Exhibit 10.6

 

CREDIT AGREEMENT

 

between

 

BROTMAN MEDICAL CENTER, INC.

 

and

 

such other Persons joined hereto as Borrowers from time to time,

 

as Borrowers,

 

and

 

GEMINO HEALTHCARE FINANCE, LLC,

 

as Lender

 

 

dated as of April 14, 2009

 

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TABLE OF CONTENTS

 

 

 

PAGE

 

 

 

ARTICLE 1.    DEFINITIONS, ACCOUNTING TERMS AND PRINCIPLES OF CONSTRUCTION

1

1.01

Terms Defined

1

1.02

Matters of Construction

1

1.03

Accounting Principles

1

1.04

Fiscal Quarters

1

 

 

 

ARTICLE 2.    THE LOANS

2

2.01

Credit Facility - Description

2

2.02

Funding Procedures

2

2.03

Interest and Fees

3

2.04

Additional Interest Provisions

4

2.05

Payments

4

2.06

Use of Proceeds

5

2.07

Lockboxes and Collections

5

2.08

Application of Proceeds of Collateral

6

 

 

 

ARTICLE 3.    COLLATERAL

6

3.01

Description:

6

3.02

Extent of Security Interests

7

3.03

Lien Documents

7

3.04

Other Actions

7

3.05

Searches

8

3.06

Good Standing Certificates

8

3.07

Filing Security Agreement

8

3.08

Power of Attorney

8

3.09

[Reserved]

8

3.10

[Reserved]

8

3.11

Credit Balances; Additional Collateral

8

3.12

Reference to Other Loan Documents

9

 

 

 

ARTICLE 4.    CLOSING AND CONDITIONS PRECEDENT TO ADVANCES

9

4.01

Resolutions, Opinions, and Other Documents

9

4.02

Additional Preconditions to Loans

10

4.03

Absence of Certain Events

11

4.04

Compliance with this Agreement

11

4.05

Closing Certificate

11

4.06

Closing

11

4.07

Non-Waiver of Rights

11

 

 

 

ARTICLE 5.    REPRESENTATIONS AND WARRANTIES

12

5.01

Organization and Validity

12

5.02

Places of Business

12

5.03

Healthcare Matters

12

5.04

Pending Litigation

15

 

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5.05

Medicaid and Medicare Cost Reporting

15

5.06

Title to Collateral

15

5.07

Governmental Consent

15

5.08

Taxes

15

5.09

Financial Statements

15

5.10

Full Disclosure

16

5.11

Guarantees, Contracts, etc

16

5.12

Compliance with Laws

16

5.13

Other Associations

16

5.14

Environmental Matters

16

5.15

Capital Stock

17

5.16

Lockboxes

17

5.17

Borrowing Base Reports

17

5.18

Security Interest

17

5.19

Accounts

17

5.20

ERISA

17

5.21

Representations and Warranties for each Loan

18

5.22

Interrelatedness of Borrowers

19

5.23

[Reserved]

19

5.24

[Reserved]

19

5.25

Intellectual Property

19

5.26

Solvency

20

5.27

Schedules

20

5.28

Location of Computerized Billing System; Books and Records

20

5.29

No Documents or Correspondence Regarding CMS Claim

20

 

 

 

ARTICLE 6.    AFFIRMATIVE COVENANTS

20

6.01

Payment of Taxes and Claims

20

6.02

Maintenance of Insurance, Financial Records and Existence

20

6.03

Business Conducted

21

6.04

Litigation

21

6.05

Taxes

21

6.06

Financial Covenants

21

6.07

Financial and Business Information

21

6.08

Officers’ Certificates

22

6.09

Inspection

22

6.10

Tax Returns and Reports

23

6.11

Material Adverse Developments

23

6.12

Places of Business

23

6.13

Notice of Action

23

6.14

Verification of Information

23

6.15

Receivables Tracking System

23

6.16

[Reserved]

23

6.17

Compliance with Laws

23

6.18

Collateral Reporting

24

6.19

Collateral

24

6.20

[Reserved]

