25  
39
 
Var Resources
 
Computer Hardware
  $ 60,481  
Jun-09
    34  
Mar-12
    2,340.06       46,854.67  
40
 
LTI
 
Lab Equipment
  $ 424,116  
Jun-09
    35  
Apr-12
    15,357.57       333,652.97  
41
 
LTI
 
Lab Equipment
  $ 38,614  
Jul-09
    35  
May-12
    1,424.63       31,464.78  
42
 
Butler Capital
 
Furniture & fixtures
  $ 95,002  
Sep-09
    35  
Jul-12
    3,305.62       81,266.65  
43
 
Becman Coulter
 
Flow Cytometer
  $ 125,581  
Sep-09
    60  
Aug-14
    2,710.24       115,808.30  
44
 
Royal Bank
 
Computer Hardware APVX
  $ 84,347  
Sep-09
    36  
Aug-12
    3,082.36       73,349.51  
45
 
LTI
 
Furniture & fixtures
  $ 28,177  
Sep-09
    35  
Jul-12
    1,013.36       24,227.83  
46
 
Wells Fargo
 
Lab Equipment
  $ 282,897  
Oct-09
    60  
Sep-14
    5,794.67       259,649.25  
47
 
Suntrust
 
Lab Equipment, Computer HW and furniture
  $ 422,905  
Nov-09
    59  
Sep-14
    8,433.67       398,415.42  
48
 
Wells Fargo
 
Lab Equipment
  $ 421,516  
Jan-10
    60  
Dec-14
    8,627.66       410,121.89  
49
 
Suntrust
 
Lab Equipment and small amount furniture
  $ 287,992  
Jan-10
    59  
Nov-14
    5,703.88       279,639.68  
50
 
DeLange Landen
 
Copiers
  $ 30,139  
Apr-10
    34  
Jan-13
    1,080.30       30,138.78  
51
 
Suntrust
 
Lab Equipment, Computer HW
  $ 248,898  
Apr-10
    60  
Mar-15
    4,901.52       248,898.00               $ 5,281,577            
 
    146,212.90       3,701,931.80  

 
Investments Held by Guarantor
  
$200,000 Convertible Note Receivable from Power3 Medical Products, Inc.

Investments Held by Subsidiary

None
 
Schedule 7.15B
Indebtedness with a Maturity Date During the Term – See Schedule 7.15A

 
Schedule 7.16
Other Agreements - See Schedule 7.5

 
 
xii

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Schedule 7.17 
Insurance

 
NeoGenomics Laboratories, Inc.
Commercial Insurance Schedule

   
Broker / Agent
 
Carrier (Ins. Co)
 
Policy Number
 
Policy Premium
 
Effective Date
 
Expiration
Date
 
Limit
                                 
   1
 
Russell Bond & Co.
 
Homeland Ins. Co of NY. Prof. Liability
 
MFL-0146-09
  $ 71,994  
10/9/2009
 
10/9/2010
 
1M/3M
                                     
   2
 
Russell Bond & Co.
 
Homeland
 
MFX-0051-09
  $ 35,734  
10/9/2009
 
10/9/2010
 
10M Excess of
all Underlying
                                     
   3
 
Gulfshore Insurance
 
Automobile
Amerisure Commercial.
General Liability
Umbrella Liability
 
CA2053213
CA2053214
GL2053215
CU2053216
  $ 72,088  
5/4/2009
 
5/4/2010
 
See Policy
See Policy
GL 1M
UL 4M
                                     
   4
 
Gulfshore Insurance
 
Amerisure-Worker's Comp
 
WC253879
  $ 70,346  
5/4/2009
 
5/4/2010
                                           
   5
 
Gulfshore Insurance
 
Ins. Co. of the West CA DIC - EQ
 
XCH - 5002667
  $ 24,600  
11/6/2009
 
11/6/2010
    3,145,906                                      
   6
 
Russell Bond & Co.
 
Great American Ins. Co.
 
NSP2380654
  $ 19,884  
6/15/2009
 
6/15/2010
 
2M + Excess
                                     
6A
 
Russell Bond & Co.
 
Great American Ins. Co.
 
NSP2380654
  $ 12,260  
8/24/2009
 
6/15/2010
 
 
3M
                                      
   7
 
Russell Bond & Co.
 
Great American Ins. Co. Employers Liabili ty
 
EPL2824392
  $ 7,511  
6/15/2009
 
6/15/2010
   
1M
                                     
   8
 
Russell Bond & Co.
 
