Exhibit 10.1

 

SECOND AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

 

THE PROVIDENCE SERVICE CORPORATION

 

And each of Its Subsidiaries Listed on Exhibits A and B,

 

as Borrowers

 

with

 

HEALTHCARE BUSINESS CREDIT CORPORATION,

 

as Lender

 

June 28, 2005

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TABLE OF CONTENTS

 

         Page

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Section 1.        DEFINITIONS AND INTERPRETATION    1

1.1

 

Terms Defined.

   1

1.2

 

Matters of Construction

   16

1.3

 

Accounting Principles

   17

1.4

 

Uniform Commercial Code

   17 Section 2.        THE CREDIT FACILITIES    17   

2.1

 

Revolving Credit Facility.

   17

2.2

 

Funding Procedures.

   18

2.3

 

The Term Loan.

   19

2.4

 

Interest and Fees.

   21

2.5

 

Additional Interest Provisions.

   24

2.6

 

Payments.

   24

2.7

 

Use of Proceeds

   26

2.8

 

Lockboxes and Collections

   26

2.9

 

Joint and Several Liability; Appointment of Borrower Agent.

   27 Section 3.        COLLATERAL    28

3.1

 

Collateral

   28

3.2

 

Lien and Ancillary Documents

   30

3.3

 

Other Actions

   30

3.4

 

Searches

   31

3.5

 

Filing Security Agreement

   31

 

i

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Table of Contents

(cont’d)

 

3.6

 

Power of Attorney

   31 Section 4.        CLOSING AND CONDITIONS PRECEDENT TO THE LOANS    32

4.1

 

Closing Date

   32

4.2

 

Conditions to Each Loan

   33

4.3

 

Closing

   35

4.4

 

Non-Waiver of Rights

   35 Section 5.        REPRESENTATIONS AND WARRANTIES    35

5.1

 

Organization and Validity

   35

5.2

 

Places of Business

   36

5.3

 

Operation of Business

   36

5.4

 

Pending Litigation

   36

5.5

 

Medicaid and Medicare Cost Reporting

   37

5.6

 

Title to Collateral

   37

5.7

 

Governmental Consent

   38

5.8

 

Taxes

   38

5.9

 

Financial Statements

   38

5.10

 

Full Disclosure

   38

5.11

 

Guarantees, Contracts, Investments, etc

   39

5.12

 

Compliance with Laws

   39

5.13

 

Environmental Matters

   39

5.14

 

Capital Stock and Equity Interests

   40

5.15

 

Lockboxes

   40

5.16

 

Borrowing Base Reports

   40

5.17

 

Security Interest

   40

 

ii

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Table of Contents

(cont’d)

 

5.18

 

Accounts.

   40

5.19

 

Pension Plans

   41

5.20

 

Representations and Warranties for each Loan

   41

5.21

 

Commercial Tort Claims

   42

5.22

 

Letter of Credit Rights

   42

5.23

 

Intellectual Property

   43

5.24

 

Management Agreements

   43

5.25

 

Social Service Providers Captive Insurance Co.

   43 Section 6.        BORROWERS’ AFFIRMATIVE COVENANTS    43

6.1

 

Payment of Taxes and Claims

   43

6.2

 

Maintenance of Insurance, Financial Records and Corporate Existence.

   43

6.3

 

Business Conducted

   45

6.4

 

Litigation

   45

6.5

 

Taxes

   45

6.6

 

Financial Covenants

   45

6.7

 

Financial and Business Information

   45

6.8

 

Officers’ Certificates

   47

6.9

 

Inspection

   47

6.10

 

Tax Returns and Reports

   48

6.11

 

Material Adverse Developments

   48

6.12

 

Places of Business.

   48

6.13

 

Notice of Action

   48

6.14

 

Verification of Information

   48

6.15

 

Value Track System™.

   49

 

iii

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Table of Contents

(cont’d)

 

6.16

 

Commercial Tort Claims

   49 Section 7.        BORROWERS’ NEGATIVE COVENANTS    49

7.1

 

Merger, Consolidation, Dissolution or Liquidation

   49

7.2

 

Liens and Encumbrances

   50

7.3

 

[Intentionally Omitted]

   50

7.4

 

Transactions With Affiliates, Subsidiaries, Non-Profit Borrowers and Managed
Entities

   50

7.5

 

Guarantees

   50

7.6

 

Indebtedness

   51

7.7

 

Loans, Investments, Acquisitions

   52

7.8

 

Withdrawals

   55

7.9

 

Payments on Account of Subordinated Debt.

   55

7.10

 

No Interference with Collections

   55

7.11

 

Deposit Accounts

   55 Section 8.        EVENTS OF DEFAULT    55

8.1

 

Events of Default

   55

8.2

 

Cure

   58

8.3

 

Rights and Remedies on Default

   58

8.4

 

Nature of Remedies

   59

8.5

 

Set-Off

   59 Section 9.        MISCELLANEOUS    59

9.1

 

GOVERNING LAW

   59

9.2

 

Integrated Agreement

   59

9.3

 

Waiver and Indemnity

   60

9.4

 

Time

   60

 

iv

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Table of Contents

(cont’d)

 

9.5

 

Expenses of Lender

   60

9.6

 

Confidentiality

   61

9.7

 

Notices

   62

9.8

 

Headings

   62

9.9

 

Survival

   62

9.10

 

Successors and Assigns

   62

9.11

 

Duplicate Originals

   63

9.12

 

Modification

   63

9.13

 

Third Parties

   63

9.14

 

Waivers

   63

9.15

 

CONSENT TO JURISDICTION

   64

9.16

 

WAIVER OF JURY TRIAL.

   64

9.17

 

Publication

   64

9.18

 

Discharge of Taxes, Borrowers’ Obligations, Etc.

   64

9.19

 

Injunctive Relief

   64

9.20

 

Privacy of Patient Information

   65

 

v

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EXHIBITS AND SCHEDULES

 

Exhibit A

   —   

Existing Borrowers

Exhibit B

   —   

New Borrowers

Exhibit 2.1(b)

   —   

Form of Revolving Credit Note

Exhibit 2.2(b)

   —   

Form of Borrowing Base Report

Exhibit 2.2(c)

   —   

Form of Advance Request

Exhibit 2.3(c)

   —   

Form of Term Note

Exhibit 4.2A

   —   

Form of Notice to Commercial Obligor

Exhibit 4.2B

   —   

Form of Notice to Governmental Obligor

Exhibit 6.8

   —   

Form of Officer’s Certificates

Exhibit 7.4

   —   

Form of Joinder Agreement

Schedule 1

   —   

Ineligible Obligors and Concentration Limits

Schedule 2

   —   

Management Agreements

Schedule 5.1

   —   

Borrowers’ States of Qualifications

Schedule 5.2

   —   

Chief Executive Office; Places of Business; Additional Names

Schedule 5.3

   —   

Provider Identification Numbers

Schedule 5.4

   —   

Pending Litigation

Schedule 5.6

   —   

Permitted Liens

Schedule 5.9

   —   

Fiscal Year End; Tax I.D. Numbers

Schedule 5.11

   —   

Existing Guaranties, Investments Joint Ventures, etc.

Schedule 5.13

   —   

Environmental Matters

Schedule 5.14

   —   

Capital Stock

Schedule 5.15

   —   

Lockboxes

Schedule 5.21

   —   

Commercial Tort Claims

Schedule 5.22

   —   

Letter of Credit Rights

Schedule 5.23

   —   

Intellectual Property

Schedule 7.4

   —   

Transactions with Affiliates or Subsidiaries

Schedule 7.5

   —   

Existing Guarantees

Schedule 7.6

   —   

Existing Indebtedness

 

vi

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SECOND AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

 

This Second Amended and Restated Loan and Security Agreement (this “Agreement”)
is dated this 28th day of June, 2005, by and among The Providence Service
Corporation, a Delaware corporation (“Providence”), each of its Subsidiaries
listed on Exhibit A attached hereto (together with Providence, collectively, the
“Existing Borrowers”) and each of its Subsidiaries listed on Exhibit B attached
hereto (collectively, the “New Borrowers” and, together with the Existing
Borrowers, each individually a “Borrower”, and collectively, the “Borrowers”),
and Healthcare Business Credit Corporation, a Delaware corporation, as lender
(“Lender”).

 

BACKGROUND

 

A. Certain of the Borrowers and the Lender are parties to that certain Amended
and Restated Loan and Security Agreement dated as of September 30, 2003, as
amended (the “Original Loan Agreement”) pursuant to which the Lender has
extended certain credit facilities to the Existing Borrowers thereunder.

 

B. Providence and the other Borrowers under the Original Loan Agreement have
requested that Lender: (i) permit the New Borrowers to become party to the
Original Loan Agreement as Borrowers thereunder; and (ii) increase and extend
the credit facilities provided under the Original Loan Agreement.

 

C. The Lender is willing so to join the New Borrowers as Borrowers under the
Original Loan Agreement, increase and extend the credit facilities available to
the Borrowers, the Borrowers and the Lender desire to amend and restate the
Original Loan Agreement in its entirety.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as follows:

 

SECTION 1. DEFINITIONS AND INTERPRETATION

 

1.1 Terms Defined.

 

As used in this Agreement, the following terms have the following respective
meanings:

 

“Account” means: (a) all payments and all rights to receive payments owing to a
Borrower from an Obligor, together with all unbilled work-in-process for
services rendered or goods delivered, arising in connection with the Borrowers’
Business (whether such services are supplied by Borrowers or a third party),
including without limitation, all health-care insurance receivables and other
rights to reimbursement and/or payment under any agreements with an Obligor; (b)
all accounts, general intangibles, rights, remedies, guarantees, supporting
obligations, letter of credit rights and security interests in respect of the
foregoing, all rights of

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enforcement and collection, all books and records evidencing or related to the
foregoing, and all rights under this Agreement in respect of the foregoing; (c)
all information and data compiled or derived by Borrowers or to which Borrowers
are entitled in respect of the foregoing (other than any such information and
data subject to legal restrictions of patient confidentiality); and (d) all
products and proceeds of any of the foregoing.

 

“Accounts Detail File” has the meaning set forth in Section 2.2(b) hereof.

 

“Acquisition” means:

 

(a) The acquisition by a Borrower (or a wholly owned Subsidiary of a Borrower
which shall become a Borrower hereunder through execution of a Joinder Agreement
and such other documents as reasonably requested by the Lender) of all of the
outstanding Capital Stock, or all or a substantial portion of the assets, or all
or substantially all of an operating division or business unit, of any other
entity (the “Target”); or

 

(b) A merger or consolidation of a Borrower (or a wholly owned Subsidiary of a
Borrower which shall become a Borrower hereunder through execution of a Joinder
Agreement) with a Target in which such Borrower is the surviving entity or the
Target becomes a Borrower hereunder and executes a Joinder Agreement and such
other documents as reasonably requested by Lender.

 

“Activated Revolving Credit Amount” means, as of the Closing Date, $10,000,000,
and thereafter, the amount available to Borrowers for borrowing under the
Revolving Credit after giving effect to any increases pursuant to Section 2.1(d)
hereof.

 

“Advance(s)” means any monies advanced or credit extended to or for the benefit
of Borrowers by Lender, under the Revolving Credit.

 

“Advance Rate” means with respect to all Eligible Accounts, 85%.

 

“Advance Request” has the meaning set forth in Section 2.2(c) hereof.

 

“Affiliate” means with respect to any Person (the “Specified Person”), (a) any
Person which directly or indirectly controls, or is controlled by, or is under
common control with, the Specified Person, and (b) any director or officer (or,
in the case of a Person which is not a corporation, any individual having
analogous powers) of the Specified Person or of a Person who is an Affiliate of
the Specified Person within the meaning of the preceding clause (a). For
purposes of the preceding sentence, “control” of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, or direct or indirect
ownership (beneficially or of record) of, or direct or indirect power to vote,
ten percent (10.0%) or more of the outstanding shares of any class of capital
stock of such Person (or in the case of a Person that is not a corporation, ten
percent (10.0%) or more of any class of equity interest). For the avoidance of
doubt, none of the Non-Profit Borrowers or any Managed Entity shall be deemed to
be an Affiliate of any of the Borrowers unless, in the

 

2

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case of a Managed Entity which is not a statutory not-for-profit entity, 10% or
more of the Voting Stock of such Managed Entity is owned by any of the Borrowers
or any of their Affiliates.

 

“Agreement” means this Second Amended and Restated Loan and Security Agreement,
as amended and in effect from time to time.

 

“Applicable Margin” means for the period from the date hereof through the date
of delivery of the audited financial statements of the Borrowers for the Fiscal
Year ended December 31, 2004, (i) as to Advances under the Revolving Credit,
four percent (4.00%), and (ii) as to amounts outstanding under the Term Loan,
four and one-half percent (4.50%); provided, however, that commencing on the
date on which Borrowers deliver to Lender their audited financial statements for
the Fiscal Year ended December 31, 2004, and upon Lender’s receipt of Borrowers’
subsequent quarterly financial statements hereunder, the Applicable Margin shall
be adjusted to the percentage set forth below opposite the applicable Debt
Service Coverage Ratio, determined based upon whether the Debt Service Coverage
Ratio for the immediately preceding Fiscal Quarter is at or within the range
indicated below for such period.

 

Quarterly Debt Service

Coverage Ratio

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

   Revolving Credit

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

    Term Loan

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

 

1.25 : 1.00 to 1.50 : 1.00

   4.00 %   4.50 %

1.50 : 1.00 to 2.00 : 1.00

   3.75 %   4.25 %

Greater than 2.00 : 1.00

   3.50 %   4.00 %

 

The Applicable Margin shall be calculated and established effective as of the
date of Lender’s receipt of Borrowers’ quarterly financial statements delivered
pursuant to Section 6.7(a)(ii) hereof, and shall remain in effect until adjusted
thereafter (if required pursuant to the terms of this definition) on the first
day of the next Fiscal Quarter.

 

“Authorized Officer” means the chairman, chief executive officer, president,
chief financial officer, secretary, treasurer, and any additional officer,
employee, member or partner of Borrower Agent authorized by specific resolution
of the Borrower Agent to request Loans, as set forth in the incumbency
certificate of the Borrower Agent referred to in Section 4.1(d) of this
Agreement.

 

“Bank of Tucson Provider Account Agreement” means that certain Provider Account
Agreement, dated as of January 9, 2003, among Bank of Tucson, certain of the
Borrowers, the Non-Profit Borrowers, and the Lender, as amended and in effect
from time to time.

 

“Billing Date” means with respect to an Account, the date on which the
applicable Borrower bills the Obligor for the goods and/or the services that
gave rise to such Account.

 

3

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“Borrower Agent” has the meaning set forth in Section 2.9(b).

 

“Borrowers” means (i) each of the Persons named in the preamble hereto as a
Borrower (including, without limitation, the Existing Borrowers and the New
Borrowers), and (ii) each other Person that may be joined as a Borrower
hereunder pursuant to a Joinder Agreement.

 

“Borrowing Base” means, at any date, an amount equal to the product of (i) the
Estimated Net Value of all Eligible Accounts as of such date times (ii) the
Advance Rate; provided, however, that the maximum amount included in the
Borrowing Base attributable to Unbilled Accounts shall at no time exceed 50% of
the portion of the Borrowing Base attributable to Accounts for which an invoice
has been sent to the applicable Obligor.

 

“Borrowing Base Deficiency” means, as of any date, the amount, if any, by which
(a) the aggregate outstanding principal amount of all Advances outstanding as of
such date exceeds (b) the lesser of (i) the Activated Revolving Credit Amount as
of such date, or (ii) the Borrowing Base as of such date.

 

“Borrowing Base Excess” means, as of any date, the amount, if any, by which (i)
the Borrowing Base as of such date exceeds (ii) the sum of the aggregate
outstanding principal amount of all Advances outstanding as of such date.

 

“Borrowing Base Report” has the meaning set forth in Section 2.2(b) hereof.

 

“Business” means the Borrowers’ business, which consists of providing a variety
of human services, including, without limitation, behavioral health care
services, foster care, network management, case management, home-based and
community-based counseling, school-based services, and substance abuse
treatment.

 

“Business Day” means any day other than a Saturday, Sunday or any day on which
banking institutions in Philadelphia, Pennsylvania are permitted or required by
law, executive order or governmental decree to remain closed or a day on which
Lender is closed for business.

 

“Camelot Pledge Agreement” means that certain Pledge and Security Agreement
dated as of January 9, 2003, made by Camelot Care Corporation, as pledgor, in
favor of the Lender, as secured party, relating to all of the outstanding
Capital Stock of such pledgor’s directly owned Subsidiaries, as amended and in
effect from time to time.

 

“Capital Stock” means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
membership interests, partnership interests or other equivalent ownership
interests in a Person other than a corporation, and any and all warrants or
options to purchase any of the foregoing.

 

4

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“Capitalized Lease” means, as applied to any Person, any lease of property
(whether real, personal or mixed) by such Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of such
Person. The amount of the lessee’s obligation under a Capital Lease for purposes
of this Agreement shall be the amount required to be accounted for as
indebtedness on the balance sheet of the lessee in accordance with GAAP.

 

“Captive” means Social Services Providers Captive Insurance Co., an Arizona
corporation.

 

“CHAMPUS” means the Civilian Health and Medical Program of the Uniformed
Services, a part of TRICARE, a medical benefits program supervised by the U.S.
Department of Defense.

 

“Change of Control” means the time at which:

 

(a) Any Person (other than a Person who is or becomes a Borrower hereunder) or
group (within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) becomes the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) of at least twenty-five percent (25%)
of the Voting Stock (based on voting power, in the event different classes of
stock shall have different voting powers) of any Borrower, or such Person or
group shall otherwise obtain the power to control the election of the Board of
Directors of such Borrower;

 

(b) There shall be consummated any consolidation or merger of any Borrower
pursuant to which such Borrower’s common stock (or other Capital Stock) would be
converted into cash, securities or other property, other than a merger or
consolidation (i) of a Borrower with or into another Borrower or a Person who
becomes a Borrower hereunder, or (ii) in which the holders of such common stock
(or other Capital Stock) immediately prior to the merger have the same
proportionate ownership, directly or indirectly, of common stock of the
surviving corporation immediately after the merger as they had of the applicable
Borrower’s common stock (or other Capital Stock) immediately prior to such
merger, or (iii) which shall constitute or be a part of a Permitted Acquisition;

 

(c) All or substantially all of a Borrower’s assets shall be sold, leased,
conveyed or otherwise disposed of as an entirety or substantially as an entirety
to any Person (other than a Person who is or becomes a Borrower hereunder) in
one or a series of transactions; or

 

(d) Fletcher J. McCusker shall cease for any reason to serve actively as
chairman or chief executive officer in the day-to-day management of each of the
Borrowers, and (i) within thirty (30) days after the date of such cessation,
Borrowers shall have failed to retain an executive search firm reasonably
acceptable to Lender (which acceptance shall not be unreasonably withheld or
delayed) to identify a candidate for the position of chief executive officer (or
chairman, as the case may be) of the relevant Borrowers, or (ii) within one
hundred twenty (120) days after the date of such cessation, the relevant
Borrowers shall not have appointed a new chief executive officer reasonably
acceptable to lender (which acceptance shall not be unreasonably withheld or
delayed).

 

5

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“Closing” has the meaning set forth in Section 4.3 hereof.

 

“Closing Date” has the meaning set forth in Section 4.3 hereof.

 

“Collateral” has the meaning set forth in Section 3.1(a).

 

“Collateralized Investment” means an Investment consisting of a loan, guaranty
or other credit support provided by a Borrower to or for the benefit of an
Affiliate, Non-Profit Borrower or a Managed Entity (for purposes of this
definition, the “Obligor”), which satisfies each of the following conditions:

 

(i) The obligation of the Obligor in respect of such Investment is evidenced by
a duly executed promissory note, reimbursement agreement or other instrument
satisfactory to the Lender, and the applicable Borrower shall have pledged or
assigned (and, if applicable, endorsed and delivered) such original note,
agreement or instrument to the Lender pursuant to documentation satisfactory to
the Lender in form and substance;

 

(ii) The obligation of the Obligor in respect of such Investment is secured by a
valid and perfected first priority Lien granted in favor of the applicable
Borrower in assets of such Obligor having a fair value (as determined by Lender
in its sole discretion) equal to no less than 100% of the amount of such
Investment; and

 

(iii) Such Investment, the obligation of the Obligor to the applicable Borrower
in respect thereof, and the collateral securing such obligation are otherwise
satisfactory to the Lender in its sole discretion.

 

“Collections” means with respect to any Account, all cash collections or
collections of instruments on such Account.

 

“Collection Account” has the meaning set forth in Section 2.8(a) hereof.

 

“Commitment(s)” means individually, the Revolving Credit Commitment and the Term
Loan Commitment, and collectively, both of them.

 

“Commitment Fee” has the meaning set forth in Section 2.4(f) hereof.

 

“Concentration Limits” means the various financial tests, expressed as
percentages of the then current ENV of all Eligible Accounts, described on
Schedule 1 as in effect from time to time.

 

“Consolidated Net Income” shall mean, with respect to any Person for any period,
the aggregate of the net income (loss) of such Person and its Subsidiaries, on a
consolidated basis, for such period (excluding to the extent included therein
any extraordinary or

 

6

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

non-recurring gains and extraordinary non-cash charges) and after deducting all
charges which should be deducted before arriving at the net income (loss) for
such period, all as determined in accordance with GAAP.

 

“Contract” means an agreement by which an Obligor is obligated to pay Borrowers
for services rendered in connection with Borrowers’ Business.

 

“Credit Facility(ies)” means each of the Revolving Credit, the Term Loan, and
any other credit facility extended hereunder by Lender to Borrowers.

 

“Debt Service Coverage Ratio” means, for any period, the ratio of (a) EBIDA, to
(b) the sum of (i) interest expense, plus (ii) the current portion of long-term
debt, plus (iii) the current portion of lease payments under Capitalized Leases,
plus (iv) all cash payments of principal or premium on account of Subordinated
Debt during such period, plus (v) Withdrawals and paid in cash during such
period, plus (vi) Investments made during such period other than Collateralized
Investments, all as determined for the Borrowers on a consolidated basis in
accordance with GAAP; provided that in determining the Debt Service Coverage
Ratio, there shall be excluded from such calculation any amounts attributable to
any Subsidiary which is not a Borrower hereunder. Notwithstanding anything to
the contrary contained in the definition of Consolidated Net Income, for any
measurement period hereunder during which any Borrower may have consummated a
Permitted Acquisition or other merger, consolidation, or acquisition permitted
under Section 7.1(b) below, or an Investment permitted under Section 7.7(d)
below, the EBIDA of the Borrowers shall be determined on a pro forma basis as
though such transaction had occurred on the first day of such measurement
period, and such adjustments to EBIDA shall be made prior to measuring EBIDA for
any such period.