24

 

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6.21

Additional Capital Infusion

24

6.22

Potential CMS Liability

24

6.23

Maintenance of Computerized Billing System; Books and Records

24

6.24

Dissolution of Southern California Spine Institute, LLC

24

 

 

 

ARTICLE 7.    NEGATIVE COVENANTS

25

7.01

Merger, Consolidation, Dissolution or Liquidation

25

7.02

Liens and Encumbrances

25

7.03

Negative Pledge

25

7.04

Transactions With Affiliates or Subsidiaries

25

7.05

Guarantees

25

7.06

Investments

25

7.07

Indebtedness

26

7.08

Loans to Other Persons

26

7.09

Change in Ownership/Management

26

7.10

Subordinated Debt Payments

27

7.11

Distributions

27

7.12

No Change in Business

27

 

 

 

ARTICLE 8.    DEFAULT

27

8.01

Events of Default

27

8.02

Cure

29

8.03

Rights and Remedies on Default

30

8.04

[Reserved]

31

8.05

Nature of Remedies

31

8.06

Set-Off

31

8.07

Application of Proceeds

31

 

 

 

ARTICLE 9    MISCELLANEOUS

31

9.01

Governing Law

31

9.02

Integrated Agreement

31

9.03

Waiver and Indemnity

31

9.04

Time

32

9.05

Expenses of Lender

32

9.06

Confidentiality

33

9.07

Notices

33

9.08

Brokerage

33

9.09

Headings

33

9.10

Survival

33

9.11

Successors and Assigns

33

9.12

Duplicate Originals

33

9.13

Modification

33

9.14

Signatories

34

9.15

Third Parties

34

9.16

Waivers

34

9.17

Consent to Jurisdiction

34

9.18

Waiver of Jury Trial

35

 

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9.19

Publication

35

9.20

Discharge of Taxes, Borrower’s Obligations, Etc

35

9.21

Injunctive Relief

35

9.22

Assignment or Syndication by Lender

35

9.23

Severability

35

9.24

Authority

35

9.25

Usury Limit

36

9.26

Termination

36

 

 

 

ARTICLE 10.    SPECIAL INTER-BORROWER PROVISIONS

36

10.01

Certain Borrower Acknowledgments and Agreements

36

10.02

Maximum Amount of Joint and Several Liability

37

10.03

Authorization of Borrower Representative by Borrowers

37

10.04

Joint and Several Liability

37

 

iv

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LIST OF EXHIBITS AND ANNEXES

 

Exhibit 2.01(b)

Form of Revolving Note

Exhibit 2.02(b)

Form of Borrowing Base Report

Exhibit 2.02(c)

Loan Request

Exhibit 4.01

Form of Opinion of Counsel

Exhibit 4.02(c)

Notice Letter Re: Commercial Obligors

Exhibit 4.02(d)

Notice Letter Re: Government Obligors

Exhibit 6.08

Officer’s Certificate

Exhibit 6.23

Form of Landlord Waiver

 

 

Annex A

Definitions

 

v

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LIST OF SCHEDULES

 

Schedule 1

Accounts

Schedule 5.01

Borrowers’ States of Qualifications

Schedule 5.02

Jurisdictions of Organization/Chief Executive Office/Other Locations of
Collateral

Schedule 5.03

Provider Identification Numbers

Schedule 5.04

Pending Litigation

Schedule 5.06

Permitted Liens

Schedule 5.09

Fiscal Year End

Schedule 5.11

Existing Guaranties, Investments and Borrowings

Schedule 5.13

Other Associations

Schedule 5.14

Environmental Matters

Schedule 5.15

Capital Stock

Schedule 5.25

Intellectual Property and General Intangibles

Schedule 7.04

Permitted Affiliate Transactions

Schedule 7.06

Investments

Schedule 7.07

Indebtedness

 

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CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (“Agreement”) is dated this 14th day of April, 2009,
between BROTMAN MEDICAL CENTER, INC., a California Corporation (“BMC”), and such
other Persons joined hereto as a Borrower from time to time (together with BMC,
“Borrowers” and each individually a “Borrower”), and GEMINO HEALTHCARE FINANCE,
LLC, a Delaware limited liability company, as lender (“Lender”).

