Exhibit 10.1

LOAN, SECURITY AND GUARANTY AGREEMENT

between

FOUNDATION HEALTHCARE, INC.,

as Borrower,

THE SUBSIDIARIES OF BORROWER FROM TIME TO TIME PARTY HERETO,

as Guarantors,

BANK SNB, NATIONAL ASSOCIATION,

as Agent,

TEXAS CAPITAL BANK,

as Syndication Agent

THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO,

as Lenders.

June 30, 2014

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TABLE OF CONTENTS

 

         Page  

Section 1.

  Definitions      1   

1.1

  Defined Terms      1   

1.2

  UCC Terms      13   

Section 2.

  The Loans      13   

2.1

  Term Loan      13   

2.2

  Revolving Loans      13   

2.3

  Notes      14   

2.4

  Use of Proceeds      14   

Section 3.

  Interest      14   

3.1

  Interest Rate      14   

3.2

  Default Rate      14   

3.3

  Computation of Interest      14   

Section 4.

  Borrowing and Payment Procedures      14   

4.1

  Borrowing and Funding      14   

4.2

  Defaulting Lender      15   

4.3

  One Obligation      15   

4.4

  Payments of Obligations      15   

4.5

  Manner of Payments; Settlement      16   

4.6

  Payment Authorization      16   

4.7

  Voluntary Prepayment      16   

4.8

  Mandatory Prepayments      16   

4.9

  Taxes      18   

4.10

  Fees      18   

4.11

  Increased Costs; Capital Adequacy; Illegality      19   

4.12

  Allocation of Payments during Event of Default      20   

Section 5.

  Conditions Precedent      21   

5.1

  Conditions to Term Loan and Initial Revolving Loan      21   

5.2

  Conditions to Subsequent Revolving Loans      22   

Section 6.

  Collateral      23   

6.1

  Grant of Security Interest      23   

6.2

  No Assumption of Liability      23   

6.3

  Agreements Regarding Accounts      23   

6.4

  Commercial Tort Claims      23   

6.5

  Further Assurances      23   

6.6

  Pledged Securities      24   

Section 7.

  Representations and Warranties      24   

7.1

  Legal Status; Subsidiaries      24   

7.2

  Authorization and Validity      24   

7.3

  No Conflict      24   

7.4

  No Consents      24   

 

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7.5

  Indebtedness      25   

7.6

  Title to Properties      25   

7.7

  Taxes      25   

7.8

  Brokers      25   

7.9

  Litigation      25   

7.10

  Compliance with Laws      25   

7.11

  Compliance with Environmental Laws      25   

7.12

  Deposit Accounts      25   

7.13

  Intellectual Property      25   

7.14

  Labor Relations      26   

7.15

  Financial Statements      26   

7.16

  Not a Regulated Entity      26   

7.17

  Margin Stock      26   

7.18

  Material Contracts; Management Agreements      26   

7.19

  Liabilities      26   

7.20

  Solvency      27   

7.21

  ERISA      27   

7.22

  Foreign Assets Control Regulations, Etc.      27   

7.23

  Complete Disclosure      28   

7.24

  Healthcare Matters      28   

7.25

  Motion Picture Entities      28   

Section 8.

  Affirmative Covenants      28   

8.1

  Payment of Indebtedness      28   

8.2

  Existence      29   

8.3

  Compliance with Laws; Licenses; Provider Agreements      29   

8.4

  Taxes      29   

8.5

  Collateral      29   

8.6

  Inspection      29   

8.7

  Insurance      29   

8.8

  Material Contracts; Management Agreements      30   

8.9

  Deposit Accounts      30   

8.10

  Intercompany Note Documents      30   

8.11

  Reporting Obligations      30   

8.12

  Post-Closing Covenants      32   

Section 9.

  Negative Covenants      32   

9.1

  Existence of Liens      32   

9.2

  Restrictions on Debt      32   

9.3

  Sale of Assets      32   

9.4

  Changes in Structure; Amendments to Organizational Documents      32   

9.5

  Distributions      32   

9.6

  Loans and Investments      33   

9.7

  Subsidiaries      33   

9.8

  Collection of Accounts      33   

9.9

  Restricted Payments      33   

9.10

  Motion Picture Entities      33   

Section 10.

  Financial Covenants      33   

10.1

  Covenants      33   

10.2

  Definitions      34   

10.3

  Annualized EBITDA      35   

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Section 11.

  Guaranty      35   

11.1

  Guaranty of Payment and Performance      35   

11.2

  Actions with Respect to the Obligations      35   

11.3

  Waivers      36   

11.4

  Subordination      37   

11.5

  No Subrogation      37   

11.6

  Insolvency Proceedings      37   

11.7

  Guarantors’ Authorization to Agent      37   

Section 12.

  Events of Default      38   

12.1

  Non-Payment of Loans      38   

12.2

  Covenant Defaults Subject to Limited Cure      38   

12.3

  Covenant Defaults Subject to Cure      38   

12.4

  Breach of Representation or Warranty      38   

12.5

  Loss of Medicare or Medicaid Authority      38   

12.6

  Change in Control      38   

12.7

  Management Agreements      39   

12.8

  Destruction of Collateral      39   

12.9

  Insolvency      39   

12.10

  Dissolution      39   

12.11

  Levy Judgment      39   

12.12

  ERISA Events      39   

12.13

  Intercompany Note Documents      39   

12.14

  Cross-Default      39   

12.15

  Material Contracts      39   

12.16

  Failure of Perfection      40   

12.17

  Healthcare Proceedings      40   

Section 13.

  Remedies      40   

13.1

  Remedies Generally      40   

13.2

  Pledged Securities      41   

13.3

  Right of Setoff      42   

Section 14.

  License      42   

Section 15.

  Agency      42   

15.1

  Appointment and Authority      42   

15.2

  Rights as a Lender      43   

15.3

  Exculpatory Provisions      43   

15.4

  Reliance by Agent      43   

15.5

  Delegation of Duties      44   

15.6

  Resignation of Agent      44   

15.7

  Non-Reliance on Agent and Other Lenders      45   

15.8

  Replacement of Certain Lenders      45   

15.9

  Sharing of Payments by Lenders      45   

15.10

  Syndication Agent      45   

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Section 16.

  Miscellaneous      45   

16.1

  Failure or Indulgence Not Waiver      45   

16.2

  Modification      45   

16.3

  Assignments      46   

16.4

  USA PATRIOT Act      47   

16.5

  Expenses; Indemnification      47   

16.6

  Notices      48   

16.7

  Severability      48   

16.8

  Construction      48   

16.9

  Applicable Law      48   

16.10

  Assignability      49   

16.11

  Participations      49   

16.12

  Counterparts      49   

16.13

  Further Assurances      49   

16.14

  Attorneys’ Fees      50   

16.15

  Usury      50   

16.16

  Integration      50   

16.17

  Time      50   

16.18

  VENUE      50   

16.19

  WAIVER OF JURY TRIAL      50   

16.20

  Notice of Final Agreement      51   

 

Exhibit A:

  Form of Assignment and Assumption Agreement

Exhibit B:

  Form of Hospital Entity Control Agreement

Exhibit C:

  Form of Hospital Entity Security Agreement

Exhibit D:

  Form of Intercompany Note

Exhibit E:

  Form of Revolving Note

Exhibit F:

  Form of Term Note

Exhibit G:

  Form of Opinion of Counsel

Exhibit H:

  Form of Request for Advance

Exhibit I:

  Form of Compliance Certificate

Exhibit J:

  Form of Notice of Assignment

Schedule 1.1:

  Hospital Entities

Schedule 1.2:

  Permitted Indebtedness

Schedule 1.3:

  Permitted Liens

Schedule 1.4:

  Lenders’ Commitments; Notice Addresses

Schedule 1.5:

  Commercial Tort Claims

Schedule 4.8:

  Permitted Issuance of Equity Interests

Schedule 7.1:

  Legal Names; Jurisdictions; Equity Interests

Schedule 7.9:

  Litigation

Schedule 7.11:

  Environmental Matters

Schedule 7.12:

  Deposit Accounts

Schedule 7.13:

  Intellectual Property

Schedule 7.18(a):

  Material Contracts

Schedule 7.18(b):

  Management Agreements

Schedule 7.25:

  Assets, Liabilities and Business Operations of Motion Picture Entities

Schedule 10.2(a):

  Excluded REIT Transactions

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LOAN, SECURITY AND GUARANTY AGREEMENT

THIS LOAN, SECURITY AND GUARANTY AGREEMENT (this “Agreement”) is made as of
June 30, 2014, among Foundation Healthcare, Inc., an Oklahoma corporation
(“Borrower”), the guarantors from time to time party hereto (“Guarantors” and
collectively with Borrower, the “Loan Parties”), Bank SNB, National Association
(“Agent”), and the financial institutions from time to time party hereto
(“Lenders”).

PRELIMINARY STATEMENTS

A. Borrower has requested that Lenders grant to Borrower the credit
accommodations set forth in this Agreement.

B. Lenders have agreed to grant such credit accommodations, subject to the terms
and conditions set forth in this Agreement.

AGREEMENT

In consideration of the mutual covenants and agreements in this Agreement, and
intending to be legally bound hereby, Agent, Lenders and the Loan Parties agree
as follows:

Section 1. Definitions.

1.1 Defined Terms. Capitalized terms used in this Agreement (including all
schedules and exhibits to this Agreement) and not otherwise defined have the
meanings set forth in this Section 1.

“Adjusted Senior Debt Service Coverage Ratio” is defined in Section 10.

“Affiliate” means, with respect to any Person, another Person that directly, or
indirectly through one or more intermediaries, controls or is controlled by or
is under common control with the Person specified. As used in this definition,
“control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “controlled” have correlative meanings.

“Agent” is defined in the preamble to this Agreement.

“Agent Fee Letter” means the letter agreement between Agent and Borrower dated
the date of this Agreement, as amended, restated or otherwise modified from time
to time.

“Applicable Law” means all laws, rules, regulations and governmental guidelines
applicable to the Person, conduct, transaction, agreement or matter in question,
including all applicable statutory law, common law and equitable principles, and
all provisions of constitutions, treaties, statutes, rules, regulations, orders
and decrees of Governmental Authorities.

 

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“Applicable Margin” means the percentage in the chart below corresponding to the
Senior Debt Ratio reported in the most recent compliance certificate delivered
pursuant to Section 8.11(c) as of such date:

 

Senior Debt Ratio

   Applicable Margin for
Revolving Loans   Applicable Margin for Term
Loan

³ 2.5x

   3.75%   4.25%

< 2.5x, but ³ 2.0x

   3.25%   3.75%

< 2.0x

   2.75%   3.25%

Any increase or decrease in the Applicable Margin resulting from a change in the
Senior Debt Ratio shall become effective as of the first Business Day
immediately following the date a compliance certificate is delivered pursuant to
Section 8.11(c). The Applicable Margin in effect from the Closing Date through
the first Business Day immediately following the date a compliance certificate
is delivered pursuant to Section 8.11(c) for the fiscal quarter ending
December 31, 2014 shall be 3.75% for Revolving Loans and 4.25% for the Term
Loan.

“Assignment and Assumption Agreement” means an assignment and assumption
agreement in substantially the form of Exhibit A.

“Availability” means the lesser of (a) the aggregate amount of Lenders’
Revolving Loan Commitments or (b) $2,500,000.

“Bankruptcy Code” means Title 11 of the United States Code.

“Blocked Account” is defined in Section 2.4(c).

“Borrower” is defined in the preamble to this Agreement.

“Borrower Entities” means the Loan Parties, the Controlled Hospital Entities and
their respective Subsidiaries that are required to be consolidated with them in
accordance with GAAP.

“Business Day” means any day other than a Saturday, Sunday, or other day on
which commercial banks in Oklahoma are authorized or required to close under
federal laws or the laws of the State of Oklahoma.

“Capital Expenditures” is defined in Section 10.

“Cash Equivalents” means (a) marketable obligations issued or unconditionally
guaranteed by, and backed by the full faith and credit of, the United States
government, maturing within 12 months of the date of acquisition;
(b) certificates of deposit, time deposits and bankers’ acceptances maturing
within 12 months of the date of acquisition, and overnight bank deposits, in
each case that are issued by Agent or a commercial bank organized under the laws
of the

 

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United States or any state or district thereof, rated A-1 (or better) by
Standard & Poor’s Rating Service or P-1 (or better) by Moody’s Investor
Services, Inc. at the time of acquisition, and (unless issued by Agent) not
subject to offset rights; (c) repurchase obligations with a term of not more
than 30 days for underlying investments of the types described in clauses
(a) and (b) entered into with Agent or any other bank described in clause (b);
and (d) shares of any money market fund that has substantially all of its assets
invested continuously in the types of investments referred to above, has net
assets of at least $500,000,000 and has the highest rating obtainable from
either Moody’s Investor Services, Inc. or Standard & Poor’s Rating Services.

“Change in Control” means any event, transaction or series of transactions,
whereby:

(a) A majority of the seats (other than vacant seats) on the board of directors
of Borrower are occupied by Persons who were neither (i) nominated by the board
of directors of Borrower, (ii) appointed by directors so nominated, nor
(iii) nominated by Foundation Healthcare Affiliates, LLC;

(b) Borrower ceases to own all of the outstanding voting and economic interest
in TSH or FHE other than the Preferred Shares;

(c) FHE ceases to directly own all of the Preferred Shares issued by TSH;

(d) TSH ceases, directly or indirectly, to own all of the outstanding voting and
economic interest in each other Guarantor;

(e) Borrower ceases to own, directly or indirectly, at least 51% of any
Controlled Hospital Entity; or

(f) All or substantially all of the assets of any Borrower Entity (other than a
Non-Controlled Hospital Entity) are sold, leased or otherwise transferred.

“Change in Law” means the occurrence, after the date hereof, of (a) the
adoption, taking effect or phasing in of any law, rule, regulation or treaty;
(b) any change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof; or (c) the making, issuance or
application of any request, guideline, requirement or directive (whether or not
having the force of law) by any Governmental Authority. For the purposes of this
definition, the Dodd-Frank Wall Street Reform and Consumer Protection Act and
any and all rules, regulations, orders, requests, guidelines and directives
adopted, promulgated or implemented in connection therewith are deemed to have
been introduced and adopted after the date of this Agreement.

“Closing Date” is defined in Section 5.1.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collateral” means all assets of each Loan Party, including without limitation,
all right title and interest of each Loan Party in all Equipment, Inventory,
Accounts, Chattel Paper, General Intangibles, Goods, Documents, Fixtures,
Deposit Accounts, Instruments, Investment Property, Letter-of-credit Rights,
Software and the Specified Commercial Tort Claims, in each case, whether owned
now or acquired after the date of this Agreement. Without limiting the
foregoing, the Collateral shall include the Intercompany Note Documents and the
Pledged Securities.

 

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“Collateral Access Agreement” means an agreement, in form and substance
satisfactory to Agent, of any lessor of a premises where any of the Collateral
is located by which the lessor agrees (a) to waive or subordinate any lien it
may have on the Collateral, (b) to permit Agent to enter on the premises to
inspect, store, sell or remove the Collateral and (c) at the option of Agent, to
occupy the premises and continue operation of Borrower’s business.

“Commitments” means the Term Loan Commitments and the Revolving Loan
Commitments.

“Contingent Obligation” means any obligation of a Person (without duplication)
arising from a guaranty, indemnity or other assurance of payment or performance
of any Indebtedness, lease, dividend or other obligation (“primary obligations”)
of another obligor (“primary obligor”) in any manner, whether directly or
indirectly, including any obligation of such Person under any (a) guaranty,
endorsement, co-making or sale with recourse of an obligation of a primary
obligor; (b) obligation to make take-or-pay or similar payments regardless of
nonperformance by any other party to an agreement; and (c) arrangement (i) to
purchase any primary obligation or security therefor, (ii) to supply funds for
the purchase or payment of any primary obligation, (iii) to maintain or assure
working capital, equity capital, net worth or solvency of the primary obligor,
(iv) to purchase property or services for the purpose of assuring the ability of
the primary obligor to perform a primary obligation, or (v) otherwise to assure
or hold harmless the holder of any primary obligation against loss in respect
thereof. The amount of any Contingent Obligation shall be deemed to be the
stated or determinable amount of the primary obligation (or, if less, the
maximum amount for which such Person may be liable under the instrument
evidencing the Contingent Obligation) or, if not stated or determinable, the
maximum reasonably anticipated liability with respect thereto.

“Controlled Hospital Entity” means a Hospital Entity of which Borrower, directly
or indirectly, owns more than 50% of the outstanding voting Equity Interests or
otherwise is capable of directing the management (it being understood that a
Loan Party shall not be deemed to be “capable of directing the management” of a
Person solely because it is party to a Management Agreement with such Person).