Great American Ins. Co. Fiduciary Liability
 
FDP6660848
  $ 820  
7/14/2009
 
7/14/2010
   
1M
                                     
   9
 
Baca rella Ins. (Jim Michaelis)
 
Old Republic Surety Co. Medicaid Provider Surety bond $50,000
      $ 1,010  
2/25/2010
 
2/25/2011
                                           
 10
 
Baca rella Ins. (Ji m Mi chael i s)
 
Old Republic Surety Co. Injunction bond $25,000
      $ 505  
4/15/2010
 
4/15/2011
                                                       
Total Policy Premium
  $ 316,752                

 
Schedule 7.18A 
Borrower’s Names

 
NeoGenomics Laboratories, Inc.
NeoGenomics Laboratories

Schedule 7.18B 
Chief Executive Offices and Other Places of Business

 
Chief Executive Offices
12701 Commonwealth Drive, Suites 1-9
Fort Myers, FL 33913

Other Places of Business
618 Grassmere Park Drive, Suite 20
Nashville, TN 37211

6 Morgan Street, Suite’s 116, 130 and 150

 
xiii

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Irvine, CA 92618

9548 Topanga Canyon Blvd.
Chatsworth, CA 91311

Schedule 8.8 
Post-Closing Matters

 
Schedule 9.2 
Permitted Indebtedness

 
All Capital Leases listed in Schedule 7.15A
 
Schedule 9.3 
Permitted Liens

 
Purchase Money on all Equipment financed through the Capital Leases listed on
Schedule 7.15A
 
Schedule 9.4 
New Facilities

 
[***]
 
Schedule 9.5 
Related Party Contracts

All Related Party agreements listed in Schedule 7.5
 
 
[***] Information redacted pursuant to a confidential treatment request.  An
unredacted version of this Agreement has been filed separately with the
Securities and Exchange Commission.
 
xiv

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EXHIBIT A
TO
REVOLVING CREDIT AND SECURITY AGREEMENT

BORROWING CERTIFICATE
dated as of                                   ,                 

NEOGENOMICS, INC., a Florida corporation, (the “Borrower”), by the undersigned
duly authorized officer, hereby certifies to Lender in accordance with the
Amended and Restated Revolving Credit and Security Agreement dated as of April
26, 2010, between Borrower, NeoGenomics, Inc., a Nevada corporation, and
CapitalSource Finance LLC (“Lender”) (as amended, supplemented or modified from
time to time, the "Loan Agreement;" all capitalized terms not defined herein
have the meanings given them in the Loan Agreement) and other Loan Documents
that:

A.           Borrowing Base and Compliance
 
Pursuant to the Loan Documents, Lender has been granted a lien on all Accounts
of Borrower. The amounts, calculations and representations set forth below and
on Schedule 1 are true and correct in all respects and were determined in
accordance with the Loan Agreement and GAAP. All of the Accounts referred to
(other than those entered as ineligible on Schedule 1) are Eligible Accounts.
Attached are reports with detailed aging and categorizing of Borrower’s accounts
receivable and payables and supporting documentation with respect to the
amounts, calculation and representations set forth on Schedule 1, all as
reasonably requested by Lender pursuant to the Loan Agreement.
 
B.           Borrowing Notice (to be completed and effective only if Borrower is
requesting an Advance)

(1)         In accordance with Sections 2.3 and 6.2(a) of the Loan Agreement,
Borrower hereby irrevocably requests from Lender an Advance under the Revolving
Facility pursuant to the Loan Agreement in the aggregate principal amount of
$_________ (“Requested Advance”) to be made on _________________, _________ (the
“Borrowing Date”), which day is a Business Day.
 
(2)         Immediately after giving effect to the Requested Advance, the
aggregate outstanding principal amount of Advances will not exceed the lesser of
(i) the Availability and (ii) the Facility Cap.
  
(3)         Borrower certifies to Lender as of the applicable Borrowing Date (I)
to the solvency of Borrower after giving effect to the Requested Advance and the
transactions contemplated by the Loan Agreement and the other Loan Documents,
and (II) as to Borrower’s financial resources and ability to meet its respective
obligations and liabilities as they become due, to the effect that as of the
applicable Borrowing Date and after giving effect to the Requested Advance and
the transactions contemplated by the Loan Agreement and the other Loan
Documents:
 
 
(a)
the assets of Borrower, at a fair valuation, exceed the total liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities) of
such Person; and

 
(b)
no unreasonably small capital base with which to engage in its anticipated
business exists with respect to Borrower.

 

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

 
  
(4)         Attached hereto are all consents, approvals and agreements from
third parties necessary or desirable with respect to the requested Advance.