 

RECITALS

 

WHEREAS, Borrowers have requested that Lender make available to them, on a joint
and several basis, a Credit Facility in the maximum amount of $6,000,000.00
which will be secured by a first priority perfected security interest in the
Collateral (as defined below); and

 

WHEREAS, Lender is willing to make the Credit Facility available to Borrowers
pursuant to the terms and provisions hereinafter set forth; and

 

WHEREAS, the parties desire to set forth the terms and conditions of their
relationship to writing.

 

NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:

 

ARTICLE 1

 

DEFINITIONS, ACCOUNTING TERMS AND
PRINCIPLES OF CONSTRUCTION

 

1.01         Terms Defined. As used in this Agreement, those terms set forth in
Annex A shall have the respective meanings set forth therein.

 

1.02         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. The words
“include”, “includes” and “including” when used in any Loan Document, shall be
deemed to be followed by the phrase “without limitation”. Any pronoun used shall
be deemed to cover all genders. 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 and/or, where applicable, a
Borrower, 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.

 

1.03         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.

 

1.04         Fiscal Quarters. For the purposes hereof, “fiscal quarter” shall
mean each quarterly accounting period during any fiscal year; provided, that,
all references to the fiscal quarter ending December 31, March 31, June 30 or
September 30 shall mean the first, second, third or fourth fiscal quarter of the
applicable fiscal year, respectively, irrespective of the actual date on which
such fiscal quarter may end.

 

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ARTICLE 2

 

THE LOANS

2.01                           Credit Facility - Description

 

(a)           Subject to the terms and conditions of this Agreement, Lender
hereby establishes for the joint and several benefit of Borrowers, a credit
facility (“Credit Facility”) which shall include advances which may be extended
by Lender to or for the benefit of Borrowers from time to time hereunder in the
form of revolving loans (“Revolving Loans”). The aggregate outstanding amount of
all Revolving Loans, shall not at any time exceed the lesser of (i) Maximum
Credit Limit and (ii) the Borrowing Base. In no event shall the initial
principal amount of any Revolving Loan be less than $25,000.00. Subject to such
limitation, the outstanding balance of all Revolving Loans may fluctuate from
time to time, to be reduced by repayments made by Borrowers, to be increased by
future Revolving Loans which may be made by Lender. If the aggregate outstanding
amount of all Revolving Loans exceeds the lesser of (i) the Borrowing Base or
(ii) the Maximum Credit Limit, Borrowers shall immediately repay such excess in
full. Lender has the right at any time, and from time to time, to set aside cash
reserves against the Borrowing Base in such amounts as it may deem appropriate
in Lender’s reasonable discretion (“Reserves”). The Obligations of Borrowers
under the Credit Facility and this Agreement are joint and several and shall at
all times be absolute and unconditional.

 

(b)           At Closing, Borrowers shall execute and deliver a promissory note
to Lender in the principal amount of Six Million and No/100 Dollars
($6,000,000.00) (as may be amended, modified or replaced from time to time, the
“Revolving Note”). The Revolving Note shall evidence Borrowers’ joint and
several, absolute and unconditional obligation to repay Lender for all Revolving
Loans made by Lender under the Credit Facility, with interest as herein and
therein provided. Each and every Revolving Loan under the Credit Facility shall
be deemed evidenced by the Revolving Note, which is deemed incorporated herein
by reference and made a part hereof. The Revolving Note shall be substantially
in the form set forth in Exhibit 2.01(b) attached hereto and made a part hereof.

 

(c)           [Reserved]

 

(d)           The initial term of the Credit Facility (“Initial Term”) shall
expire on the earlier of (i) April 14, 2012, and (ii) the JHA Maturity Date. All
Loans shall be repaid on or before the earlier of the last day of the Initial
Term or upon termination of the Credit Facility or termination of this Agreement
(“Maturity Date”). After the Maturity Date no further Revolving Loans shall be
available from Lender.