“Debt Service” is defined in Section 10.

“Defaulting Lender” means any Lender that, as determined by Agent, (a) has
failed to perform any of its funding obligations hereunder within three Business
Days of the date required, (b) has notified Borrower or Agent that it does not
intend to comply with its funding obligations or has made a public statement to
that effect with respect to its funding obligations hereunder or under other
agreements generally in which it commits to extend credit, (c) has failed,
within three Business Days after reasonable request by Agent, to confirm in a
manner satisfactory to Agent that it will comply with its funding obligations,
or (d) has, or has a direct or indirect parent company that has, (i) become the
subject of an Insolvency Proceeding, or (ii) taken any action in furtherance of
an Insolvency Proceeding; provided that a Lender shall not be a Defaulting
Lender solely by virtue of the ownership or acquisition of any equity interest
in that Lender or any direct or indirect parent company thereof by a
Governmental Authority.

 

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“EBITDA” is defined in Section 10.

“Eligible Assignee” means a Person that is (a) a Lender or an Affiliate of a
Lender that is organized under the laws of the United States or any state or
district thereof, (b) any other financial institution approved by Agent, that is
organized under the laws of the United States or any state or district thereof,
has total assets in excess of $200,000,000, extends commercial lending
facilities in its ordinary course of business, and whose becoming an assignee
would not constitute a prohibited transaction under Section 4975 of ERISA or any
other Applicable Law, and (c) during any Event of Default, any Person acceptable
to Agent in its discretion.

“Environmental Laws” means all laws, rules, regulations and orders of any
Governmental Authority relating to public health (but excluding occupational
safety and health) or the protection or pollution of the environment, including
the Comprehensive Environmental Response Compensation and Liability Act, the
Clean Water Act, and the Resource Conservation and Recovery Act.

“Equity Interests” means with respect to any Person, all of the shares of
capital stock of, membership interests in, or other ownership or profit
interests in, such Person, all of the warrants, options or other rights for the
purchase or acquisition from such Person of shares of capital stock of,
membership interests in, or other ownership or profit interests in, such Person,
all of the securities convertible into or exchangeable for shares of capital
stock of, membership interests in, or other ownership or profit interests in,
such Person or warrants, rights or options for the purchase or acquisition from
such Person of such shares or interests, and all of the other ownership or
profit interests in such Person, whether voting or nonvoting, and whether or not
such shares, warrants, options, rights or other interests are outstanding on any
date of determination.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with a Borrower Entity within the meaning of Section 414(b)
or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).

“ERISA Event” means: (a) a Reportable Event with respect to a Pension Plan;
(b) a withdrawal by any Borrower Entity or ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by any Borrower Entity or ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) any Borrower Entity or ERISA Affiliate fails to
meet any funding obligations with respect to any Pension Plan or

 

5

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Multiemployer Plan, or requests a minimum funding waiver; (f) an event or
condition which constitutes grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan
or Multiemployer Plan; or (g) the imposition of any liability under Title IV of
ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon any obligor or ERISA Affiliate.

“Excess Cash Flow” is defined in Section 4.8(f)(ii).

“Excluded Tax” means, with respect to Agent, any Lender, or any other recipient
of a payment to be made by or on account of any Obligation, (a) taxes imposed on
or measured by its overall net income (however denominated), and franchise taxes
imposed on it (in lieu of net income taxes), by the jurisdiction (or any
political subdivision thereof) under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable branch is located; (b) any branch profits taxes
imposed by the United States or any similar tax imposed by any other
jurisdiction in which Agent is located; and (c) any backup withholding tax
required by the Code to be withheld from amounts payable to a Lender that has
failed to comply with Section 4.9(c).

“FHE” means Foundation Health Enterprises, an Oklahoma limited liability
company.

“Foreign Plan” means any employee benefit plan or arrangement (a) maintained or
contributed to by any Borrower Entity that is not subject to the laws of the
United States; or (b) mandated by a government other than the United States for
employees of any Borrower Entity.

“GAAP” means generally accepted accounting principles in effect in the United
States from time to time.

“Governmental Authority” means any federal, state, local, foreign, tribal or
other agency, authority, body, commission, court, instrumentality, political
subdivision, or other entity or officer exercising executive, legislative,
judicial, regulatory or administrative functions for any governmental, judicial,
investigative, regulatory or self-regulatory authority.

“Guarantors” means TSH, FHE and each of the direct or indirect wholly-owned
Subsidiaries of Borrower, TSH or FHE.

“Healthcare Laws” means (a) any and all federal, state and local fraud and abuse
laws, including, without limitation, the federal Anti-Kickback Statute (42
U.S.C. § 1320a-7b), the Stark Law, the civil False Claims Act (31 U.S.C. §§ 3729
et seq.), Sections 1320a-7 and 1320a-7a of Title 42 of the United States Code
and the regulations promulgated pursuant to such statutes; (b) the federal Food,
Drug & Cosmetic Act (21 U.S.C. §§ 301 et seq.) and the regulations promulgated
thereunder; (c) the Health Insurance Portability and Accountability Act of 1996
(Pub. L. No. 104-191) and the regulations promulgated thereunder and any
applicable state privacy and security laws; (d) Medicare and the regulations
promulgated thereunder; (e) Medicaid and the regulations promulgated thereunder;
(f) the Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(Pub. L. No. 108-173) and the regulations promulgated thereunder; (g) quality,
safety and accreditation standards and requirements of all applicable state laws
or regulatory bodies; and (h) each other law, regulation, interpretation,
guidance or similar issuance of any Governmental Authority with respect to
(i) the

 

6

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establishment, construction, ownership, operation, use, management or occupancy
of a health care facility operated by a Hospital Entity, (ii) the provision of
services therein, and (iii) the billing or submission of claims, collection of
accounts receivable, underwriting the cost of, or provision of management or
administrative services in connection with, any and all of the foregoing, by any
Borrower Entity, including, but not limited to, laws and regulations relating to
the practice of medicine and other health care professions, professional fee
splitting, tax-exempt organization and charitable trust law applicable to health
care organizations, certificates of need, certificates of operations and
authority, in each case, as amended from time to time.

“Hospital Entities” means the entities listed on Schedule 1.1 and each other
healthcare facility operating entity of which Borrower from time to time owns
any Equity Interests.

“Hospital Entity Control Agreement” means the deposit account control agreement
in substantially the form of Exhibit B among a Hospital Entity, as borrower,
Borrower, as lender, and Agent, as depository bank.

“Hospital Entity Security Agreement” means a security agreement in substantially
the form of Exhibit C, pursuant to which a Hospital Entity grants to Borrower a
security interest in substantially all of the assets of such Hospital Entity.

“Indebtedness” means (a) all items that would be included as liabilities on a
balance sheet in accordance with GAAP, including capital leases, but excluding
trade payables incurred and being paid in the ordinary course of business,
(b) all Contingent Obligations and (c) all reimbursement obligations in
connection with letters of credit issued.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Insolvency Proceeding” means any case or proceeding commenced by or against a
Person under any state, federal or foreign law for, or any agreement of such
Person to, (a) the entry of an order for relief under the Bankruptcy Code, or
any other insolvency, debtor relief or debt adjustment law; (b) the appointment
of a receiver, trustee, liquidator, administrator, conservator or other
custodian for such Person or any part of its property; or (c) an assignment or
trust mortgage for the benefit of creditors.

“Intercompany Note” means a promissory note in substantially the form of Exhibit
D evidencing advances made by Borrower to a Hospital Entity from the proceeds of
the Loans.

“Intercompany Note Documents” means each Intercompany Note, Hospital Entity
Control Agreement, Hospital Entity Security Agreement and each other document,
instrument or agreement executed or delivered in connection with the foregoing.

“Lenders” is defined in the Preamble to this Agreement.

“LIBOR” means, for any calendar month, the British Bankers Association 30-day
LIBOR as published by Reuters (or other commercially available source designated
by Agent) on the date that is two Business Days prior to such calendar month.

“Loans” means the Term Loan and the Revolving Loans, collectively.

 

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“Loan Parties” is defined in the Preamble to this Agreement.

“Loan Documents” means this Agreement, the Notes, the Agent Fee Letter, each
other agreement, document or instrument executed pursuant to any of the
foregoing, and all renewals and extensions of, or amendments or supplements to,
or restatements of, any of the foregoing from time to time in effect.

“Management Agreements” means each agreement between a Loan Party and a Hospital
Entity or any other healthcare facility pursuant to which the Loan Party
provides management services to such Person.

“Margin Stock” is defined in Regulation U of the Board of Governors of the
Federal Reserve (the “Board of Governors”).

“Material Contract” means any agreement or arrangement to which a Borrower
Entity is party from time to time (other than the Loan Documents) (a) that is
deemed to be a material contract under any securities law applicable to such
Borrower Entity, including the Securities Act of 1933; (b) for which breach,
termination, nonperformance or failure to renew could reasonably be expected to
have a Material Adverse Effect; or (c) that constitutes Indebtedness in an
aggregate amount of $100,000 or more.

“Material Adverse Effect” means any set of circumstances or events that
(a) would have any material adverse effect upon the validity or enforceability
of any of the Loan Documents or the validity, perfection or priority of any
security interest granted thereunder; (b) is or could reasonably be expected to
become material and adverse to the business condition or prospects (financial or
otherwise), assets, properties, or operations of the Loan Parties on a
consolidated basis; (c) could reasonably be expected to materially impair the
ability of any Loan Party to fulfill its obligations under the Loan Documents;
or (d) causes an Event of Default or an event that with the giving of notice or
passage of time, or both, would constitute an Event of Default.

“Medicaid” means the means-tested entitlement program under Title XIX of the
Social Security Act, which provides federal grants to states for medical
assistance based on specific eligibility criteria, as set forth at Section 1396,
et seq. of Title 42 of the United States Code.

“Medicare” means the government-sponsored entitlement program under Title XVIII
of the Social Security Act, which provides for a health insurance system for
eligible elderly and disabled individuals, as set forth at Section 1395, et seq.
of Title 42 of the United States Code.

“Motion Picture Entities” means Surveillance, The Motion Picture, LLC, The Hunt,
The Motion Picture, LLC, Fingerprint Productions, LLC and Soul’s Midnight, LLC.

“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which any obligor or ERISA Affiliate makes or is
obligated to make contributions, or during the preceding five plan years, has
made or been obligated to make contributions.

 

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“Net Proceeds” means proceeds (including, when received, any deferred or
escrowed payments) received by a Loan Party in cash from an asset sale,
insurance or condemnation event or the issuance of Indebtedness or Equity
Interests, net of (a) reasonable and customary costs and expenses actually
incurred in connection therewith, including legal fees and sales commissions;
(b) in the case of an asset sale or insurance or condemnation event, amounts
applied to repayment of Indebtedness secured by a Permitted Lien senior to
Agent’s liens on assets subject thereto; (c) transfer or similar taxes; and
(d) reserves for indemnities, until such reserves are no longer needed.

“Non-Controlled Hospital Entities” means the Hospital Entities of which Borrower
owns 50% or less of the outstanding voting Equity Interests.

“Notes” means the Term Notes and the Revolving Notes, collectively.

“Obligations” means (a) all obligations, liabilities and indebtedness (monetary
or otherwise, including post-petition and default interest, whether allowed or
not) of each Loan Party arising under this Agreement or any other Loan Document
of any nature whatsoever, including, without limitation, for principal,
interest, fees, costs, expenses, indemnification, and legal fees, whether direct
or indirect (including those acquired by assumption), absolute or contingent,
due or to become due, now existing or hereafter arising and (b) all obligations
under any Treasury Management Agreement between Agent and any Borrower Entity.

“Other Taxes” means all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any
payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.

“Payment Date” means the 30th day of each March, June, September and December,
or, if such day is not a Business Day, the first Business Day thereafter.

“Participant” is defined in Section 16.11(a).

“PBGC” means the Pension Benefit Guaranty Corporation.

“Pension Plan” means any employee pension benefit plan (as such term is defined
in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to
Title IV of ERISA and is sponsored or maintained by any Borrower Entity or ERISA
Affiliate or to which the Borrower Entity or ERISA Affiliate contributes or has
an obligation to contribute, or in the case of a multiple employer or other plan
described in Section 4064(a) of ERISA, has made contributions at any time during
the preceding five plan years.

“Permitted Acquisition” means (a) the acquisition of any Subsidiary, (b) the
acquisition of substantially all of the assets of a Person or a healthcare
facility, or (c) the merger or consolidation with any Person, if (i) Agent has
received such financial, legal and other due diligence materials as it may
reasonably request and, with the approval of the Required Lenders, consented to
such acquisition in writing in its reasonable discretion, (ii) immediately
following such acquisition, Agent will have a perfected, first priority (subject
to Permitted Liens) security interest in the Equity Interests in such Person and
(iii) in the case of the acquisition or formation of any Subsidiary that is
wholly-owned, directly or indirectly, by Borrower or TSH, such Person has joined
this Agreement as a Guarantor; provided, however, that item (i) shall not be

 

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applicable to any acquisition, merger or consolidation for consideration (net of
any Indebtedness of such Person or healthcare facility remaining after the
acquisition) not in excess of $1,000,000, if the operating income of such Person
or healthcare facility for the 12 month period preceding the acquisition is
greater than zero.

“Permitted Indebtedness” means the Obligations and each of the following:

(a) Permitted Purchase Money Indebtedness;

(b) trade payables incurred in the ordinary course of business and not past due;

(c) the Intercompany Notes;

(d) Contingent Obligations (i) arising from endorsements of payment items for
collection or deposit in the ordinary course of business or (ii) incurred in the
ordinary course of business with respect to surety, appeal or performance bonds
or other similar obligations;

(e) other unsecured Indebtedness not exceeding $100,000 in the aggregate at any
time outstanding;

(f) the Indebtedness set forth on Schedule 1.2 so long as no default exists
under Section 9.9;

(g) Indebtedness that will be paid from Loan proceeds that have been placed in
the Blocked Account and held pursuant to Section 2.4(c).

“Permitted Liens” means liens created under the Loan Documents or the
Intercompany Note Documents and each of the following:

(a) liens securing Permitted Purchase Money Indebtedness and attaching only to
the fixed assets acquired from the proceeds of such Permitted Purchase Money
Indebtedness;

(b) liens for taxes not yet due and payable, or which are being Properly
Contested;

(c) mechanics, warehouseman’s, and other similar liens arising in the ordinary
course of business for obligations not yet due and payable, or which are being
Properly Contested;

(d) easements, rights-of-way, restrictions, covenants and other agreements with
respect to real property that do not secure any monetary obligation and do not
materially interfere with Borrower’s business;

(e) statutory liens (other than liens imposed under ERISA) arising in the
ordinary course of business for obligations not yet due and payable, or which
are being Properly Contested;

 

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(f) normal and customary rights of setoff upon deposits in favor of depository
institutions, and liens of a collecting bank on payment items in the course of
collection; and

(g) the liens set forth on Schedule 1.3.

“Permitted Purchase Money Indebtedness” means purchase money Indebtedness for
the purchase of fixed assets in an amount not exceeding $500,000 incurred in any
fiscal year of the Borrower Entities on a consolidated basis, or such other
amount as may be approved in writing by Agent from time to time, which consent
shall not be unreasonably withheld, conditioned or delayed.

“Person” means, whether or not capitalized, any individual, partnership,
corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, limited liability company, Governmental Authority,
or other entity of any nature.

“Plan” means any employee benefit plan (as such term is defined in Section 3(3)
of ERISA) established by a Borrower Entity or, with respect to any such plan
that is subject to Section 412 of the Code or Title IV of ERISA, an ERISA
Affiliate.

“Pledged Securities” means all Equity Interests of a Loan Party in another
Borrower Entity or any Non-Controlled Hospital Entity, including the Equity
Interests owned by each Loan Party set forth on Schedule 7.1, whether now
existing or hereafter existing.

“Preferred Shares” means the Class B Membership Interests of each of FHE and
TSH.

“Properly Contested” means, with respect to any obligation of a Borrower Entity,
(a) the obligation is subject to a bona fide dispute; (b) the obligation is
being properly contested in good faith by appropriate proceedings promptly
instituted and diligently pursued; (c) appropriate reserves have been
established in accordance with GAAP; (d) non-payment could not have a Material
Adverse Effect; (e) no lien or encumbrance is imposed on assets of the Loan
Party, unless bonded and stayed to the satisfaction of Agent; and (f) if the
obligation results from entry of a judgment or other order, such judgment or
order is stayed pending appeal or other judicial review.