 

“Default Rate” means 300 basis points above the interest rate otherwise
applicable on the Loans.

 

“Defaulted Account” means an Account (a) as to which the initial ENV has not
been received in full as Collections within (i) 150 days of the applicable
Billing Date, and (ii) 180 days of the applicable date of service, or (b) which
has not been billed to the applicable Obligor within 30 days of the date of
service and remains unbilled at the date of determination, or (c) which was not
billed to the applicable Obligor within 60 days of the date of service,
regardless of whether it has been billed subsequently, or (d) which Lender deems
uncollectible in the reasonable exercise of its credit judgment because of the
bankruptcy or insolvency of, or other adverse event impacting, the applicable
Obligor.

 

“Designated Funding Date” has the meaning set forth in Section 2.2(a) hereof.

 

“Designated Locations” means the Borrowers’ offices located at (i) 620 North
Craycroft Road, Tucson Arizona, 660 North Craycroft Road, 5444 Jefferson Davis
Highway, Suite 1000, Fredericksburg, Virginia, (ii) 5524 East Forth Street,
Tucson, AZ, (iii) 4910-D Creekside Drive, Clearwater, FL, and (iv) any other
business location of any of the Borrowers to which access would be required by
the Lender (as determined by Lender in its sole discretion) following the
occurrence of an Event of Default in order to successfully bill, collect and
track the Accounts.

 

7

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“Download Date” has the meaning set forth in Section 2.2(b) hereof.

 

“EBIDA” means, for any fiscal period for the Borrowers and their Subsidiaries,
the sum of (i) Consolidated Net Income, plus (ii) Interest Expense, plus (iii)
depreciation and amortization expense, all as determined on a consolidated basis
in accordance with GAAP.

 

“Eligible Account” means an Account of a Borrower:

 

(a) Which is a liability of an Obligor that is (i) a commercial insurance
company acceptable to Lender, organized under the laws of or authorized to do
business as a commercial insurance company in, any jurisdiction in the United
States, having its principal office in the United States, other than those
listed on Schedule 1 as ineligible, or (ii) a Blue Cross/Blue Shield Plan, other
than those listed on Schedule 1 as ineligible, or (iii) CHAMPUS, or (iv) a HMO,
PPO, POS or other health care plan acceptable to Lender, other than those listed
on Schedule 1 as ineligible, or (v) a federal, state or local governmental unit
or any intermediary for a federal, state or local governmental unit or an
institutional Obligor acceptable to Lender, other than those listed on Schedule
1 as ineligible, or (vi) any other type of Obligor not included in the
categories of Obligors listed in the foregoing clauses (i) through (v), which is
organized under the laws of any jurisdiction in the United States, having its
principal office in the United States (unless Lender shall consent (which
consent shall not be unreasonably withheld or delayed) and Lender shall
reasonably determine that its Lien on such Account is perfected and Lender would
be able to pursue collection of such Account under applicable local law), and
which is not listed on Schedule 1 as an ineligible Obligor;

 

(b) The Obligor of which is not a Managed Entity, an Affiliate of Borrowers, a
Non-Profit Borrower or any Affiliate thereof;

 

(c) The Obligor of which has received a letter substantially in the form of
Exhibit 4.2A or B;

 

(d) As to which the representations and warranties of Section 5.20 hereof are
true and correct;

 

(e) Which is not payable by an Obligor who is the individual patient or person
who received the goods or services rendered;

 

(f) Which is not outstanding more than (i) 150 days past the Billing Date in the
case of Accounts that have been billed, and (ii) 30 days past the date the
corresponding services and/or goods were provided in the case of Unbilled
Accounts; provided that in no event may the Account be outstanding more than 180
days past the date the corresponding services and/or goods were provided;

 

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(g) The Obligor on which, at the time of determination, does not have more than
fifty (50%) percent of the Estimated Net Value of its Accounts owing to
Borrowers constituting Defaulted Accounts; and

 

(h) Which complies with such other criteria and requirements as may be specified
from time to time by Lender in the reasonable exercise of its credit judgment.

 

In calculating the amount of any Eligible Account, there shall be excluded the
portion of such Account constituting late charges or finance charges, if any.
Without limiting the foregoing, the Accounts of each New Borrower or any other
party which becomes a Borrower hereunder pursuant to a Joinder Agreement shall
not constitute Eligible Accounts, unless and until (A) Lender shall have
completed its due diligence with respect to such Accounts, (B) Borrowers shall
have delivered to Lender the Accounts Detail File with respect thereto in form
and substance satisfactory to Lender, (C) Lender shall have successfully
interfaced its Value Track System™ to such Borrower’s data files as contemplated
by Section 6.15 hereof, and (C) such Accounts satisfy each of the other
conditions and criteria specified in clauses (a) through (h) of this definition
of Eligible Accounts.

 

“Equipment” means all of Borrowers’ now owned or hereafter acquired equipment,
wherever located, including machinery, data processing and computer equipment,
including vehicles, tools, furniture, fixtures, all attachments, accessions and
property now or hereafter affixed thereto or used in connection therewith, and
all substitutions and replacements therefor, wherever located, and further
including, without limitation, all computer hardware and software (including
embedded software) and all rights with respect thereto, including any and all
licenses, options, warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal rights and
indemnifications.

 

“Estimated Net Value” or “ENV” means on any date of calculation with respect to
any Account an amount equal to the anticipated cash collections as calculated by
Lender using the Value Track System™ (which system periodically adjusts such
amount to reflect Lender’s reasonable evaluation of the performance of similar
Accounts and to reflect payments received with respect thereto), except that if
Lender reasonably determines that all Obligor payments with respect to an
Account have been made or if an Account has become a Defaulted Account, the ENV
of such Account shall be zero.

 

“Event of Default” has the meaning set forth in Section 8.1 hereof.

 

“Existing Borrowers” means collectively, Providence and each of its Subsidiaries
listed on Exhibit A attached hereto.

 

“Expenses” has the meaning set forth in Section 9.5 hereof.

 

“Fiscal Quarter” means a fiscal quarter of any Fiscal Year.

 

“Fiscal Year” means the fiscal year of Providence and its Subsidiaries ending on
December 31 of each calendar year.

 

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“FPS” means Family Preservation Services, Inc., a Virginia corporation.

 

“Funding Date” has the meaning set forth in Section 2.2(a) hereof.

 

“GAAP” means generally accepted accounting principles, applied consistently with
the financial statements required to be delivered hereunder, except to the
extent provided otherwise in Section 1.3 hereof.

 

“Governmental Authority” means any federal, state, local or other governmental
department, commission, board, bureau, agency, central bank, court, tribunal or
other instrumentality or authority or subdivision thereof, domestic or foreign,
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

 

“Hazardous Substances” means any substances defined or designated as hazardous
or toxic waste, hazardous or toxic material, hazardous or toxic substance or
similar term, by any environmental statute, rule or regulation of any
governmental entity presently in effect and applicable to such real property.

 

“HIPAA” has the meaning set forth in Section 9.20.

 

“Indebtedness” of a Person at a particular date shall mean, without duplication,
all indebtedness, debt and other similar monetary obligations of such Person
whether direct or guaranteed (including principal, interest, fees and charges),
in each case, for borrowed money or for the deferred purchase price of property
or services (other than trade payables and accrued expenses arising in the
ordinary course of business), and all premiums, if any, due at the required
prepayment dates of such indebtedness, the maximum amount available to be drawn
under all letters of credit issued for the account of such Person, all
obligations of such Person under Capitalized Leases, all obligations of such
Person to pay a specified purchase price for goods or services whether or not
delivered or accepted (i.e., take-or-pay and similar obligations), all
obligations of such Person under interest rate protection agreements and other
hedging agreements, all obligations of such Person guaranteeing or intended to
guarantee any Indebtedness, leases, dividends, distributions or other
obligations of any other Person in any manner, and all indebtedness secured by a
lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any Indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the Indebtedness secured thereby,
whether or not actually so created, assumed or incurred.

 

“Initial Revolving Credit Term” has the meaning set forth in Section 2.1(c).

 

“Interest Expense” shall mean, with respect to any Person for any period, the
total interest expense of such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP, whether paid or accrued during such
period (including the interest component of Capitalized Leases for such period),
including, without limitation, bank fees, commissions, discounts and other fees
and charges owed with respect to letters of credit,

 

10

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banker’s acceptances or similar instruments and payments made pursuant to
hedging agreements covering interest rate risk, but excluding any such payment
of interest paid in property other than cash and any other interest expense not
payable in cash.

 

“Inventory” means all of Borrowers’ now owned or hereafter existing or acquired
goods, wherever located, that (a) are leased by a Borrower as lessor, (b) are
held by a Borrower for sale or lease or to be furnished under a contract of
service, or (c) consist of raw materials, work in process, finished goods or
materials used or consumed in its business.

 

“Investment” means, with respect to any Person, any investment by such Person in
any Affiliate, Non-Profit Borrower or Managed Entity in the form of loans,
guarantees, advances, capital contributions, purchases or other acquisitions of
Indebtedness, Capital Stock, or all of substantially all of the assets of such
other Person, but excluding, however, an Acquisition.

 

“Joinder Agreement” shall mean a Joinder Agreement in substantially the form
attached hereto as Exhibit 7.4, pursuant to which a Person shall become a
Borrower hereunder in connection with an Acquisition or otherwise.

 

“Lender” has the meaning set forth in the preamble to this Agreement.

 

“Leverage Ratio” means, for any period, the ratio of (a) Senior Debt to (b)
EBIDA, as determined for Borrowers on a consolidated basis in accordance with
GAAP, provided that in determining the Leverage Ratio, there shall be excluded
from such calculation any amounts attributable to any Subsidiary which is not a
Borrower hereunder. For any measurement period hereunder during which any
Borrower may have consummated a Permitted Acquisition or other merger,
consolidation, or acquisition permitted under Section 7.1(b) below, the EBIDA of
the Borrowers shall be determined on a pro forma basis as though such
transaction had occurred on the first day of such measurement period, and such
adjustments to EBIDA shall be made prior to measuring EBIDA for any such period.

 

“LIBOR Rate” means an annual rate of interest equal to the sum of the annual
rate in effect in the London Interbank market applicable to one (1) month
deposits of U.S. dollars as reported in the Wall Street Journal on the Business
Day preceding the date of determination. If the Wall Street Journal is not
published on such Business Day or does not report such rate, such rate shall be
as reported by such other publication or source as Lender may select.

 

“Lien” means any lien, encumbrance, mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement or other preferential
arrangement, or charge (including, any conditional sale or other title retention
agreement, or finance lease) of any kind.

 

“Loan(s)” means each advance of funds by the Lender to the Borrowers hereunder,
specifically including, without limitation, the Advances and the Term Loan
(including all Term Advances made thereunder).

 

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“Loan Documents” means this Agreement, the Revolving Credit Note, the Term Note,
the Provider Account Agreements and all agreements relating to the Lockboxes,
the Pledge Agreements, the Management Fee Subordination Agreements, the
Management Agreement Assignment, the Subordination Agreements, all financing
statements, all Joinder Agreements, and any other agreements, instruments,
documents and certificates delivered in connection with this Agreement.

 

“Lockbox” means each lockbox bank account in the name of one or more of the
Borrowers maintained at a Lockbox Bank, or such other bank as is acceptable to
Lender, to which Collections on all Accounts shall be sent.

 

“Lockbox Bank(s)” means individually and collectively, (i) Wachovia Bank,
National Association, (ii) BankOne, N.A., and/or (ii) such other bank that is
acceptable to Lender.

 

“Managed Entities” means any Person for which Providence, any of the other
Borrowers, or any of their Affiliates provides or intends in the future to
provide management or administrative services, excluding, however, each of the
Non-Profit Borrowers.

 

“Management Agreement(s)” means individually and collectively, (i) each of those
certain Management Service Agreements listed on Schedule 2 attached hereto, each
as amended to date, and (ii) each additional management services agreement or
administrative services agreement that may be entered into between Providence or
one of its Affiliates as the manager and any Non-Profit Borrower or other
Affiliate as the managed entity; provided, that in the case of any such
management agreement with a Non-Profit Borrower (A) a fairness opinion has been
issued by an independent valuation firm regarding the management fees payable
thereunder, and (B) such agreement has been approved by the Lender in writing
(which approval shall not be unreasonably withheld or delayed), as each of the
same may be amended, supplemented or replaced with the prior written consent of
Lender (which consent shall not be unreasonably withheld or delayed).

 

“Management Agreement Assignment” means that certain Consolidated Amended and
Restated Collateral Assignment of Management Agreements dated as of the date of
this Agreement, executed in favor of the Lender by each Borrower party to a
Management Agreement as a manager (other than Management Agreements with Managed
Entities), as amended and in effect from time to time.

 

“Management Fee Subordination Agreement(s)” means the Subordination Agreements
executed by each of the Borrowers in favor of the Lender relating to
Indebtedness of the Non-Profit Borrowers in favor of the Borrowers (including,
without limitation, all Management Fees payable by the Non-Profit Borrowers
pursuant to Management Agreements), each as amended and in effect from time to
time.

 

“Management Fees” means management service fees, expenses and other amounts
payable to the Borrowers under any Management Agreement.

 

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“Material Adverse Effect” means a material adverse effect on (i) the business,
assets, condition (financial or otherwise), or results of operations of the
Borrowers taken as a whole; (ii) the ability of the Borrowers to perform their
obligations under this Agreement and the other Loan Documents (including,
without limitation, repayment of the Obligations as they come due); (iii) the
validity or enforceability of this Agreement, the other Loan Documents, or the
rights or remedies of Lender hereunder and thereunder (including, without
limitation, the ability of Lender to enforce the Obligations or realize upon any
material portion of the Collateral); (iv) the value of the Collateral; or (v)
the priority of Lender’s Liens with respect to the Collateral.

 

“Maximum Revolving Credit” means as of any date, the lesser of (i) the Revolving
Credit Commitment, or (ii) the Borrowing Base.

 

“Monitoring Fee” has the meaning set forth in Section 2.4(e).

 

“New Borrowers” means each of the Subsidiaries of Providence listed on Exhibit B
attached hereto.

 

“Non-Profit Borrowers” means each of (i) Camelot Community Care, Inc., a Florida
corporation not-for-profit, (ii) Family Preservation Services of S.C., Inc., a
South Carolina nonprofit corporation, and (iii) Intervention Services, Inc., a
Florida corporation not-for-profit.

 

“Non-Profit Borrower Loan Agreement(s)” means each of those three (3) certain
Loan and Security Agreements dated as of September 30, 2003, between Lender and
each of the Non-Profit Borrowers, each as amended and in effect from time to
time.

 

“Obligations” means all now existing or hereafter arising debts, obligations,
covenants, and duties of payment or performance of every kind, matured or
unmatured, direct or contingent, owing, arising, due, or payable to Lender, by
or from Borrowers, whether arising out of this Agreement or any other Loan
Document or otherwise, including, without limitation, all obligations to repay
principal of and interest on all the Loans, and to pay interest, fees, costs,
charges, expenses, professional fees, and all sums chargeable to Borrowers under
the Loan Documents, whether or not evidenced by any note or other instrument.

 

“Obligor” means the party primarily obligated to pay an Account.

 

“Original Loan Agreement” has the meaning set forth in the Recitals to this
Agreement.

 

“Organizational Documents” means (a) with respect to any corporation, its
certificate or articles of incorporation or organization and its bylaws, each as
amended, (b) with respect to any limited partnership, its certificate of limited
partnership and its partnership agreement, each as amended, (c) with respect to
any general partnership, its partnership agreement, as amended, and (d) with
respect to any limited liability company, its articles of organization and its
operating agreement, each as amended.

 

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“Person” means any individual, corporation, partnership, limited liability
partnership, limited liability company, association, trust, unincorporated
organization, joint venture, court or government or political subdivision or
agency thereof, or other entity.

 

“Permitted Acquisition” has the meaning set forth in Section 7.7(g) hereof.

 

“Permitted Liens” has the meaning set forth in Section 5.6.

 

“Pledge Agreement(s)” means collectively, the Providence Pledge Agreement and
the Camelot Pledge Agreement.

 

“Property” means an interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.

 

“Providence Management” means Providence Management Corporation of Florida,
Inc., a Florida corporation.

 

“Providence Pledge Agreement” means that certain Amended and Restated Pledge and
Security Agreement dated as of the Closing Date, made by Providence, as pledgor,
in favor of the Lender, as secured party, relating to all of the outstanding
Capital Stock of Providence’s directly owned Subsidiaries and certain
inter-company Indebtedness owing to Providence by certain of the Borrowers, as
amended and in effect from time to time.

 

“Provider Account Agreements” means collectively, the Bank of Tucson Provider
Account Agreement, the Wachovia Provider Account Agreement, and each other
provider account, lockbox, depository or similar agreement among the Borrowers,
the Lender, and a Lockbox Bank, relating to a Lockbox that may be entered into
from time to time in connection with this Agreement, each as amended and in
effect from time to time.

 

“Providence” has the meaning set forth in the preamble to this Agreement.

 

“Repayment Date” has the meaning set forth in Section 2.3(d) hereof

 

“Revolving Credit” has the meaning set forth in Section 2.1(a).

 

“Revolving Credit Commitment” means $25,000,000 or such lesser amount as
determined from time to time after giving effect to any voluntary reductions by
the Borrowers under Section 2.5(c); provided, however, that until the Borrowers
shall have requested to increase the amount available to be drawn under the
Revolving Credit in accordance with Section 2.1(d) hereof, the maximum amount
available in respect of the Revolving Credit Commitment shall be $10,000,000.

 

“Revolving Credit Maturity Date” has the meaning set forth in Section 2.1(c).

 

“Revolving Credit Note” has the meaning set forth in Section 2.1(b).

 

“Securities” has the meaning set forth in Section 6.14 hereof.

 

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“Senior Debt” means all Indebtedness of the Borrowers on a consolidated basis,
excluding Subordinated Debt.

 

“Shareholder” means, as applicable, a shareholder, member or partner of the
Borrowers.

 

“Subordinated Debt” means the Indebtedness due a Subordinating Creditor (and the
note(s) evidencing such) which has been subordinated, by a Subordination
Agreement, to the prior payment and satisfaction of the Obligations.

 

“Subordinating Creditor” means any Person hereafter executing a Subordination
Agreement and, in each case, their respective successors and assigns.

 

“Subordination Agreement” means an agreement executed by or otherwise binding
upon a Subordinating Creditor, pursuant to which Subordinated Debt is
subordinated to the prior payment and satisfaction of the Obligations, in form
and substance satisfactory to Lender.

 

“Subsidiary” means any Person (other than an individual or a court or
governmental or political subdivision or agency thereof) of which the designated
parent shall at any time own, directly or indirectly through a Subsidiary or
Subsidiaries, at least a majority (by number of votes) of the outstanding Voting
Stock.

 

“Target” has the meaning set forth in clause (a) of the definition of
“Acquisition”.

 

“Term Advance(s)” has the meaning set forth in Section 2.3(a).

 

“Term Advance Request” has the meaning set forth in Section 2.3(b).

 

“Term Loan” means the term loan to be made by the Lender to the Borrowers in the
form of one or more Term Advances provided in Section 2.3 hereof.

 

“Term Loan Commitment” means the commitment of the Lender to make the Term Loan
to the Borrowers, in the maximum principal amount equal to $25,000,000 or such
lesser amount as determined from time to time after giving effect to any
voluntary reductions by the Borrowers under Section 2.4(c).

 

“Term Loan Maturity Date” means June 28, 2010.

 

“Term Note” has the meaning set forth in Section 2.3(c) hereof.

 

“Termination Fee” has the meaning set forth in Section 2.4(c)(i).

 

“Termination Fee Percentage” means, with respect to any prepayment of the Loans
or termination of the Commitments pursuant to Section 2.4(c)(i) or 2.4(c)(ii)
hereunder: (A) two and one-half percent (2.5%) if the prepayment or voluntary
Commitment reduction

 

15

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giving rise to such Termination Fee occurred on or prior to the first
anniversary of the date of this Agreement; (B) two percent (2.0%) if the
prepayment or voluntary Commitment reduction giving rise to such Termination Fee
occurred after the first anniversary of the date of this Agreement but on or
prior to the second anniversary of the date of this Agreement; (C) one percent
(1.0%) if the prepayment or voluntary Commitment reduction giving rise to such
Termination Fee occurred after the second anniversary of the date of this
Agreement but on or prior to the fourth anniversary of the date of this
Agreement; and (D) zero (0%) if the prepayment or voluntary Commitment reduction
giving rise to such Termination Fee occurred after the fourth anniversary of the
date of this Agreement.

 

“TRICARE” means the medical program for active duty members, qualified family
members, CHAMPUS eligible retirees and their family members and survivors, of
all uniformed services.

 

“Unbilled Accounts” mean Accounts relating to services rendered in the ordinary
course of Borrowers’ business which have been properly recorded in the
applicable Borrower’s billing system and books and records, but for which an
invoice has not yet been sent.

 

“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as in
effect from time to time in the State of New Jersey.

 

“Unmatured Event of Default” means an event which with the passage of time,
giving of notice or both, would become an Event of Default.

 

“Unused Line Fee” has the meaning set forth in Section 2.4(d).

 

“Value Track System™” means the proprietary business system used by Lender to
value and record the status of Accounts.

 

“Voting Stock” means Capital Stock having ordinary voting power to elect a
majority of the board of directors (or Persons holding similar functions) of the
Person involved, whether or not the right so to vote exists by reason of the
happening of a contingency.

 

“Wachovia Provider Account Agreement” means that certain Provider Account
Agreement, dated January 9, 2003, among First Union National Bank (now known as
Wachovia Bank), certain of the Borrowers, the Non-Profit Borrowers, and the
Lender, as amended and in effect from time to time.