 

(e)           From time to time, upon not less than three (3) Business Days
notice to Borrowers, Lender may adjust the Advance Rate in order to reflect, in
Lender’s sole discretion, the experience with Borrowers (including by way of
illustration, to adjust for any known or potential offsets by Medicare or
Medicaid) or the aggregate amount or percentage of the Collections with respect
to the Accounts.

 

2.02                           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 Revolving Loans to Borrowers upon request. Borrowers shall
provide Lender with a signed Borrowing Base Report on a specified Business Day
of each week (such day to be mutually agreeable to Borrowers and Lender (such
date shall be referred to herein as the “Settlement Date”, whether or not
Borrowers have requested a Revolving Loan to be made on such date)). Borrowers
may request a Revolving Loan on the Settlement Date or any other day of the week
(such day along with the Settlement Date are referred to herein as the “Funding
Date”). Whether or not Borrowers have requested a Revolving Loan to be made on
such date, Lender may at any time deduct from the Borrowing Base an amount equal
to all fees, Expenses, interest or other amounts due and payable to Lender
hereunder, and such deduction shall be deemed to be a Revolving Loan hereunder.

 

(b)           Not later than 2:00 p.m. (Eastern Time) two (2) Business Days
prior to each Settlement Date (“Download Date”), Borrowers will deliver to
Lender the computer file data associated with the Accounts,

 

2

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which shall include without limitation, the information (including changes in
the Obligor reimbursement rates and changes in federal or state laws or
regulations affecting payment for medical services), required by Lender to
enable Lender to process and value the outstanding Accounts of Borrowers, as
well as bill and collect such Accounts following an Event of Default (“Accounts
Detail File”). Upon completion of the processing of the data with respect to
such Accounts, Lender or its agent will prepare and deliver to Borrowers by no
later than 12:00 p.m. (Eastern Time) on the second 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 third Business Day following
the Download Date), a report regarding the Borrowing Base then in effect, which
shall be substantially in the form of Exhibit 2.02(b) hereto (a “Borrowing Base
Report”). No later than 2:00 p.m. (Eastern Time) one (1) Business Day prior to
the Settlement Date, Borrowers will deliver to Lender a cash posting file.

 

(c)           If Borrowers request that a Revolving Loan be made on any date
other than the Settlement Date, Borrowers shall deliver to Lender an executed
Borrowing Base Report and a written request for such Loan substantially in the
form of Exhibit 2.02(c) hereto (a “Loan Request”). The Borrowing Base Report and
Loan Request may be delivered via telecopy and Borrowers acknowledge that
Lenders may rely on Borrowers signatures by facsimile, which shall be legally
binding upon Borrowers.

 

(d)           Subject to the terms and conditions of this Agreement, if the
Borrowing Base Report (if applicable) and Loan Request are delivered to Lender
before 3:00 p.m. (Eastern Time) on the Funding Date, Lender will advance on the
Funding Date (or the next Business Day if the Borrowing Base Report and Loan
Request are delivered after 3:00 p.m. (Eastern Time)) to Borrowers a Revolving
Loan in the amount equal to the lesser of (i) the amount of the Revolving Loan
requested by Borrowers in the Loan Request, or (ii) the Borrowing Base Excess as
of such date.

 

(e)           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.

 

2.03                           Interest and Fees.

 

(a)           Each Revolving Loan shall bear interest on the outstanding
principal amount thereof from the date made until such Revolving Loan is paid in
full, at a rate per annum equal to the LIBOR Rate plus seven percent (7.0%) (the
“Interest Rate”). The interest rate on all amounts outstanding under the Credit
Facility shall be adjusted daily based on the LIBOR Rate. If at any time the
outstanding balance of the Revolving Loans is less than $2,000,000.00 (the
“Minimum Balance”), Borrowers shall pay interest at a rate per annum equal to
the Interest Rate times the Minimum Balance until such time as the outstanding
balance of the Revolving Loans is $2,000,000.00 or more.