“Pro Rata Share” means, for any Lender with respect to any Loan, the percentage
set forth for such Lender for such Loan on Schedule 1.4.

“Provider Agreement” means an agreement entered into between, as applicable, the
Centers for Medicare & Medicaid Services or a state agency or other such entity
administering the Medicaid or Medicare program and a health care provider or
supplier, under which the health care provider or supplier agrees to provide
services for Medicaid or Medicaid patients in accordance with the terms of the
agreement and Applicable Law pertaining to Medicare or Medicaid.

“Reportable Event” means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

 

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“Required Lenders” means Lenders having, collectively, 66% or more of the
aggregate Revolving Loan Commitments and the outstanding Term Loan.

“Revolver Rate” means LIBOR in effect from time to time plus the Applicable
Margin for Revolving Loans.

“Revolving Loan” is defined in Section 2.2.

“Revolving Loan Commitment” means, for each Lender, the amount set forth for
such Lender on Schedule 1.4.

“Revolving Loan Maturity Date” means June 30, 2016.

“Revolving Note” means a promissory note dated the date of this Agreement in the
form of Exhibit E evidencing the Revolving Loans made by a Lender.

“Securities Laws” is defined in Section 13.2(a).

“Senior Debt Ratio” is defined in Section 10.

“Senior Debt Service Coverage Ratio” is defined in Section 10.

“Senior Indebtedness” is defined in Section 10.

“Solvent” means, with respect to any Person, that (a) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay all of such Person’s debts (including contingent, unmatured, and
unliquidated liabilities), (b) such Person is able to pay all of its debts as
they mature, (c) such Person will not have an unreasonably small capital in
relation to its business or with respect to any contemplated transaction and
(d) such Person has not incurred (by way of assumption or otherwise) any
obligations or liabilities (contingent or otherwise) under any of the Loan
Documents, or made any conveyance in connection with the Loan Documents, with
actual intent to hinder, delay or defraud either present or future creditors of
such Person.

“Specified Commercial Tort Claims” means the Commercial Tort Claims listed on
Schedule 1.5, as amended or restated from time to time.

“Stark Law” means the federal prohibitions on physician self-referrals codified
at 42 U.S.C. § 1395nn and § 1395q and the regulations promulgated pursuant
thereto.

“Subsidiary” means any entity at least 10% of whose voting securities or Equity
Interests are owned by a Borrower Entity or any combination of Borrower Entities
(including indirect ownership by a Borrower Entity through other entities in
which the Borrower Entity directly or indirectly owns 10% of the voting
securities or Equity Interests).

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable
thereto.

 

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“Term Loan” is defined in Section 2.1.

“Term Loan Commitment” means, for each Lender, the amount set forth for such
Lender on Schedule 1.4.

“Term Loan Maturity Date” means June 30, 2021.

“Term Note” means a promissory note, dated the date of this Agreement, in the
form of Exhibit F, evidencing a Lender’s Pro Rata Share of the Term Loan.

“Term Rate” means LIBOR in effect from time to time plus the Applicable Margin
for the Term Loan.

“Treasury Management Agreement” means any agreement governing the provision of
treasury or cash management services, including deposit accounts, overnight
draft, credit cards, debit cards, funds transfer, automated clearinghouse, zero
balance accounts, returned check concentration, controlled disbursement,
lockbox, account reconciliation and reporting and trade finance services and
other cash management service.

“TSH” means TSH Acquisition, LLC, a Delaware limited liability company.

“UCC” means the Uniform Commercial Code, as amended and in effect in the State
of Oklahoma.

“Unfunded Pension Liability” means the excess of a Pension Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan’s assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.

1.2 UCC Terms. The following capitalized terms shall have the meanings set forth
in the UCC: Equipment, Inventory, Accounts, Chattel Paper, General Intangibles,
Goods, Documents, Fixtures, Deposit Accounts, Instruments, Investment Property,
Letter-of-credit Rights, Software, and Commercial Tort Claims.

Section 2. The Loans.

2.1 Term Loan. Subject to the terms and conditions of this Agreement, each
Lender agrees to make a term loan (collectively, the “Term Loan”) to Borrower in
the principal amount of such Lender’s Term Loan Commitment. Principal amounts of
the Term Loan that are repaid may not be reborrowed.

2.2 Revolving Loans. Subject to the terms and conditions of this Agreement, each
Lender agrees to make one or more revolving loans (collectively, the “Revolving
Loans”) to Borrower in an aggregate amount not to exceed such Lender’s Revolving
Loan Commitment. The aggregate amount of Revolving Loans outstanding at any time
shall not exceed the Availability. The Revolving Loans may be repaid and
reborrowed as set forth in this Agreement.

 

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2.3 Notes. The Term Loan shall be evidenced by the Term Notes. The Revolving
Loans shall be evidenced by the Revolving Notes.

2.4 Use of Proceeds; Blocked Account.

(a) Term Loan Proceeds. Proceeds of the Term Loan shall be used by Borrower
solely (i) to refinance existing indebtedness of the Loan Parties, (ii) to
refinance existing indebtedness of the Hospital Entities by making advances
under Intercompany Notes and (iii) to pay reasonable transaction costs in
connection with the foregoing. Use of the Term Loan proceeds shall be set forth
on a closing statement dated the Closing Date in form and substance reasonably
acceptable to Agent and Lenders.

(b) Revolving Loan Proceeds. Proceeds of the Revolving Loans shall be used
(i) for the general working capital purposes of the Loan Parties, (ii) to make
advances to the Hospital Entities under Intercompany Notes for the general
working capital needs of the Hospital Entities or (iii) to finance the
construction, development or acquisition of a health care facility that has been
approved in writing by Agent at the direction of the Required Lenders.

(c) Blocked Account. On the closing date, Borrower may, by written instructions
to Agent setting forth in sufficient detail a description of Indebtedness to be
repaid, deposit Loan proceeds in an account maintained with Agent to be held for
the payment in full of Indebtedness of the Borrower Entities (the “Blocked
Account”) (including by use of such proceeds to make advances on Intercompany
Notes). Borrower shall only use funds deposited in the Blocked Account for, and
Agent shall only accept Borrower’s instructions with respect to the Blocked
Account if relating to, the payment in full such Indebtedness (including by
making advances on Intercompany Notes for such purposes). If such proceeds are
not used as described in this Section 2.4(c) within 30 days, they shall be
applied to prepay the Term Loan.

Section 3. Interest.

3.1 Interest Rate. Subject to Sections 3.2, 3.3 and 16.15, (a) the unpaid
principal of the Revolving Loans shall bear interest at the Revolver Rate and
(b) the unpaid principal balance of the Term Loan shall bear interest at the
Term Rate.

3.2 Default Rate. Subject to Section 3.3 and 16.15, during an Event of Default,
the unpaid principal of the Loans shall bear interest at the rate set forth in
Section 3.1 plus 10%.

3.3 Computation of Interest. Interest shall be computed for the actual number of
days elapsed on the basis of a year of 360 days.

Section 4. Borrowing and Payment Procedures.

4.1 Borrowing and Funding. Following receipt of a notice of borrowing pursuant
to Section 5.2(c), Agent shall promptly notify each Lender of the amount of its
Pro Rata Share of the requested Revolving Loans by facsimile, e-mail or other
similarly expeditious means not later than 11:00 a.m., Oklahoma City, Oklahoma
time. Provided such notice is sent prior to 11:00 a.m., each Lender shall remit
such amount in immediately available funds to the

 

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account designated by Agent not later than 2:00 p.m., Oklahoma City, Oklahoma
time. Upon satisfaction of the conditions set forth in Section 5.2, Agent shall
make all funds so received available to Borrower either by (a) crediting the
account of Borrower on the books of Agent with the amount of such funds or
(b) wire transfer of such funds, in each case in accordance with instructions
provided to (and reasonably acceptable to) Agent by Borrower.

4.2 Defaulting Lender. Agent may (but shall not be required to), in its
discretion, retain any payments or other funds received by Agent that are to be
provided to a Defaulting Lender hereunder, and may apply such funds to such
Lender’s defaulted obligations or readvance the funds to Borrower in accordance
with this Agreement. The failure of any Lender to fund a Loan or to otherwise
perform its obligations hereunder shall not relieve any other Lender of its
obligations, and no Lender shall be responsible for default by another Lender.
Lenders and Agent agree (which agreement is solely among them, and not for the
benefit of or enforceable by Borrower) that, solely for purposes of determining
a Defaulting Lender’s right to vote on matters relating to the Loan Documents
and to share in payments, fees and Collateral proceeds thereunder, a Defaulting
Lender shall not be deemed to be a “Lender” until all of its defaulted
obligations have been cured.

4.3 One Obligation. The Revolving Loans, the Term Loan and all other Obligations
of the Loan Parties are one general obligation of the Loan Parties and are
secured by Lenders’ liens and security interests in the Collateral; provided,
however, that Agent and each Lender shall be deemed to be a creditor of, and the
holder of a separate claim against, each Loan Party to the extent of any
Obligations owned jointly or severally by such Loan Party.

4.4 Payments of Obligations.

(a) Term Loan. On each of the first four Payment Dates following the Closing
Date, Borrower shall make a payment of (i) principal of the Term Loan in an
amount of $875,000 and (ii) all accrued and unpaid interest on the Term Loan. On
each Payment Date thereafter, Borrower shall make a payment of (y) principal of
the Term Loan in an amount of $1,000,0000 and (z) all accrued and unpaid
interest on the Term Loan. A final payment of all outstanding Obligations owing
with respect to the Term Loan shall be due and payable on the Term Loan Maturity
Date.

(b) Revolving Loans. On each Payment Date, commencing on the first Payment Date
following the date of this Agreement, Borrower shall make quarterly payments of
all accrued and unpaid interest on the outstanding Revolving Loans. On the
Revolving Loan Maturity Date, the outstanding principal balance of the Revolving
Loans shall be due and payable, together with all accrued and unpaid interest
and all other Obligations owing with respect to the Revolving Loans.

(c) Other Obligations. Unless otherwise specified in a Loan Document, all other
Obligations owing from Borrower to Agent and Lenders from time to time pursuant
to the Loan Documents shall be payable on demand, but in any event shall be due
and payable on the Term Loan Maturity Date.

 

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4.5 Manner of Payments; Settlement.

(a) Payments by Loan Parties. All payments of Obligations shall be made in
United States Dollars, without offset, counterclaim or defense of any kind, free
and clear of (and without any deduction for) taxes in immediately available
funds at the office specified by Agent not later than 2:00 p.m., Oklahoma City,
Oklahoma time on the date due. Funds received after such hour shall be deemed to
have been received on the following Business Day.

(b) Settlement. Within two Business Days of receipt of any payment of the
Obligations, Agent shall pay each Lender its Pro Rata Share of such Obligations.

4.6 Payment Authorization. In the event a payment is late and applicable cure
periods have expired or an Event of Default exists, Borrower authorizes Agent,
in its sole discretion, to charge any of Borrower’s accounts to make any
payments of principal and interest.

4.7 Voluntary Prepayment. Borrower may prepay the Revolving Loans and terminate
the Revolving Loan Commitments at any time without penalty or premium. Borrower
may prepay the Term Loan at any time, provided that Borrower shall pay to Agent,
for the benefit of Lenders in accordance with their Pro Rata Share of the Term
Loan, a prepayment penalty of (a) 2% of the amount prepaid, if the prepayment is
made on or before the first anniversary of this Agreement, (b) 1.5% of the
amount prepaid, if the prepayment is made after the first anniversary of this
Agreement but on or before the second anniversary of this Agreement, and (c) 1%
of the amount prepaid, if the prepayment is made at any time after the second
anniversary of this Agreement, but prior to the Term Loan Maturity Date. The
prepayment penalty required by this Section 4.7 shall not be applicable to
prepayments made pursuant to Section 4.8 or Section 4.11. Each prepayment
pursuant to this Section 4.7, unless a prepayment of all outstanding Revolving
Loans or the entire outstanding amount of the Term Loan, shall be in an amount
not less than $500,000, and in increments of $100,000 thereafter.

4.8 Mandatory Prepayments.

(a) Asset Sale. On any date on which any Loan Party receives Net Proceeds from
the sale of any assets exceeding $100,000 individually or in the aggregate for
any 12 month period, Borrower shall prepay the Loans in an amount equal to the
amount of such Net Proceeds, unless Borrower gives written notice to Agent that
Borrower intends to use such proceeds to pay the purchase price of a Permitted
Acquisition, and such proceeds are actually applied to such purchase price
within 12 months of receipt. This Section 4.8(a) shall not be construed to
permit any sale that is not permitted by this Agreement.

(b) Casualty Events. Not later than three Business Days following the receipt by
any Loan Party of the Net Proceeds of insurance, any condemnation award, or
other compensation that, individually or collectively with all such compensation
during the prior 12 month period, exceeds $100,000 in respect of any loss or
damage to, or any condemnation or other taking of property, Borrower shall
prepay the Loans in an amount equal to the amount of such Net Proceeds.
Notwithstanding the foregoing, if Net Proceeds of insurance related to any loss
do not exceed $500,000 (or such higher amount as may be approved in writing by
Agent in its reasonable discretion, which approval shall not be unreasonably
withheld, conditioned or delayed), at Borrower’s request, Agent will place such
Net Proceeds in a restricted account to be used by Borrower to repair or replace
the property that is the subject of such Net Proceeds.

 

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(c) Issuances of Debt or Equity Interests. On the date on which any Loan Party
receives the Net Proceeds (i) from any issuance of Indebtedness other than
Permitted Indebtedness or (ii) from any issuance of Equity Interests of any Loan
Party, Borrower shall prepay the Loans in an amount equal to the amount of such
Net Proceeds, unless, in the case of proceeds from the issuance of Equity
Interests, such proceeds (A) are proceeds of a transaction described on Schedule
4.8 or (B) Borrower gives written notice to Agent that Borrower intends to use
such proceeds to redeem Preferred Shares or to pay the purchase price of a
Permitted Acquisition, and such proceeds are actually applied to such redemption
or purchase price within 12 months of receipt.

(d) Overadvance. If the aggregate balance of the Revolving Loans exceeds the
Availability, Borrower shall prepay the Revolving Loans in the amount of the
excess not later than the first Business Day following Borrower’s knowledge of
the excess.

(e) Prepayment of Intercompany Note. Upon the prepayment, in whole or in part,
of the principal amount of any Intercompany Note, Borrower shall prepay the
Loans in the amount of such prepayment.

(f) Special Distributions. Upon the receipt of any dividends or distributions by
a Hospital Entity made from the proceeds of (i) borrowed money, (ii) any asset
disposition outside the ordinary course of business or (iii) any other
transaction made outside of the ordinary course of business, Borrower shall
prepay the Obligations in an amount equal to such proceeds, unless Borrower
gives written notice to Agent that Borrower intends to use such proceeds to pay
the purchase price of a Permitted Acquisition, and such proceeds are actually
applied to such purchase price within 12 months of receipt.

(g) Excess Cash Flow.

(i) Not later than the thirtieth Business Day following delivery of the
financial statements referred to in Section 8.11(b), Borrower shall prepay the
Loans in an amount equal to 30% of any Excess Cash Flow for the applicable
fiscal year.

(ii) “Excess Cash Flow” means for each fiscal year of the Loan Parties, the
amount by which EBITDA for such fiscal year exceeds the sum of (A) Debt Service
payments in respect of Senior Indebtedness for such fiscal year plus (B) Capital
Expenditures during such fiscal year, other than Capital Expenditures made from
the proceeds of Permitted Indebtedness plus (C) cash payments in respect of
federal, state and local income taxes of the Loan Parties in such fiscal year
plus (D) distributions by Hospital Entities to Persons other than Loan Parties
plus (E) distributions (but not redemptions or repurchases) in respect of the
Preferred Shares (without duplication) and any distributions by Borrower
permitted by the Loan Documents.

(h) Application of Mandatory Pre-Payments. Payments made pursuant to this
Section 4.8, shall be applied first to the Term Loan, and then to the Revolving
Loans, except that payments made pursuant to paragraph (d) shall be applied to
the Revolving Loans.

 

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4.9 Taxes.

(a) All payments of Obligations shall be free and clear of and without reduction
for any Taxes. If Applicable Law requires any Loan Party or Agent to withhold or
deduct any Tax (including backup withholding or withholding Tax), Agent shall
pay the amount withheld or deducted to the relevant Governmental Authority. If
the withholding or deduction is made on account of Indemnified Taxes or Other
Taxes, the sum payable by such Loan Party shall be increased so that Agent
receives an amount equal to the sum it would have received if no such
withholding or deduction (including deductions applicable to additional sums
payable under this Section) had been made. Without limiting the foregoing, the
Loan Parties shall timely pay all Other Taxes to the relevant Governmental
Authorities.