 
C.
General Certifications

Borrower further certifies to Lender that: (a) the certifications,
representations, calculations and statements herein will be true and correct as
of the date hereof and on the Borrowing Date (if applicable); (b) all conditions
and provisions of Section 6.2 and, if applicable, Section 6.1 of the Loan
Agreement are as of the date hereof, and will be as of the Borrowing Date (if
applicable), fully satisfied, including, without limitation, receipt by Lender
of all fees, charges and expenses payable to Lender on or prior to such
Borrowing Date pursuant to the Loan Documents; [(c) Borrower has paid all
payroll taxes through the payroll period ended _________; (d) Borrower is in
substantial compliance with all material regulatory provisions; (e) no Medicare
or Medicaid recoupments and/or recoupments of any third-party payor in excess of
the limits specified in the Loan Agreement are being sought, requested or
claimed, or, to Borrower’s knowledge, threatened against Borrower or Borrower’s
affiliates except the following amounts: Medicare _______; Medicaid _______;
Third-Party Payor _______.

IN WITNESS WHEREOF, the undersigned has caused this certificate to be executed
as of the day first written above.

NEOGENOMICS, INC.

Prepared by:
 
Approved by:
                      
Name: 
   
Name: 
 
Title:
   
Title:
 

 
 
2

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

 

EXHIBIT B
TO
REVOLVING CREDIT AND SECURITY AGREEMENT

FORM OF COMPLIANCE CERTIFICATE

Date: [___________________]
  
This certificate (the “Compliance Certificate”) is given by NEOGENOMICS, INC., a
Florida corporation (the “Borrower”) pursuant to Section 8.1(a) of that certain
Revolving Credit, Term Loan and Security Agreement, dated as of ____________
___, 2008 (the “Loan Agreement”) by and among Borrower, NeoGenomics, Inc., a
Nevada corporation, and CAPITALSOURCE FINANCE LLC, a Delaware limited liability
company (“Lender”). Capitalized terms used herein without definition shall have
the meanings set forth in the Loan Agreement.

The officer executing this Compliance Certificate is the chief financial officer
of Borrower and as such is duly authorized to execute and deliver this
Compliance Certificate on behalf of Borrower. By so executing this Compliance
Certificate, Borrower hereby certifies to the Lender that:

(a)         the financial statements delivered with this Compliance Certificate
in accordance with Section 8.1(a) of the Loan Agreement fairly present the
consolidated results of operations and financial condition of the Borrower and
its respective subsidiaries on a consolidated basis for the period(s) ending on
and as of the dates of such financial statements;

(b)         the Borrower has reviewed the relevant terms of the Loan Documents
and the condition of the Borrower;

(c)         no Default or Event of Default has occurred or is continuing, except
as set forth in Schedule 2 hereto, which includes a description of the nature,
status and period of existence of such Default or Event of Default, if any, and
what action the Borrower has taken, is undertaking and proposes to take with
respect thereto; and
 

(d)         the Borrower is in compliance with all financial covenants set forth
in the Loan Agreement and then applicable, as demonstrated, with respect to
Annex I of the Loan Agreement by the calculations of such covenants in Schedule
1 hereto, except as set forth in Schedule 2.

[Signature page follows.]

 
3

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

 

 
IN WITNESS WHEREOF, the Borrower has caused this Compliance Certificate to be
executed by its duly authorized officer on behalf of the Borrower this ____ day
of _________ 200__.

NEOGENOMICS, INC.
 
By:
 
Name: 
 
Title:
 

 
 
4

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

 
 
SCHEDULE 1 TO COMPLIANCE CERTIFICATE
Date: _______________ __, 20__

For calendar month and Test Period ended ____________

I.
MINIMUM FIXED CHARGE COVERAGE
 
ADJUSTED EBITDA
     
A.
Net Income
         
1.
Net income (or loss)
 
$___________
               
2.
Income (or loss) of any Person in which any other Person (other than any
Borrower) has a joint interest, except to the extent of the amount of dividends
or other distributions actually paid to a Borrower by such Person
 
$___________
               
3.
Income (or loss) of any Person accrued prior to the date it becomes a Borrower
or is merged into or consolidated with a Borrower or that Person’s assets are
acquired by any Borrower
 
$___________
               
4.
Income of any Subsidiary of Borrower to the extent that the declaration or
payment of dividends or similar distributions of that income by that Subsidiary
is not at the time permitted by operation of the terms of the charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary
 
$___________
               
5.
Compensation expense resulting from the issuance of capital stock, warrant,
stock options or stock appreciation rights issued to former or current
employees, including officers, consultants and Board Members of a Borrower, or
the exercise of such options or rights, in each case to the extent the
obligation (if any) associated therewith is not expected to be settled by the
payment of cash by a Borrower or any affiliate thereof
 