 

(b)           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)           Should the Credit Facility be terminated for any reason on or
prior to the last day of the Initial Term, in addition to repayment of all
Obligations then outstanding and termination of Lender’s commitment hereunder,
Borrowers shall unconditionally be obligated to pay at the time of such
termination, a fee (“Revolving Termination Fee”) in an amount equal to the
following percentage of the Revolving Loan Commitment: three percent (3%), if
such early termination occurs on or prior to the first anniversary of the date
of this Agreement; two percent (2%) if such early termination occurs after the
first anniversary date of this Agreement but on or prior to the second
anniversary of the date of this Agreement; and one percent (1%) if such early
termination occurs after the second anniversary of the date of this Agreement
but on or prior to 180 days after the second anniversary of the date of this
Agreement.

 

Borrowers acknowledge that the Revolving Termination Fee is an estimate of
Lender’s damages in the event of early termination and is not a penalty. In the
event of termination of the Credit Facility, all of the Obligations shall be
immediately due and payable upon the termination date stated in any notice of
termination. All

 

3

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undertakings, agreements, covenants, warranties and representations of Borrowers
contained in the Loan Documents shall survive any such termination, and Lender
shall retain its security interests 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, in immediately available
funds, together with the applicable Revolving Termination Fee, if any.
Notwithstanding the payment in full of the Obligations, Lender shall not be
required to terminate its security interests in the Collateral unless, with
respect to 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, Lender shall, at its option, (i) have received a
written agreement executed by Borrowers and by any Person whose loans or other
advances to Borrowers are used in whole or in part to satisfy the Obligations,
indemnifying Lender from any such loss or damage; or (ii) have retained such
monetary reserves and security interests on the Collateral for such period of
time as Lender, in its reasonable discretion, may deem necessary to protect
Lender from any such loss or damage.

 

(d)           Borrowers shall unconditionally pay to Lender a fee (“Unused Line
Fee”) equal to one-half percent (0.5%) per annum of the unused portion of the
Credit Facility. The unused portion of the Credit Facility shall be the
difference between the Revolving Loan Commitment and the Average Outstanding
Balance of the Revolving Loans during each month (or portion thereof, as
applicable), which fees shall be calculated and payable monthly, in arrears, and
shall be due and payable on the first calendar day of each month.

 

(e)           Borrowers shall unconditionally pay to Lender a collateral
monitoring fee (“Collateral Monitoring Fee”) equal to one-half percent (0.5%)
per annum of the Average Outstanding Balance of the Revolving Loans. The
Collateral Monitoring Fee shall be calculated and payable monthly, in arrears,
and shall be due and payable on the first calendar day of each month.

 

(f)            Lender has fully earned a non-refundable commitment fee
(“Commitment Fee”) equal to One Hundred Twenty Thousand and No/Dollars
($120,000.00). Borrowers agree and acknowledge that the Commitment Fee in its
entirety is due and payable upon Closing.

 

2.04         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, termination of the Credit Facility,
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.

 

2.05         Payments.

 

(a)           All accrued interest on the Revolving Loans shall be due and
payable monthly in arrears on the first calendar day of each month. Any accrued
Unused Line Fees and Collateral Monitoring Fees shall be due and payable monthly
on the first calendar day of the following calendar month.

 

(b)           If at any time the aggregate principal amount of all Revolving
Loans outstanding exceeds the lesser of (i) the Borrowing Base then in effect,
or (ii) the Maximum Credit Limit, Borrowers shall immediately make such
principal prepayments of the Revolving Loans in the amount of such excess.

 

4

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(c)           The entire principal balance of all of the Revolving Loans,
together with all unpaid accrued interest thereon and the Revolving Termination
Fee, if any, and any unpaid Unused Line Fees, shall be due and payable on the
Maturity Date.

 

(d)           Subject to the terms of Sections 2.03(c) and 2.03(d) hereof,
Borrowers may prepay the principal of the Loans and terminate the Credit
Facility on any Settlement Date by giving Lender written notice of the proposed
prepayment at least two (2) Business Days prior to such Settlement Date.