(b) The Loan Parties shall indemnify, hold harmless and reimburse (within 10
days after demand therefor) Agent and Lenders for any Indemnified Taxes or Other
Taxes (including those attributable to amounts payable under this Section)
withheld or deducted by any Loan Party or Agent, or paid by Agent or any Lender,
with respect to any Obligations or the Loan Documents, whether or not such Taxes
were properly asserted by the relevant Governmental Authority, and including all
penalties, interest and reasonable expenses relating thereto. A certificate as
to the amount of any such payment or liability delivered to Borrower by Agent or
a Lender shall be conclusive, absent manifest error. As soon as practicable
after any payment of Taxes by a Loan Party, Borrower shall deliver to Agent,
upon request by Agent, a receipt from the Governmental Authority or other
evidence of payment satisfactory to Agent.

(c) Each Lender shall deliver to Borrower and Agent on or prior to the date on
which such Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of Borrower or Agent), properly completed
and duly executed originals of IRS Form W-9 certifying that such Lender is
exempt from U.S. federal backup withholding tax.

4.10 Fees.

(a) Origination Fee. On the Closing Date, Borrower shall pay to Agent, for the
benefit of Lenders in accordance with their Pro Rata Shares of the Term Loan, an
origination fee in an amount equal to 1.0% of the principal amount of the Term
Loan.

(b) Unused Line Fee. On the first Business Day of each January, April, July and
October, Borrower shall pay to Agent for the benefit of Lenders in accordance
with their Pro Rata Shares of the Revolving Loan Commitments, an unused line fee
equal to 0.375% of the difference of (A) the aggregate Revolving Loan
Commitments minus (B) the average daily principal balance of the Revolving Loans
during the preceding three month period.

(c) Agent Fee Letter. Borrower shall pay the fees set forth in the Agent Fee
Letter.

(d) Intercompany Loans. For the avoidance of doubt, Borrower may, in its
discretion, charge any fee or expense payable by the Loan Parties hereunder to
the Hospital Entities pursuant to the Intercompany Notes. Nonpayment of any such
fee or expense by a Hospital Entity shall not excuse payment by Borrower.

 

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4.11 Increased Costs; Capital Adequacy; Illegality.

(a) Change in Law. If any Change in Law shall (i) impose modify or deem
applicable any reserve, special deposit, compulsory loan, insurance charge or
similar requirement against assets of, deposits with or for the account of, or
credit extended or participated in by, any Lender; (ii) subject such Lender to
any Tax with respect to any Loan or Loan Document, or change the basis of
taxation of payments to such Lender in respect thereof; or (iii) impose on such
Lender or any interbank market any other condition, cost or expense affecting
the Loans or any Loan Document and the result thereof shall be to increase the
cost to such Lender of making or maintaining the Loans (or such Lender’s
obligations to make such Loans) or to reduce the amount of any sum received or
receivable by such Lender hereunder (whether of principal, interest or any other
amount) then, upon request by such Lender, Borrower will pay to such Lender such
additional amount or amounts as will compensate such Lender for such additional
costs incurred or reduction suffered.

(b) Capital Adequacy. If any Lender determines that any Change in Law affecting
it or any of its lending offices or its holding company regarding capital
requirements has or would have the effect of reducing the rate of return on such
Lender’s capital or on the capital of its holding company, if any, as a
consequence of this Agreement, such Lender’s Commitments or the Loans made by
such Lender to a level below that which such Lender or its holding company could
have achieved but for such Change in Law (taking into consideration such
Lender’s policies and the policies of its holding company with respect to
capital adequacy), then from time to time Borrower will pay to such Lender such
additional amount or amounts as will compensate such Lender or its holding
company for any such reduction suffered.

(c) Illegality. Notwithstanding any other provision of this Agreement, in the
event that on or after the date of this Agreement any Change in Law shall make
it unlawful for any Lender or its applicable branch to make or maintain its
Loans (and, in the opinion of such Lender, the designation of a difference
branch would either not avoid such unlawfulness or would be disadvantageous to
such Lender), then such Lender shall promptly notify Borrower thereof (with a
copy to Agent), following which (i) such Lender’s Commitments shall be suspended
until such time as such Lender may again make and maintain its Loans hereunder
and (ii) if such law shall so mandate, such Lender’s Loans shall be prepaid by
Borrower, together with accrued and unpaid interest thereon and all other
amounts payable by Borrower under this Agreement, on or before such date as
shall be mandated by such law.

(d) Replacement of Lenders. If any Lender requests compensation or prepayment
under this Section 4.11, Borrower may, in its sole expense and effort, upon
notice to such Lender and Agent, require such Lender to assign and delegate
without recourse (in accordance with and subject to the restrictions contained
in, and consents required by, Section 16.3), all of its interests, rights and
obligations under this Agreement and the Loan Documents to an assignee that
shall assume such obligations (which assignee may be another Lender, if a Lender
accepts such assignment), provided that:

(i) Borrower shall have paid to Agent the assignment fee specified in
Section 16.3;

 

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(ii) such Lenders shall have received payment of an amount equal to the
outstanding principal of its Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder and under the other Loan Documents
from the assignee (to the extent of such outstanding principal and accrued
interest and fees) or Borrower (in the case of all other amounts);

(iii) such assignment will result in a reduction in such compensation or
payments thereafter; and

(iv) such assignment does not conflict with Applicable Law.

A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling Borrower to require such assignment and delegation cease
to apply.

4.12 Allocation of Payments during Event of Default.

(a) Allocation. Notwithstanding anything herein to the contrary, during an Event
of Default, monies to be applied to the Obligations, whether arising from
payments by the Obligors, realization on Collateral, or otherwise, shall be
allocated as follows:

(i) first, to all fees and expenses owing to Agent;

(ii) second, to all Obligations constituting fees (excluding amounts relating to
Treasury Management Agreements);

(iii) third, to all Obligations constituting interest (excluding amounts
relating to Treasury Management Agreements);

(iv) fourth, to all other Obligations other than those owing under Treasury
Management Agreements; and

(v) last, to Obligations owing under Treasury Management Agreements.

The allocations set forth in this Section are solely to determine the rights and
priorities of Agent and Lenders as among themselves, and may be changed by
agreement among them without the consent of any Loan Party. This Section 4.12 is
not for the benefit of or enforceable by any Loan Party.

(b) Erroneous Application. Agent shall not be liable for any application of
amounts made by it in good faith and, if any such application is subsequently
determined to have been made in error, the sole recourse of any Lender or other
Person to which such amount should have been made shall be to recover the amount
from the Person that actually received it (and, if such amount was received by
any Lender, such Lender hereby agrees to return it).

 

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Section 5. Conditions Precedent.

5.1 Conditions to Term Loan and Initial Revolving Loan. Lenders shall not be
required to make the Term Loan or the initial Revolving Loan until the date (the
“Closing Date”) on which the following conditions have been satisfied or waived
by Agent:

(a) No Event of Default. No Event of Default shall exist or result from the
making of the Loans, and no event shall have occurred, or shall occur with the
making of the Loans, that with the giving of notice or passage of time, or both,
would constitute an Event of Default.

(b) Representations and Warranties. The representations and warranties of the
Loan Parties in the Loan Documents shall be true and accurate as of the Closing
Date.

(c) Loan Documents. The Loan Documents shall be duly authorized, executed, and
delivered to Agent.

(d) Intercompany Note Documents. Agent shall have received the duly executed
Intercompany Note Documents evidencing advances made by Borrower to Hospital
Entities on the Closing Date, together with such other evidence (including
landlord lien waivers) as Agent may reasonably require of the perfection and
(except as permitted by the Loan Documents and the Intercompany Note Documents)
first priority status of the liens created thereby.

(e) Collateral Access Agreement. Agent shall have received a Collateral Access
Agreement with respect to each location that is not owned by a Loan Party where
any material Collateral is located.

(f) Evidence of Insurance. Agent shall have received evidence of the insurance
referred to in Section 8.7.

(g) Financing Statement. UCC-1 financing statements naming each Loan Party as
debtor and Agent as secured party shall be properly filed in each jurisdiction
deemed reasonably necessary by Agent, and Borrower shall have provided to Agent
such evidence as Agent may require to evidence the first priority of Agent’s
security interest.

(h) Secretary’s Certificate. Agent shall have received certificates of the
secretary, manager or other responsible officer of each Loan Party certifying
(i) copies such Loan Party’s organizational documents, (ii) copies of
resolutions of such Loan Party’s governing Person(s) authorizing the
transactions contemplated in this Agreement and the other Loan Documents, and
(iii) the title, name and signature of each Person authorized to sign the Loan
Documents on behalf of such Loan Party.

(i) Certificate of Good Standing. Agent shall have received a certificate
certifying the existence and good standing of each Borrower Entity in the
jurisdiction of its organization and each jurisdiction where it is qualified to
do business.

 

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(j) Opinion of Counsel. Agent shall have received an opinion of counsel to the
Loan Parties as to the matters set forth on Exhibit G.

(k) Valuation Reports. Agent shall have received evidence acceptable to it in
its sole discretion that the aggregate amount of (i) the enterprise value of
Borrower’s hospitals located in San Antonio and El Paso and (ii) the cash
consideration to be received by Borrower from the sale of its interest in the
Heritage Park Hospital to Baylor Medical Center shall not be less than 125% of
all Indebtedness of the Loan Parties that is secured by a lien or security
interest in any asset of a Loan Party, including the Loans and any Capital
Leases. For the purpose of clause (i), enterprise value shall be determined by
third-party valuations acceptable to Agent in its sole discretion. For the
purpose of clause (ii), cash consideration shall be calculated as of the Closing
Date as set forth in the Term Sheet – Heritage Park Surgical Hospital,
acknowledged by Texas Health Venture Group, L.L.C. and Grayson County Physicians
Property, LLC on December 7, 2012.

(l) Reconciliation. Agent shall have received a reconciliation, in form and
substance acceptable to Agent in it sole discretion, of the balance of the
Indebtedness of the Loan Parties on a consolidated basis as of the closing date
to the balance sheet for the fiscal year 2013.

(m) Q1 EBITDA. Agent shall have received a certificate of Borrower calculating
EBITDA for the fiscal quarter ending March 31, 2014, and EBITDA for such period
shall not be less than $1,000,000, subject to adjustments for non-recurring
expenses approved in writing by Agent and Required Lenders in their reasonable
discretions.

(n) Due Diligence. Agent shall have satisfactorily completed its due diligence
with respect to material Indebtedness and legal obligations of the Loan Parties.

(o) Fees and Expenses. Borrower shall have paid all fees and expenses required
by the Loan Documents to be paid by Borrower, which shall include Agent’s
expenses incurred in preparation and negotiation of this Agreement and the other
Loan Documents, including Agent’s legal fees.

(p) Anti-Money Laundering. Agent shall have received all documentation and
information required by bank regulatory authorities under applicable “know your
customer” and anti-money laundering rules and regulations, including, without
limitation, the United States PATRIOT Act.

(q) Other Documents. Agent shall have received such other agreements, documents,
instruments and certificates as it may reasonably request.

5.2 Conditions to Subsequent Revolving Loans. Lenders shall not be required to
make any subsequent Revolving Loans or grant any other accommodation to Borrower
unless the following conditions are satisfied:

(a) No Event of Default. No Event of Default shall exist or result from the
making of the Revolving Loan, and no event shall have occurred, or occur with
the making of the Revolving Loan, that with the giving of notice or passage of
time, or both, would constitute an Event of Default.

 

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(b) Representations and Warranties. The representations and warranties of the
Loan Parties in the Loan Documents shall be true and accurate as of the date of
the Revolving Loan.

(c) Request for Advance. Not later than 10:00 a.m. on the Business Day
immediately preceding the requested date of the Revolving Loan, Agent shall have
received a duly executed request for the Revolving Loan in the form of Exhibit H
to this Agreement.

(d) Other Documents. Agent shall have received such other agreements, documents,
instruments and certificates as it may reasonably request.

(e) Material Adverse Effect. No event shall have occurred or circumstance exist
that has or could reasonably be expected to have a Material Adverse Effect.

(f) No Overadvance. After the making of such Revolving Loan, the aggregate
principal amount of all Revolving Loans shall not exceed the Availability.

Section 6. Collateral.

6.1 Grant of Security Interest. To secure the prompt payment and performance of
all Obligations, each Loan Party hereby grants to Agent for the benefit of Agent
and Lenders a lien and continuing security interest in all of such Loan Party’s
Collateral.

6.2 No Assumption of Liability. The security interest granted by this Agreement
is given as security only and shall not subject Agent to, or in any way modify,
any obligation or liability of Borrower relating to any of the Collateral.

6.3 Agreements Regarding Accounts. At any time that an Event of Default exists,
Agent may give notice to Account debtors of the assignment of any Loan Party’s
Accounts to Agent and require that the Accounts be paid directly to Agent.

6.4 Commercial Tort Claims. The Loan Parties jointly and severally represent to
Agent that Schedule 1.5 is a complete list of all Commercial Tort Claims of each
Loan Party, together with an accurate description thereof. At any time that a
Loan Party has any Commercial Tort Claim not set forth on Schedule 1.5, such
Loan Party shall promptly give notice to Agent of such Commercial Tort Claim and
deliver to Agent a revised Schedule 1.5 setting forth an accurate description of
such Commercial Tort Claim.

6.5 Further Assurances. Promptly upon request, Borrower shall deliver such
instruments, assignments, title certificates or other documents or agreements,
and shall take such reasonable actions, as Agent deems appropriate to evidence
or perfect its liens and security interests in any of the Collateral, or
otherwise to give effect to the intent of this Agreement.

 

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6.6 Pledged Securities. Except, at Agent’s option, during an Event of Default,
the Loan Parties shall be entitled to exercise all voting rights with respect to
the Pledged Securities, to give consents, waivers and ratifications in respect
thereof and to receive all interest and regular cash distributions paid as a
result of the ownership of the Pledged Securities; provided, however, that no
vote shall be cast or consent, waiver or ratification given or action taken that
would result or, with the giving of notice or the passage of time would result,
in an Event of Default. During any Event of Default, Agent may, in its
discretion, exercise all voting rights with respect to the Pledged Securities
and shall be paid all interest, dividends and distributions made with respect to
the Pledged Securities.

Section 7. Representations and Warranties. The Loan Parties, jointly and
severally, represent and warrant to Agent as follows:

7.1 Legal Status; Subsidiaries. Schedule 7.1 sets forth for each Borrower Entity
and each Non-Controlled Hospital Entity (a) its correct legal name, (b) its
organizational form, (c) its jurisdiction of organization, (d) the number of
shares of each class of Equity Interest outstanding and (e) the ownership of
each class of its Equity Interest. Except as set forth on Schedule 7.1, no
Borrower Entity or Non-Controlled Hospital Entity has any Subsidiaries. Each
Borrower Entity and Non-Controlled Hospital Entity is duly incorporated or
organized and existing in good standing in the jurisdiction indicated on
Schedule 7.1. Each Borrower Entity is qualified or licensed to do business, and
is in good standing as a foreign entity, in each of the jurisdictions in which
the failure to so qualify or to be so licensed would reasonably be expected to
have a Material Adverse Effect.

7.2 Authorization and Validity. The execution, delivery and performance of the
Loan Documents have been duly authorized by all necessary organizational action
of each Loan Party. Each Loan Document is an enforceable obligation of each Loan
Party that is party thereto in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors’ rights generally.

7.3 No Conflict. The execution, delivery, and performance by each Loan Party of
the Loan Documents to which it is a party do not and will not:

(a) conflict with the terms of the organizational documents of such Loan Party;

(b) violate any provision of any material judgment, decree, or order of any
court or Governmental Authority by which such Loan Party is bound, or any
provision of any Applicable Law with respect to such Loan Party, its business or
its properties;

(c) result in a breach of, or constitute a default under, any Material Contract,
except where such breach of or default under would not reasonably be expected to
have a Material Adverse Effect; or

(d) result in or require the imposition of any lien or encumbrance on any
material property of such Loan Party.

7.4 No Consents. The execution, delivery, and performance by each Loan Party of
the Loan Documents to which it is a party do not and will not require any
authorization, approval, or other action by, or notice to or filing with, any
Governmental Authority, regulatory body, or any other Person.

 

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7.5 Indebtedness. No Borrower Entity has any outstanding Indebtedness, except
Permitted Indebtedness.

7.6 Title to Properties. Each Borrower Entity has, as applicable, good,
marketable and indefeasible title to (or valid leasehold interests in) all of
its material real and personal property free and clear of all liens, charges,
security interests and other encumbrances, except Permitted Liens.