 

“Withdrawals” means payments made in respect of: (a) dividends or other
distributions on Capital Stock of the Borrowers; (b) the redemption, repurchase
or acquisition of Capital Stock or of warrants, rights or other options to
purchase Capital Stock; and (c) loans and advances made to any officers,
Affiliates and Shareholders.

 

1.2 Matters of Construction. The terms “herein,” “hereof” and “hereunder” and
other words of similar import refer to this Agreement as a whole and not to any
particular section, paragraph or subdivision. Any pronoun used shall be deemed
to cover all genders.

 

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Wherever appropriate in the context, terms used herein in the singular also
include the plural and vice versa. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. Unless otherwise provided, all references to any instruments or
agreements to which Lender is a party, including, without limitation, references
to any of the Loan Documents, shall include any and all modifications or
amendments thereto and any and all extensions or renewals thereof.

 

1.3 Accounting Principles. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP, to the
extent applicable, except as otherwise expressly provided in this Agreement.
Financial statements and other information required to be delivered by Borrowers
to Lender shall be prepared in accordance with GAAP as in effect at the time of
such preparation. Calculations in connection with the definitions, covenants and
other provisions of this Agreement shall utilize GAAP as in effect on the date
of determination; provided, however, that, if at any time any change in GAAP
would affect the computation of any financial ratio or requirement set forth in
any Loan Document, and Borrowers or Lender shall so request, Lender and
Borrowers shall negotiate in good faith to amend such ratio or requirement to
preserve the original intent thereof in light of such change in GAAP, and until
so amended, such ratio or requirement shall continue to be computed in
accordance with GAAP as in effect prior to such change therein.

 

1.4 Uniform Commercial Code. All financing terms or terms related to the
Collateral, not otherwise specifically defined, shall have the meanings, if any,
accorded to them under the UCC.

 

SECTION 2. THE CREDIT FACILITIES

 

2.1 Revolving Credit Facility.

 

(a) Subject to the terms and conditions of this Agreement, Lender hereby
establishes for the benefit of Borrowers a line of credit facility (the
“Revolving Credit”) pursuant to which Lender shall, from time to time, make
Advances to the Borrowers in the form of revolving credit loans. The aggregate
outstanding amount of all Advances shall not at any time exceed the Maximum
Revolving Credit. In no event shall the initial principal amount of any Advance
be less than $25,000. Subject to such limitation, the aggregate outstanding
balance of all Advances may fluctuate from time to time, to be reduced by
repayments and prepayments made by Borrowers, to be increased by future Advances
which may be made by Lender. If at any time there exists a Borrowing Base
Deficiency, Borrowers shall immediately repay such Borrowing Base Deficiency in
full. Lender has the right at any time, and from time to time, in its reasonable
discretion (but without any obligation) to set aside reasonable reserves against
the Borrowing Base in such amounts as it may deem appropriate. The Obligations
of Borrowers under the Revolving Credit and this Agreement shall at all times be
absolute and unconditional.

 

(b) At Closing, Borrowers shall execute and deliver a promissory note to Lender
in the stated principal amount of Twenty-Five Million Dollars ($25,000,000) and
payable

 

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in the principal amount of the Advances evidenced thereby (as may be amended,
modified or replaced from time to time, the “Revolving Credit Note”). The
Revolving Credit Note shall evidence Borrowers’ absolute and unconditional
obligation to repay Lender for all Advances made by Lender under the Revolving
Credit, with interest as herein and therein provided. Each and every Advance
under the Revolving Credit shall be deemed evidenced by the Revolving Credit
Note, which is deemed incorporated herein by reference and made a part hereof.
The Revolving Credit Note shall be substantially in the form set forth in
Exhibit 2.1(b) attached hereto and made a part hereof.

 

(c) The term of the Revolving Credit (the “Initial Revolving Credit Term”) shall
expire on June 28, 2010. All Advances shall be repaid on or before the earlier
of the last day of the Initial Revolving Credit Term or upon termination of the
Revolving Credit or termination of this Agreement (the “Revolving Credit
Maturity Date”). After the Revolving Credit Maturity Date no further Advances
shall be available from Lender.

 

(d) At the Closing, the Activated Revolving Credit Amount, being the amount
available to Borrowers for borrowing under the Revolving Credit, shall be
$10,000,000. Provided that no Event of Default or Unmatured Event of Default
shall have occurred and continue to then exist, Borrowers shall have the option,
exercisable upon not less than five (5) Business Days written request to Lender
accompanied by payment of the Commitment Fee described in Section 2.4(f)(i)
below, to increase the Activated Revolving Credit Amount in multiple increments
of $2,500,000, provided that the Activated Revolving Credit Amount shall in no
event exceed the Revolving Credit Commitment.

 

2.2 Funding Procedures.

 

(a) Subject to the terms and conditions of this Agreement and so long as no
Event of Default or Unmatured Event of Default has occurred hereunder, Lender
will make Advances to Borrowers (i) once a week, on a specified Business Day of
each week (such day to be mutually agreeable to Borrowers and Lender; such day
is referred to herein as the “Designated Funding Date”), whether or not
Borrowers have requested an Advance to be made on such date, or (ii) on such
other Business Day of the week as Borrowers may request (any such requested date
of funding, together with the Designated Funding Date, is hereinafter referred
to as a “Funding Date”).

 

(b) Not later than 2:00 P.M. (Eastern Time) on Wednesday of each week (or such
other day as mutually agreed by Lender and Borrowers) (such day is referred to
herein as the “Download Date”), Borrowers will deliver to Lender the computer
file data associated with the Accounts, which shall include, without limitation,
changes in the Obligor reimbursement rates as well as other information
reasonably required by Lender to enable Lender to process and value the
outstanding Accounts of Borrowers on Lender’s Value Track System™ (as well as,
following and during the continuation of an Event of Default, to bill and
collect such Accounts) (the “Accounts Detail File”). Upon completion of the
processing of the data with respect to such Accounts, Lender will prepare and
deliver to Borrowers by no later than 5:00 p.m. (Eastern Time) on the first
Business Day following the Download Date (or if such Accounts Detail File is not
delivered until after 2:00 P.M. (Eastern Time) on the Download Date, the second
Business Day following the Download Date), a report regarding the Borrowing Base
then in effect, which shall be substantially in the form of Exhibit 2.2(b) (a
“Borrowing Base Report”).

 

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(c) On each Designated Funding Date, if Borrowers are in agreement with the
facts stated in the Borrowing Base Report, Borrowers will sign and return the
Borrowing Base Report to Lender. If Borrowers are requesting that an Advance be
made on such Designated Funding Date, Borrowers shall also deliver to Lender,
concurrently with the Borrowing Base Report, a written request for such Advance
substantially in the form of Exhibit 2.2(c) (an “Advance Request”). If Borrowers
request an Advance on a date other than the Designated Funding Date, Lender
shall, upon receipt of the Advance Request, prepare and deliver to Borrowers a
revised Borrowing Base Report based upon the most recent Accounts Detail File
and Collections received since the immediately preceding Designated Funding
Date. Borrowers shall verify and sign such Borrowing Base Report (provided the
Borrowers are in agreement with the facts stated therein) and return the same to
Lender.

 

(d) Subject to the terms and conditions of this Agreement, if the signed
Borrowing Base Report and Advance Request are delivered to Lender before 3:00
P.M. (Eastern Time) on the applicable Funding Date, Lender shall make an Advance
on such Funding Date (or the next Business Day if the signed Borrowing Base
Report and Advance Request are delivered after 3:00 P.M. (Eastern Time)), in an
amount equal to the lesser of (i) the amount of the Advance requested by
Borrowers in the applicable Advance Request, or (ii) the Borrowing Base Excess
as of such date.

 

(e) Each Borrowing Base Report and Advance Request may be delivered via telecopy
and Borrowers acknowledge that Lender may rely on Borrowers’ signature by
facsimile, which shall be legally binding upon Borrowers. In no event will
Lender make any Advance on any Funding Date or other date of requested Advances
unless Lender shall have received a signed Borrowing Base Report and Advance
Request.

 

(f) Any Advances made by Lender hereunder shall bear interest at the rate
applicable to Advances hereunder and under the Revolving Credit Note, shall be
treated for all purposes as Loans hereunder, and shall be secured by all of the
Collateral.

 

(g) The Lender’s determination of the Estimated Net Value of the Eligible
Accounts and other amounts to be determined or calculated under this Agreement
shall, in the absence of manifest error, be binding and conclusive.

 

2.3 The Term Loan.

 

(a) The Lender agrees, upon the terms and subject to the conditions hereof, to
make the Term Loan to the Borrowers in a maximum principal amount not to exceed
the Term Loan Commitment. The Term Loan shall be available to the Borrowers in
multiple advances from the Closing Date to the Term Loan Maturity Date (the
“Term Advances”), each such Term Advance to be in a minimum amount of $2,500,000
and multiple increments of $2,500,000. Term Advances shall be used by the
Borrowers solely to fund Permitted Acquisitions. The making of any Term Advance
with respect to any Permitted Acquisition and the amount thereof,

 

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shall be within Lender’s sole discretion (provided that the amount of a Term
Advance made by Lender may not exceed the amount requested by the Borrowers).
Lender is under no obligation to make any Term Advance. The Term Loan (including
all Term Advances) shall be secured by all of the Collateral. Notwithstanding
anything to the contrary contained herein, in no event may the aggregate
outstanding principal balance of the Term Loan on any date exceed the Activated
Revolving Credit Amount as of such date. In the event that for any reason the
aggregate outstanding principal balance of the Term Loan exceeds the Activated
Revolving Credit Amount, Borrowers shall immediately repay such excess in full.

 

(b) Each request by Borrowers for a Term Advance (a “Term Advance Request”)
shall be submitted to Lender in writing, signed by an Authorized Officer of
Borrower Agent, no less than thirty (30) days in advance of the proposed funding
date for such Term Advance. Each Term Advance Request shall (i) specify the
amount of the requested Term Advance, (ii) specify the proposed funding date
(which shall be a Business Day), (iii) describe in reasonable detail the
proposed Permitted Acquisition, (iv) specify the anticipated owner of the
business to be acquired (which may be a Borrower or an Affiliate of a Borrower
which, concurrently with the funding of such Term Advance and the closing of
such Permitted Acquisition shall become a Borrower hereunder pursuant to a
Joinder Agreement), and (v) be accompanied by such additional documents and
information required under Section 7.7(e)(vii). In the event of any material
change in the proposed amount, funding date, transaction structure or any other
matter relevant to a proposed Permitted Acquisition or requested Term Advance,
Borrowers shall notify Lender as soon as practicable and provide to Lender any
information required by Lender in order to evaluate the change in circumstances.

 

(c) At Closing, Borrowers shall execute and deliver a promissory note to Lender
in the stated amount of the Term Loan Commitment and payable in the amount of
the Term Advances evidenced thereby from time to time (as may be amended,
modified or replaced from time to time, the “Term Note”). The Term Note shall
evidence Borrowers’ absolute and unconditional obligation to repay Lender the
full amount of the Term Advances made by Lender thereunder, with interest as
herein and therein provided. The Term Note shall be substantially in the form
set forth in Exhibit 2.3(c) attached hereto and made a part hereof. The Term
Loan and all Term Advances thereunder shall be secured by all of the Collateral.

 

(d) The principal balance of the Term Loan shall be paid in consecutive monthly
installments payable on the first Designated Funding Date of each month (each
such date, a “Repayment Date”), commencing with the first Repayment Date
following the initial Term Advance hereunder and continuing through the first
Designated Funding Date occurring in June 28, 2010. The monthly principal
payment amount shall be set forth on a schedule to be prepared or updated by
Lender and delivered to Borrowers on each date when a Term Advance is funded.
Lender shall prepare or update such schedule (i) by reflecting the amount of the
monthly principal payment due on each Repayment Date occurring prior to the Term
Loan Maturity Date as the quotient obtained by dividing the sum of (A) the
original principal amounts of all Term Advances theretofore made by (B) sixty
(60), and (ii) by reflecting the amount of the principal payment due on the Term
Loan Maturity Date as the remaining outstanding principal balance of the Term
Loan as of the Term Loan Maturity Date. The entire outstanding balance of the
Term

 

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Loan (including principal, unpaid interest, unpaid fees and Expenses shall be
due and payable on the Term Loan Maturity Date. The amount of the Term Loan
(including each Term Advance) and all payments of principal, interest, and fees
and expenses due to be received by Lender in respect of the Term Loan shall be
recorded in the books and records of Lender, which books and records shall, in
the absence of manifest error, be conclusive as to the outstanding balance
and/or other information related to the Term Loan. Upon request (which request
may not be made more frequently than once per calendar quarter), Lender will
provide to Borrower Agent copies of its books and records relevant to the
balance of the Term Loan.

 

(e) Notwithstanding anything to the contrary contained herein, in the event of
termination of the Revolving Credit for any reason, or at the expiration of the
Initial Revolving Credit Term absent renewal thereof by the Lender, the Term
Loan shall mature and all amounts outstanding in respect of the Term Loan
(including principal of the Term Advances, interest, fees and Expenses
(including, without limitation, Deferred Term Loan Termination Fees, if any) and
any other amounts) shall be immediately due and payable by the Borrowers.

 

(f) Borrowers may prepay the outstanding balance of the Term Loan in whole or in
part at any time upon not less than ten (10) days’ prior written notice to
Lender, provided that any such prepayment shall be accompanied by accrued
interest on the amount so prepaid to the date of such prepayment. Amounts
prepaid or repaid on account of the Term Loan may be reborrowed in the form of
new Term Advances hereunder, provided that the aggregate outstanding balance of
the Term Loan shall at no time exceed the lesser of (i) the Activated Revolving
Credit Amount, and (ii) the Term Loan Commitment Amount.

 

2.4 Interest and Fees.

 

(a) Interest. Each Loan shall bear interest on the outstanding principal amount
thereof from the date made until such Loan is paid in full. Interest shall
accrue on amounts outstanding under the Credit Facilities at a per annum rate
equal to the LIBOR Rate plus the Applicable Margin, with any change in the LIBOR
Rate effective on the next succeeding Designated Funding Date.

 

(b) Default Rate. If any Event of Default shall occur and be continuing, the
rate of interest applicable to each Loan then outstanding shall be the Default
Rate. The Default Rate shall apply from the date of the Event of Default until
the date such Event of Default is waived, and interest accruing at the Default
Rate shall be payable upon demand.

 

(c) Termination Fees.

 

(i) Termination of Commitments. The Borrowers shall have the right to reduce or
terminate, in whole or in part, either or both of the unused portion of the
Revolving Credit Commitment and the Term Loan Commitment voluntarily at any time
and from time to time, upon not less than ten (10) days prior written notice to
Lender, provided that, in the case of a reduction or termination of the
Revolving Credit Commitment and/or the Term Loan Commitment, Borrowers shall
unconditionally be obligated to pay on the effective date of any such reduction
or termination, a fee (the

 

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“Termination Fee”) in an amount equal to the applicable Termination Fee
Percentage of (A) in the case of a reduction of the Revolving Credit Commitment
and/or the Term Credit Commitment, the amount of such reduction, (B) in the case
of a termination of the Revolving Credit Commitment, the highest Activated
Revolving Credit Amount in effect on or after the date of this Agreement, and
(C) in the case of a termination of the Term Loan Commitment, the lesser of (x)
the aggregate original amount of all Term Advances made hereunder, and (y) the
Term Loan Commitment. Any such voluntary reduction or termination shall be
effective on the date set forth in the notice provided by Borrowers to Lender
and the applicable Termination Fee (if any) is paid by Borrowers to the Lender.
If the Borrowers reduce the Revolving Credit Commitment to an amount that is
less than the outstanding principal amount of the Advances on the date of such
reduction, then Borrowers shall repay the Advances in the amount of such excess,
together with accrued interest on the principal amount so repaid. If the
Borrowers reduce the Term Loan Commitment to an amount that is less than the
outstanding principal amount of the Term Loan on the date of such reduction,
then Borrowers shall repay the Term Loan in the amount of such excess, together
with accrued interest on the principal amount so repaid. In no event shall
Borrowers reduce the Revolving Credit Commitment or the Activated Revolving
Credit Amount to an amount less than the then effective amount of the Term Loan
Commitment.

 

(ii) Termination of Credit Facilities. In the event that Borrowers shall elect
to terminate the Credit Facilities in whole prior to the Revolving Credit
Maturity Date and the Term Loan Maturity Date (as applicable), all Obligations
shall be immediately due and payable upon the termination date stated in any
notice of termination. Lender shall retain its Liens in the Collateral and all
of its rights and remedies under the Loan Documents notwithstanding such
termination until Borrowers have paid the Obligations to Lender, in full (other
than contingent indemnity and expense reimbursement obligations for which no
claim has been made), in immediately available funds, together with the
applicable Termination Fee, if any. In connection with any termination of the
Credit Facilities in whole, the Lender may, in its reasonable discretion, (i)
require a written agreement executed by Borrowers indemnifying Lender from any
loss or damage Lender may incur as a result of dishonored checks or other items
of payment received by Lender from Borrowers or any Obligor and applied to the
Obligations, or (ii) retain such monetary reserves for such period of time as
Lender, in its reasonable discretion, may deem necessary to protect Lender from
any such loss or damage.

 

(d) Unused Line Fee. Commencing on the Closing Date, Borrowers shall
unconditionally pay to Lender a fee (the “Unused Line Fee”) equal to one-half of
one percent (.50%) per annum of the aggregate unused portion of the Revolving
Credit and the Term Loan, calculated based upon the difference between (i) the
sum of the average daily amount of the Revolving Credit Commitment and the Term
Loan Commitment, and (ii) the average daily outstanding balance of the Advances
and the Term Advances during the preceding month (or portion thereof). The
Unused Line Fee shall be calculated and payable monthly, in arrears, on the
first Business Day of each calendar month and on the Revolving Credit Maturity
Date.

 

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Notwithstanding anything to the contrary contained herein, for purposes of
calculating the Unused Line Fees payable hereunder, (A) until request by
Borrowers to increase the Activated Revolving Credit Amount pursuant to Section
2.1(d) hereof, the Revolving Credit Commitment shall be deemed to be
$10,000,000, whereupon, for purposes of calculating the Unused Line Fee, the
Revolving Credit Commitment shall be deemed to be the aggregate amount available
to Borrowers in respect of the Revolving Credit after giving effect to the
Borrowers’ request pursuant to Section 2.1(d) (or, if applicable, such lesser
amount after giving effect to voluntary reductions of the Revolving Credit
Commitment pursuant to Section 2.4(c)), and (B) until the funding of Term
Advances in an original aggregate principal amount in excess of $10,000,000, the
Term Loan Commitment shall be deemed to be $10,000,000, whereupon, for purposes
of calculating the Unused Line Fee, the Term Loan Commitment shall be deemed to
be the highest principal balance of the Term Loan after giving effect to the
making of Term Advances in an original aggregate amount excess of $10,000,000
(or, if applicable, such lesser amount after giving effect to voluntary
reductions of the Term Loan Commitment pursuant to Section 2.4(c)).

 

(e) Monitoring Fee. Commencing on the Closing Date, Borrowers shall
unconditionally pay to Lender a monthly fee (the “Monitoring Fee”) in the amount
of $1,500.00 per month. The Monitoring Fee shall be payable monthly, in advance,
on the first Business Day of each calendar month.

 

(f) Commitment Fees. In consideration of the Lender making available the Credit
Facilities to the Borrowers in amounts up to the Revolving Credit Commitment and
the Term Loan Commitment, the Borrowers shall unconditionally pay to Lender the
following fees (collectively, “Commitment Fees”), on the dates and in the
amounts indicated:

 

(i) In the event that Borrowers shall request that the Activated Revolving
Credit Amount be increased pursuant to Section 2.1(d) hereof above $10,000,000,
Borrowers shall pay to Lender, as of the date of Borrowers’ request for such
increase, a non-refundable Commitment Fee in the amount of 1.0% of the
incremental amount requested by Borrowers in respect of the Revolving Credit.

 

(ii) In the event that Lender shall make available to Borrowers the proceeds of
any Term Advance such that the aggregate original principal amount of all Term
Advances funded hereunder exceeds $10,000,000 (including, for purposes of this
Section 2.4(f)(ii), amounts prepaid and reborrowed on account of the Term Loan
as provided herein), Borrowers shall pay to Lender, no later than the date of
making of such Term Advance, a Commitment Fee in an amount equal to 1.0% of the
amount of the Term Advance so funded by the Lender.

 

(iii) Lender acknowledges receipt from Borrowers of commitment fees paid in
advance of the Closing Date in an aggregate amount of $75,000 (the “Prepaid
Commitment Fee”), which fees are fully earned in consideration of the execution
and delivery of this Agreement by the Lender and Lender making the Credit
Facilities hereunder available to the Borrowers. To the extent that Borrowers
shall become obligated to pay Commitment Fees to Lender pursuant to the
foregoing clauses (i) and (ii), such amounts shall be deemed paid by crediting
of the Prepaid Commitment Fee in

 

23

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the amount of the applicable Commitment Fee, until the balance of the Prepaid
Commitment Fee is reduced to zero. Thereafter, any additional Commitment Fees
shall be paid by the Borrowers to the Lender in cash, as provided herein. Lender
further acknowledges receipt of a deposit on account of Expenses in the amount
of $25,000.

 

(iv) Notwithstanding the provisions of clauses (i) and (ii) of this Section
2.4(f), and for the avoidance of doubt, to the extent that Borrowers repay or
prepay any portions of the Revolving Credit Commitment or Term Loan Commitment
for which Borrowers have paid Prepaid Commitment Fees or Commitment Fees as
required hereunder, and Borrowers subsequently reborrow Advances and/or Term
Advances hereunder in an amount up to the portions of the Commitments for which
such Prepaid Commitment Fees and Commitment Fees have been previously been paid,
then no additional Commitment Fees shall be payable on account of such amounts
so reborrowed hereunder.

 

2.5 Additional Interest Provisions.

 

(a) Calculation of Interest. Interest on the Loans shall be based on a year of
three hundred sixty (360) days and charged for the actual number of days
elapsed.

 

(b) Continuation of Interest Charges. All contractual rates of interest
chargeable on outstanding Loans shall continue to accrue and be paid even after
default, maturity, acceleration, judgment, bankruptcy, insolvency proceedings of
any kind or the happening of any event or occurrence similar or dissimilar.