$___________
               
6.
Compensation expense resulting from the repurchase of capital stock, options and
rights described in clause (iv) of the definition of Net Income
 
$___________
               
7.
Net Income: (A.1) minus (A.2 through A.6)
 
$___________
             
B.
Interest Expense
                 
1.
Total interest expense (including attributable to Capital Leases in accordance
with GAAP) and fees with respect to all outstanding Indebtedness
 
$___________
               
2.
Commissions, discounts and other fees owed with respect to letters of credit and
bankers' acceptance financing and net costs under Interest Rate Agreements
 
$___________
               
3.
Non-cash amortization of warrant expense (that has been categorized as interest
expense) that may arise as a result of warrants being attached to outstanding
Indebtedness
                   
4.
Non-cash amortization of capitalized financing fees arising out of the initial
closing of the Agreement which have been previously paid and have been
categorized as interest expense in accordance to GAAP.
   

 
 

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5.
Interest Expense: (B.1) minus (B.2 through B.4)
 
$___________
             
C.
Taxes on income, whether paid, payable or accrued
 
$___________
           
D.
Depreciation expense
 
$___________
           
E.
Amortization expense
 
$___________
           
F.
All other non-cash, recurring charges and expenses, excluding accruals for cash
expenses made in the ordinary course of business
 
$___________
           
G.
Loss from any sale of assets, other than sales in the ordinary course of
business
 
$___________
           
H.
Non-cash stock option and warrant-based compensation expense
 
$___________
           
I.
Other extraordinary or non-recurring charges that would not have otherwise been
incurred in the ordinary course of business as determined in accordance with
GAAP, including, but not limited to, severance payments up to the amounts
permitted in Section 9.6 of the Loan Agreement
               
J.
Gains from any sale of assets, other than sales in the ordinary course of
business
               
K.
Other extraordinary or non-recurring gains
 
$___________
           
L.
ADJUSTED EBITDA: (A.7) plus ((B.5) and (C through I)) minus (J and K)
 
$___________
         
II.
FIXED CHARGE COVERAGE RATIO
     
A.
ADJUSTED EBITDA (See ADJUSTED EBITDA calculation, (I.K)
 
$___________
           
B.
Fixed Charges
         
1.
Total Debt Service
                     
a.
Payments of principal on Indebtedness
 
$___________
                   
b.
Interest Expense (I.B.3)
 
$___________
                   
c.
Total Debt Service: (B.1.a) plus (B.1.b)
 
$___________
                 
2.
Unfinanced Capital Expenditures paid in cash
 
$___________
               
3.
Income taxes paid in cash or accrued
 
$___________
               
4.
Dividends and distributions paid or accrued or declared (except for Accumulated
Distributions)
 
$___________
               
5.
Fixed Charges: Sum of (B.1.c) through (B.4)
 
$___________
             
C.
FIXED CHARGE COVERAGE RATIO: (A) divided by (B.5)
 
____________

 
 

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D.
MINIMUM RATIO REQUIRED:
 
____________
           
E.
COMPLIANCE:
 
__Yes/__No
         
III.
CASH VELOCITY
     
A.
Net revenue for the three calendar month period commencing the first day of the
calendar month of the second month immediately preceding the first month of the
current Test Period less the bad debt expense recognized on the income statement
for such three calendar month period
 
$___________
           
B.
Collections of the Borrower’s Accounts for the test period
 
$ _________
           
C.
III(B) DIVIDED BY III(A)
 
$ _________
           
D.
MINIMUM REQUIRED (80% OF III.B.):
 
87.5%
           
D.
COMPLIANCE:
 
__Yes/__No

 
 

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SCHEDULE 2 TO COMPLIANCE CERTIFICATE

Date: ________________ __, 20__

CONDITIONS OR EVENTS WHICH CONSTITUTE
A DEFAULT OR AN EVENT OF DEFAULT

If any condition or event exists that constitutes a Default or an Event of
Default, specify nature and period of existence and what action the Borrower has
taken, is taking or proposes to take with respect thereto; if no such condition
or event exists, state “None.”
 
i

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EXHIBIT C
TO
AMENDED AND RESTATED REVOLVING CREDIT SECURITY AGREEMENT