7.7 Taxes. Each Borrower Entity, and to the Loan Parties’ knowledge, each
Non-Controlled Hospital Entity, has filed all federal, state and local tax
returns and other reports that it is required by law to file, and has paid, or
made provision for the payment of, all Taxes upon it, its income and its
properties that are due and payable, except to the extent being Properly
Contested.

7.8 Brokers. There are no brokerage commissions, finder’s fees or investment
banking fees payable by any Borrower Entity in connection with any transactions
contemplated by the Loan Documents.

7.9 Litigation. Except as set forth on Schedule 7.9, there are no suits,
proceedings, claims, or disputes pending or, to the knowledge of any Loan Party,
threatened against or affecting any Borrower Entity or any Borrower Entity’s
assets or properties that (a) relate to any of the Loan Documents or
Intercompany Note Documents or the transactions contemplated thereby or (b) if
adversely determined, could reasonably be expected to have a Material Adverse
Effect.

7.10 Compliance with Laws. Each Borrower Entity, and to the knowledge of each
Loan Party, each Non-Controlled Hospital Entity, its properties and its business
are in compliance, in all material respects, with all Applicable Laws.

7.11 Compliance with Environmental Laws. Except as set forth on Schedule 7.11,
no present, or to the knowledge of the Loan Parties, past operations or
properties of any Borrower Entity, or to the knowledge of any Loan Party, any
Non-Controlled Hospital Entity, is subject to any federal, state or local
investigation to determine whether any remedial action is needed to address any
environmental pollution, hazardous material or environmental clean-up. No
Borrower Entity, and to the knowledge of any Loan Party, no Non-Controlled
Hospital Entity, has received any notice of any possible noncompliance with,
investigation of a possible violation of, litigation relating to, or potential
fine or liability under any Environmental Law, or with respect to any release,
environmental pollution or hazardous materials.

7.12 Deposit Accounts. Schedule 7.12 sets forth a complete and accurate list of
all Deposit Accounts of each Borrower Entity.

7.13 Intellectual Property. Each Borrower Entity owns or has the lawful right to
use all intellectual property necessary for the conduct of its business.
Schedule 7.13 sets forth a complete and accurate list of all registered patents,
trademarks or copyrights of each Borrower Entity, and each application of a
Borrower Entity for any of the foregoing.

 

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7.14 Labor Relations. No Borrower Entity and, to the knowledge of any Loan
Party, no Non-Controlled Hospital Entity is party to or bound by any collective
bargaining agreement, management agreement or consulting agreement other than
the Management Agreements. There are no material grievances, disputes or
controversies with any union or other organization of any of any Borrower
Entity’s employees, or, to any Loan Party’s knowledge, any asserted or
threatened strikes, work stoppages or demands for collective bargaining.

7.15 Financial Statements. The most recent balance sheet of the Borrower
Entities and the related financial statements provided to Agent are materially
complete and correct and fairly present the financial condition of Borrower as
at the dates thereof in accordance with GAAP. Since December 31, 2013, no events
have occurred that alone or together with other events have had or would
reasonably be expected to have a Material Adverse Effect.

7.16 Not a Regulated Entity. No Borrower Entity or any Non-Controlled Hospital
Entity is (a) an “investment company” or a “person directly or indirectly
controlled by or acting on behalf of an investment company” within the meaning
of the Investment Company Act of 1940; or (b) subject to regulation under the
Federal Power Act, the Interstate Commerce Act, any public utilities code or any
other Applicable Law regarding its authority to incur Indebtedness.

7.17 Margin Stock. No Borrower Entity or Non-Controlled Hospital Entity is
engaged, principally or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin Stock. No
Loan or Intercompany Note proceeds will be used to purchase or carry, or to
reduce or refinance any Indebtedness incurred to purchase or carry, any Margin
Stock or for any related purpose governed by Regulations T, U or X of the Board
of Governors.

7.18 Material Contracts; Management Agreements.

(a) Schedule 7.18(a) contains a complete list of all Material Contracts of any
Borrower Entity (other than the Management Agreements) as of the Closing Date.
All Material Contracts of the Borrower Entities are in full force and effect and
no material defaults exist thereunder.

(b) Schedule 7.18(b) contains a complete list of each Management Agreement as of
the Closing Date. Each Management Agreement is in full force and effect and no
material default exists thereunder.

7.19 Liabilities. No Borrower Entity or, to the knowledge of any Loan party, no
Non-Controlled Hospital Entity, has any material liabilities, fixed or
contingent, that are not reflected in the financial statements delivered to
Agent or that have not otherwise been disclosed in writing to Agent.

 

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7.20 Solvency. Each Borrower Entity is Solvent. No Insolvency Proceedings have
been filed by or against any Borrower Entity.

7.21 ERISA.

(a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code, and other federal and state laws. Each Plan that
is intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS or an application for such a letter is
currently being processed by the IRS with respect thereto and, to the knowledge
of any Loan Party, nothing has occurred which would prevent, or cause the loss
of, such qualification. Each Borrower Entity and ERISA Affiliate has made all
required contributions to each Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.

(b) There are no pending or, to the knowledge of any Loan Party, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan that could reasonably be expected to have a Material Adverse
Effect. There has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan that has resulted in or could
reasonably be expected to have a Material Adverse Effect.

(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no
Pension Plan has any Unfunded Pension Liability; (iii) no Borrower Entity or
ERISA Affiliate has incurred, or reasonably expects to incur, any liability
under Title IV of ERISA with respect to any Pension Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); (iv) no Borrower Entity or
ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and
no event has occurred which, with the giving of notice under Section 4219 of
ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with
respect to a Multiemployer Plan; and (v) no Borrower Entity or ERISA Affiliate
has engaged in a transaction that could be subject to Section 4069 or 4212(c) of
ERISA.

(d) No Borrower Entity has a Foreign Plan.

7.22 Foreign Assets Control Regulations, Etc.

(a) Neither the receipt by Borrower of the proceeds of the Loans nor Borrower’s
use of the proceeds of the Loans will violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.

(b) None of the Borrower Entities or Non-Controlled Hospital Entities (i) is a
Person described or designated in the Specially Designated Nationals and Blocked
Persons List of the Office of Foreign Assets Control or in Section 1 of the
Executive Order No. 13,244 of September 24, 2011 or (ii) engages in any dealings
or transactions with any such Person. Each Borrower Entity is compliance, in all
material respects, with the USA PATRIOT Act.

 

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(c) No part of the proceeds of the Loans will be used, directly or indirectly,
for any payments to any governmental official or employee, political party,
official of a political party, candidate for political office, or anyone else
acting in an official capacity, in order to obtain, retain or direct business or
obtain any improper advantage, in violation of the United States Foreign Corrupt
Practices Act of 1977, as amended, assuming in all cases that such Act applies
to each Borrower Entity.

7.23 Complete Disclosure. No Loan Document contains any untrue statement of a
material fact or fails to disclose any material fact. No Loan Party has failed
to disclose to Agent in writing any fact or circumstance that could reasonably
be anticipated to have a Material Adverse Effect.

7.24 Healthcare Matters.

(a) Licenses. Each Borrower Entity and has obtained and maintained in full force
and effect all material permits, licenses, accreditations, approvals, or
regulatory agreements required by any Healthcare Laws for the conduct of its
business, the provision of professional services, and the construction and
ownership of its properties.

(b) Provider Agreements. Each Hospital Entity has entered into and maintains in
good standing its Provider Agreements.

(c) Compliance with Healthcare Laws. Each Borrower Entity and each
Non-Controlled Hospital Entity is in compliance in all material respects with
all applicable Healthcare Laws. Each Borrower Entity and each Non-Controlled
Hospital Entity possesses and implements all necessary policies and procedures
to ensure that all aspects of its operations, its employees, and all healthcare
providers under contract with any Borrower Entity or Non-Controlled Hospital
Entity, comply in all material respects with all applicable Healthcare Laws.

(d) Termination Proceedings. There are no Medicare or Medicaid termination
proceedings underway with respect to any of the Hospital Entities, and no
employee or independent contractor of any Hospital Entity has been excluded from
participating in Medicare or Medicaid.

(e) Regulatory Proceedings. There are no claims, actions or appeals pending (and
no Hospital Entity has filed any claims or reports that should result in any
such claims, actions or appeals) before any commission, board or agency, with
respect to cost reports or claims filed by any Hospital Entity under Medicare or
Medicaid, or any disallowance by any commission, board or agency in connection
with any audit of such cost reports or claims.

7.25 Motion Picture Entities. Except as set forth on Schedule 7.25, no Motion
Picture Entity has any assets, liabilities or business operations.

Section 8. Affirmative Covenants. Until all Obligations have been satisfied in
full, each Loan Party shall comply with the following covenants:

8.1 Payment of Indebtedness. Each Loan Party shall, and Borrower shall cause
each Controlled Hospital Entity to, promptly pay all of its Indebtedness as it
becomes due, except to the extent that any such Indebtedness (other than the
Obligations) is being Properly Contested.

 

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8.2 Existence. Each Loan Party shall, and Borrower shall cause each Controlled
Hospital Entity to, do or cause to be done all things necessary to preserve,
renew, and keep in full force and effect its existence and comply with the
provisions of its organizational documents.

8.3 Compliance with Laws; Licenses; Provider Agreements. Each Loan Party shall,
and Borrower shall cause each Controlled Hospital Entity to, comply in all
material respects with all Applicable Laws (including all Healthcare Laws). Each
Loan Party shall, and Borrower shall cause each Controlled Hospital Entity to,
maintain all permits, licenses, accreditations, approvals, or regulatory
agreements required by Applicable Laws (including Healthcare Laws) for the
conduct of its business, the provision of professional services, and the
construction and ownership of its properties. Borrower shall cause each
Controlled Hospital Entity to maintain its Provider Agreements in full force and
effect.

8.4 Taxes. Each Loan Party shall, and Borrower shall cause each Controlled
Hospital Entity to, pay when due all Taxes imposed upon it or upon its income or
profits or upon any of its properties, except, to the extent Properly Contested.

8.5 Collateral.

(a) Records with Respect to Collateral. Each Loan Party shall keep accurate and
complete records of the Collateral, including, acquisitions and dispositions of
Collateral, and shall submit the records to Agent upon request.

(b) Defense of Title to Collateral. Each Loan Party shall, at all times, defend
its title to the Collateral and the lien of Agent in the Collateral against all
Persons, claims and demands.

(c) Condition of Collateral. Each Loan Party shall maintain all Collateral in
good operating condition and repair, and make all necessary replacements and
repairs so that the value and operating efficiency of the Collateral shall be
preserved at all times, reasonable wear and tear excepted. Each Loan Party shall
keep all Collateral from being affixed to any real property.

8.6 Inspection. Each Loan Party shall permit Agent from time to time, subject
(except where a default exists) to reasonable notice, to visit and inspect the
Collateral and the other properties and operations of the Loan Parties, inspect
and audit the Loan Parties’ books and records, and discuss the Loan Parties’
business, assets, prospects and results of operations with its officers,
employees, agents, accountants and advisors. The Loan Parties will reimburse
Agent for all its reasonable charges, costs and expenses incurred in connection
with any of the foregoing.

8.7 Insurance. Each Loan Party shall, and Borrower shall cause each Controlled
Hospital Entity to, maintain the insurance policies that Agent may reasonably
require from time to time. The insurance policies of the Loan Parties shall
contain an endorsement, in

 

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form and substance satisfactory to Agent, describing Agent as additional insured
or loss payee, as applicable, and providing that the insurance company shall
give Agent 30 days prior written notice (10 days in the event of cancellation
for non-payment of premiums) before such policies are altered, canceled or
expired.

8.8 Material Contracts; Management Agreements.

(a) Each Loan Party shall, and Borrower shall cause each Hospital Entity to,
perform each of its Material Contracts in accordance with its terms, except
where the failure to do so would not result in a material default thereunder.

(b) Each Loan Party shall perform each Management Agreement to which it is a
party in accordance with its terms, except where the failure to do so would not
result in a material default thereunder. Each Loan Party shall also enforce each
Management Agreement in accordance with its terms and shall not waive any
default thereunder or forebear from the exercise of any remedies thereunder
without the prior written consent of Agent.

8.9 Deposit Accounts. Each Loan Party shall, and Borrower shall cause each
Controlled Hospital Entity to, maintain all material Deposit Accounts (including
all operating accounts of the Borrower Entities) with Agent not later than 30
days following the Closing Date.

8.10 Intercompany Note Documents. Borrower shall enforce the Intercompany Note
Documents in accordance with their terms and shall not waive any default
thereunder or forebear from the exercise of any remedies thereunder without the
prior written consent of Agent, which consent shall not be unreasonably
withheld, conditioned or delayed. Borrower shall record in its books and records
each loan or advance made under an Intercompany Note and shall furnish evidence
thereof to Agent upon request.

8.11 Reporting Obligations.

(a) Quarterly Reports. Within 45 days after the close of each fiscal quarter of
the Borrower Entities, Borrower shall provide to Agent an unaudited balance
sheet of the Borrower Entities and the related consolidated and consolidating
statements of income and shareholders’ equity for such fiscal quarter, together
with a certification by Borrower’s responsible financial officer that such
financial statements are complete and correct, present the financial condition
of the Borrower Entities at the end of such period and the results of their
operation during such period in accordance with GAAP, consistently applied, and
certifying, in a form satisfactory to Agent, that no Loan Party has been and is
not then in default as to any of the covenants contained in this Agreement or
any of the Loan Documents and there was no known Event of Default (or specifying
those Events of Default of which he or she is aware).

(b) Annual Reports. Within 120 days after the close of each fiscal year of the
Borrower Entities, Borrower shall provide to Agent an audited balance sheet of
the Borrower Entities and the related consolidated and consolidating statements
of income and shareholders’ equity for such fiscal year, together with a
certification by Borrower’s responsible financial officer that such financial
statements are complete and correct, present the financial condition of the
Borrower Entities at the end of such period and the results of their operation
during such period in accordance with GAAP, consistently applied, and
certifying, in a form

 

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satisfactory to Agent, that Borrower has not been and is not then in default as
to any of the covenants contained in this Agreement or any of the Loan Documents
and there was no known Event of Default (or specifying those Events of Default
of which he or she is aware).

(c) Compliance Certificate. At the time of delivery of the reports specified in
paragraphs (a) and (b) of this Section 8.11, Borrower shall deliver to Agent a
duly completed and executed compliance certificate in the form of Exhibit I to
this Agreement.

(d) Census Reports. At the time of delivery of the reports specified in
paragraph (a) of this Section 8.11, Borrower shall deliver to Agent a census
report for the quarterly reporting period with respect to each Hospital Entity,
including, without limitation, (i) admissions and discharges for such period,
(ii) the average daily census for such period, (iii) the average length of
admission for such period, (iv) occupancy percentage for such period, and
(v) such other operating data as are included in such Hospital Entity’s monthly
operating reviews.

(e) Notice of Litigation. Immediately following any Loan Party’s knowledge
thereof, Borrower shall deliver to Agent written notice of any litigation that
is pending or threatened against any Borrower Entity or Non-Controlled Hospital
Entity that, if adversely determined, would reasonably be expected to have a
Material Adverse Effect.

(f) Notice of Default. Immediately following any Loan Party’s knowledge of any
default or Event of Default under any Loan Document, Borrower shall deliver to
Agent written notice of the default or Event of Default together with a
reasonably detailed description thereof.

(g) Healthcare Notices. Immediately upon receipt thereof, Borrower shall deliver
to Agent copies of any notice received by any Borrower Entity or Non-Controlled
Hospital Entity from a Governmental Authority pertaining to (i) any
investigation, audit, or pending or threatened proceedings relating to any
violation of Healthcare Laws, (ii) any investigation, review or proceeding
pertaining to any Hospital Entity’s Provider Agreement, or (iii) any
investigation, review or proceeding relating to any permits, licenses,
accreditations, approvals, or regulatory agreements maintained by a Hospital
Entity under Healthcare Laws.

(h) ERISA Reports; ERISA Events. Promptly after sending or filing such report,
Borrower shall provide Agent with a copy of any annual report to be filed in
connection with each Plan or Foreign Plan. Immediately upon the occurrence
thereof, Borrower shall provide Agent written notice of any ERISA Event.

(i) Annual Budget. Within 90 days after the close of each fiscal year of the
Borrower Entities, Borrower shall provide to Agent an annual budget of the
Borrower Entities.

(j) Other Information. Promptly upon request, Borrower shall provide Agent with
any other information or reports that Agent reasonably requests.

 

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8.12 Post-Closing Covenants.