 

(e)           [Reserved]

 

(f)            If any Borrower sells any of the Collateral, such Borrower shall
pay to Lender a sum equal to the proceeds received by such Borrower from such
sale, net of all reasonable costs, expenses and taxes incurred by such Borrower
in connection with such sale, as approved by Lender in its sole discretion, or
as otherwise expressly authorized by this Agreement, as and when received by
such Borrower and as a mandatory prepayment of the outstanding Loans, until all
Obligations are paid and satisfied in full.

 

(g)           Monthly, on the first calendar day of each month, all payments and
prepayments shall be applied first to any unpaid interest, fees, and thereafter
to the principal of the Loans and to other amounts due Lender, in the order
provided in Section 2.07(f) hereof. Except as otherwise provided herein, all
payments of principal, interest, fees, or other amounts payable by Borrowers
hereunder shall be remitted to Lender in immediately available funds not later
than 11:00 a.m. (Eastern Time) on the day due. Whether or not Borrowers have
requested a Revolving Loan to be made on such date, Borrowers authorize Lender
to charge interest, fees and all other amounts due to Lender, to Borrowers’
account, and such charge shall be deemed to be a Revolving Loan as of the date
such payment is due.

 

2.06         Use of Proceeds. The extensions of credit under and proceeds of the
Credit Facility shall be used (a) to repay existing Indebtedness of Borrowers,
(b) to make payments as provided under the Plan of Reorganization, (c) to pay
amounts owing under the Credit Facility, and (d) for working capital and general
business purposes.

 

2.07         Lockboxes and Collections.

 

(a)           Borrowers will enter into Depository Agreements in respect of the
Government Lockbox and Commercial Lockbox in such form and with the Lockbox Bank
or such other bank as is acceptable to Lender. Borrowers shall instruct the
Lockbox Bank maintaining the Government Lockbox that all collections sent to the
Government Lockbox shall be deposited into a bank account at the Lockbox Bank in
which Lender has a first priority perfected security interest. Borrower shall
instruct the Lockbox Bank maintaining the Commercial Lockbox that all
Collections sent to the Commercial Lockbox shall be deposited into a bank
account at the Lockbox Bank in the name of Lender. Borrowers shall also instruct
the Lockbox Bank as described further in the Depository Agreements to initiate a
daily transfer of all available funds to an account of Lender to be designated
by Lender (“Collection Account”).

 

(b)           Borrowers will cause all Collections with respect to all of the
Accounts, other than Government Accounts and Accounts which pay into the Risk
Pool Account, to be sent directly to the Commercial Lockbox, and will cause all
Collections with respect to all of the Government Accounts to be sent directly
to the Government Lockbox (which may be effectuated by electronic transfer
directly to the Government Lockbox). In the event that any Borrower receives any
Collections that should have been sent to the Commercial Lockbox or the
Government Lockbox, such Borrower will, promptly upon receipt and in any event
within one Business Day of receipt, forward such Collections directly to the
Commercial Lockbox or Government Lockbox, as applicable, in the form received,
and if requested by Lender, promptly notify Lender of such event. Until so
forwarded, such Collections not generated from Government Accounts shall be held
in trust for the benefit of Lender.

 

(c)           No Borrower shall withdraw any amounts from the accounts into
which the Collections remitted to the Commercial Lockbox are deposited nor shall
any Borrower change the procedures under the agreements governing the Commercial
Lockbox and related accounts.

 

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(d)           Borrowers will cooperate with Lender in the identification and
reconciliation on a daily basis of all amounts received in the Commercial
Lockbox and the Government Lockbox. If more than five percent (5%) of the
Collections since the most recent Settlement Date is not identified or
reconciled to the 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 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 expenses), to make such examination and
report as may be necessary to identify and reconcile such amount.

 

(e)           No Borrower will send to or deposit in the Commercial Lockbox or
the Government Lockbox any funds other than payments made with respect to
Accounts.