 

(c) Applicable Interest Limitations. In no contingency or event whatsoever shall
the aggregate of all amounts deemed interest hereunder and charged or collected
pursuant to the terms of this Agreement exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such court determines
Lender has charged or received interest hereunder in excess of the highest
applicable rate, Lender shall, in its sole discretion, apply and set off such
excess interest received by Lender against other Obligations due or to become
due and such rate shall automatically be reduced to the maximum rate permitted
by such law.

 

2.6 Payments.

 

(a) Interest shall be payable on all amounts outstanding under the Revolving
Credit weekly as of each Designated Funding Date. Interest shall be payable on
all amounts outstanding under the Term Loan monthly with each installment of
principal. Any Termination Fee, Deferred Term Loan Termination Fee, Commitment
Fee, and all Unused Line Fees and Monitoring Fees shall be due and payable in
accordance with Section 2.4 of this Agreement. Any other fees, costs and
Expenses shall be due and payable on demand.

 

(b) If at any time there exists a Borrowing Base Deficiency, Borrowers shall
immediately make such principal repayments of the Advances as is necessary to
eliminate such Borrowing Base Deficiency. Until paid in full, the portion of the
Advances constituting the

 

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Borrowing Base Deficiency shall bear interest at the Default Rate. If at any
time the aggregate principal balance of the Term Advances exceeds the Activated
Revolving Credit Amount, Borrowers shall immediately repay such excess in full.
Until paid in full, the portion of the Term Advances in excess of the Activated
Revolving Credit Amount shall bear interest at the Default Rate.

 

(c) The entire principal balance of all of the Advances, together with all
unpaid accrued interest thereon and any unpaid fees, costs and Expenses shall be
due and payable on the Revolving Credit Maturity Date. The entire principal
balance of the Term Loan, together with all unpaid accrued interest thereon and
any unpaid fees, costs and Expenses shall be due and payable on the Term Loan
Maturity Date.

 

(d) Subject to the terms of Section 2.4(c) above, Borrowers may prepay the
principal of the Loans on any Business Day by giving Lender written notice of
the proposed prepayment ten (10) days prior to the proposed date of prepayment.

 

(e) Prior to the occurrence of an Event of Default hereunder, on each Designated
Funding Date, Lender shall cause all Collections deposited and/or transferred to
the Collection Account since the last Designated Funding Date to be disbursed in
the following order of priority:

 

(i) to Lender, the amount of any costs, fees and Expenses of Lender required to
be paid or reimbursed by Borrowers under this Agreement or under any of the
other Loan Documents;

 

(ii) to Lender, an amount equal to the unpaid accrued interest on the aggregate
outstanding Advances as of such Designated Funding Date;

 

(iii) to Lender, an amount equal to any unpaid accrued Unused Line Fees which
are then due and payable as of such Designated Funding Date;

 

(iv) to Lender, the amount of any Borrowing Base Deficiency, if any;

 

(v) to Lender, an amount equal to the unpaid accrued interest on the Term Loan
then due and payable;

 

(vi) to Lender, an amount equal to any installment of principal on the Term Loan
then due and payable; and

 

(vii) to Lender, the aggregate outstanding amount of the Advances.

 

All prepayments on account of the Term Loan shall be applied by Lender first,
against accrued but unpaid interest on the Term Loan, and then, to scheduled
installments of principal on the Term Loan in the inverse order of maturity.
Except as otherwise provided herein, all payments of principal, interest, fees,
Expenses, or other amounts payable by Borrowers hereunder shall be remitted to
Lender in immediately available funds not later than 3:00 p.m.

 

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(Eastern Time) on the day due. Whenever any payment is stated as due on a day
which is not a Business Day, the maturity of such payment shall be extended to
the next succeeding Business Day and interest shall continue to accrue during
such extension.

 

2.7 Use of Proceeds. Advances under the Revolving Credit and the proceeds of the
Term Loan shall be used for Permitted Acquisitions and for general corporate
purposes.

 

2.8 Lockboxes and Collections.

 

(a) Each Borrower has or will execute and deliver to Lender the Provider Account
Agreements pursuant to which all Collections shall be deposited to an applicable
Lockbox. Borrowers shall instruct Lockbox Banks to initiate (or, in the case of
the Lockbox accounts receiving only proceeds of non-governmental Accounts, to
accept an initiation from Lender which effectuates) a daily transfer of all
available funds to an account of Lender in the United States to be designated by
Lender in a notice in writing to the Borrowers (the “Collection Account”). To
the extent that any Lockbox Bank shall receive Collections attributable to any
Non-Profit Borrower, the Borrowers shall, or shall cause such Lockbox Bank to,
within three (3) Business Days of the date of receipt, deliver the applicable
Collections in the form received to the applicable lockbox bank for the
Non-Profit Borrower to which such Collections are attributable.

 

(b) Each Borrower will cause all Collections with respect to all of the Accounts
to be sent directly to the applicable Lockbox. In the event that Borrowers
receive any Collections that should have been sent to a Lockbox, Borrowers will,
promptly upon receipt and in any event within two (2) Business Days of receipt,
forward such Collections directly to the applicable Lockbox in the form
received, and if requested by Lender, promptly notify Lender of such event.
Until so forwarded, such Collections shall be held in trust for the benefit of
Lender.

 

(c) Borrowers shall not withdraw any amounts from the accounts into which the
Collections remitted to the Lockboxes are deposited, nor shall Borrowers change
the procedures under the agreements governing the Lockboxes and related
accounts.

 

(d) Borrowers will cooperate with Lender in the identification and
reconciliation on a daily basis of all Collections. If more than ten percent
(10.0%) of the Collections since the most recent Designated Funding Date is not
identified or reconciled to the reasonable satisfaction of Lender within ten
(10) Business Days of receipt, Lender shall not be obligated to make further
Loans until such amount is identified or is reconciled to the reasonable
satisfaction of Lender, as the case may be. In addition, if any such amount
cannot be identified or reconciled to the satisfaction of Lender, Lender may
utilize its own staff or, if it reasonably deems necessary, engage an outside
auditor, in either case at Borrowers’ expense (which in the case of Lender’s own
staff shall be in accordance with Lender’s then prevailing customary charges
plus out-of-pocket expenses), to make such examination and report as may be
necessary to identify and reconcile such amount.

 

(e) Borrowers will not send to or deposit in the Lockboxes any funds other than
payments made with respect to Accounts.

 

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(f) So long as no Event of Default has occurred and continues to exist, on each
Designated Funding Date (or in Lender’s discretion, more frequently), Lender
shall cause all Collections which have been deposited in the Collection Account
since the last Designated Funding Date to be disbursed in the order of priority
required by Section 2.6(e). In addition, promptly upon request of Borrowers, so
long as no Event of Default or Unmatured Event of Default shall have occurred
and be continuing, Lender shall disburse to Borrowers the amount, if any, by
which the collected balance in the Collection Account exceeds the aggregate
outstanding principal amount of the Advances and all interest and other amounts
that will be payable on the next Designated Funding Date. Following the
occurrence and during the continuation of an Event of Default, Lender may apply
all Collections to Borrowers’ Obligations in such order as Lender may in its
sole discretion determine.

 

(g) Notwithstanding anything to the contrary contained in the Loan Agreement,
each of the Borrowers shall enter into a lockbox arrangement with a bank
acceptable to the Lender (the “Lockbox Bank”) no later than July 15, 2005.
Notwithstanding anything to the contrary contained herein, until each of the
Borrowers has entered into a lock box arrangement with a Lockbox Bank and has
executed Provider Account Agreements relative thereto in form and substance
satisfactory to the Lender and such other agreements reasonably required by the
Lockbox Bank and/or the Lender, the total aggregate amount available for
borrowing under the Term Loan shall not exceed $10,000,000 and the total
aggregate amount available for borrowing under the Revolving Credit shall not
exceed $10,000,000.

 

2.9 Joint and Several Liability; Appointment of Borrower Agent.

 

(a) Each Borrower acknowledges that it is jointly and severally liable for all
of the Obligations under the Loan Documents. Each Borrower expressly
understands, agrees and acknowledges that (i) the Borrowers are all affiliated
entities by common ownership, (ii) each Borrower desires to have the
availability of one common credit facility instead of separate credit
facilities, (iii) each Borrower has requested that Lender extend such a common
credit facility on the terms herein provided, (iv) Lender will be lending
against, and relying on a lien upon, all of the Borrowers’ assets even though
the proceeds of any particular Loan made hereunder may not be advanced directly
to a particular Borrower, (v) each Borrower will nonetheless benefit by the
making of all such Loans by Lender and the availability of a single credit
facility of a size greater than each could independently warrant, and (vi) all
of the representations, warranties, covenants, obligations, conditions,
agreements and other terms contained in the Loan Documents shall be applicable
to and shall be binding upon each Borrower.

 

(b) Each of the Borrowers hereby irrevocably designates and authorizes
Providence to act as its agent generally for purposes of this Agreement and the
other Loan Documents (Providence, in such capacity, is referred to herein as the
“Borrower Agent”). Each Borrower agrees (i) that Borrower Agent may exercise any
right, or perform any obligation, specified by this Agreement on such Borrower’s
behalf, (ii) that all documents and instruments executed by the Borrower Agent
on such Borrower’s behalf will jointly and severally bind such Borrower, and
(iii) to be bound by any communication or request delivered by the Borrower
Agent to Lender or its agents. Each Borrower grants to Borrower Agent a power of
attorney to

 

27

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act on its behalf as provided herein, including, without limitation, with
respect to executing documents and instruments, requesting Advances hereunder,
and providing notices, reports, certificates and statements to, and receiving
the same from, Lender hereunder and under the other Loan Documents. This
appointment as attorney-in-fact is durable and irrevocable as long as any
Obligations are outstanding, and will not be affected by any disability or
incapacity of any Borrower or any of its employees, agents or representatives,
or the lapse of time. The Lender shall be entitled to rely on any such
communication or request delivered by the Borrower Agent.

 

SECTION 3. COLLATERAL

 

3.1 Collateral.

 

(a) Grant of Security. Pursuant to the Original Loan Agreement, the Existing
Borrowers granted or caused to be granted to Lender security interests, liens,
rights of set off and assignments as security in, upon, against and of
collateral described in the Original Loan Agreement (the “Existing Collateral”)
in order to secure payment and performance of all Obligations described in the
Original Loan Agreement (the “Existing Obligations”). Each Existing Borrower
hereby restates, reaffirms and continues those grants of the Existing Collateral
pursuant to the remaining provisions of this Section, and Lender shall retain
its interests in the Existing Collateral, in order to secure payment and
performance of all Obligations (which include the Existing Obligations) in
accordance with the respective terms and provisions of this Agreement and the
other Loan Documents. To the extent that the Collateral described below in this
Section includes assets and properties of the Existing Borrowers not included in
the Existing Collateral, each Existing Borrower intends to grant, and pursuant
to the remaining provisions of this Section hereby grants to Lender, a
continuing security interest in and to those assets and properties. In
consideration of Lender continuing to make the Credit Facilities available
hereunder and permitting the New Borrowers to be joined as Borrowers hereunder,
each New Borrower hereby grants in favor of the Lender the collateral security
described in this Section to secure all of the Obligations.

 

To secure the prompt payment when due, and the punctual performance of all of
the Obligations, each Borrower assigns to Lender, and grants to Lender a
security interest in and to all of its right, title and interest, in and to the
following Property (collectively, the “Collateral”):

 

(i) all accounts, healthcare receivables, payment intangibles, instruments and
other rights to receive payments of the Borrowers (including, without
limitation, the Accounts), whether now existing or hereafter arising or
acquired;

 

(ii) all documents and instruments (including all promissory notes), chattel
paper (whether tangible or electronic chattel paper), guarantees, letters of
credit (whether or not the letter of credit is evidenced by a writing), banker’s
acceptances and similar instruments, including all letter of credit rights;

 

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(iii) all Lockboxes, all Collection Accounts and other deposit accounts, all
funds received thereby or deposited therein, and any checks or instruments from
time to time representing or evidencing the same, and all rights with respect
thereto;

 

(iv) all goods, including without limitation all Inventory and Equipment;

 

(v) all commercial tort claims;

 

(vi) all general intangibles including, without limitation, contract rights,
payment intangibles, any disproportionate share settlements, risk share
settlements, cost report settlements, capitation settlement payments or other
distributions related to the Collateral or any portion thereof of the related
contracts, all trademarks, trademark applications and registrations, copyrights,
trade names, patents, service marks and other intellectual property and
associated goodwill and the right, exercisable only upon the occurrence and
during the continuation of an Event of Default, to sue for past, present and
future infringement thereof throughout the world;

 

(vii) all investment property, including securities (whether certificated or
uncertificated), and all cash, monies, credit balances, supporting obligations,
and deposits;

 

(viii) all books and records of such Borrowers evidencing or relating to or
associated with any of the foregoing;

 

(ix) all information and data compiled or derived by such Borrowers with respect
to any of the foregoing (other than any such information and data subject to
legal restrictions of patient confidentiality), and all rights, remedies,
guarantees and collateral evidencing, securing or otherwise relating to or
associated with, any of the foregoing, including without limitation all rights
of enforcement and collection; and

 

(x) all collections, receipts, insurance proceeds, and other proceeds (cash and
noncash) derived from any of the foregoing.

 

(b) Limitations on Grant of Security. Notwithstanding anything contained in this
Agreement to the contrary, in no event shall the Collateral include, and no
Borrower shall be deemed to have granted a security interest in, any of such
Borrower’s right, title or interest in or to any license, contract or agreement
to which such Borrower is party as of the date hereof or any of its right, title
or interest thereunder to the extent that such a grant would, under the terms of
such license, contract or agreement, result in a breach of the terms of, or
constitute a default under any license, contract or agreement to which such
Borrower is party (other than to the extent that any such term would be rendered
ineffective pursuant to Sections 9-406 to 9-409 of the UCC or any other
applicable law (including the Bankruptcy Code) or principles of equity);
provided, however, that immediately upon the ineffectiveness, lapse or
termination of any such provision, the Collateral shall include, and such
Borrower shall be deemed to have granted a security interest in, all rights and
interests as if such provision had never been in effect.

 

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3.2 Lien and Ancillary Documents. Borrowers shall execute (if required) and
deliver to Lender, or shall have executed (if required) and delivered the
following documents, instruments and agreements (all in form and substance
reasonably satisfactory to Lender), at the time(s) or within the periods
indicated:

 

(a) At the Closing, Uniform Commercial Code financing statements which Lender
may file in the jurisdiction where each Borrower is organized and in any
jurisdiction where a financing statement must be filed in order to perfect a
security interest in any Collateral;

 

(b) No later than December 31, 2005, a Landlord Waiver Agreement with respect to
Borrowers’ Fredericksburg, Virginia location or such other business location to
which Borrowers have relocated all of their Fredericksburg, Virginia operations;

 

(c) No later than June 30, 2005, an analysis of patient billings for each
Borrower business location for the preceding six month period, setting forth for
each location on a month by month basis, total patient billings by amount and by
percentage of total Borrower billings; and, following delivery of such report,
within thirty (30) days of Lender’s request therefor, Borrower shall use
commercially reasonable efforts to deliver to Lender a Landlord Waiver Agreement
for any additional Borrower business location reasonably determined by Lender to
represent a material portion of Borrowers’ aggregate patient billings and for
which all patient, billing and other information required in order for Lender to
track, bill and collect Borrowers’ Accounts is not located at any other location
for which Lender has received a Landlord Waiver Agreement in form and substance
satisfactory to Lender; and

 

(d) Any other agreements, documents, instruments and writings, including,
without limitation, security agreements, deposit account control agreements (but
only with respect to deposit accounts other than Lockboxes in which the proceeds
of governmental Accounts are deposited), deeds of trust and assignment
agreements, reasonably required by Lender to evidence, perfect or protect
Lender’s liens and security interest in the Collateral or as Lender may
reasonably request from time to time.

 

3.3 Other Actions.

 

(a) In addition to the foregoing, Borrowers shall do anything further that may
be lawfully and reasonably required by Lender to perfect Lender’s security
interests and to effectuate the intentions and objectives of this Agreement,
including, but not limited to, the execution (if required) and delivery of
continuation statements, amendments to financing statements, security
agreements, contracts and any other documents required hereunder. At Lender’s
reasonable request, Borrowers shall also immediately deliver (with execution by
Borrowers of all necessary documents or forms to reflect Lender’s security
interest therein) to Lender, all items for which Lender must or may receive
possession to obtain a perfected security interest.

 

(b) Lender may at any time and from time to time, file financing statements,
continuation statements and amendments thereto that describe the Collateral and
which contain any other information required by the UCC for the sufficiency or
filing office acceptance of any

 

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financing statement, continuation statement or amendment, including whether any
Borrower is an organization, the type of organization and any organization
identification number issued to any Borrower. Borrowers agree to furnish any
such information to Lender promptly upon request. Any such financing statements,
continuation statements or amendments may be signed by Lender on behalf of each
Borrower (if a signature is required) and may be filed at any time in any
jurisdictions by Lender. So long as no Unmatured Event of Default or Event of
Default has occurred and is continuing, Lender shall give Borrowers and their
counsel a reasonable opportunity to review and comment on each such financing
statement, continuation statements and amendment prior to filing.

 

3.4 Searches. Lender shall, prior to or at Closing, and thereafter as Lender may
reasonably request from time to time, at Borrowers’ expense, obtain the
following searches:

 

(a) UCC Searches. With respect to each Borrower, UCC searches with the Secretary
of State and, where applicable, local filing office, of each state where each
Borrower is organized, maintains its chief executive office, a place of
business, or assets;

 

(b) Judgments, Etc. Judgment, federal and state tax lien searches against the
Borrowers, in all applicable filing offices of each state searched under
subparagraph (a) above.

 

3.5 Filing Security Agreement. A carbon, photographic or other reproduction or
other copy of this Agreement or of a financing statement is sufficient as and
may be filed in lieu of a financing statement.

 

3.6 Power of Attorney. Each of the officers of Lender is hereby irrevocably
made, constituted and appointed the true and lawful attorney for Borrowers
(without requiring any of them to act as such) with full power of substitution
to do the following (such power to be deemed coupled with an interest): (a)
Endorse the name of Borrowers upon any and all checks, drafts, money orders and
other instruments for the payment of monies that are payable to Borrowers and
constitute collections on the Collateral for purpose of depositing the same in
the applicable Lockbox; (b) Execute in the name of Borrowers any financing
statements, schedules, assignments, instruments, documents and statements that
Borrowers are obligated to give Lender hereunder or is necessary to perfect
Lender’s security interest or lien in the Collateral (but only with respect to
deposit accounts other than Lockboxes in which the proceeds of governmental
Accounts are deposited) (provided that, so long as no Unmatured Event of Default
or Event of Default has occurred and is continuing, Lender shall give Borrowers
and their counsel a reasonable opportunity to review and comment on each such
item prior to filing such item or delivering such item to any third party); (c)
To verify validity, amount or any other matter relating to the Collateral by
mail, telephone, telecopy or otherwise; and (d) Effective upon the occurrence
and during the continuance of an Event of Default, do such other and further
acts and deeds in the name of Borrowers that Lender may reasonably deem
necessary or desirable to enforce its right with respect to any Collateral;
provided, however, that such power of attorney shall be effective and shall be
exercised only to the extent that such effectiveness and such exercise would not
violate, or cause any Borrower to violate, the provisions of 42 U.S.C.
§1395g(c), 42 U.S.C. §1396a(a)(32), any state law, or any state plan enacted in
accordance with 42 U.S.C. §1396a(a)(32).

 

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SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO THE LOANS

 

4.1 Closing Date. The Closing under this Agreement and the obligation of the
Lender to make the initial Loan(s) hereunder are subject to the satisfaction of
the following conditions precedent on or before the Closing Date (all documents
to be in form and substance satisfactory to Lender and Lender’s counsel):

 

(a) Loan Documents. The Lender shall have received this Agreement, the Revolving
Credit Note, the Term Note, the Management Agreement Assignment, the Pledge
Agreements, and any other required Loan Documents, all properly executed by each
party thereto other than the Lender;

 

(b) Additional Documents. The Lender shall have received each additional
document and agreement required to be executed under any provision of this
Agreement or any of the other Loan Documents;

 

(c) Organizational Documents. The Lender shall have received: (i) Certified
copies of resolutions of the board of directors, general partners, or managers,
as applicable, of each of the Borrowers, authorizing the execution of this
Agreement and the other Loan Documents and each document required to be
delivered by any Section hereof; (ii) Copies of the Organizational Documents of
each of the Borrowers (certified, as applicable, by the Secretary of State of
each Borrower’s state of organization or formation or the clerk, secretary,
managing member or general partner of such Borrower) (or, with respect to the
Existing Borrowers, a certificate of the clerk, secretary, managing member or
general partner of each Existing Borrower certifying that there have been no
changes to the Organizational Documents of such Existing Borrower from the forms
thereof previously delivered to the Lender in connection with the closing under
the Original Credit Agreement); and (iii) Good Standing or equivalent
certificates showing each Borrower to be in good standing in its respective
state of incorporation or organization;

 

(d) Incumbency. The Lender shall have received incumbency certificates
identifying all Authorized Officers of Borrower Agent and all other officers of
the Borrowers that are authorized to sign this Agreement on behalf of such
Borrowers, with specimen signatures;

 

(e) Opinion of Counsel. The Lender shall have received in form and substance
satisfactory to Lender such opinion letters of counsel to the Borrowers with
respect to the Loan Documents and such other matters as Lender shall request;

 

(f) Fees and Expenses. The Borrowers shall have paid all fees and Expenses
associated with the Credit Facilities incurred to the Closing Date;

 

(g) Lockbox Matters. The Lender, Borrowers and each Lockbox Bank shall have
executed and delivered modifications to the applicable Provider Account
Agreements and such other agreements relating to the Lockboxes as required by
the Lender, each in form and substance satisfactory to the Lender;

 

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(h) Lien Searches. The Lender shall have received the results of Uniform
Commercial Code, judgment, federal and state tax lien searches pursuant to
Section 3.4 above, all in form and substance satisfactory to Lender;

 

(i) Collateral Releases. Lender shall have received releases from all Persons
having a security interest or other interest in the Collateral, together with
all UCC-3 terminations necessary to terminate such Persons’ interests in the
Collateral;

 

(j) Evidence of Insurance. Lender shall have received evidence of Borrowers’
insurance coverage in accordance with the provisions of Section 6.2 hereof
satisfactory to Lender in its sole discretion, together with all certificates,
endorsements and other items required to be delivered under Section 6.2(a) and
(b);

 

(k) Closing Certificate. Lender shall have received a certificate dated the
Closing Date and signed by the chief financial officer of each Borrower
certifying that all of the conditions specified in this Section 4.1 have been
fulfilled in all material respects (except to the extent that fulfillment of any
such condition depends on the acceptability of any item to the Lender or on the
Lender’s satisfaction with any of the matters described in this Section 4.1) and
that there has not occurred any material adverse change in the operations and
conditions (financial or otherwise) of the Borrowers and their Subsidiaries
since March 31, 2005;

 

(l) Pledged Collateral. Lender shall have received amendments to the Pledge
Agreements relative to (i) the pledge of the Capital Stock of each of the New
Borrowers, together with original stock certificates evidencing all such pledged
shares and stock powers duly executed in blank, and (ii) the pledge of the
inter-company Indebtedness referred to in the Providence Pledge Agreement,
together with the original promissory notes evidencing such Indebtedness;

 

(m) Financial Statements. No later than fifteen (15) days preceding the Closing,
Lender shall have received the most recent monthly, quarterly and year to date
financial statements with respect to each of the Borrowers, in the form required
pursuant to Section 6.7(a) hereof;

 

(n) 2005 Budget. Lender shall have received Borrowers’ projected financial
statements for Fiscal Year 2005; and

 

(o) Additional Items. The Lender shall have received all other documents,
information and reports required or requested to be executed and/or delivered by
Borrowers under any provision of this Agreement or any of the Loan Documents.