(a) Not later than 60 days following the date of this Agreement, Borrower shall
have provided Agent with reasonably satisfactory evidence of all requisite
consents to the pledge by each applicable Loan Party of its Equity Interests in
any Hospital Entity pursuant to this Agreement.

(b) Not later than 30 days following the date of this Agreement, Borrower shall
provide to Lender certificates evidencing the good standing of Nocturna Sleep
Therapy General Partner, LLC and Nocturna Sleep Therapy, LP.

Section 9. Negative Covenants. The Loan Parties, jointly and severally, covenant
and agree with Agent, so long as the Obligations remain outstanding, as follows:

9.1 Existence of Liens. No Loan Party shall, and Borrower shall not permit any
Controlled Hospital Entity to, create, assume or permit to exist any mortgage,
pledge, security interest, encumbrance, lien, charge or deposit arrangement, or
any other arrangement having the practical effect of the foregoing on any of its
assets, except for Permitted Liens.

9.2 Restrictions on Debt. No Loan Party shall, and Borrower shall not permit any
Controlled Hospital Entity to, create, incur, or permit to exist any
Indebtedness, other than Permitted Indebtedness.

9.3 Sale of Assets. No Loan Party shall, and Borrower shall not permit any
Controlled Hospital Entity to, sell, transfer, convey, or otherwise dispose of,
whether pursuant to a single transaction or a series of transactions, any of its
material assets, other than (a) the disposition of Inventory or worn or obsolete
Equipment in the ordinary course of business, (b) the disposition of Equipment
if such Equipment is promptly replaced with Equipment of at least equivalent
value, (c) any disposition or dispositions (exclusive of dispositions referred
to in items (a) and (b)) that, in the aggregate, do not exceed $100,000 in any
12 month period and (d) in connection with any Permitted Acquisition.

9.4 Changes in Structure; Amendments to Organizational Documents. Except to the
extent constituting a Permitted Acquisition, no Loan Party shall, and Borrower
shall not permit any Controlled Hospital Entity to: (a) merge or consolidate
with any Person (or enter into any merger or consolidation agreement or plan),
or permit any such merger or consolidation with it; (b) sell all or
substantially all of its assets; (c) acquire any healthcare facility or acquire
all or substantially all of the assets of any Person; (d) make any material
change in the nature of or manner in which it conducts its business; or
(e) agree to do any of the foregoing. No Loan Party shall change its name or
otherwise amend its organizational documents; provided that a Loan Party may
amend its organizational documents by giving Agent 10 Business Days’ notice if
such amendment does not adversely affect the rights of Agent or Lenders.

9.5 Distributions. No Loan Party shall pay any cash dividends, or make any cash
distributions or similar payments, or incur or permit to exist any lien or
restriction on any such payments (except for restrictions and liens arising
under the Loan Documents), except that a Loan Party may pay dividends or make
distributions or similar payments (a) to another Loan Party or (b) if (i) such
payment is not prohibited by Section 9.9 and (ii) no Event of Default exists
and, on a pro forma basis after giving effect to such payment, no default would
exist in the covenants set forth in Section 10.

 

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9.6 Loans and Investments. No Loan Party shall, and Borrower shall not permit
any Controlled Borrower Entity to, make any loans to, or investments in, any
Person, except for (a) advances to employees for travel expenses and similar
items in the ordinary course of business, (b) extensions of trade credit in the
ordinary course of business, (c) the Intercompany Notes, (d) investments in Cash
Equivalents, (e) Permitted Acquisitions, (f) investments by a Loan Party in
another Loan Party and (g) investments in and loans to a Loan Party by another
Loan Party (including advances to a Loan Party for physician salaries and
expenses and similar items in the ordinary course of business).

9.7 Subsidiaries. No Loan Party shall form or acquire any Subsidiary unless
(a) Agent shall have received 10 days prior written notice thereof and
(b) (i) in the case of a Subsidiary other than a Hospital Entity, such
Subsidiary shall, within 10 days of formation or acquisition by Borrower, have
joined the Loan Documents as a Guarantor pursuant to an agreement in form and
substance reasonably satisfactory to Agent or (ii) in the case of a Subsidiary
that is a Hospital Entity that will receive proceeds of the Loans, Agent shall
have received original Intercompany Note Documents executed by such Hospital
Entity.

9.8 Collection of Accounts. Each Loan Party shall, and Borrower shall cause each
Controlled Hospital Entity to, collect its Accounts in the ordinary course of
business and in compliance with all Applicable Laws (including, as applicable,
Healthcare Laws), and will not make any discount, credit, rebate or other
reduction in the original amount owing except, prior to an Event of Default, for
ordinary course reductions in accordance with existing policies.

9.9 Restricted Payments. No Loan Party shall permit (a) any payment or
redemption in respect of the Preferred Shares or (b) any payment with respect to
the Indebtedness listed on Schedule 1.2, in each case, prior to January 1, 2015,
and thereafter, only to the extent that no Event of Default exists and, on a pro
forma basis after giving effect to such payment or redemption, no default would
exist in the covenants set forth in Section 10.

9.10 Motion Picture Entities. No Motion Picture entity will own any assets or
have any liabilities or business operations except as set forth on Schedule
7.25.

Section 10. Financial Covenants. The Loan Parties, jointly and severally,
covenant and agree with Agent, so long as the Obligations remain outstanding, as
follows:

10.1 Covenants.

(a) Senior Debt Ratio. The Borrower Entities, on a consolidated basis, shall
maintain a Senior Debt Ratio not in excess of 3.00:1.00 as of the end of each
fiscal quarter, commencing with the fiscal quarter ending September 30, 2014.

(b) Senior Debt Service Coverage Ratio. The Borrower Entities, on a consolidated
basis, shall maintain a Senior Debt Service Coverage Ratio of not less than
1.30:1.00 as of the end of each fiscal quarter, commencing with the fiscal
quarter ending September 30, 2014.

 

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(c) Adjusted Senior Debt Service Coverage Ratio. The Borrower Entities, on a
consolidated basis, shall maintain an Adjusted Senior Debt Service Coverage
Ratio of not less than 1.05:1.00 as of the end of each fiscal quarter,
commencing with the fiscal quarter ending September 30, 2014.

(d) Minimum EBITDA. The Borrower Entities, on a consolidated basis, shall
maintain EBITDA of not less than $2,000,000 for the fiscal quarter ending
June 30, 2014.

10.2 Definitions.

(a) “Adjusted Senior Debt Service Coverage Ratio” means, as at any date, the
ratio of (i) (A) EBITDA for the period of four fiscal quarters end on, or most
recently ended prior to such date minus (B) cash payments for such period in
respect of federal state and local income taxes other than such taxes payable in
connection with the transactions described on Schedule 10.2(a) minus (C) Capital
Expenditures for such period, unless made from proceeds of Indebtedness other
than the Loans to (ii) (X) scheduled payments of Debt Service in respect of
Senior Indebtedness for four quarter period immediately following the most
recently ended four quarter period plus (Y) scheduled distributions in respect
of the Preferred Shares (without duplication) during such period plus
(Z) distributions, dividends and like payments by the Hospital Entities other
than such payments to Loan Parties during the period of four fiscal quarters
ended on, or most recently ended prior to the date of determination.

(b) “Capital Expenditures” means, for any period, expenditures (including the
aggregate amount of obligations incurred with respect to any lease required to
be capitalized for financial reporting purposes in accordance with GAAP) made by
the Borrower Entities on a consolidated basis to acquire or construct fixed
assets, plant and equipment (including renewals, improvements and replacements,
but excluding repairs) during such period computed in accordance with GAAP.

(c) “Debt Service” means, for any period, the sum, for Borrower, of the
following all regularly scheduled payments or prepayments of principal and
interest of Indebtedness (including the any payments in respect of capital lease
obligations) made during such period.

(d) “EBITDA” means, for the Borrower Entities on a consolidated basis, for any
period, (i) net income, calculated before interest expense, provision for income
taxes, depreciation and amortization expense, stock compensation, gains arising
from the write-up of assets, and any extraordinary gains, one-time expenses
approved by Agent and Required Lenders in writing in their reasonable discretion
(in each case, to the extent included in determining net income).

(e) “Senior Debt Ratio” means, as of any date of determination, the ratio, for
the Borrower Entities on a consolidated basis, of (i) Senior Indebtedness to
(ii) EBITDA for the preceding four fiscal quarters.

 

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(f) “Senior Debt Service Coverage Ratio” means, as at any date, the ratio of
(i) (A) EBITDA for the period of four fiscal quarters ending on, or most
recently ended prior to such date minus (B) cash payments for such period in
respect of federal state and local income taxes other than such taxes payable in
connection with the transactions described on Schedule 10.2(a) minus (C) Capital
Expenditures for such period, unless made from the proceeds of Indebtedness
other than the Loans to (ii) Debt Service in respect of Senior Indebtedness for
such period.

(g) “Senior Indebtedness” means all Indebtedness (including capital leases) of
the Borrower Entities that is secured by a lien or security interest on any of
the assets of the Borrower Entities or otherwise made senior by its terms or by
agreement.

10.3 Annualized EBITDA. Anything in this Section 10 to the contrary
notwithstanding, for the fiscal quarter ending September 30, 2014 and each of
the next three succeeding fiscal quarters, EBITDA shall be determined by
annualizing EBITDA for the fiscal quarter ending on September 30, 2014 and each
fiscal quarter that has elapsed thereafter.

Section 11. Guaranty.

11.1 Guaranty of Payment and Performance. Guarantors hereby jointly and
severally, absolutely and unconditionally, as primary obligors and not only a
surety, guarantee to Agent, for the benefit of Lenders and each of their
successors, endorsees, transferees and assigns, the prompt payment and
performance of the Obligations when due (whether at the stated maturity, by
acceleration or otherwise). This Guaranty is an absolute and continuing guaranty
of payment and performance. The obligations of Guarantors shall not terminate
until all Obligations now or hereafter owing have been paid in full in cash.
Agent may proceed against Guarantors pursuant to this Guaranty to satisfy the
Obligations without proceeding against Borrower, any Loan Party, or any other
guarantor or resorting to any security for the Obligations.

11.2 Actions with Respect to the Obligations. Guarantors’ liability under this
Section 11 shall not be released, reduced, or otherwise affected by:

(a) the acceptance or release of any security interest, collateral or guaranty
for the Obligations;

(b) any release, surrender, exchange, subordination, or loss of any security
interest or Collateral for the Obligations;

(c) the dissolution, liquidation, insolvency, bankruptcy, discharge, disability,
or lack of corporate power of Borrower or any other Loan Party, or any party at
any time liable for the payment or performance of any of the Obligations;

(d) any renewal, extension, or modification of the terms of this Agreement, any
of the other Loan Documents or any other part of the Obligations, either with or
without notice to, or consent of, Guarantors;

(e) any forbearance or compromise by Agent or Lenders;

 

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(f) any neglect, delay, failure, or refusal by Agent or Lenders to take or
prosecute any action for the collection of the Obligations or to foreclose or
take or prosecute any action in connection with any security for the
Obligations;

(g) the sale, encumbrance, or transfer of any Loan Party’s interest in any
collateral for the Obligations;

(h) any failure by Agent to notify Guarantors of any of the foregoing actions or
events or any new agreement between Agent or Lenders and any Loan Party;

(i) any transfer of any interest in any Loan Party; or

(j) any other circumstance which might otherwise constitute a defense available
to, or a legal or equitable discharge of, any Loan Party, any surety or any
guarantor (other than payment in full of the indebtedness owing under the
Obligations).

Under no circumstances will Agent or any Lender be required to give Guarantors
any notice in connection with any of the foregoing events or otherwise in
connection with the Obligations.

11.3 Waivers. Each Guarantor waives:

(a) any defense based upon any legal disability or other defense of any Loan
Party, any other guarantor or other Person, or by reason of the cessation or
limitation of the liability of any Loan Party from any cause other than full
payment and performance of all of the Obligations;

(b) any defense based upon any lack of authority of anyone acting or purporting
to act on behalf of any Loan Party or any principal of any Loan Party or any
defect in the formation of a Loan Party;

(c) any defense based upon the application by any Loan Party of the proceeds of
any credit extended to Borrower by Agent or any Lender for purposes other than
the purposes represented by Borrower to Agent or intended or understood by Agent
or Guarantors;

(d) any defense based upon Agent’s or any Lender’s election of any remedy
against Guarantors or Borrower and the consequent loss by any Guarantor of the
right to recover any deficiency from any other Loan Party;

(e) any defense based upon any statute or rule of law that provides that the
obligation of a surety must be neither larger in amount nor in any other
respects more burdensome that than of a principal;

(f) any defense based upon Agent’s election in any proceeding instituted under
the Bankruptcy Code of the application of Section 1111(b)(2) of the Bankruptcy
Code or any successor statute;

 

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(g) any defense based upon any borrowing or any grant of a security interest
under Section 364 of the Bankruptcy Code;

(h) any right to enforce any remedy that Agent may have against Borrowers, and
any right to participate in, or benefit from, any security for the Obligations;

(i) presentment, demand, protest, and notice of any kind; and

(j) the benefit of 12 Okla. Stat. § 686 and 15 Okla. Stat. §§ 334, 335, 338,
340, 341, 379, 383, and 384, and any amendments thereof.

11.4 Subordination. Each Guarantor subordinates all present and future debts,
claims, and other obligations of each other Loan Party to such Guarantor to the
Obligations and assigns and grants a security interest in all such debts,
claims, and other obligations to Agent, for the benefit of Lenders, as security
for Guarantor’s obligations under this Section 11 and all of the Obligations. No
Guarantor shall make any claim for such debts, claims, and other obligations
until all Obligations have been fully discharged.

11.5 No Subrogation. Notwithstanding any payment made by any Guarantor with
respect to the Obligations or any set-off or application of funds of such
Guarantor by Agent, no Guarantor shall be entitled to be subrogated to any of
the rights of Agent or any Lender against any Loan Party or any other guarantor
of the Obligations or any collateral, security interest, guaranty or right of
offset held by Agent or any Lender for the payment of the Obligations, nor shall
any Guarantor seek or be entitled to seek any contribution or reimbursement from
any Loan Party or any other guarantor of the Obligations until all of the
Obligations are paid in full in cash. If any amount shall be paid to any
Guarantor on account of such subrogation rights at any time when all of the
Obligations shall not have been paid in full in cash, such amount shall be held
by such Guarantor in trust for Agent, segregated from other funds of such
Guarantor, and shall immediately be paid to Agent to be applied against the
Obligations.

11.6 Insolvency Proceedings. In any Insolvency Proceeding or other proceeding in
which the filing of claims is required by law, Guarantors shall file all claims
that Guarantors may have relating to any of the Obligations and shall assign to
Agent all rights of Guarantors thereunder. If all or any portion of the
Obligations guarantied under this Agreement is paid or performed, the
obligations of Guarantors shall continue and shall remain in full force and
effect if all or any part of such payment or performance is avoided or recovered
directly or indirectly from Agent as a preference, fraudulent transfer, or
otherwise under the Bankruptcy Code or other similar laws, irrespective of any
notice of revocation given by Guarantors prior to such avoidance or recovery and
irrespective of full payment and performance of all of the Obligations.

11.7 Guarantors’ Authorization to Agent. Each Guarantor authorizes Agent,
without notice or demand and without lessening such Guarantor’s liability
hereunder from time to time to: (a) make one or more additional secured or
unsecured loans to Borrower, to lease equipment, or other goods to Borrower, or
otherwise extend additional credit to Borrower; (b) alter, compromise, renew,
extend, accelerate, or otherwise change one or more times the time for

 

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payment or other terms of the indebtedness or any part of the indebtedness,
including increases and decreases of the rate of interest on the indebtedness
(extensions may be repeated and may be longer than the original loan term);
(c) take and hold security for the payment of Guarantor’s obligations hereunder
or the indebtedness, and exchange, enforce, waive, subordinate, fail or decide
not to perfect, and release any such security, with or without the substitution
of new collateral; (d) release, substitute, fail or decide to perfect, and delay
with one or more of Borrower’s sureties, endorsers, or other guarantors on any
terms or in any manner Agent may choose; (e) determine how, when and what
application of payments and credits shall be made on the indebtedness; (f) apply
such security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Agent in its discretion may determine;
(g) sell, transfer, assign or grant participations in all or any part of the
indebtedness; (h) assign or transfer this Agreement in whole or in part;
(i) exercise or refrain from exercising any rights against Borrower or others,
or otherwise act or refrain from acting; (j) settle or compromise any or all of
the indebtedness; and (k) subordinate the payment of all or any part of any
indebtedness of Borrower to Agent or any Lender to the payment of any
liabilities which may be due to Agent or any Lender or others.