 

(f)            So long as no Event of Default has occurred and is continuing,
once a week, Lender shall cause all Collections deposited and/or transferred to
the Collection Account to be applied in the following order of priority:

 

(i)            to Lender, any interest due and payable hereunder;

 

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

 

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

 

(iv)          to Lender, to be applied to the principal amount outstanding of
the Revolving Loans.

 

In addition, promptly upon request of Borrowers, 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 Revolving
Loans and all interest and other amounts that will be payable on or before the
next Settlement Date.

 

2.08         Application of Proceeds of Collateral.

 

(a)           Unless this Agreement expressly provides otherwise, so long as no
Event of Default shall have occurred and remain outstanding, Lender agrees to
apply all Collections as set forth in Section 2.07(f) hereof.

 

(b)           If an Event of Default shall have occurred and remain outstanding,
Lender may apply Collections, any other proceeds of Collateral and all other
payments received by Lender to the payment of the Obligations in such manner and
in such order as Lender may elect in its sole discretion.

 

ARTICLE 3

 

COLLATERAL

 

3.01         Description.

 

To secure the prompt payment and performance in full when due, whether by lapse
of time, acceleration, mandatory prepayment or otherwise, of the Obligations,
each Borrower hereby grants to the Lender a continuing security interest in, and
a right to set off against, any and all right, title and interest of such
Borrower in and to all of the following, whether now owned or existing or owned,
acquired, or arising hereafter (collectively, the “Collateral”): (a) all
Accounts; (b) all cash and currency (other than cash and currency deposited in
the Excluded Deposit Accounts); (c) all Documents and General Intangibles
directly related to the Accounts; (d) all Deposit Accounts (other than the
Excluded Deposit Accounts); and (e) all Proceeds of any and all of the
foregoing.

 

All capitalized terms in this Section 3.01 shall have the meanings set forth in
the Uniform Commercial Code unless otherwise defined herein.

 

Notwithstanding anything to the contrary contained herein, the security
interests granted under this Agreement shall not extend to any lease, license or
other contract of a Borrower if the grant of a security interest in such lease,
license or contract in the manner contemplated by this Agreement is prohibited
by the terms of such

 

6

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lease, license or contract or by Applicable Law and would result in the
termination of such lease, license or contract or give the other parties thereto
the right to terminate, accelerate or otherwise adversely alter such Borrower’s
rights, titles and interests thereunder (including upon the giving of notice or
the lapse of time or both); provided that (i) any such limitation described in
the foregoing clause on the security interests granted hereunder shall only
apply to the extent that any such prohibition could not be rendered ineffective
pursuant to the UCC or any other Applicable Law (including Debtor Relief Laws)
or principles of equity and (ii) in the event of the termination or elimination
of any such prohibition or the requirement for any consent contained in such
lease, license or contract or in any Applicable Law, to the extent sufficient to
permit any such item to be Collateral hereunder, or upon the granting of any
such consent, or waiving or terminating any requirement for such consent, a
security interest in such lease, license or contract shall be automatically and
simultaneously granted hereunder and shall be included as Collateral hereunder.

 

Borrowers and the Lender hereby acknowledge and agree that the security interest
created hereby in the Collateral (i) constitutes continuing collateral security
for all of the Obligations, whether now existing or hereafter arising and
(ii) is not to be construed as an assignment of any copyrights, copyright
licenses, patents, patent licenses, trademarks or trademark licenses.

 

3.02         Extent of Security Interests. The security interest granted in
Section 3.01 hereof shall extend and attach to all Collateral which is presently
in existence or hereafter acquired and which is owned by any Borrower or in
which any Borrower has any interest, whether held by such Borrower or by others
for such Borrower’s account, and wherever located.

 

3.03         Lien Documents. At Closing and thereafter as Lender deems
necessary, each Borrower shall execute (if required) and deliver to Lender, or
shall have executed (if required) and delivered (all in form and substance
reasonably satisfactory to Lender):

 

(a)           Financing Statements. Financing statements pursuant to the UCC,
which Lender may file in the jurisdiction where any Borrower is organized and in
any other jurisdiction that Lender deems appropriate; and

 

(b)           Other Agreements. Any other agreements, documents, instruments and
writings, including, without limitation, security agreements, deposit account
control agreements, deeds of trust, mortgages, 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, including, without limitation, a waiver agreement from each
landlord with respect to any real property of any Borrower, in form and
substance satisfactory to Lender.