 

4.2 Conditions to Each Loan. The obligation of the Lender to make any Loan
hereunder (including the initial Loan(s) to be made on the Closing Date, if any)
is subject to the

 

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satisfaction of the following conditions precedent on or before the date of
making of the relevant Loan (all documents to be in form and substance
satisfactory to Lender and Lender’s counsel):

 

(a) In the case of Advances, after giving effect to such Advance:

 

(i) the aggregate principal amount of all Advances outstanding shall not exceed
the lesser of (A) the Activated Revolving Credit Amount then in effect, or (B)
the Maximum Revolving Credit then in effect;

 

(ii) the ENV of all Eligible Accounts shall not exceed any of the Concentration
Limits; and

 

(iii) if applicable, Borrowers shall have paid the Commitment Fee required to be
paid under Section 2.4(f)(i).

 

(b) In the case of Term Advances:

 

(i) Borrowers shall have complied with the provisions of Section 2.3 hereof with
respect to the applicable Permitted Acquisition and Term Advance;

 

(ii) if required by Lender, any entity acquired in connection with such
Permitted Acquisition or any Subsidiary of the Borrowers formed in connection
with such Permitted Acquisition, shall be joined as a Borrower under this
Agreement pursuant to a Joinder Agreement in form and substance satisfactory to
Lender;

 

(iii) Borrowers shall have paid the Commitment Fee required to be paid under
Section 2.4(f)(ii); and

 

(iv) The aggregate principal balance of the Term Loan after giving effect to the
requested Term Advance shall not exceed the Activated Revolving Credit Amount
then in effect.

 

(c) As of the date of the making of such Loan, (i) all representations and
warranties of Borrowers shall be true and correct in all material respects on
and as of that date (it being understood that any representation or warranty
made as of a specific date shall be true and correct in all material respects as
of such date), (ii) without limiting the foregoing, the representations and
warranties set forth in Section 5.20 shall be true and correct with respect to
each Eligible Account included in the Borrowing Base, (iii) Borrowers shall be
in compliance with this Agreement and the other Loan Documents and no Event of
Default or Unmatured Event of Default shall have occurred and be continuing, and
(iv) Borrowers shall have certified such matters to Lender, in the case of an
Advance, pursuant to the form of Borrowing Base Report or Advance Request
relating to such Loan;

 

(d) Borrowers shall have signed and delivered to Lender copies of notices in the
form of Exhibit 4.2A and 4.2B with respect to any new Obligors which have not
previously received such notice, directing such Obligors to make payment to a
Lockbox;

 

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(e) The lockbox arrangements required by Section 2.8 hereof shall be in effect,
and the amounts received in the Lockboxes shall have been identified or
reconciled to Lender’s reasonable satisfaction, as required by Section 2.8(d)
hereof; and

 

(f) Borrowers shall have taken such other actions, including the delivery of
documents (including, without limitation, in the case of Advances, an Advance
Request and Borrowing Base Report), as Lender may reasonably and in good faith
request.

 

4.3 Closing. Subject to the conditions of Sections 4.1 and 4.2, the Credit
Facilities shall be made available on the date (“Closing Date”) this Agreement
is executed and all of the conditions contained in Sections 4.1 and 4.2 hereof
are completed (the “Closing”).

 

4.4 Non-Waiver of Rights. By completing the Closing hereunder, or by making
Loans hereunder, Lender does not thereby waive a breach of any warranty,
representation or covenant made by Borrowers hereunder or under any agreement,
document, or instrument delivered to Lender or otherwise referred to herein, and
any claims and rights of Lender resulting from any breach or misrepresentation
by Borrowers are specifically reserved by Lender.

 

SECTION 5. REPRESENTATIONS AND WARRANTIES

 

To induce Lender to complete the Closing and make the Loans under the Credit
Facilities to Borrowers, Borrowers warrant and represent to Lender that:

 

5.1 Organization and Validity.

 

(a) Each of the Borrowers and their Subsidiaries: (i) is duly organized as
either a corporation or limited liability company and validly existing under the
laws of its state of incorporation or formation, as the case may be; and (ii) is
duly qualified, validly existing and in good standing, and has lawful power and
authority to engage in the business it conducts in each state and other
jurisdiction where the nature and extent of its business requires qualification,
except where the failure to so qualify would not have a Material Adverse Effect.
A list of all states and other jurisdictions where each Borrower is qualified to
do business as of the Closing Date is attached hereto as Schedule 5.1 and made a
part hereof.

 

(b) The making and performance of this Agreement and the related Loan Documents
will not: (i) violate any law, government rule or regulation, or the charter,
minutes, partnership agreement, operating agreement or bylaw provisions of any
of the Borrowers; or (ii) violate or result in a default (immediately or with
the passage of time) under any contract, agreement or instrument to which any
Borrower or any Subsidiary is a party, or by which any of the Borrowers or such
Subsidiaries is bound. None of the Borrowers or any Subsidiary is in violation
of, or has knowingly caused any Person to violate any term of any agreement or
instrument to which it or such Person is a party or by which it may be bound, or
of its charter, minutes, partnership agreement, operating agreement or bylaws,
which violation could reasonably be expected to have a Material Adverse Effect.

 

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(c) Each of the Borrowers has all requisite power and authority to enter into
and perform this Agreement and the other Loan Documents and to incur the
obligations herein provided for, and has taken all proper and necessary
corporate action to authorize the execution, delivery and performance of this
Agreement and the other Loan Documents.

 

(d) This Agreement, the Revolving Credit Note, the Term Note, and the other Loan
Documents, when delivered, will be valid and binding upon Borrowers and
enforceable in accordance with their respective terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or affecting creditors’ rights generally (including, without limitation,
fraudulent conveyance laws) and by general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance or injunctive
relief, regardless of whether considered in a proceeding in equity or at law.

 

5.2 Places of Business. As of the Closing Date, the jurisdiction of
organization, the address of the chief executive office and all other places of
business of each of the Borrowers are as set forth on Schedule 5.2. As of the
Closing Date, except as disclosed on Schedule 5.2: (i) no Borrower has been
organized in any other jurisdiction nor has changed the location of its chief
executive office in the five years preceding the Closing Date; (ii) no Borrower
has changed its name in the five years preceding the Closing Date; (iii) during
such period, none of the Borrowers has used any fictitious or trade name; and
(iv) no Borrower maintains any material books and records or material billing
information at any location other than a Designated Location which is not
duplicated or capable of being duplicated through at a Designated Location. The
Designated Locations contain all books, records, financial and billing
information and computer hardware and software required in order to process the
outstanding Accounts of Borrowers as well as, following and during the
continuation of an Event of Default, to bill and collect such Accounts.

 

5.3 Operation of Business. Each of the Borrowers (a) maintains, to the extent
applicable, Medicare and Medicaid provider status and is the holder of the
provider identification numbers identified on Schedule 5.3 hereto (as
supplemented or modified from time to time by written notice by Borrower to
Lender), all of which are current and valid; and the Borrowers have not allowed,
permitted, authorized or caused any other Person to use any such provider
identification number, and (b) has obtained all material licenses,
accreditations, certificates of need and approvals of Governmental Authorities
and all other Persons necessary for such Borrower to own its assets, to carry on
its business, to execute, deliver and perform the Loan Documents, and to receive
payments from the Obligors. As of the Closing Date, none of the Borrowers has
been notified by any such Governmental Authority or other Person during the
immediately preceding twenty-four month period that such party has rescinded or
not renewed, or intends to rescind or not renew, any such material license or
approval.

 

5.4 Pending Litigation. Except as set forth on Schedule 5.4 hereto and for other
matters disclosed by Borrowers to Lender from time to time as required hereby,
there are no judgments or judicial or administrative orders, proceedings or
investigations (civil or criminal) pending, or to the knowledge of the
Borrowers, threatened, against any of the Borrowers or any

 

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Subsidiary in any court or before any governmental authority or arbitration
board or tribunal, that, if adversely determined, could reasonably be expected
to have a Material Adverse Effect. None of the Borrowers or any Subsidiary is in
default with respect to any order of any court, governmental authority,
regulatory agency or arbitration board or tribunal, except for any such matters
which individually or in the aggregate could not reasonably be expected to have
a Material Adverse Effect. No executive officer of any of the Borrowers has been
indicted or convicted in connection with or is engaging in any criminal conduct,
or is currently subject to any material lawsuit or proceeding or (to the
knowledge of Borrowers) under investigation in connection with any
anti-racketeering or other conduct or activity.

 

5.5 Medicaid and Medicare Cost Reporting. To the extent applicable, the Medicaid
and Medicare cost reports of each facility and of the home office of each of the
Borrowers for all cost reporting periods have been submitted when and as
required to (i) as to Medicaid, the state agency, or other CMS-designated agent
of such state agency, charged with such responsibility or (ii) as to Medicare,
the Medicare intermediary or other CMS-designated agent charged with such
responsibility.

 

5.6 Title to Collateral. Each of the Borrowers has good and marketable title to
all the Collateral, free from Liens, except for the following (collectively,
“Permitted Liens”):

 

(a) Liens in favor of Lender;

 

(b) Liens for taxes which are not yet overdue or the validity of which is being
contested in good faith by appropriate proceedings diligently pursued and for
which reserves or other appropriate provision as shall be required by GAAP have
been made on Borrowers’ books and records;

 

(c) Liens securing Indebtedness described in Section 7.6(d) and 7.6(i) hereof,
provided that such Liens attach only to such real or personal property acquired
with the proceeds of such Indebtedness and the proceeds thereof;

 

(d) Deposits or pledges under workman’s compensation, unemployment insurance,
social security and similar laws, or to secure the performance of bids, tenders
or contracts (other than for the repayment of borrowed money) or leases or to
secure indemnity, performance or similar bonds for the performance of bids,
tenders or contracts (other than for the repayment of borrowed money) or to
secure statutory obligations or surety or appeal bonds;

 

(e) Mechanics’, materialmen’s, workmen’s, artisan’s and other non-consensual
statutory Liens arising in the ordinary course of business to the extent such
Liens secure Indebtedness (i) which is not overdue, or (ii) relating to claims
or liabilities which are fully insured, or (iii) which are being contested in
good faith by appropriate proceedings and for which the applicable Borrower has
taken a reserve on its books in accordance with GAAP;

 

(f) Reservations, exceptions, encroachments, easements, rights of way, covenants
running with the land, and other similar title exceptions or encumbrances
affecting any real estate owned or leased by Borrowers, provided that they do
not in the aggregate materially detract from the value of the real estate or
materially interfere with its use in the ordinary course of the applicable
Borrower’s business;

 

 

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(g) Leases or subleases granted to others not interfering in any material
respect with the Business of the Borrowers;

 

(h) Liens granted in connection with the extension, renewal or refinancing of
the Indebtedness secured by Liens of the type described above, provided that any
extension, renewal or replacement Lien is limited to the property encumbered by
the existing Lien and the principal amount of the Indebtedness being extended,
renewed or replaced does not increase; and

 

(i) Liens existing as of the Closing Date that are described on Schedule 5.6
attached hereto.

 

5.7 Governmental Consent. Neither the nature of Borrowers or of Borrowers’
Business or Property, nor any relationship between any of the Borrowers and any
other Person, nor any circumstance affecting Borrowers in connection with the
execution and delivery of this Agreement and the other Loan Documents is such as
to require a consent, approval or authorization of, or filing, registration or
qualification with, any Governmental Authority on the part of the Borrowers that
has not been obtained or made, except for any of the same the failure of which
to obtain or make could not reasonably be expected to have a Material Adverse
Effect.

 

5.8 Taxes. All tax returns required to be filed by each of the Borrowers and
their Subsidiaries in any jurisdiction have in fact been filed, and all taxes,
assessments, fees and other governmental charges upon the Borrowers, such
Subsidiaries, or upon any of their respective Properties, income or franchises,
which are shown to be due and payable on such returns have been paid, except for
those taxes being contested in good faith with due diligence by appropriate
proceedings and for which reserves or other appropriate provision as required by
GAAP have been made therefor on applicable Borrower’s or Subsidiary’s books and
records. Borrowers are not aware of any proposed additional tax assessment or
tax to be assessed against or applicable to any of the Borrowers that could
reasonably be expected to have a Material Adverse Effect.

 

5.9 Financial Statements. All financial statements delivered by the Borrowers to
the Lender in connection with the negotiation of this Agreement and Lender’s due
diligence have been prepared in accordance with GAAP (subject to the absence of
footnotes and normal year end adjustments in the case of unaudited financial
statements), and are true, complete and correct in all material respects. As of
the Closing Date, the fiscal year for Borrowers ends on the date set forth on
Schedule 5.9 hereto, and the federal tax identification number and any
applicable state tax or identification number for each of the Borrowers is as
set forth on Schedule 5.9 hereto.

 

5.10 Full Disclosure. Neither the financial statements referred to in Section
5.9, nor any documents or any written statement furnished by or on behalf of
Borrowers to Lender in connection with the negotiation of the Credit Facilities,
or contained in any financial statements or documents relating to the Borrowers,
contain any untrue statement of a material fact or omit a material fact (known
to the Borrowers in the case of any document not furnished by them) necessary to
make the statements contained therein or herein not misleading in light of the
circumstances in which the same were made.

 

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5.11 Guarantees, Contracts, Investments, etc.

 

(a) Except as described in Schedule 5.11 hereto and for items arising after the
Closing Date permitted under the terms of this Agreement, none of the Borrowers
owns or holds any Investment, or any other equity or long term debt investments
in, has any outstanding advances to, or serves as guarantor, surety or
accommodation maker for the obligations of, or have any outstanding borrowings
from, any Person.

 

(b) Except as described on Schedule 5.11 hereto and for items arising after the
Closing Date permitted under the terms of this Agreement, none of the Borrowers
is engaged in, nor does it have an interest in any joint venture or partnership
with any other Person, or has any Subsidiaries.

 

(c) None of the Borrowers is subject to any charter or other restriction in its
governing documents, which materially and adversely affects its business,
financial condition, Property or prospects.

 

(d) Except as otherwise specifically provided in this Agreement, none of the
Borrowers has agreed or consented to cause or permit any of the Collateral,
whether now owned or hereafter acquired, to be subject in the future (upon the
happening of a contingency or otherwise) to a Lien not permitted by this
Agreement.

 

5.12 Compliance with Laws.

 

(a) None of the Borrowers or any Subsidiary is in violation of, has received
written notice that it is in violation of, or has knowingly caused any Person to
violate, any applicable statute, regulation or ordinance of any Governmental
Authority (including without limitation, environmental laws and regulations),
which could have a Material Adverse Effect.

 

(b) Each of the Borrowers and each Subsidiary is current with all reports and
documents required to be filed with any Governmental Authority and is in full
compliance in all material respects with all applicable rules and regulations of
such Governmental Authorities, except where such failure to file or such
non-compliance could reasonably be expected to have a Material Adverse Effect.

 

5.13 Environmental Matters. Except as disclosed on Schedule 5.13 hereto, and
except, in each case as could not reasonably be expected to have a Material
Adverse Effect, none of the Borrowers has knowledge:

 

(a) of the presence of any Hazardous Substances on any real property where any
of the Borrowers or any Subsidiary conducts operations or has its personal
property; or

 

 

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(b) of any on-site spills, releases, discharges, disposal or storage of
Hazardous Substances that have occurred or are presently occurring on any such
real property or where any Collateral is located; or

 

(c) of any spills, releases, discharges or disposal of Hazardous Substances that
have occurred, are presently occurring on any other real property as a result of
the conduct, action or activities of any of the Borrowers or their Subsidiaries.

 

5.14 Capital Stock and Equity Interests. As of the Closing Date, the authorized
and outstanding shares of Capital Stock of each of the Borrowers and each of
their respective Subsidiaries is as set forth on Schedule 5.14 hereto. All of
the shares of Capital Stock of each Borrower and Subsidiary have been duly and
validly authorized and issued and are fully paid and non-assessable, and have
been sold and delivered to the holders thereof in compliance with, or under
valid exemption from, all Federal and state laws and the rules and regulations
of all regulatory bodies thereof governing the sale and delivery of securities.
As of the Closing Date, except as set forth on Schedule 5.14, there are no
subscriptions, warrants, options, calls, commitments, rights or agreements by
which any Borrower or Subsidiary is bound relating to the issuance, transfer,
voting or redemption of shares of its Capital Stock or any pre-emptive rights
held by any Person with respect to the shares of Capital Stock of the Borrowers
or such Subsidiaries. As of the Closing Date, except as set forth in Schedule
5.14, none of the Borrowers or any Subsidiary has issued any securities
convertible into or exchangeable for shares of its Capital Stock or any options,
warrants or other rights to acquire such shares or securities convertible into
or exchangeable for such shares.

 

5.15 Lockboxes. As of the Closing Date, Schedule 5.15 sets forth all deposit
accounts, Lockboxes and other Lockbox Accounts maintained by each Borrower. Each
Obligor of an Eligible Account has been directed by a notice in the form of
Exhibit 4.2A or 4.2B (as applicable) to this Agreement to remit all payments
with respect to such Account to the applicable Lockbox.

 

5.16 Borrowing Base Reports. Each Borrowing Base Report signed by Borrowers or
Borrower Agent contains an accurate summary of all Eligible Accounts of the
Borrowers contained in the Borrowing Base as of its date.

 

5.17 Security Interest. Each of the Borrowers has granted to Lender a valid,
perfected, first priority security interest in the Accounts and the other
Collateral subject to no other Liens, except for Permitted Liens.

 

5.18 Accounts.

 

(a) None of the Borrowers has done anything to interfere with the collection of
the Accounts, and the Borrowers have not amended or waived the terms or
conditions of any Account or any related Contract in any material adverse manner
without Lender’s prior written consent.

 

 

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(b) Each of the Borrowers has made all payments to Obligors necessary to prevent
any Obligor from offsetting any earlier overpayment to Borrowers against any
amounts such Obligor owes on an Account.

 

(c) Except for Borrowers’ Fredericksburg, Virginia location, all information
required for Lender to track and bill the Accounts for all of the Borrowers is
available at the locations for which the Borrowers have obtained a waiver
agreement from the landlords or can be replicated from such locations.

 

5.19 Pension Plans. Each pension or profit sharing plan, if any, to which any
Borrower or Subsidiary is a party has been funded in accordance with the
obligations of Borrowers set forth in such plan.

 

5.20 Representations and Warranties for each Loan. As of each date that
Borrowers shall request any Advance, and as of each Funding Date, Borrowers
shall be deemed to make, with respect to each Eligible Account included in the
Borrowing Base, each of the following representations and warranties:

 

(a) Such Account satisfies each of the conditions of an Eligible Account.

 

(b) All information relating to such Account that has been delivered to Lender
is true and correct in all material respects. With respect to each such Account
that has been billed, Borrowers have delivered to the Obligor all reasonably
requested supporting claim documents, and all information set forth in the bill
and supporting claim documents is true, complete and correct in all material
respects.

 

(c) There is no Lien or material adverse claim in favor of any third party, nor
any filing against any Borrower, as debtor, covering or purporting to cover any
interest in such Account.

 

(d) Such Account is (i) payable in an amount not less than its Estimated Net
Value by the Obligor identified by Borrowers as being obligated to do so, and
Borrowers have not received notice from the applicable Obligor to the contrary,
(ii) the legally enforceable obligation of such Obligor, and (iii) an account
receivable or general intangible within the meaning of the Uniform Commercial
Code of the state in which the applicable Borrower is organized, and is not
evidenced by any instrument or chattel paper. Except for co-payment obligations,
there is no payor other than the Obligor identified by Borrowers as the payor
primarily liable on such Account.

 

(e) No such Account (i) requires the approval of any third Person for such
Account to be subject to Lender’s security interest hereunder, (ii) is subject
to any legal action, proceeding or investigation (pending or threatened),
dispute, set-off, counterclaim, defense, abatement, suspension, deferment,
deductible, reduction or termination by the Obligor, except in each case as
arising under applicable law, or (iii) is past, or within 180 days of, the
statutory limit for collection applicable to the Obligor.

 

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(f) Borrowers do not have any guaranty of, letter of credit support for, or
collateral security for, such Account, other than any such guaranty, letter of
credit or collateral security in which the Lender has a security interest.

 

(g) The Obligor with respect to such Account is located in the United States,
and is (i) an entity organized under the laws of any jurisdiction in the United
States and has its principal office in the United States, or (ii) a state or
agency, instrumentality or political subdivision of the United States or a
state.