Section 12. Events of Default. The occurrence of any of the following shall
constitute an “Event of Default:”

12.1 Non-Payment of Loans. The failure of any Loan Party to pay any principal,
interest or other Obligation due under any of the Loan Documents when due and
payable and such failure continues for three Business Days.

12.2 Covenant Defaults Subject to Limited Cure. A default by a Loan Party in any
of the covenants set forth in Sections 8.2, 8.6, 8.7, 8.9, 8.11, 9 or 10 of this
Agreement and, except for a default in the covenants set forth in Section 10,
such default continues for three Business Days.

12.3 Covenant Defaults Subject to Cure. A non-monetary default by a Loan Party
in any of its covenants in the Loan Documents, other than those covenants
specified in Section 12.2, and such default continues for 10 Business Days;
provided that if (a) such default is not capable of being cured within such time
period, (b) the Loan Parties have diligently pursued cure and continue to
diligently pursue cure and (c) no Material Adverse Effect is likely to result,
such default may continue for an additional 15 Business Days.

12.4 Breach of Representation or Warranty. Any representation, statement,
certificate, schedule, or report made or furnished to Agent by or on behalf of
any Loan Party in connection with the Loan Documents being untrue in any
material respect (unless such representation or warranty is already qualified by
materiality) when made or deemed made.

12.5 Loss of Medicare or Medicaid Authority. Any Hospital Entity is terminated
as an authorized Medicare or Medicaid provider by any applicable Governmental
Authority.

12.6 Change in Control. The occurrence of any Change in Control.

 

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12.7 Management Agreements. Any Management Agreement is terminated and such
Management Agreement, alone or together with any other Management Agreements
terminated in the preceding 18 month period, accounts for more than 10% of the
management fees payable to Borrower. For the avoidance of doubt, a Management
Agreement shall not be deemed terminated for the purposes of this Section 12.7
by virtue of non-renewal of the Management Agreement upon the expiration of its
term.

12.8 Destruction of Collateral. A loss, theft, damage or destruction occurs with
respect to any material asset of a Borrower Entity, and the amount not covered
by insurance exceeds $250,000 (exclusive of any deductible).

12.9 Insolvency. Any Borrower Entity ceasing to be Solvent or admitting in
writing its inability to pay its debts as they mature; or Insolvency Proceedings
being instituted by or against any Loan Party and, if instituted against it, are
not dismissed within 30 days of the filing thereof.

12.10 Dissolution. Any order, judgment, or decree shall be entered against any
Borrower Entity decreeing its involuntary dissolution or split up and such order
shall remain undischarged and unstayed for a period in excess of 30 days; or any
Borrower Entity shall otherwise dissolve or cease to exist.

12.11 Levy Judgment. An attachment or garnishment writ, or the like, in excess
of $150,000, is levied against all or any portion of the assets of any Borrower
Entity or a judgment for the payment of money is rendered against Borrower and
within 30 days from the entry of judgment has not been discharged or stayed
pending appeal or, if any such judgment is affirmed on appeal, has not been
discharged within 30 days from the entry of the final order of affirmance on
appeal.

12.12 ERISA Events. (a) An ERISA Event occurs with respect to a Pension Plan or
Multiemployer Plan that has resulted or could reasonably be expected to result
in a material liability of a Borrower Entity to a Pension Plan, Multiemployer
Plan or PBGC, or that constitutes grounds for appointment of a trustee for or
termination by the PBGC of any Pension Plan or Multiemployer Plan; (b) a
Borrower Entity or ERISA Affiliate fails to pay when due any installment payment
with respect to its withdrawal liability under Section 4201 of ERISA under a
Multiemployer Plan; or (c) any event similar to the foregoing occurs or exists
with respect to a Foreign Plan.

12.13 Intercompany Note Documents. A material default under any of the
Intercompany Note Documents.

12.14 Cross-Default. A default in the payment of any Indebtedness of a Borrower
Entity in excess of $100,000, or any other default in any other obligations of a
Borrower Entity with respect to Indebtedness in excess of $100,000, if the
maturity of such Indebtedness is accelerated as a result of such default.

12.15 Material Contracts. The occurrence of a default under any Material
Contract and the expiration of all applicable cure periods.

 

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12.16 Failure of Perfection. The security interests granted by Borrower to Agent
shall for any reason fail or cease to create a valid and perfected and, except
to the extent otherwise permitted by this Agreement, first priority lien in
favor of Agent.

12.17 Healthcare Proceedings. (i) The initiation by any Governmental Authority
of any suit, proceeding, claim, or dispute against any Borrower Entity alleging
a violation by any Borrower Entity of any Healthcare Laws, or (ii) any
determination by any Governmental Authority not otherwise stayed by judicial or
administrative action that the direct or indirect physician owners of any
Hospital Entity are prohibited from referring patients who are Medicare
beneficiaries or Medicaid recipients to such Hospital Entity, in either case if
such event results in a Material Adverse Effect, as determined by the Required
Lenders.

Section 13. Remedies.

13.1 Remedies Generally. If an Event of Default shall occur, then during the
continuance thereof:

(a) All Obligations, notwithstanding any term of this Agreement or the other
Loan Documents to the contrary, at Agent’s option in the case of any Event of
Default other than pursuant to Section 12.9, shall without further notice become
immediately due and payable, without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by each Loan Party;

(b) Agent shall have all rights, powers and remedies available under this
Agreement and the other Loan Documents or accorded by law, including, without
limitation, the right to resort to any or all security for the Obligations and
to exercise any or all of the rights of a beneficiary or secured party pursuant
to Applicable Law;

(c) Agent may require the Loan Parties to assemble Collateral at the Loan
Parties’ expense, and make it available to Agent at a place designated by Agent;

(d) Agent may enter any premises where Collateral is located and, without charge
by Borrower, store Collateral on such premises until sold (which sale may be
conducted on such premises); and

(e) Each Loan Party agrees that 10 days’ notice of any proposed sale or other
disposition of Collateral by Agent shall be reasonable. Agent shall have the
right to sell, lease or otherwise dispose of any Collateral for cash, credit or
any combination thereof, and Agent may purchase any Collateral at public or, if
permitted by law, private sale and, in lieu of actual payment of the purchase
price, may set off the amount of such price against the Obligations. All rights,
powers and remedies of Agent in connection with the Obligations may be exercised
at any time by Agent and from time to time after the occurrence of an Event of
Default, are cumulative and not exclusive, and shall be in addition to any other
rights, powers or remedies provided by law or equity.

 

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13.2 Pledged Securities.

(a) Each Loan Party recognizes that Agent may be unable to effect a public sale
of any or all the Pledged Securities by reason of certain prohibitions contained
in the Securities Act of 1933 and applicable state securities laws (the
“Securities Laws”), but may be compelled to resort to one or more private sales
thereof to a restricted group of qualified purchasers who will be obliged to
agree, among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof or in some
other manner that will not require the Pledged Securities to be registered in
accordance with the Securities Laws. Each Loan Party acknowledges that any such
private sale may result in prices and other terms less favorable to the seller
than if such sale were a public sale and, notwithstanding such circumstances,
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner. Agent shall be under no obligation to delay a
sale of any of the Pledged Securities for the period of time necessary to permit
the issuer to register such securities for public sale under the Securities
Laws, even if the issuer would agree to do so. Each Loan Party acknowledges that
any such private sale shall be deemed to have been made in a commercially
reasonable manner and that Agent has no obligation to delay the sale of any of
the Pledged Securities to permit the issuer thereof to register it for public
sale under the Securities Laws.

(b) Agent is authorized, in connection with any such sale, to (i) restrict the
prospective bidders on or purchasers of any of the Pledged Securities to a
limited number of sophisticated investors who will represent that they are
purchasing for their own account for investment and not with a view to the
distribution or sale of any of such Pledged Securities, and (ii) impose such
other limitations or conditions in connection with any such sale as Agent
reasonably deems necessary in order to comply with Applicable Law. Each Loan
Party shall execute and deliver such documents and take such other action as
Agent reasonably deems necessary in order that any such sale may be made in
compliance with Applicable Law. Upon any such sale, Agent may deliver, assign,
and transfer to the purchaser thereof the Pledged Securities so sold. Each
purchaser at any such sale shall hold the Pledged Securities so sold absolutely
free from any claim or right of the Loan Parties of whatsoever kind, including
any equity or right of redemption of the Loan Parties. Each Loan Party, to the
extent permitted by Applicable Law, hereby specifically waives all rights of
redemption, stay, or appraisal that he has or may have under any law now
existing or hereafter enacted.

(c) Without limiting the foregoing, or imposing upon Agent any obligations or
duties not required by Applicable Law, each Loan Party acknowledges that, in
foreclosing upon any of the Pledged Securities or exercising any other rights or
remedies provided Agent hereunder or under Applicable Law, Agent may, but shall
not be required to, (i) qualify or restrict prospective purchasers of the
Pledged Securities and requiring the execution and delivery of confidentiality
agreements or other documents and agreements as a condition to such prospective
purchasers’ receipt of information regarding the Pledged Securities or
participation in any public or private foreclosure sale process, (ii) provide to
prospective purchasers business and financial information regarding issues
available in the files of Agent at the time of commencing the foreclosure
process, without the requirement that Agent obtain, or seek to obtain, any
updated business or financial information or verify, or certify to prospective
purchasers, the accuracy of any such business or financial information, or
(iii) offer for sale and sell the Pledged Securities with, or without, first
employing an appraiser, investment banker, or broker with respect to the
evaluation of the Pledged Securities, the solicitation of purchasers for the
Pledged Securities, or the manner of sale of the Pledged Securities.

 

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13.3 Right of Setoff. If an Event of Default exists, Agent, each Lender, and
each of their Affiliates is hereby authorized at any time and from time to time,
to the fullest extent permitted by Applicable Law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final, in
whatever currency) at any time held and other obligations at any time owing by
Agent, such Lender or Affiliate to or for the credit or the account of Borrower
or any other Loan Party against any and all of the Obligations now or hereafter
existing under this Agreement or any other Loan Document to Agent or such
Lender, irrespective of whether demand has been made and although such
Obligations may be contingent or unmatured or are owed to a branch or office of
Agent or such Lender different from the branch or office holding such deposit or
obligated on such indebtedness. The rights of Agent and each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff) that Agent and each Lender may have. Each Lender agrees to notify
Borrower and Agent promptly after any such setoff and application, provided that
the failure to give such notice shall not affect the validity of such setoff and
application.

Section 14. License. Each Loan Party hereby irrevocably constitutes and appoints
Agent and any officer or agent of Agent, with full power of substitution, as
such Loan Party’s true and lawful attorney-in-fact with full irrevocable power
and authority in the place and stead of such Loan Party or in Agent’s own name,
for the purpose of carrying out the terms of this Agreement, during an Event of
Default, to take any and all appropriate action and to execute any and all
documents and instruments that may be necessary or useful to accomplish the
purposes of this Agreement and the other Loan Documents, and, without limiting
the generality of the foregoing, hereby gives such attorneys the power and
right, on behalf of such Loan Party, without notice to or assent by such Loan
Party, to (a) indorse and collect any cash proceeds of the Collateral, (b) apply
the proceeds of any Collateral received by Agent to the Obligations, and
(c) discharge past due taxes, assessments, charges, fees or liens on the
Collateral. Each Loan Party shall reimburse Agent on demand for any payment made
or any expense incurred by Agent in connection therewith, provided that this
authorization shall not relieve Borrower of any of its obligations under any of
the Loan Documents.

Section 15. Agency.

15.1 Appointment and Authority. Each Lender hereby irrevocably appoints Bank
SNB, National Association to act on its behalf as Agent hereunder and under the
other Loan Documents and authorizes Agent to take such actions on its behalf and
to exercise such powers as are delegated to Agent by the terms hereof or
thereof, together with such actions and powers as are reasonably incidental
thereto. The provisions of this Section 15 are solely for the benefit of Agent
and Lenders, and neither Borrower nor any other Loan Party shall have the rights
of a third party beneficiary of any of such provisions.

 

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15.2 Rights as a Lender. The Person serving as Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not Agent and the term “Lender” or “Lenders”
shall, unless otherwise expressly indicated or unless the context otherwise
requires, include the Person serving as Agent hereunder in its individual
capacity. Such Person and its Affiliates may accept deposits from, lend money
to, act as the financial advisor or in any other advisory capacity for and
generally engage in any kind of business with any Borrower Entity as if such
Person were not Agent hereunder and without any duty to account therefor to
Lenders.

15.3 Exculpatory Provisions. Agent shall not have any duties or obligations
except those expressly set forth herein and in the other Loan Documents. Without
limiting the generality of the foregoing, Agent:

(a) shall not be subject to any fiduciary or other implied duties, regardless of
whether an Event of Default exists;

(b) shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that Agent is required to
exercise as directed in writing by the Required Lenders (or such other number or
percentage of Lenders as shall be expressly provided for herein or in the other
Loan Documents), provided that Agent shall not be required to take any action
that, in its opinion or the opinion of its counsel, may expose Agent to
liability or that is contrary to any Loan Document or Applicable Law; and

(c) shall not, except as expressly set forth herein and in the other Loan
Documents, have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to any Borrower Entity that is communicated
to or obtained by the Person serving as Agent or any of its Affiliates in any
capacity.

Agent shall not be liable for any action taken or not taken by it (i) with the
consent or at the request of the Required Lenders (or such other number or
percentage of Lenders as shall be necessary, or as Agent shall believe in good
faith shall be necessary, under the circumstances or (ii) in the absence of its
own gross negligence or willful misconduct. Agent shall be deemed not to have
knowledge of any Event of Default unless and until written notice describing
such Event of Default is given to Agent by a Loan Party or a Lender.

Agent shall not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in connection with this
Agreement or any other Loan Document, (ii) the contents of any certificate,
report or other document delivered hereunder or thereunder or in connection
herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or therein
or the occurrence of any Event of Default, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement, any other Loan Document or any
other agreement, instrument or document or (v) the satisfaction of any condition
set forth in Section 15 or elsewhere herein, other than to confirm receipt of
items expressly required to be delivered to Agent.

15.4 Reliance by Agent. Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including any electronic
message, Internet or intranet website posting or other distribution) believed by
it to be genuine and to have been signed, sent

 

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or otherwise authenticated by the proper Person. Agent also may rely upon any
statement made to it orally or by telephone and believed by it to have been made
by the proper Person, and shall not incur any liability for relying thereon. In
determining compliance with any condition hereunder to the making of a Loan that
by its terms must be fulfilled to the satisfaction of a Lender, Agent may
presume that such condition is satisfactory to such Lender unless Agent shall
have received notice to the contrary from such Lender prior to the making of
such Loan. Agent may consult with legal counsel (who may be counsel for
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

15.5 Delegation of Duties. Agent may perform any and all of its duties and
exercise its rights and powers hereunder or under any other Loan Document by or
through any of its Affiliates, or any one or more sub-agents appointed by Agent.
The exculpatory provisions of this Section 15 shall apply to any such Affiliate
or sub-agent, and shall apply to their respective activities in connection with
the syndication of the credit facilities provided for herein as well as
activities as Agent.

15.6 Resignation of Agent. Agent may at any time give notice of its resignation
to Lenders and Borrower. Upon receipt of any such notice of resignation, the
Required Lenders shall have the right, in consultation with Borrower, to appoint
a successor, which shall be a bank with an office in the United States, or an
affiliate of any such bank with an office in the United States. If no such
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Agent gives notice
of its resignation, then the retiring Agent may on behalf of Lenders, appoint a
successor Agent meeting the qualifications set forth above provided that if
Agent shall notify Borrower and Lenders that no qualifying Person has accepted
such appointment, then such resignation shall nonetheless become effective in
accordance with such notice and (a) the retiring Agent shall be discharged from
its duties and obligations hereunder and under the other Loan Documents (except
that in the case of any collateral security held by Agent on behalf of Lenders
under any of the Loan Documents, the retiring Agent shall continue to hold such
collateral security until such time as a successor Agent is appointed) and
(b) all payments, communications and determinations provided to be made by, to
or through Agent shall instead be made by or to each Lender directly, until such
time as the Required Lenders appoint a successor Agent as provided for above in
this paragraph. Upon the acceptance of a successor’s appointment as Agent
hereunder, such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring (or retired) Agent, and
the retiring Agent shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents (if not already discharged therefrom
as provided above in this paragraph). The fees payable by Borrower to a
successor Agent shall be the same as those payable to its predecessor unless
otherwise agreed between Borrower and such successor. After the retiring Agent’s
resignation hereunder and under the other Loan Documents, the provisions of this
Section 15 and Section 16.5 shall continue in effect for the benefit of such
retiring Agent, its sub-agents and their respective affiliates in respect of any
actions taken or omitted to be taken by any of them while the retiring Agent was
acting as Agent.