OFFICER'S CERTIFICATE
 
The undersigned, Douglas M. VanOort, certifies that he is the CEO of
NEOGENOMICS, LABORATORIES, INC., a Florida Corporation, ("Borrower"), makes this
certificate in connection with and pursuant to Section 6.1 of the Loan Agreement
dated as of the date hereof (the "Loan Agreement") between Borrower,
NeoGenomics, Inc., a Nevada corporation, and CAPITALSOURCE FINANCE LLC, a
Delaware limited liability company ("Lender"), and certifies to Lender as
follows:
 
All conditions and provisions of Article VI of the Loan Agreement are fully
satisfied, including receipt by Lender of all fees, charges and expenses payable
to Lender on or prior to the date hereof pursuant to the Loan Documents. In
furtherance of and without limiting the foregoing, as of the date hereof, (A)
the Loan Documents, other documents required pursuant thereto and security
interests and Liens created thereby are in full force and effect, (B) each
representation and warranty of the Borrower in the Loan Documents is true and
correct in all material respects as if made on and as of the date hereof (except
where such representation or warranty is otherwise expressly made as of a
particular date, in which case it is, was or will be true and correct on and as
of such other date), before and after giving effect to the making of the Initial
Advance and/or the consummation of the transactions to be consummated on the
date hereof, (C) the Borrower is in compliance with all, and not in violation,
breach or default of any, covenants, agreements and/or other provisions of any
of the Loan Documents, (D) no Default or Event of Default under any Loan
Document has occurred and is continuing or exists on the date hereof or would
exist after giving effect to the Initial Advance and/or the consummation of the
transactions to be consummated on the date hereof, (E) the Borrower is in
compliance with the provisions of Annex I of the Loan Agreement, (F) no Material
Adverse Change or Material Adverse Effect has occurred and there are no
liabilities or obligations with respect to the Borrower of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether or not due)
which, individually or in the aggregate, could constitute a Material Adverse
Effect, (G) no material adverse deviation from the financial projections of the
Borrower previously furnished to Lender has occurred, and (H) no event(s),
fact(s), condition(s) or circumstance(s) has occurred which, individually or in
the aggregate, make it improbable that the Borrower will be able to observe or
perform in all material respects any of the Obligations under the Loan
Documents.
 
Capitalized terms used, but not defined herein, shall have the meanings given
such terms in the Loan Agreement.
 
IN WITNESS WHEREOF, the undersigned has caused this Officer's Certificate to be
executed as of April 26, 2010.
 
NEOGENOMICS, INC.
   
By: 
/s/ Douglas VanOort
 
Douglas VanOort
 
Chief Executive Officer

 

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EXHIBIT D
TO
REVOLVING CREDIT AND SECURITY AGREEMENT
SOLVENCY CERTIFICATE

NEOGENOMICS, INC.

The undersigned, George A. Cardoza, hereby certifies that he is the Chief
Financial Officer of NEOGENOMICS LABORATORIES, INC., a Florida corporation (the
“Borrower”), and that he makes this certificate on behalf of the Borrower
pursuant to Section 6.1 of that certain Amended and Restated Revolving Credit
and Security Agreement dated as of April 26, 2010 (the “Agreement”), by and
between the Borrower, NeoGenomics, Inc., a Nevada corporation (together with its
subsidiaries, the “Company”), and CapitalSource Finance LLC, a Delaware limited
liability company, and further certifies to the solvency of the Borrower after
giving effect to the transactions and the Indebtedness (as defined in the
Agreement) contemplated by the Agreement and the other Loan Documents (as
defined in the Agreement) and as to the Borrower’s financial resources and
ability to meet its obligations and liabilities as they become due, to the
effect that as of the Closing Date (as defined in the Agreement) and the
Borrowing Date for the Initial Advance and after giving effect to the
transactions and the Indebtedness contemplated by the Agreement and the other
Loan Documents:
 
 
(1)
the assets of the Borrower, at a fair valuation, exceed the total liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities) of
the Borrower; and

(2) 
no unreasonably small capital base with which to engage in the Borrower’s
anticipated business exists with respect to the Borrower.

IN WITNESS WHEREOF, the undersigned has executed this Solvency Certificate as of
April 26, 2010.

 
NEOGENOMICS, INC.
 
/S/ George A. Cardoza
Name: George A. Cardoza
Title: Chief Financial Officer

I, Jerome Dvonch, as Secretary of the Company, do hereby certify that George A.
Cardoza is the duly elected, qualified and acting Chief Financial Officer of the
Borrower, and that the signature of George A. Cardoza set forth above is his
true and correct signature.
 
IN WITNESS WHEREOF, the undersigned has caused this Incumbency Certificate to be
duly executed this 26th day of April , 2010.
 
/s/ Jerome Dvonch
Name: Jerome Dvonch
Title: Secretary

 

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