 

(h) The insurance policy or Contract obligating an Obligor to make payment is
and was in full force and effect and applicable to the Obligor at the time the
services constituting the basis for such Account were performed.

 

(i) If requested by Lender, a copy of each related Contract and provider
agreement to which any Borrower is a party has been delivered to Lender unless
Borrowers shall have, prior to the related Funding Date, delivered a certificate
of an Authorized Officer that such delivery is prohibited by the terms of the
Contract or by law, and the circumstances of such prohibition.

 

(j) If such Account is an Unbilled Account, the goods or services giving rise to
such Account have been delivered or fully and completely performed, and no more
than 30 days have elapsed after the date the services or goods giving rise to
such Account were rendered or provided, as applicable, and such Account has been
properly recorded in the Borrowers’ books, records, and billing system.

 

(k) Such Account has an Estimated Net Value which, when added to the Estimated
Net Value of all other Accounts owing by the same Obligor and which constitute
Eligible Accounts hereunder, does not exceed any applicable Concentration Limit.

 

(l) Neither such Account nor the related Contract contravenes any laws, rules or
regulations applicable thereto (including, without limitation, laws, rules and
regulations relating to usury, consumer protection, truth-in-lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and no party to such related Contract is in
violation of any such law, rule or regulation in connection with such Contract.

 

(m) As of the applicable Funding Date, to the best of Borrowers’ knowledge, (i)
no Obligor on such Account is bankrupt, insolvent, or is unable to make payment
of its obligations when due, and (ii) except as disclosed to the Lender in
writing, no other fact exists which would cause Borrowers reasonably to expect
that the amount billed to the related Obligor for such Account will not be paid
in full when due or in accordance with its terms.

 

5.21 Commercial Tort Claims. As of the Closing Date, none of the Borrowers has
any commercial tort claims except as shown on Schedule 5.21 hereto.

 

5.22 Letter of Credit Rights. As of the Closing Date, Borrowers have no letter
of credit rights except as shown on Schedule 5.22 hereto.

 

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5.23 Intellectual Property. As of the Closing Date, all trademarks, service
marks, patents or copyrights which any Borrower uses, plans to use or has a
right to use are shown on Schedule 5.23 attached hereto, and each applicable
Borrower is the sole owner of such Property, except for such rights or claims of
others in such Property shown on Schedule 5.23. None of the Borrowers is in
knowing violation of any rights of any other Person with respect to such
Property, except for such violations which individually or in the aggregate
could not reasonably be expected to result in a Material Adverse Effect. Except
as shown on Schedule 5.23, as of the Closing Date, (i) none of the Borrowers
requires any copyrights, patents, trademarks or other intellectual property, or
any license(s) to use any patents, trademarks or other intellectual property in
order to provide services to its customers or to bill Obligors and collect
therefrom, in the ordinary course of business, and (ii) Lender will not require
any copyrights, patents, trademarks or other intellectual property or any
licenses to use the same in order to provide such services or bill and collect
the Accounts, after the occurrence of an Event of Default.

 

5.24 Management Agreements. Schedule 2 sets forth all Management Agreements
between any Borrower as the provider of management services and another
Borrower, Subsidiary, or Non-Profit Borrower as of the Closing Date. Borrowers
have delivered to Lender true, accurate and complete copies of each such
Management Agreement.

 

5.25 Social Service Providers Captive Insurance Co.. Providence owns 100% of the
issued and outstanding Capital Stock of Social Services Providers Captive
Insurance Co. (the “Captive”). The Captive has been adequately capitalized by
Providence and its Subsidiaries in compliance with all applicable laws and
regulations. The sole business activity of the Captive is providing insurance
coverage for Providence, its Affiliates, the Non-Profit Borrowers and Managed
Entities. None of the Borrowers has guaranteed or otherwise agreed to pay or be
responsible for any Indebtedness or obligations of the Captive of any kind or
nature which would not be permitted under the terms of this Agreement.

 

SECTION 6. BORROWERS’ AFFIRMATIVE COVENANTS

 

Borrowers covenant that until all of Borrowers’ Obligations to Lender are paid
and satisfied in full and the Credit Facilities have been terminated:

 

6.1 Payment of Taxes and Claims. Borrowers shall pay, and shall cause each of
their Subsidiaries to pay, before they become delinquent, all taxes, assessments
and governmental charges or levies imposed upon them or upon their respective
Property, except for those being contested in good faith with due diligence by
appropriate proceedings and for which appropriate reserves have been maintained
under GAAP.

 

6.2 Maintenance of Insurance, Financial Records and Corporate Existence.

 

(a) Property Insurance. Borrowers shall maintain or cause to be maintained
insurance on their Properties against fire, flood, casualty and such other
hazards in such amounts, with such deductibles and with such insurers as are
customarily used under similar circumstances by companies operating similar
businesses in the same industry as Borrowers. The policies of all such casualty
insurance shall contain standard loss payable and additional insured clauses
issued

 

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in favor of Lender with respect to Property included in the Collateral, pursuant
to which all losses thereunder shall be paid to Lender as Lender’s interests may
appear. Such policies shall expressly provide that the requisite insurance
cannot be altered or canceled without thirty (30) days prior written notice to
Lender, and shall insure Lender notwithstanding the act or neglect of the
insured. At or prior to Closing, Borrowers shall furnish Lender with insurance
certificates on Accord Form 27 certified as true and correct and being in full
force and effect as of the Closing Date or such other evidence of insurance as
Lender may reasonably require. In the event Borrowers fail to procure or cause
to be procured any such insurance or to timely pay or cause to be paid the
premium(s) on any such insurance, Lender may do so for Borrowers, but Borrowers
shall continue to be liable for the same. Each Borrower hereby appoints Lender
as its attorney-in-fact, exercisable at Lender’s option, to endorse any check
which may be payable to Borrowers in order to collect the proceeds of such
insurance that is due to Lender. Any insurance proceeds received by Lender shall
promptly be applied by Lender to the Obligations of the Borrowers in the order
of priority set forth in Section 2.7(e) hereof.

 

(b) Liability Insurance. Borrowers shall maintain, and shall deliver to Lender
upon Lender’s request, evidence of general and professional liability insurance
in such amounts as is customary for companies in the same or similar businesses
located in the same or similar areas. The Captive shall at no time provide
reinsurance with respect to any insurance policy of the Borrowers, any of their
Affiliates, any Non-Profit Borrower or any Managed Entity in an amount exceeding
$500,000 per occurrence without Lender’s prior written consent. The Captive
shall not provide insurance or reinsurance coverage for any party other than a
Borrower, an Affiliate, a Non-Profit Borrower or a Managed Entity, without
Lender’s prior written consent.

 

(c) Financial Records. Borrowers shall keep, and cause each of their
Subsidiaries to keep, current and accurate books of records and accounts in
which full and correct entries will be made of all of Borrowers’ business
transactions, and will reflect in their financial statements adequate accruals
and appropriations to reserves, all in accordance with GAAP. Borrowers shall not
change their Fiscal Year end date without prior written notice to Lender.

 

(d) Existence and Rights. Each Borrower shall do (or cause to be done) all
things necessary to preserve and keep in full force and effect its and each of
its Subsidiaries’ legal existence, good standing, rights and franchises, except
as permitted to do otherwise pursuant to Section 7.1 hereof.

 

(e) Compliance with Laws. Each Borrower shall be, and shall cause each of its
Subsidiaries to be, in compliance with any and all laws, ordinances,
governmental rules and regulations, and court or administrative orders or
decrees to which it is subject, whether federal, state or local (including
without limitation environmental or environmental-related laws, statutes,
ordinances, rules, regulations and notices), and shall obtain and maintain any
and all licenses, permits, franchises, certificates of need, or other
governmental authorizations necessary to the ownership of its Property or to the
conduct of its businesses, except for such violations or failures to obtain
which could not reasonably be expected to have a Material Adverse Effect.

 

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6.3 Business Conducted. Borrowers shall continue in the Business presently
conducted by Borrowers. Borrowers shall not engage, directly or indirectly, in
any material respect in any line of business substantially different from the
Business conducted by the Borrowers immediately prior to the Closing Date and
businesses reasonably associated therewith.

 

6.4 Litigation. Borrowers shall give prompt notice to Lender of any litigation
pending or threatened against Borrowers or any Subsidiary claiming damages in
excess of $100,000 or which may otherwise have a Material Adverse Effect.

 

6.5 Taxes. Borrowers shall pay, and cause each of their Subsidiaries to pay, all
taxes (other than taxes based upon or measured by Lender’s income or revenues),
if any, in connection with the Loans and/or the recording of any financing
statements or other Loan Documents. The Obligations of Borrowers under this
Section 6.5 shall survive the payment of Borrowers’ Obligations under this
Agreement and the termination of this Agreement.

 

6.6 Financial Covenants. Borrowers shall perform and comply with each of the
following financial covenants as reflected and computed from their financial
statements:

 

(a) Debt Service Coverage Ratio. As at the end of each Fiscal Quarter of the
Borrowers, commencing with the Fiscal Quarter ending June 30, 2005, Borrowers
shall maintain a Debt Service Coverage Ratio of at least 1.25:1, measured with
respect to each fiscal quarter on the basis of the four fiscal quarters then
ended.

 

(b) Leverage Ratio. As at the end of each Fiscal Quarter of the Borrowers,
commencing with the fiscal quarter ending June 30, 2005, Borrowers shall
maintain a Leverage Ratio of no more than 3.0:1, measured with respect to each
Fiscal Quarter on the basis of the four Fiscal Quarters then ended.

 

6.7 Financial and Business Information. Borrowers shall deliver and cause to be
delivered to Lender the following (all to be in form and substance reasonably
satisfactory to Lender):

 

(a) Financial Statements and Additional Information.

 

(i) Audited Financial Statements. As soon as available but in any event, within
one hundred thirty-five (135) days after the end of each Fiscal Year of
Borrowers, financial statements of Borrowers for such year which present fairly
the Borrowers’ financial condition, including the balance sheet of Borrowers as
at the end of such Fiscal Year and a statement of cash flows and income
statement for such Fiscal Year, all on a consolidated and consolidating basis,
setting forth in the consolidated statements in comparative form, the
corresponding figures as at the end of and for the previous Fiscal Year, all in
reasonable detail, including all supporting schedules, and audited by
independent public accountants of recognized standing, selected by Borrowers and
reasonably satisfactory to Lender, and prepared in accordance with GAAP; and

 

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(ii) Interim Financial Statements.

 

(A) As soon as available but in any event within forty-five (45) days after the
end of each Fiscal Quarter, internally prepared quarterly consolidated and
consolidating financial statements for the Borrowers, along with year to date
information, including balance sheet, income statement and statements of cash
flows with respect to the periods measured; and

 

(B) As soon as available but in any event within forty-five (45) days after the
end of each fiscal month end, internally prepared monthly consolidated and
consolidating financial statements for the Borrowers, along with year to date
information, including balance sheet, income statement and statements of cash
flows with respect to the periods measured;

 

(iii) Additional Information. Promptly upon request, deliver such other
information concerning the Borrowers and the Collateral as Lender may from time
to time reasonably request, including Medicare and Medicaid cost reports and
audits, annual reports, security law filings and reports to any security
holders;

 

(iv) Projections. No later than sixty (60) days after the beginning of each
Fiscal Year, an annual consolidated budget for the Borrowers for the next
succeeding fiscal year, which Lender shall maintain as confidential in
accordance with the provisions of Section 9.6 hereof;

 

(v) Good Standing Certificates. Contemporaneously with delivery of the annual
financial statements referred to in clause (i) above, a good standing
certificate from each Borrower’s respective state of organization or formation
evidencing that such Borrower remains in good standing in, and continues to be
organized under the laws of, such state.

 

(vi) Change in Fiscal Year. No later than thirty (30) days prior to the
effective date thereof, written notice of any change in Borrowers’ Fiscal Year
end.

 

(vii) Governmental Communications. Within five (5) Business Days after the
sending, filing or receipt thereof, copies of all material reports and
statements that Providence or any Subsidiary sends to or receives from any
national securities exchange or federal governmental securities regulatory
agency or that Providence sends to its shareholders generally, including any
registration statements or other filings that Providence files with the
Securities and Exchange Commission or any national securities exchange or the
National Association of Securities Dealers, Inc.

 

(viii) Insurance Information. Within ten (10) Business Days after the execution
thereof, copies of any material agreement, contract or other writing relative to
insurance or reinsurance coverage provided by the Captive to any Person.

 

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(b) Notice of Event of Default. Promptly upon an Authorized Officer becoming
aware of the existence of any condition or event which constitutes an Event of
Default or Unmatured Event of Default under this Agreement, a written notice
specifying the nature and period of existence thereof and what action Borrowers
are taking (and propose to take) with respect thereto; and

 

(c) Notice of Claimed Default. Promptly upon receipt by Borrowers, notice of
default, oral or written, given to Borrowers by any creditor for borrowed money
in excess of $100,000.

 

6.8 Officers’ Certificates. Along with the financial statements delivered to
Lender by Borrowers at the end of each Fiscal Quarter and Fiscal Year pursuant
to Section 6.7(a) hereof, Borrowers shall deliver to Lender a certificate (in
the form of Exhibit 6.8 attached hereto and made a part hereof) signed on behalf
of each Borrower by the chief financial officer of such Borrower setting forth:

 

(a) Covenant Compliance. The information (including detailed calculations)
required in order to establish whether Borrowers are in compliance with the
requirements of Section 6.6 as of the end of the period covered by the financial
statements then being furnished (and any exhibits appended thereto) under
Section 6.7;

 

(b) Event of Default. That the signer in his capacity as an Authorized Officer
of Borrowers has reviewed the relevant terms of this Agreement, and has made (or
caused to be made under his supervision) a review of the transactions and
conditions of Borrowers from the beginning of the accounting period covered by
the financial statements being delivered therewith to the date of the
certificate, and that such review has not disclosed the existence during such
period of any condition or event which constitutes an Event of Default or
Unmatured Event of Default or if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action Borrowers
have taken or propose to take with respect thereto;

 

(c) Changes of Authorized Officers. Any change in the identity of the Authorized
Officers of the Borrowers and, in the event of any such change, an incumbency
certificate setting forth the name, title and specimen signature of any new
Authorized Officer; and

 

(d) Investments. A summary of all Investments made or incurred by the Borrowers
during the period covered by such financial statements, including the nature,
amount and beneficiary or recipient of each such Investment.

 

6.9 Inspection. Borrowers will permit any of Lender’s officers or other
representatives to visit and inspect Borrowers’ location(s) or where any
Collateral is kept during regular business hours to examine and audit all of
Borrowers’ books of account, records, reports and other papers, to make copies
and extracts therefrom and to discuss Borrowers’ affairs, finances and accounts
with Borrowers’ officers, employees and independent certified public accountants
and attorneys. Borrowers shall pay to Lender all reasonable fees based on
standard rates for such inspections, currently at the rate of $850 per day, per
person (plus out-of-pocket expenses).

 

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So long as no Event of Default has occurred and is continuing, (i) Lender shall
provide Borrowers with reasonable notice of any intended inspection, and (ii)
Lender shall not conduct more than one such inspection in any fiscal quarter of
the Borrowers.

 

6.10 Tax Returns and Reports. At Lender’s request from time to time, Borrowers
shall promptly furnish Lender with copies of the annual federal and state income
tax returns of Borrowers and their Subsidiaries.

 

6.11 Material Adverse Developments. Borrowers agree that promptly upon Borrowers
or any of their officers becoming aware of any development or other information
which could reasonably be expected to have a Material Adverse Effect, Borrowers
shall give Lender telephonic or facsimile notice specifying the nature of such
development or information and such anticipated effect. In addition, such verbal
communication shall be confirmed by written notice thereof to Lender on the next
Business Day after such verbal notice is given.

 

6.12 Places of Business. Borrowers shall give ten (10) days prior written notice
to Lender of (i) any change in (A) the location of the chief executive office of
any of the Borrowers or (B) any location at which any Borrower maintains patient
or billing information which is not duplicated or capable of being duplicated at
any other location for which Lender has received a Landlord Waiver Agreement, or
(ii) the establishment of any new, or the discontinuance of any existing place
of business. In the event that any Borrower shall establish any new place of
business at which patient billing information or billing systems are or will be
located, or relocate any such information or systems from a Designated Location
to any other place of business of the Borrowers, Borrowers shall deliver to
Lender a landlord waiver agreement executed by the lessor of such Property in
form and substance reasonably satisfactory to Lender.

 

6.13 Notice of Action. Borrowers will promptly notify Lender in the event of any
legal action, dispute, setoff, counterclaim, defense or reduction that is or
which is reasonably expected to be asserted by an Obligor with respect to any
Account(s) that may have a material adverse effect on the collectibility of
Accounts representing more than one percent (1.0%) of the value of all Eligible
Accounts included in the Borrowing Base.

 

6.14 Verification of Information. At the request of Lender, Borrowers will use
commercially reasonable efforts to provide and verify to the Lender the accuracy
of information concerning Borrowers of the type provided to Lender in connection
with Lender’s decision to enter into this Agreement and such other information
concerning Borrowers as Lender may reasonably request in connection with any
offering documents with respect to the contemplated securitization of, and sale
of securities backed by, the Eligible Accounts pooled together with collateral
from other loans in the Lender’s portfolio (the “Securities”), including,
without limitation, all information necessary to provide full and complete
disclosure to the Lender of all material facts pertaining to an investment in
the Securities in compliance with federal and state securities and blue sky
laws, and such information may be published in such offering documents and
relied upon by Lender and any party arranging the offering of such Securities by
Lender or its assignee. No such information provided by the Borrowers to the
Lender shall contain any untrue statement of a material fact or omit a material
fact (known to the Borrowers in the case of any document not furnished by them)
necessary to make the statements contained therein not misleading in light of
the circumstances in which the same were made.

 

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6.15 Value Track System™. Borrowers shall permit Lender to interface its Value
Track System™ to Borrowers’ data files and will assist Lender in completing and
maintaining such interface such that the interface can interpret, track and
reconcile the Accounts Detail File provided by Borrowers.

 

6.16 Commercial Tort Claims. Borrowers shall provide written notice to Lender of
any material commercial tort claim to which any Borrower is or becomes a party
or which otherwise inures to the benefit of Borrowers and which relates,
directly or indirectly, to any Collateral. Such notice shall contain a
sufficient description of the commercial tort claim including the parties, the
court in which the claim was commenced (if applicable), the docket number
assigned to the case (if applicable), and a detailed explanation of the events
giving rise to such claim. Borrowers hereby grant Lender a security interest in
such commercial tort claim to secure payment of the Obligations. Borrowers shall
execute and deliver such instruments, documents and agreements as Lender may
reasonably require in order to obtain and perfect such security interest
including, without limitation, a security agreement or amendment to this
Agreement all in form and substance satisfactory to Lender. Each Borrower
authorizes Lender to file (without such Borrower’s signature) financing
statements or amendments to existing financing statements as Lender reasonably
deems necessary to perfect the security interest; provided, that so long as no
Event of Default or Unmatured Event of Default has occurred and is continuing,
Lender shall give Borrowers and their counsel a reasonable opportunity to review
and comment on each such financing statement or amendment prior to filing.

 

SECTION 7. BORROWERS’ NEGATIVE COVENANTS

 

Borrowers covenant that, until all of Borrowers’ Obligations to Lender are paid
and satisfied in full and the Credit Facilities have been terminated:

 

7.1 Merger, Consolidation, Dissolution or Liquidation.

 

(a) No Borrower shall sell, lease, license, transfer or otherwise dispose of any
of their Property, other than: (i) Property sold, leased, licensed, transferred
or otherwise disposed of in the ordinary course or ordinary operation of such
Borrower’s business; (ii) Property sold, leased, licensed, transferred or
otherwise conveyed by such Borrower to another Borrower; and (iii) sales,
leases, licenses, transfers and other dispositions of Property in an amount for
all of the Borrowers in the aggregate not to exceed $100,000 in any calendar
year, in each case, without Lender’s prior written consent, which consent will
not be unreasonably withheld.

 

(b) No Borrower shall merge or consolidate with, or acquire, any Person other
than another Borrower, without Lender’s prior written consent, except that (i)
Borrowers may consummate Permitted Acquisitions, and (ii) Borrowers may
consummate transactions excluded from clauses (a), (b) or (c) of the definition
of “Change of Control”.

 

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(c) No Borrower shall commence a dissolution or liquidation without Lender’s
prior written consent, except for the dissolution or liquidation of an inactive
Subsidiary, provided that any assets of such Subsidiary are transferred to a
Borrower.

 

7.2 Liens and Encumbrances. No Borrower shall cause or permit or agree or
consent to cause or permit in the future (upon the happening of a contingency or
otherwise) the Collateral, whether now owned or hereafter acquired, to be
subject to any Lien other than (a) Permitted Liens, and (b) Liens on cash
deposits securing guarantees and other credit support obligations permitted
under Section 7.5(a) hereof.

 

7.3 [Intentionally Omitted]

 

7.4 Transactions With Affiliates, Subsidiaries, Non-Profit Borrowers and Managed
Entities.

 

(a) Except for the existing transactions and arrangements described on Schedule
7.4 hereto, no Borrower shall enter into any transaction with any Non-Profit
Borrower, any Subsidiary or other Affiliate of any Borrower (other than another
Borrower), or any Managed Entity, including, without limitation, the purchase,
sale, lease or exchange of Property, or the lending, capitalization or giving of
funds (other than as specifically permitted hereunder) to any such Non-Profit
Borrower, Affiliate, Subsidiary or Managed Entity, unless (i) the transaction is
in the ordinary course of and pursuant to the reasonable requirements of the
applicable Borrower’s business and upon terms no less favorable to such Borrower
as would be obtained in a comparable arm’s-length transaction with any Person
not an Affiliate, Subsidiary, Non-Profit Borrower or Managed Entity, and (ii)
such transaction is not otherwise prohibited hereunder. Notwithstanding the
foregoing, to the extent not otherwise prohibited hereunder, (x) Providence may
raise equity capital from Affiliates, and (y) the Borrowers shall be permitted
to incur additional Subordinated Debt on terms and conditions reasonably
satisfactory to the Lender.