 

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15.7 Non-Reliance on Agent and Other Lenders. Each Lender acknowledges that it
has, independently and without reliance upon Agent or any other Lender or any of
their affiliates and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon Agent or any other Lender or any of their affiliates and based on
such documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Loan Document or any related agreement or any
document furnished hereunder or thereunder.

15.8 Replacement of Certain Lenders. If a Lender is a Defaulting Lender, then,
in addition to any other rights and remedies that any Person may have, Agent
may, by notice to such Lender within 120 days, require such Lender to assign all
of its rights and obligations under the Loan Documents to Eligible Assignee(s)
specified by Agent, pursuant to appropriate Assignment and Assumption(s) and
within 20 days after Agent’s notice. Agent is irrevocably appointed as
attorney-in-fact to execute any such Assignment and Acceptance if such Lender
fails to execute same. Such Lender shall be entitled to receive, in cash,
concurrently with such assignment, all amounts owed to it under the Loan
Documents, including all principal, interest, and fees through the date of
assignment (but excluding any prepayment charge). Borrower shall pay the
processing fee required by Section 16.3, with respect to any assignment by a
Lender pursuant to this Section 15.8.

15.9 Sharing of Payments by Lenders. If any Lender shall obtain any payment or
reduction of any Obligation (whether through set-off or otherwise) in excess of
its Pro Rata Share of payments or reductions of Obligations obtained by all
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the affected Obligations as shall be necessary to cause the
purchasing Lender to share the excess payment or reduction, net of costs
incurred in connection therewith, on a pro rata basis, provided that if any of
such payment or reduction is thereafter recovered from the purchasing Lender or
if any additional costs are incurred, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery or additional costs, but
without interest.

15.10 Syndication Agent. Anything in this Agreement to the contrary
notwithstanding, the Syndication Agent listed on the cover page hereof shall not
have any powers, duties or responsibilities under this Agreement or any of the
other Loan Documents, except in its capacity as Lender hereunder.

Section 16. Miscellaneous.

16.1 Failure or Indulgence Not Waiver. No failure or delay on the part of Agent
or any Lender in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof or
of any other right, power or privilege. All rights and remedies existing under
this Agreement and the other Loan Documents are cumulative, and not exclusive of
any rights or remedies otherwise available.

16.2 Modification. No modification of any Loan Document, including any extension
or amendment of a Loan Document or any waiver of a default or Event of Default,
shall be effective without the prior written agreement of Agent, the Required
Lenders and each Loan Party that is a party to such Loan Document; provided,
however, that:

(a) Without the prior written consent of each affected Lender, no modification
shall be effective that would (i) increase any Commitment of such Lender or
(ii) reduce the amount of, or waive or delay payment of, any principal, interest
or fees payable to such Lender; and,

 

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(b) Without the prior written consent of all Lenders (except a Defaulting
Lender), no modification shall be effective that would (i) extend the Revolving
Loan Maturity Date or the Term Loan Maturity Date, (ii) alter the definition of
“Collateral” or amend Section 6.1; (iii) amend the definitions of “Required
Lenders”, (iv) increase the aggregate Commitments, (v) release Collateral with a
book value greater than $500,000 during any 12 month period, except as currently
contemplated by the Loan Documents, (vi) agree to subordinate any Obligations or
(vii) release any Loan Party from liability for any Obligations, if such Obligor
is Solvent at the time of the release, or subordinate Agent’s lien in any
Collateral.

(c) The agreement of Borrowers shall not be necessary to the effectiveness of
any modification of a Loan Document that deals solely with the rights and duties
of Lenders or Agent as among themselves.

(d) The making of any Loans during the existence of a default or Event of
Default shall not be deemed to constitute a waiver of such default or Event of
Default, nor to establish a course of dealing. Any waiver or consent granted by
Agent and Lenders hereunder shall be effective only if in writing, and then only
in the specific instance and for the specific purpose for which it is given.

(e) No Borrower will, directly or indirectly, pay any remuneration or other
thing of value, whether by way of additional interest, fee, or otherwise, to any
Lender (in its capacity as a Lender hereunder) as consideration for agreement by
such Lender with any modification of any Loan Documents, unless such
remuneration or value is concurrently paid, on the same terms, to all Lenders
providing their consent in accordance with their Pro Rata Shares.

16.3 Assignments.

(a) Permitted Assignments. A Lender may assign to any Eligible Assignee any of
its rights and obligations under the Loan Documents, as long as (i) each
assignment is of a constant, and not a varying, percentage of the transferor
Lender’s rights and obligations under the Loan Documents and, in the case of a
partial assignment, is in a minimum principal amount of $1,000,000 (unless
otherwise agreed by Agent in its discretion) and integral multiples of
$1,000,000 in excess of that amount, (ii) except in the case of an assignment in
whole of a Lender’s rights and obligations, the aggregate amount of the
Commitments retained by the transferor Lender be at least $5,000,000 (unless
otherwise agreed by Agent in its discretion), (iii) the parties to each such
assignment shall execute and deliver to Agent, for its acceptance and recording,
an Assignment and Assumption Agreement and (iv) Borrower shall have received
prior written notice of the Eligible Assignee. Nothing herein shall limit the
right of a Lender to pledge or assign any rights under the Loan Documents to
(A) any Federal Reserve Bank or the United States Treasury as collateral
security pursuant to Regulation A of the Board of Governors and any Operating
Circular issued by such Federal Reserve Bank or (B) counterparties to swap
agreements relating to any Loans; provided that any payment by Borrower to the
assigning Lender in respect of any Obligations assigned as described in this
sentence shall satisfy Borrowers’ obligations hereunder to the extent of such
payment, and no such assignment shall release the assigning Lender from its
obligations hereunder.

 

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(b) Effect; Effective Date. Upon delivery to Agent of a notice of assignment in
the form of Exhibit J and a processing fee of $2,500, such assignment shall
become effective as specified in the notice, if it complies with this
Section 16.3. From the effective date of such assignment, the Eligible Assignee
shall for all purposes be a Lender under the Loan Documents, and shall have all
rights and obligations of a Lender thereunder. Upon consummation of an
assignment, the transferor Lender, Agent, and Borrower shall make appropriate
arrangements for issuance of replacement and/or new Notes, as appropriate.

16.4 USA PATRIOT Act. Agent hereby notifies Borrower that pursuant to the
requirements of the USA PATRIOT Act, Agent may be required to obtain, verify and
record information that identifies Borrower, including the name and address of
Borrower and other information that will allow Agent to identify Borrower in
accordance with the USA PATRIOT Act.

16.5 Expenses; Indemnification.

(a) Costs and Expenses. Borrower shall pay (i) all reasonable out-of-pocket
expenses incurred by Agent, Syndication Agent and their respective Affiliates
(including the reasonable fees, charges and disbursements of counsel for Agent
and Syndication Agent), in connection with the syndication of the credit
facilities provided for herein, the preparation, negotiation, execution,
delivery and administration of this Agreement and the other Loan Documents or
any amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions contemplated hereby or thereby are
consummated), (ii) all reasonable out-of-pocket expenses incurred by Agent or
any Lender (including the fees, charges and disbursements of any counsel to
Agent or any Lender) in connection with the enforcement or protection of its
rights (A) in connection with this Agreement and the other Loan Documents,
including its rights under this Section 16.5, or (B) in connection with the
Loans, including all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of the Loans.

(b) Indemnification. The Loan Parties, jointly and severally, shall indemnify
Agent and each Lender, and all of their officers, employees, directors,
attorneys, agents, Affiliates, successors and assigns (each, an “Indemnitee”)
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses (including the fees, charges and
disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or
asserted against any Indemnitee by any third party or by any Borrower Entity
arising out of, in connection with, or as a result of (i) the execution or
delivery of this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the parties hereto
of their respective obligations hereunder or thereunder or the consummation of
the transactions contemplated hereby or thereby, (ii) any Loan or the use or
proposed use of the proceeds therefrom, (iii) any actual or alleged presence or
release of hazardous materials on or from any property owned or operated by a
Borrower Entity, or any environmental liability related in any way to a Borrower
Entity, or (iv) any actual or prospective claims, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory, whether brought by a third party or by a Borrower Entity, and
regardless of whether any Indemnitee is party thereto.

 

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16.6 Notices. Except as otherwise expressly provided herein, any notice herein
required or permitted to be given shall be in writing and shall be deemed
effective when delivered personally, by certified mail, return receipt
requested, or by FedEx or other national overnight courier to the appropriate
party at the address set forth below (or at such other address as may be
designated by either party in a written notice sent in accordance with this
section):

 

If to a Loan Party:    c/o Foundation Healthcare, Inc.    14000 N. Portland
Ave., Suite 200    Oklahoma City, OK 73134    Attn: Stanton Nelson, CEO With a
copy to:    Foundation Healthcare, Inc.    14000 N. Portland Ave., Suite 200   
Oklahoma City, OK 73134    Attn: Marcelo Puiggari, General Counsel If to Agent:
   Bank SNB, National Association    6301 Waterford Boulevard, Suite 400   
Oklahoma City, OK 73118    Attn: Matt Pollock With a copy to:    McAfee & Taft
   211 N. Robinson Ave, 10th Floor    Oklahoma City, OK 73102    Attn: J.
Barrett Ellis If to a Lender:    To the address specified for such Lender on
Schedule 1.4.   

16.7 Severability. In case any provision in this Agreement or the other Loan
Documents shall be invalid, illegal or unenforceable, such provision shall be
severable from the remainder of such contract and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

16.8 Construction. The rule of construction that a document is to be construed
most strictly against the party who drafted the document shall not be applicable
because all parties participated in the preparation of this Agreement and the
other Loan Documents. “Includes” and “including” are not limiting. References to
exhibits shall be to exhibits to this Agreement.

16.9 Applicable Law. The laws of the State of Oklahoma shall govern this
Agreement and the other Loan Documents, and the legal relations between the
parties without giving effect to any conflict of law provision (whether of the
State of Oklahoma or any other jurisdiction) that would cause the application of
the law of any other jurisdiction.

 

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16.10 Assignability. Borrower may not assign its rights or obligations under
this Agreement or the other Loan Documents to any other Person without the prior
written consent of the other party, and any attempted assignment in violation
hereof shall be null and void ab initio.

16.11 Participations.

(a) Permitted Participants; Effect. Any Lender may, in the ordinary course of
its business and in accordance with Applicable Law, at any time sell to a
financial institution (“Participant”) a participating interest in the rights and
obligations of such Lender under any Loan Documents. Despite any sale by a
Lender of participating interests to a Participant, such Lender’s obligations
under the Loan Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for performance of such obligations,
such Lender shall remain the holder of its Loans and Commitments for all
purposes, all amounts payable by Borrower shall be determined as if such Lender
had not sold such participating interests, and Borrower and Agent shall continue
to deal solely and directly with such Lender in connection with the Loan
Documents. Each Lender shall be solely responsible for notifying its
Participants of any matters under the Loan Documents, and Agent and the other
Lenders shall not have any obligation or liability to any such Participant.

(b) Voting Rights. Each Lender shall retain the sole right to approve, without
the consent of any Participant, any amendment, waiver, or other modification of
any Loan Documents other than that which forgives principal, interest, or fees,
reduces the stated interest rate or fees payable with respect to any Loan or
Commitment in which such Participant has an interest, postpones the maturity
date, or any date fixed for any regularly scheduled payment of principal,
interest, or fees on such Loan or Commitment, or releases any Borrower,
Guarantor, or substantial portion of the Collateral.

(c) Benefit of Set-Off. The Loan Parties agree that each Participant shall have
a right of set-off in respect of its participating interest to the same extent
as if such interest were owing directly to a Lender, and each Lender shall also
retain the right of set-off with respect to any participating interests sold by
it. By exercising any right of set-off, a Participant agrees to share with
Lenders all amounts received through its set-off, in accordance with
Section 13.3 as if such Participant were a Lender.

16.12 Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement. The exchange of copies of this Agreement and of signature pages by
facsimile transmission shall constitute effective execution and delivery of this
Agreement and may be used in lieu of the original Agreement for all purposes.

16.13 Further Assurances. At any time or from time to time upon the request of
any Lender, Borrower will, and will take affirmative steps to cause third
parties to, execute and deliver such further documents and do such other acts
and things as such Lender may reasonably request in order to effect fully the
purposes of this Agreement and the other Loan Documents and to provide for the
payment of the Obligations in accordance with the terms of this Agreement and
the other Loan Documents.

 

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16.14 Attorneys’ Fees. In the event any party institutes any action or
proceeding to enforce the terms and conditions of this Agreement or the other
Loan Documents, the prevailing party shall be entitled to reasonable attorneys’
fees and costs.

16.15 Usury. It is the intention of Borrower, Agent and Lenders to comply with
applicable usury laws. Therefore, notwithstanding any provisions to the contrary
in this Agreement or in any other Loan Document, neither this Agreement nor any
other Loan Document shall require the payment or permit the collection of
interest in excess of the maximum amount permitted by law. If compliance with
this Agreement or any other Loan Document would result in a violation of
applicable usury law, the amount of the payment obligation imposed by this
Agreement or any other Loan Document shall be reduced to the maximum amount
permitted by law. If any Lender receives any payment of interest, or receives
any payment or transfer that is deemed to be interest by Applicable Law, in an
amount that exceeds Applicable Law, the amount in excess of the limit imposed by
law shall be applied to reduce the principal amount owing under this Agreement
or the other Loan Document. If the amount received in excess of the limit
imposed by law exceeds the unpaid principal balance due to Lenders under this
Agreement, the excess amount shall be refunded without interest to Borrower.

16.16 Integration. This Agreement and the other Loan Documents reflect the
entire understanding of the parties with respect to the transactions
contemplated hereby and shall not be contradicted or qualified by any other
agreement, oral or written, whether before or after the date hereof, except in a
writing executed by the parties hereto and referring specifically to this
Agreement.

16.17 Time. Time is of the essence of this Agreement and the Loan.

16.18 VENUE. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE DISTRICT COURT OF OKLAHOMA COUNTY, OKLAHOMA OR IN THE UNITED
STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA. BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH PARTY IRREVOCABLY ACCEPTS THE JURISDICTION OF
SUCH COURTS. THIS AGREEMENT SHALL NOT AFFECT THE RIGHT OF AGENT OR LENDERS TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER IN ANY OTHER
JURISDICTION ALLOWED BY LAW. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.

16.19 WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY (WHETHER BASED ON CONTRACT, TORT

 

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OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

16.20 Notice of Final Agreement. The Loan Documents represent the final
agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties. There are no
unwritten oral agreements between the parties.

 

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EXECUTED as of the date first written above.

 

BORROWER: FOUNDATION HEALTHCARE, INC. By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Chief Executive Officer GUARANTORS: TSH
ACQUISITION, LLC By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Manager FOUNDATION SURGICAL HOSPITAL
AFFILIATES, LLC By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Manager FOUNDATION SURGERY AFFILIATES, LLC
By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Manager

 

52

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FOUNDATION SURGICAL HOSPITAL HOLDINGS, LLC By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Manager FOUNDATION SURGICAL HOSPITAL
MANAGEMENT, LLC By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Manager FOUNDATION SURGERY HOLDINGS, L.L.C.
By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Manager FOUNDATION SURGERY MANAGEMENT, LLC
By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Manager FOUNDATION WEIGHTWISE SERVICES,
L.L.C. By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Manager

 

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FOUNDATION HEALTH ENTERPRISES, LLC By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Manager SDC HOLDINGS, LLC By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Manager SOMNICARE, INC. By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Chief Executive Officer SOMNITECH, INC. By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Chief Executive Officer NOCTURNA SLEEP
THERAPY GENERAL PARTNER, LLC By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Manager

 

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NOCTURNA SLEEP THERAPY, LP By: Nocturna Sleep Therapy General Partner, LLC, its
General Partner   By:  

/s/ Stanton M. Nelson

  Name:   Stanton M. Nelson   Title:   Manager SLEEP DISORDER CENTERS LLC By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Manager APOTHECARYRX, LLC By:  

/s/ Stanton M. Nelson

Name:   Stanton M. Nelson Title:   Manager

 

55

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AGENT AND LENDER: BANK SNB, NATIONAL ASSOCIATION By:  

/s/ Matt Pollock

Name:   Matt Pollock Title:   President

 

56

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LENDERS: TEXAS CAPITAL BANK, NATIONAL ASSOCIATION By:  

/s/ Deborah T. Purvin

Name:   Deborah T. Purvin Title:   Senior Vice President

 

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