 

(b) Subject in any event to the limitations of Section 7.4(a) above, except with
the prior written consent of Lender (which consent shall not be unreasonably
withheld), no Borrower shall create or acquire any Subsidiary unless such
Subsidiary engages in a business substantially related to the Business of
Borrowers as conducted immediately prior to the Closing Date, and if required by
Lender, such Subsidiary becomes a Borrower hereunder pursuant to the terms of a
Joinder Agreement in substantially the form of Exhibit 7.4 attached hereto.

 

7.5 Guarantees. No Borrower shall, or permit any of its Subsidiaries to, become
or be liable, directly or indirectly, primarily or secondarily, matured or
contingent, in any manner, whether as guarantor, surety, accommodation maker, or
otherwise, for the existing or future Indebtedness of any kind of any other
Person, except:

 

(a) Investments consisting of guarantees or other credit support issued by a
Borrower with respect to Indebtedness or lease obligations of Affiliates,
Subsidiaries which are not Borrowers hereunder, Non-Profit Borrowers and Managed
Entities, which are permitted under Sections 7.7(d), 7.7(e) and 7.7(f) hereof;

 

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(b) existing guarantees described on Schedule 7.5 hereto;

 

(c) the endorsement in the ordinary course of business of negotiable instruments
for deposit or collection;

 

(d) guaranties of Indebtedness permitted under Section 7.6 hereof;

 

(e) guaranties of leases permitted hereunder of which a Borrower is the lessee;

 

(f) guaranties of Subordinated Debt, provided that such guaranty is subordinated
to the Obligations pursuant to a Subordination Agreement; and

 

(g) obligations of the Captive in respect of insurance and reinsurance coverage
as permitted under Section 6.2(b) above.

 

7.6 Indebtedness. Without Lender’s prior written consent, no Borrower shall, or
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt), except:

 

(a) Indebtedness in favor of Lender;

 

(b) Subordinated Debt;

 

(c) additional Indebtedness outstanding as of the Closing Date and reflected on
Schedule 7.6 hereto;

 

(d) Indebtedness incurred in connection with the acquisition of any real or
personal Property by the Borrowers, and obligations under Capitalized Leases,
provided that as of any date of determination, the amount thereof shall not
exceed the sum of $1,000,000, and provided further, that no such obligation
shall be incurred at any time during which an Event of Default or Unmatured
Event of Default has occurred and is continuing hereunder;

 

(e) obligations permitted pursuant to Section 7.5;

 

(f) inter-company Indebtedness owing to any other Borrower;

 

(g) provided that no Event of Default or Unmatured Event of Default has occurred
and is continuing hereunder at the time of incurrence, additional Indebtedness
in an aggregate amount not to exceed $1,000,000 at any time outstanding;

 

(h) Indebtedness of a Target acquired by the Borrowers through a Permitted
Acquisition which becomes a Borrower hereunder pursuant to a Joinder Agreement
and/or Indebtedness of a Target assumed by a Borrower in connection with a
Permitted Acquisition, in each case, in respect of the acquisition of any real
or personal Property by the applicable obligor and obligations under Capitalized
Leases of the applicable obligor, provided that the aggregate amount of such
Indebtedness does not to exceed $1,000,000 at any time outstanding;

 

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(i) additional Indebtedness of a Target acquired by a Borrower through a
Permitted Acquisition which becomes a Borrower hereunder pursuant to a Joinder
Agreement and/or additional Indebtedness of a Target assumed by a Borrower in
connection with a Permitted Acquisition, in each case, so long as prior to and
after giving effect to such Permitted Acquisition and the assumption by the
applicable Borrower of such Indebtedness, (A) no Unmatured Event of Default or
Event of Default has occurred and is continuing or would result after giving
effect to such Permitted Acquisition and incurrence of such Indebtedness, and
(B) Borrowers would have been in compliance with the provisions of Section 6.6
for the four Fiscal Quarter period reflected in the Compliance Certificate most
recently delivered to Lender pursuant to Section 6.8(a) prior to the
consummation of such Permitted Acquisition (after giving effect to such
Permitted Acquisition and all Indebtedness incurred in connection therewith as
if made on the first day of such period); and

 

(j) obligations of the Captive in respect of insurance and reinsurance coverage
as permitted under Section 6.2(b) above.

 

7.7 Loans, Investments, Acquisitions. No Borrower shall, or permit any of its
Subsidiaries to, make or be permitted to have outstanding, directly or
indirectly, any Investments or any loans, advances or extensions of credit to
any Person, or invest in (by capital contribution, dividend or otherwise) or
purchase or repurchase the Capital Stock or Indebtedness or all or a substantial
part of the assets or property of any Person, or form or acquire any
Subsidiaries, or agree to do any of the foregoing, except:

 

(a) Loans and advances in favor of other Borrowers made in the ordinary course
of business;

 

(b) Transactions permitted under Section 7.4(a);

 

(c) Existing equity Investments in Subsidiaries and debt and equity Investments
in Borrowers and/or new Subsidiaries permitted under Section 7.4(b) and in
connection with Permitted Acquisitions;

 

(d) Collateralized Investments not exceeding $1,000,000 individually or
$3,000,000 in the aggregate outstanding at any time, provided that Borrowers
shall not make any such Collateralized Investment at any time that an Unmatured
Event of Default or Event of Default has occurred and is continuing;

 

(e) Additional Investments in Affiliates, Subsidiaries which are not Borrowers
hereunder, Non-Profit Borrowers and Managed Entities, so long as prior to and
after giving effect to such Investment, (A) no Unmatured Event of Default or
Event of Default has occurred and is continuing or would result after giving
effect to such Investment, and (B) Borrowers would have been in compliance with
the provisions of Section 6.6 for the four Fiscal Quarter period reflected in
the Compliance Certificate most recently delivered to Lender pursuant to Section
6.8(a) prior to the making or incurrence of such Investment;

 

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(f) Additional Investments in Persons which may become Managed Entities or
Targets, not exceeding $250,000 in the aggregate outstanding at any time; and

 

(g) The consummation of Acquisitions, subject to the satisfaction of each of the
following conditions (a “Permitted Acquisition”):

 

(i) Lender shall receive at least 30 days’ prior written notice of such proposed
Acquisition, which notice shall include a reasonably detailed description of
such proposed Acquisition, including the identity of the Target;

 

(ii) such Acquisition shall only involve assets located in the United States or
Canada and comprising a business, or those assets of a business of the type
engaged in by Borrowers as of the date hereof or ancillary businesses reasonably
related to the business engaged in by Borrowers as of the date hereof;

 

(iii) such Acquisition shall be consensual and shall have been approved by the
board of directors or managers of the Target;

 

(iv) no additional Indebtedness, contingent obligations or other liabilities
shall be incurred, assumed or otherwise be reflected on a consolidated balance
sheet of the Borrowers and the Target after giving effect to such Permitted
Acquisition, except (A) Loans made hereunder, (B) ordinary course trade
payables, accrued expenses and unsecured Indebtedness of the Target, and (C)
Indebtedness and contingent obligations permitted hereunder (including
Indebtedness permitted under Section 7.6(h) and 7.6(i) and Subordinated Debt
issued to the seller subject to a Subordination Agreement satisfactory to Lender
in its sole discretion);

 

(v) the business and assets acquired in such Permitted Acquisition shall be free
and clear of all Liens and security interests other than Permitted Liens, and at
or prior to the closing of any Permitted Acquisition, (A) in the case of a
Capital Stock Acquisition, the Target, or in the case of an asset Acquisition,
the Person acquiring the assets of the Target, shall be a Borrower hereunder or
a wholly-owned Subsidiary of a Borrower which shall become a Borrower hereunder
and shall execute a Joinder Agreement pursuant hereto, and (B) Lender will be
granted a first priority perfected Lien and security interest in all assets
acquired pursuant to such Acquisition or in the assets and Capital Stock of the
Target, and Borrowers and the Target (if a Capital Stock acquisition) shall have
executed such documents and taken such actions as may be reasonably required by
Lender in connection therewith;

 

(vi) concurrently with delivery of the notice referred to in clause (i) above,
Borrowers shall have delivered to Lender, in form and substance reasonably
satisfactory to Lender a pro forma consolidated balance sheet, income statement
and cash flow statement of Providence and its Subsidiaries (the “Acquisition Pro
Forma”), based on recent financial statements, which shall be complete and shall
fairly present in all material respects the assets, liabilities, financial
condition and results of operations of Providence and its Subsidiaries in
accordance with GAAP consistently applied, but

 

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taking into account the consummation of such Permitted Acquisition and the
funding of all Loans and incurrence of all Indebtedness, if applicable, in
connection therewith, and such Acquisition Pro Forma shall reflect that on a pro
forma basis, (A) no Unmatured Event of Default or Event of Default has occurred
and is continuing or would result after giving effect to such Permitted
Acquisition, and (B) Borrowers would have been in compliance with the provisions
of Section 6.6 for the four Fiscal Quarter period reflected in the Compliance
Certificate most recently delivered to Lender pursuant to Section 6.8(a) prior
to the consummation of such Permitted Acquisition (after giving effect to such
Permitted Acquisition and all Loans funded and Indebtedness incurred, if
applicable, in connection therewith as if made on the first day of such period);

 

(vii) on or prior to the date of such Permitted Acquisition, Lender shall have
received, in form and substance reasonably satisfactory to Lender, copies of the
acquisition agreement and related agreements and instruments, Organizational
Documents, and such financial statements, reports and other information relative
to the Target or the business proposed to be acquired, its assets, principals
and such other matters relative to the Target or such business and the proposed
Acquisition as Lender shall reasonably request, and all opinions, certificates,
lien search results and other documents reasonably requested by Lender; and

 

(viii) at the time of such Permitted Acquisition and after giving effect
thereto, no Unmatured Event of Default or Event of Default has occurred and is
continuing.

 

(h) The consummation of Acquisitions subject to satisfaction of each of the
following conditions:

 

(i) such Acquisitions are funded solely from Borrowers’ funds on hand or
Indebtedness permitted hereunder;

 

(ii) such Acquisitions comply with each of the conditions set forth in clauses
(ii), (iii), (iv), (v) and (viii) of Section 7.7(g) above;

 

(iii) prior to and after giving effect to each such Acquisition, the Borrowers
are in pro forma compliance with the provisions of Section 6.6 hereof; and

 

(iv) the fair market consideration exchanged in connection with such
Acquisitions does not exceed (A) $1,000,000 with respect to any individual
Acquisition, or (b) $2,500,000 in the aggregate with respect to all Acquisitions
consummated pursuant to this Section 7.7(h) during the preceding twelve (12)
months.

 

Lender shall hold such financial statements, reports and other information
delivered by Borrowers in connection with any proposed Acquisition confidential
in accordance with the terms of any confidentiality agreement executed by
Borrowers and disclosed to Lender and, upon the request of Borrowers, Lender
shall execute counterparts to such confidentiality agreement and authorize the
delivery of such counterparts to such Persons as Borrowers may reasonably
request. Notwithstanding the foregoing, the Accounts of the Target shall not be
included in Eligible Accounts without the prior written consent of the Lender.

 

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7.8 Withdrawals. Borrowers shall not declare or pay or make any Withdrawals to
their Shareholders or their successors or assigns (other than Restricted
Payments by a Subsidiary to its parent which is a Borrower hereunder), if, prior
to or after giving effect to the applicable Restricted Payment, an Event of
Default or Unmatured Event of Default has or would occur and be continuing.

 

7.9 Payments on Account of Subordinated Debt. Borrowers shall not, and shall not
permit any Subsidiary to, make any payment on account of any Subordinated Debt
if, prior to or after giving effect to the applicable payment, (i) an Event of
Default or Unmatured Event of Default has or would occur, or (ii) the relevant
Subordination Agreement would be breached.

 

7.10 No Interference with Collections. Borrowers shall not, and shall not permit
any Subsidiary to, take any action to interfere with the collection of the
Accounts, and Borrowers shall not amend or waive the terms and conditions of any
Account or any related Contract in any material adverse manner without Lender’s
prior written consent. Borrowers will continue to make all payments to Obligors
necessary to prevent any Obligor offsetting any earlier overpayment to Borrowers
against any amounts such Obligor owes on an Account.

 

7.11 Deposit Accounts. Borrowers shall not establish any deposit account unless
the applicable Borrower(s) shall have delivered to Lender an agreement of the
applicable depository institution in form substantially similar to the Provider
Account Agreements and sufficient to establish “control” over such deposit
accounts in favor of Lender within the meaning of the Uniform Commercial Code.

 

SECTION 8. EVENTS OF DEFAULT

 

8.1 Events of Default. Each of the following events shall constitute an event of
default (“Event of Default”) and Lender shall thereupon have the option to
declare the Obligations immediately due and payable, all without demand, notice,
presentment or protest or further action of any kind (it also being understood
that the occurrence of any of the events or conditions set forth in
subparagraphs (j), (k), (l) or (r) shall automatically cause an acceleration of
the Obligations):

 

(a) Payments - if Borrowers fail to make any payment of principal or interest on
the date when such payment is due and payable and such failure continues for a
period of two (2) Business Days; provided however, that the two (2) Business
Days grace period shall not be applicable if such payments are due and payable
due to maturity, acceleration or demand, whether following an Event of Default
or otherwise; or

 

(b) Other Charges - if Borrowers fail to pay any other charges, fees, Expenses
or other monetary obligations owing to Lender, arising out of or incurred in
connection with this Agreement on the date when such payment is due and payable,
whether upon maturity, acceleration, demand or otherwise, and such failure
continues for a period of five (5) Business

 

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Days after the earlier of Borrowers becoming aware of such failure or Borrowers
receipt of written notice of such failure from Lender; provided however, that
the five (5) Business Day grace period shall not be applicable if such payments
are due and payable due to maturity, acceleration or demand, whether following
an Event of Default, or otherwise; or

 

(c) Particular Covenant Defaults - if Borrowers fail to perform, comply with or
observe any covenant or undertaking contained in this Agreement not otherwise
described in this Section 8.1, and such failure continues for a period of ten
(10) Business Days after the earlier of Borrowers becoming aware of such failure
or Borrowers receipt of written notice of such failure from Lender; or

 

(d) Change in Control - a Change in Control shall occur; or

 

(e) Uninsured Loss - if there shall occur any uninsured damage to or loss,
theft, or destruction in excess of $1,000,000 with respect to any portion of the
Property of a Borrower; or

 

(f) Warranties or Representations - if any warranty, representation or other
statement by or on behalf of Borrowers, contained in or pursuant to this
Agreement, or in any document, agreement or instrument furnished in compliance
with, relating to, or in reference to this Agreement, is false, erroneous, or
misleading in any material respect when made; or

 

(g) Agreements with Others - if any Borrower shall default beyond any grace
period under any agreement in respect of any Indebtedness for borrowed money in
an amount in excess of $250,000 and (i) such default consists of the failure to
pay any principal, premium or interest with respect to such Indebtedness, or
(ii) such default consists of the failure to perform any covenant or agreement
with respect to such Indebtedness, in each case, if the effect of such default
is to cause or permit such Borrowers’ obligations which are the subject thereof
to become due prior to the scheduled maturity date or prior to the regularly
scheduled date of payment; or

 

(h) Other Agreements with Lender - if an event of default occurs under any other
existing or future agreement (related or unrelated) between or among Borrowers
and Lender, including without limitation, any other Loan Documents or any lease
agreements or finance agreements with any affiliate of Lender; or

 

(i) Judgments - if any final judgment for the payment of money in excess of
$500,000 shall be rendered against any of the Borrowers which is not fully and
unconditionally covered by insurance or an appeal bond, or for which Borrowers
have not established a cash or cash equivalent reserve in the amount of such
judgment; or

 

(j) Assignment for Benefit of Creditors, etc. - if any Borrower makes or
proposes an assignment for the benefit of creditors generally, offers a
composition or extension to creditors, or makes or sends notice of an intended
bulk sale of any business or assets now or hereafter owned or conducted by such
Borrower which could reasonably be expected to have a Material Adverse Effect;
or

 

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(k) Bankruptcy, Dissolution, etc. - upon the commencement of any action for the
dissolution or liquidation of any of the Borrowers, or the commencement of any
proceeding to avoid any transaction entered into by any of the Borrowers, or the
commencement of any case or proceeding for reorganization or liquidation of any
Borrower’s debts under the Bankruptcy Code or any other state or federal law now
or hereafter enacted for the relief of debtors, whether instituted by or against
Borrowers; provided, however, that the Borrowers shall have forty-five (45) days
to obtain the dismissal or discharge of involuntary proceedings filed against
them, it being understood that during such forty-five (45) day period, Lender
shall be not obligated to make Advances or Term Advances hereunder and Lender
may seek adequate protection in any bankruptcy proceeding; or

 

(l) Receiver - upon the appointment of a receiver, liquidator, custodian,
trustee or similar official or fiduciary for any of the Borrowers or for any of
their Property; provided, however, that the Borrowers shall have forty-five (45)
days to obtain the rescission of the appointment of such an official or
fiduciary without the consent of the Borrowers, it being understood that during
such forty-five (45) day period, Lender shall not be obligated to make Advances
of Term Advances hereunder, and Lender may seek adequate protection in any
relevant proceeding; or

 

(m) Execution Process, Seizure, etc. - the issuance of any execution or
distraint process against any of the Borrowers which could result in a Material
Adverse Effect, or any Property of Borrowers is seized without compensation by
any governmental entity, federal, state or local; or

 

(n) Termination of Business - if Borrowers cease any material portion of their
business operations as presently conducted; or

 

(o) Pension Benefits, etc. - if Borrowers fail to comply with ERISA, so that
grounds exist to permit the appointment of a trustee under ERISA to administer
their employee plans or to allow the Pension Benefit Guaranty Corporation to
institute proceedings to appoint a trustee to administer such plan(s), or to
permit the entry of a Lien to secure any deficiency or claim; or

 

(p) Investigations – Lender reasonably determines, based on evidence received by
Lender, that there is reasonable cause to believe that Borrowers may have
directly or indirectly been engaged in any type of activity which would be
reasonably likely to result in the forfeiture of any Property of Borrowers to
any governmental entity, federal, state or local; or

 

(q) Material Adverse Events -

 

(i) Lender reasonably determines that an event which materially and adversely
affects the likelihood of collection of a material portion of the Accounts has
occurred; or

 

(ii) There shall occur any Material Adverse Effect or a material adverse change
occurs in the business or condition of Borrowers.

 

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(r) Lockbox Instructions – Following the occurrence of a Lockbox Trigger Event
and notification thereof by Lender to the Lockbox Banks, any instruction or
agreement regarding a Lockbox or the bank accounts related thereto is amended or
terminated without the written consent of Lender, or if Borrowers fail, within
two (2) Business Days of receipt, to forward Collections it receives with
respect to any Accounts to the applicable Lockbox.

 

8.2 Cure. Nothing contained in this Agreement or the Loan Documents shall be
deemed to compel Lender to accept a cure of any Event of Default hereunder.

 

8.3 Rights and Remedies on Default.

 

(a) In addition to all other rights, options and remedies granted or available
to Lender under this Agreement or the Loan Documents, or otherwise available at
law or in equity, upon or at any time after the occurrence and during the
continuance of an Event of Default or Unmatured Event of Default, Lender may, in
its discretion, withhold or cease making Advances and Term Advances under the
Credit Facilities.

 

(b) In addition to all other rights, options and remedies granted or available
to Lender under this Agreement or the Loan Documents (each of which is also then
exercisable by Lender), Lender may, in its discretion, upon or at any time after
the occurrence and during the continuance of an Event of Default, terminate the
Credit Facilities.

 

(c) In addition to all other rights, options and remedies granted or available
to Lender under this Agreement or the Loan Documents (each of which is also then
exercisable by Lender), Lender may, upon or at any time after the occurrence and
during the continuance of an Event of Default, exercise all rights under the UCC
and any other applicable law or in equity, and under all Loan Documents
permitted to be exercised after the occurrence and during the continuance of an
Event of Default, including the following rights and remedies (which list is
given by way of example and is not intended to be an exhaustive list of all such
rights and remedies):

 

(i) Subject to all applicable laws and regulations governing payment of Medicare
and Medicaid receivables, the right to “take possession” of the Collateral, and
notify all Obligors of Lender’s security interest in the Collateral and require
payment under the Accounts to be made directly to Lender, and Lender may, in its
own name or in the name of the applicable Borrowers, exercise all rights of a
secured party with respect to the Collateral and collect, sue for and receive
payment on all Accounts, and settle, compromise and adjust the same on any terms
as may be satisfactory to Lender, in its sole and absolute discretion for any
reason or without reason and Lender may do all of the foregoing with or without
judicial process (including without limitation notifying the United States
postal authorities to redirect mail addressed to Borrowers, to an address
designated by Lender); or

 

(ii) Require Borrowers, at Borrowers’ expense, to assemble all or any part of
the Collateral and make it available to Lender at any place designated by
Lender, which may include providing Lender or any entity designated by Lender
with access

 

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(either remote or direct) to Borrowers’ information system for purposes of
monitoring, posting payments and rebilling Accounts to the extent deemed
desirable by Lender in its sole discretion; or

 

(iii) The right to reduce or modify the Commitments, the Borrowing Base or any
portion thereof, or the Advance Rate, or to modify the terms and conditions upon
which Lender may be willing to consider making Loans under the Credit Facilities
or to take additional reserves in the Borrowing Base for any reason.

 

(d) Borrowers hereby agree that a notice received at least ten (10) days before
the time of any intended public sale or before the time after which any private
sale or other disposition of the Collateral is to be made, shall be deemed to be
reasonable notice of such sale or other disposition. If permitted by applicable
law, any Collateral which threatens to speedily decline in value or which is
sold on a recognized market may be sold immediately by Lender without prior
notice to Borrowers. Borrowers covenant and agree not to interfere with or
impose any obstacle to Lender’s exercise of its rights and remedies with respect
to the Collateral.

 

8.4 Nature of Remedies. All rights and remedies granted Lender hereunder and
under the Loan Documents, or otherwise available at law or in equity, shall be
deemed concurrent and cumulative, and not alternative remedies, and Lender may
proceed with any number of remedies at the same time until all Obligations are
satisfied in full. The exercise of any one right or remedy shall not be deemed a
waiver or release of any other right or remedy, and Lender, upon or at any time
after the occurrence of an Event of Default, may proceed against Borrowers, at
any time, under any agreement, with any available remedy and in any order.

 

8.5 Set-Off. If any bank account or other Property held by or with Lender, or
any Affiliate of Lender, or any participant is attached or otherwise liened or
levied upon by any third party, Lender (and such participant) shall have and be
deemed to have, without notice to Borrowers, the immediate right of set-off and
may apply the funds or other amounts or property thus set off against any of
Borrowers’ Obligations hereunder.

 

SECTION 9. MISCELLANEOUS

 

9.1 GOVERNING LAW. THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND DOCUMENTS,
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF
THE STATE OF NEW JERSEY. THE PROVISIONS OF THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE
DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL
NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE
AND EFFECT.

 

9.2 Integrated Agreement. This Agreement, the Revolving Credit Note, the Term
Note, the other Loan Documents and all related agreements, and shall be
construed as integrated and complementary of each other, and as augmenting and
not restricting Lender’s rights and remedies. If, after applying the foregoing,
an inconsistency still exists, the provisions of this Agreement shall constitute
an amendment thereto and shall control.

 

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9.3 Waiver and Indemnity.

 

(a) No omission or delay by Lender in exercising any right or power under this
Agreement or any related agreements and documents will impair such right or
power or be construed to be a waiver of any default, or Event of Default or an
acquiescence therein, and any single or partial exercise of any such right or
power will not preclude other or further exercise thereof or the exercise of any
other right, and as to Borrowers no waiver will be valid unless in writing and
signed by Lender and then only to the extent specified.

 

(b) Borrowers release and shall indemnify, defend and hold harmless Lender, and
its officers, directors, employees and agents, of and from any claims, demands,
liabilities, obligations, judgments, injuries, losses, damages and costs and
expenses (including, without limitation, reasonable legal fees) resulting from
(i) acts or conduct of Borrowers under, pursuant or related to this Agreement
and the other Loan Documents, (ii) Borrowers’ breach, or alleged breach, or
violation of any representation, warranty, covenant or undertaking contained in
this Agreement or the other Loan Documents, and (iii) Borrowers’ failure, or
alleged failure, to comply with any or all laws, statutes, ordinances,
governmental rules, regulations or standards, whether federal, state or local,
or court or administrative orders or decrees (including without limitation
environmental laws, etc.), and all costs, expenses, fines, penalties or other
damages resulting therefrom, unless resulting from acts or conduct of Lender
constituting willful misconduct or gross negligence.

 

(c) Lender shall not be liable for, and Borrowers hereby agree that Lender’s
liability in the event of a breach by Lender of this Agreement shall be limited
to Borrowers’ direct damages suffered and shall not extend to, any consequential
or incidental damages. In the event Borrowers bring suit against Lender in
connection with the transactions contemplated hereunder, and Lender is found not
to be liable, Borrowers shall indemnify and hold Lender harmless from all costs
and expenses, including attorneys’ fees, incurred by Lender in connection with
such suit.

 

9.4 Time. Whenever Borrowers shall be required to make any payment, or perform
any act, on a day which is not a Business Day, such payment may be made, or such
act may be performed, on the next succeeding Business Day. Time is of the
essence in Borrowers’ performance under all provisions of this Agreement and all
related agreements and documents.

 

9.5 Expenses of Lender.

 

(a) At Closing and from time to time thereafter, Borrowers will pay all
reasonable expenses of Lender on demand (including, without limitation, search
costs, audit fees, appraisal fees, and the fees and expenses of legal counsel
for Lender) relating to this Agreement, and all related agreements and
documents, including, without limitation, expenses incurred in the analysis,
negotiation, preparation, closing, administration and enforcement of this
Agreement and the other Loan Documents, the enforcement, protection and defense
of the rights of Lender

 

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in and to the Loans and Collateral or otherwise hereunder, and any reasonable
expenses relating to extensions, amendments, waivers or consents pursuant to the
provisions hereof, or any related agreements and documents or relating to
agreements with other creditors, or termination of this Agreement (collectively,
the “Expenses”). Any Expenses not paid upon demand by Lender shall bear interest
at the per annum rate equal to the highest interest rate then applicable to the
Loans.

 

(b) In addition, if at any time following the date of this Agreement, Borrowers
effect any change which results in a change in the format or sequence of
Borrowers’ data, Borrowers shall pay to Lender its reasonable charge for
implementing such changes as are necessary to accommodate the changes in the
format or sequence of the data such that the Value Track System™ is capable of
importing such data, including an hourly fee of $125.

 

9.6 Confidentiality. Except as provided in Section 9.17 hereof or to the extent
required by law or applicable regulations, Borrowers and Lender agree to
maintain the confidentiality of this Agreement and not to disclose the contents
hereof or provide a copy hereof to any third party, except (i) accountants,
lawyers and financial advisers of the parties who are informed of and agree to
be bound by this Section 9.6, and (ii) that copies hereof may be provided to any
assignee or participant (or potential assignee or participant) of Lender’s
interests herein, any investors or prospective investors who acquire or may
acquire Securities backed by Accounts and any parties which facilitate the
issuance of such Securities, including rating agencies, guarantors and insurers
who are informed of and agree to be bound by this Section 9.6. Subject to
disclosures required pursuant to subpoena or under applicable law, Lender agrees
to maintain the confidentiality of patient information obtained as a result of
its interests in, or duties with respect to, the Accounts. In addition to the
foregoing, Lender shall hold all non-public information relating to any Borrower
obtained in connection with this Agreement (including, without limitation,
information received in the context of matters described in Sections 6.9, 6.10
and 6.11 hereof), any other Loan Document or other documents delivered in
connection herewith or therewith as confidential in accordance with customary
procedures for handling confidential information of its nature. Unless
specifically prohibited by applicable law or court order, the Lender shall
notify the Borrowers of any request by any governmental authority or
representative thereof for disclosure of any such non-public information prior
to disclosure of such information.

 

9.7 Notices.

 

(a) Any notices or consents required or permitted by this Agreement shall be in
writing and shall be deemed given if delivered in person or if sent by telecopy
or by nationally recognized overnight courier, or via first class, Certified or
Registered mail, postage prepaid, to the address of such party set forth below,
unless such address is changed by written notice hereunder:

 

    Notices to Borrowers:   The Providence Service Corporation         5524 East
Fourth Street         Tucson, AZ 85711         Attn: Fletcher J. McCusker, Chief
Executive Officer         Telephone: (520) 747-6600         Fax: (520) 747-6605

 

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    With a copy to:    Blank Rome, LLP          One Logan Square          18th
and Cherry Street          Philadelphia, PA 19103          Attn: Thomas P.
Dwyer, Esq.          Telephone: (215) 569-5500          Fax: (215) 569-5555    
Notices to Lender:    Healthcare Business Credit Corporation          305
Fellowship Road, Suite 300          Mount Laurel, NJ 08054          Attn:
Bernard J. Lajeunesse, President          Telephone: (800) 952-0245         
Fax: (856) 222-0568     With a copy to:    Greenberg Traurig, LLP          One
International Place          Boston, MA 02110          Attn: Jeffrey M. Wolf,
Esq.          Telephone: (617) 310-6000          Fax: (617) 310-6001

 

(b) Any notice sent by Lender or Borrowers, by any of the above methods shall be
deemed to be given when so received.

 

(c) Lender shall be fully entitled to rely upon any facsimile transmission or
other writing purported to be sent by any Authorized Officer (whether requesting
an Advance or otherwise) as being genuine and authorized.

 

9.8 Headings. The headings of any paragraph or Section of this Agreement are for
convenience only and shall not be used to interpret any provision of this
Agreement.

 

9.9 Survival. All warranties, representations, and covenants made by any or all
Borrowers and/herein, or in any agreement referred to herein or on any
certificate, document or other instrument delivered by it or on its behalf under
this Agreement, shall be considered to have been relied upon by Lender, and
shall survive the delivery to Lender of the Notes and the other Loan Documents,
regardless of any investigation made by Lender or on its behalf. All statements
in any such certificate or other instrument prepared and/or delivered for the
benefit of Lender shall constitute warranties and representations by Borrowers
hereunder. Except as otherwise expressly provided herein, all covenants made by
Borrowers hereunder or under any other agreement or instrument shall be deemed
continuing until all Obligations are satisfied in full.

 

9.10 Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties. Borrowers may
not transfer, assign or delegate any of their duties or obligations hereunder.
Lender shall have the right at any

 

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time or times to assign all or any portion of the Credit Facilities and the
Commitments and/or grant participations in the Obligations, provided, however,
that so long as no Unmatured Event of Default or Event of Default has occurred
and is continuing, (i) Lender shall notify the Borrower Agent of any proposed
assignment and Borrowers shall have the right to approve the applicable assignee
(which approval shall not be unreasonably withheld or delayed), and (ii) the
Lender shall negotiate in good faith with the Borrowers to amend this Agreement
and the other Loan Documents to add reasonable and customary language relating
to multiple lenders. Notwithstanding the foregoing, the Borrowers shall not have
the right to approve (x) an assignment of the rights of Lender with respect to
the Loans as collateral security to Lender’s funding sources, (y) any assignment
by Lender in connection with the consummation of any securitization or sale of
Securities contemplated by Section 9.14 hereof, or (z) a sale of the Lender or
all or a substantial portion of its portfolio of loans.

 

9.11 Duplicate Originals. Two or more duplicate originals of this Agreement may
be signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument. This Agreement may be
executed in counterparts, all of which counterparts taken together shall
constitute one completed fully executed document.

 

9.12 Modification. No modification hereof or any agreement referred to herein
shall be binding or enforceable unless in writing and signed by Borrowers and
Lender.

 

9.13 Third Parties. No rights are intended to be created hereunder, or under any
related agreements or documents for the benefit of any third party donee,
creditor or incidental beneficiary of Borrowers. Nothing contained in this
Agreement shall be construed as a delegation to Lender of Borrowers’ duty of
performance, including, without limitation, Borrowers’ duties under any account
or contract with any other Person.

 

9.14 Waivers.

 

(a) Borrowers hereby consent and agree that Lender, at any time or from time to
time in its discretion may: (i) settle, compromise or grant releases for
liabilities of Borrowers, and/or any other Person or Persons liable for any
Obligations; (ii) following the occurrence of an Event of Default, exchange,
release, surrender, sell, subordinate or compromise any Collateral of any party
now or hereafter securing any of the Obligations; and (iii) following an Event
of Default, apply any and all payments received at any time against the
Obligations in any order as Lender may determine; all of the foregoing in such
manner and upon such terms as Lender may see fit, without notice to or further
consent from Borrowers who hereby agree and shall remain bound upon this
Agreement notwithstanding any such action on Lender’s part.

 

(b) The liability of Borrowers hereunder is absolute and unconditional and shall
not be reduced, impaired or affected in any way by reason of (i) any failure to
obtain, retain or preserve, or the lack of prior enforcement of, any rights
against any Person or Persons, or in any Property, (ii) the invalidity or
unenforceability of any Obligations or rights in any Collateral, (iii) any delay
in making demand upon Borrowers or any delay in enforcing, or any failure to
enforce, any rights against Borrowers or in any Collateral even if such rights
are thereby lost, (iv) any failure, neglect or omission to obtain, perfect or
retain any lien upon, protect, exercise rights

 

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against, or realize on, any Property of Borrowers, or any other party securing
the Obligations, (v) the existence or non-existence of any defenses which may be
available to the Borrowers with respect to the Obligations, or (vi) the
commencement of any bankruptcy, reorganization, liquidation, dissolution or
receivership proceeding or case filed by or against any of Borrowers.

 

9.15 CONSENT TO JURISDICTION. BORROWERS AND LENDER HEREBY IRREVOCABLY CONSENT TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN THE STATE OF NEW
JERSEY IN ANY AND ALL ACTIONS AND PROCEEDINGS WHETHER ARISING HEREUNDER OR UNDER
ANY OTHER AGREEMENT OR UNDERTAKING. BORROWERS WAIVE ANY OBJECTION TO IMPROPER
VENUE AND FORUM NON-CONVENIENS TO PROCEEDINGS IN ANY SUCH COURT AND ALL RIGHTS
TO TRANSFER FOR ANY REASON. BORROWERS IRREVOCABLY AGREE TO SERVICE OF PROCESS BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED TO THE ADDRESS OF THE APPROPRIATE PARTY
SET FORTH HEREIN.

 

9.16 WAIVER OF JURY TRIAL. BORROWERS AND LENDER HEREBY WAIVE ANY AND ALL RIGHTS
THEY MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION COMMENCED BY OR
AGAINST LENDER WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR
UNDER THE LOAN DOCUMENTS, WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE.

 

9.17 Publication. Borrowers grant Lender the right to publish and/or advertise
information to the effect that this transaction has closed, which information
may include, without limit, (i) the names of Borrowers and Lender, (ii) the size
of the transaction and (iii) those items of information commonly included within
a “tombstone advertisement” of the type customarily published in financial or
business periodicals.

 

9.18 Discharge of Taxes, Borrowers’ Obligations, Etc. Lender, in its sole
discretion, shall have the right at any time, and from time to time, with prior
notice to Borrowers, if Borrowers fail to do so five (5) Business Days after
requested in writing to do so by Lender, to: (a) pay for the performance of any
of Borrowers’ Obligations hereunder, and (b) discharge taxes or liens, at any
time levied or placed on any of Borrowers’ Property in violation of this
Agreement unless Borrowers are in good faith with due diligence by appropriate
proceedings contesting such taxes or liens. Lender may, in its discretion, upon
five (5) Business Days’ notice to Borrower Agent (unless an Event of Default
shall have occurred, in which case no such notice shall be required), fund an
Advance to pay Expenses hereunder. Lender shall have no obligation to make any
such payment or Advance, and such payments and Advances made by Lender shall not
be construed as a waiver by Lender of an Event of Default under this Agreement.

 

9.19 Injunctive Relief. The parties acknowledge and agree that, in the event of
a breach or threatened breach of Borrowers’ Obligations hereunder, Lender may
have no adequate remedy in money damages and, accordingly, shall be entitled to
an injunction (including without limitation, a temporary restraining order,
preliminary injunction, writ of attachment, or order compelling an audit)
against such breach or threatened breach, including without limitation,

 

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maintaining the cash management and collection procedure described herein.
However, no specification in this Agreement of a specific legal or equitable
remedy shall be construed as a waiver or prohibition against any other legal or
equitable remedies in the event of a breach or threatened breach of any
provision of this Agreement.

 

9.20 Privacy of Patient Information. Lender acknowledges and agrees that
Borrowers may be required to adhere to certain restrictions and conditions
regarding the use and/or disclosure of the patient health information to which
Lender has access under this Agreement in order to comply with applicable
federal and state laws and/or regulations governing the security, integrity and
confidentiality of patient health information, including, but not limited to,
regulations, standards or rules promulgated under the Health Insurance
Portability and Accountability Act of 1996 (“HIPAA”) (collectively, “Privacy
Laws”). In the event any Privacy Laws are interpreted by Borrowers to require,
or any Covered Entity (as defined under HIPAA) requires, the parties to amend
their business practices regarding the use and/or disclosure of patient health
information hereunder, Lender agrees, at Borrowers’ sole cost and expense, to
take, or cause to be taken, all reasonable actions, and to do, or cause to be
done, all things reasonably necessary, proper or advisable under the Privacy
Laws to assure that the patient health information to which Lender has access
under this Agreement is used and disclosed solely as permitted under the Privacy
Laws, including but not limited to, amendment of this Agreement; provided,
however, that if Lender reasonably determines that any such compliance or action
would have a material adverse effect on the Collateral, the ability of Lender to
enforce its rights and remedies under this Agreement as a whole or Lender’s
ability to monitor the Collateral to the extent required to enable the Lender to
make accurate determinations concerning the face amount, balance and Estimated
Net Value of Accounts, the extent to which Accounts constitute Eligible
Accounts, the extent to which Accounts constitute Defaulted Accounts, and the
amount of Collections in respect of Accounts, then Lender may, upon 180 days
prior notice, terminate the Credit Facilities and upon such termination
Borrowers shall immediately repay all outstanding Obligations. Lender
acknowledges and agrees that Borrowers shall not be obligated to pay a
Termination Fee in the event that the Credit Facility is terminated by Lender
under this Section 9.20.

 

[Signatures on the Following Pages]

 

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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first above written.

 

BORROWERS:

 

THE PROVIDENCE SERVICE

CORPORATION, individually and as

Borrower Agent

  PROVIDENCE OF ARIZONA, INC. By:  

/s/ Fletcher McCusker

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

  By:  

/s/ Fletcher McCusker

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

Name:   Fletcher McCusker   Name:   Fletcher McCusker Title:   CEO   Title:  
CEO

PROVIDENCE SERVICE

CORPORATION OF TEXAS

 

PROVIDENCE SERVICE

CORPORATION OF OKLAHOMA, INC.

By:  

/s/ Fletcher McCusker

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

  By:  

/s/ Fletcher McCusker

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

Name:   Fletcher McCusker   Name:   Fletcher McCusker Title:   CEO   Title:  
CEO FAMILY PRESERVATION SERVICES, INC.  

PROVIDENCE SERVICE

CORPORATION OF MAINE

By:  

/s/ Fletcher McCusker

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

  By:  

/s/ Fletcher McCusker

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

Name:   Fletcher McCusker   Name:   Fletcher McCusker Title:   CEO   Title:  
CEO

FAMILY PRESERVATION SERVICES

OF FLORIDA, INC.

 

FAMILY PRESERVATION SERVICES

OF NORTH CAROLINA, INC.

By:  

/s/ Fletcher McCusker

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

  By:  

/s/ Fletcher McCusker

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

Name:   Fletcher McCusker   Name:   Fletcher McCusker Title:   CEO   Title:  
CEO

FAMILY PRESERVATION SERVICES

OF WEST VIRGINIA, INC.

  CAMELOT CARE CORPORATION By:  

/s/ Fletcher McCusker

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

  By:  

/s/ Fletcher McCusker

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

Name:   Fletcher McCusker   Name:   Fletcher McCusker Title:   CEO   Title:  
CEO

 

66

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CAMELOT CARE CENTERS, INC.  

PROVIDENCE SERVICE

CORPORATION OF DELAWARE

By:  

/s/ Fletcher McCusker

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

  By:  

/s/ Fletcher McCusker

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

Name:   Fletcher McCusker   Name:   Fletcher McCusker Title:   CEO   Title:  
CEO

FAMILY PRESERVATION SERVICES

OF WASHINGTON D.C., INC.

  DOCKSIDE SERVICES, INC. By:  

/s/ Fletcher McCusker

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

  By:  

/s/ Fletcher McCusker

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

Name:   Fletcher McCusker   Name:   Fletcher McCusker Title:   CEO   Title:  
CEO

POTTSVILLE BEHAVIORAL

COUNSELING GROUP, INC.

 

PROVIDENCE COMMUNITY

SERVICES, LLC

By:  

/s/ Fletcher McCusker

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

  By:  

/s/ Michael N. Deitch

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

Name:   Fletcher McCusker   Name:   Michael N. Deitch Title:   CEO   Title:  
Secretary COLLEGE COMMUNITY SERVICES   CHOICES GROUP, INC. By:  

/s/ Michael N. Deitch

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

  By:  

/s/ Fletcher McCusker

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

Name:   Michael N. Deitch   Name:   Fletcher McCusker Title:   Secretary  
Title:   CEO RIO GRANDE MANAGEMENT CO., LLC  

PROVIDENCE MANAGEMENT

CORPORATION OF FLORIDA

By:  

/s/ Fletcher McCusker

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

  By:  

/s/ Chris Reinecker

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

Name:   Fletcher McCusker   Name:   Chris Reinecker Title:   CEO   Title:  
Secretary CYPRESS MANAGEMENT SERVICES, INC.   CHILDREN’S BEHAVIORAL HEALTH, INC.
By:  

/s/ Fletcher McCusker

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

  By:  

/s/ Fletcher McCusker

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

Name:   Fletcher McCusker   Name:   Fletcher McCusker Title:   CEO   Title:  
CEO

 

67

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THE BEHAVIORAL ASSESSMENT

CENTER, INC.

By:  

/s/ Fletcher McCusker

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

Name:   Fletcher McCusker Title:   CEO

 

LENDER:

HEALTHCARE BUSINESS CREDIT

CORPORATION

By:  

/s/ Michael D. Gervais

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

Name:   Michael D. Gervais Title:   VP-Portfolio Management

 

68

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The following sets forth a list of omitted schedules and exhibits. The
Providence Service Corporation agrees to furnish supplementally a copy of such
schedules and/or exhibits to the Securities and Exchange Commission upon
request.

 

Exhibit A

   —   

Existing Borrowers

Exhibit B

   —   

New Borrowers

Exhibit 2.1(b)

   —   

Form of Revolving Credit Note

Exhibit 2.2(b)

   —   

Form of Borrowing Base Report

Exhibit 2.2(c)

   —   

Form of Advance Request

Exhibit 2.3(c)

   —   

Form of Term Note

Exhibit 4.2A

   —   

Form of Notice to Commercial Obligor

Exhibit 4.2B

   —   

Form of Notice to Governmental Obligor

Exhibit 6.8

   —   

Form of Officer’s Certificates

Exhibit 7.4

   —   

Form of Joinder Agreement

Schedule 1

   —   

Ineligible Obligors and Concentration Limits

Schedule 2

   —   

Management Agreements

Schedule 5.1

   —   

Borrowers’ States of Qualifications

Schedule 5.2

   —   

Chief Executive Office; Places of Business; Additional Names

Schedule 5.3

   —   

Provider Identification Numbers

Schedule 5.4

   —   

Pending Litigation

Schedule 5.6

   —   

Permitted Liens

Schedule 5.9

   –   

Fiscal Year End; Tax I.D. Numbers

Schedule 5.11

   —   

Existing Guaranties, Investments Joint Ventures, etc.

Schedule 5.13

   —   

Environmental Matters

Schedule 5.14

   —   

Capital Stock

Schedule 5.15

   —   

Lockboxes

Schedule 5.21

   —   

Commercial Tort Claims

Schedule 5.22

   —   

Letter of Credit Rights

Schedule 5.23

   —   

Intellectual Property

Schedule 7.4

   —   

Transactions with Affiliates or Subsidiaries

Schedule 7.5

   —   

Existing Guarantees

Schedule 7.6

   —   

Existing Indebtedness

 

69