 

3.04         Other Actions.

 

(a)           In addition to the foregoing, each Borrower shall do anything
further that may be lawfully and reasonably required by Lender to perfect its
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 request, each Borrower shall also immediately deliver (with execution
by such Borrower 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 is hereby authorized to file financing statements naming
any Borrower as debtor, in accordance with the Uniform Commercial Code, and if
necessary, to the extent applicable, to otherwise file financing statements
without any Borrower’s signature if permitted by law. Each Borrower hereby
authorizes Lender to file all financing statements and amendments to financing
statements describing the Collateral in any filing office as Lender, in its
sole, discretion may determine, containing language indicating that the
acquisition by a third party of any right, title or interest in or to the
Collateral without Lender’s consent shall be a violation of Lender’s rights.
Borrowers agree to comply with the requirements of all federal and state laws
and requests of Lender in order for Lender to have and maintain a valid and
perfected first priority security interest in the Collateral including, without
limitation, executing and causing any other Person to execute such documents as
Lender may require to obtain Control (as defined in the UCC) over all Deposit
Accounts (as defined in the UCC), other than the Excluded Deposit Accounts.

 

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3.05         Searches. Lender shall, prior to or at Closing, and thereafter as
Lender may reasonably determine from time to time, at Borrowers’ expense, obtain
the following searches (the results of which are to be consistent with the
warranties made by Borrowers in this Agreement):

 

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

 

(b)           Judgments, Etc. Judgment, federal tax lien and corporate tax lien
searches against each Borrower, in all applicable filing offices of each state
searched under Section 3.05(a) hereof.

 

3.06         Good Standing Certificates. Borrowers shall, prior to or at Closing
and at its expense, obtain and deliver to Lender good standing or equivalent
certificates showing each Borrower to be in good standing in its state of
incorporation or organization and authorized to transact business as a foreign
corporation or entity in each other state or foreign country in which it is
doing and presently intends to do business for which such Borrower’s failure to
be so qualified could reasonably be expected to cause a Material Adverse Effect.

 

3.07         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.

 

3.08         Power of Attorney. Each of the officers of Lender is hereby
irrevocably made, constituted and appointed the true and lawful attorney for
each Borrower (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 such Borrower upon any and all checks,
drafts, money orders and other instruments for the payment of monies that are
payable to such Borrower and constitute collections on the Collateral;
(b) execute in the name of such Borrower any financing statements, schedules,
assignments, instruments, documents and statements that such Borrower is
obligated to give Lender hereunder or is necessary to perfect Lender’s security
interest or lien in the Collateral; (c) to verify validity, amount or any other
matter relating to the Collateral by mail, telephone, telecopy or otherwise; and
(d) do such other and further acts and deeds in the name of such Borrower that
Lender may reasonably deem necessary or desirable to enforce its right with
respect to any Collateral.

 

3.09         [Reserved]

 

3.10         [Reserved]

 

3.11         Credit Balances; Additional Collateral.

 

(a)           The rights and security interests granted to the Lender hereunder
shall continue in full force and effect, notwithstanding the termination of this
Agreement or the fact that the Revolving Loans may from time to time be
temporarily in a credit position, until the termination of this Agreement and
the full and final payment and satisfaction of the Obligations. Any reserves or
balances to the credit of the Borrowers, and any other Property of the Borrowers
(or any of them) in the possession of Lender, may be held by Lender, and applied
in whole or partial satisfaction of such Obligations when due, subject to the
terms of this Agreement. The liens and security interests granted to Lender
herein and any other lien or security interest which Lender may have in any
other assets of the Borrowers secure payment and performance of all present and
future Obligations.

 

(b)           Notwithstanding Lender’s security interests in the Collateral, to
the extent that the Obligations are now or hereafter secured by any assets or
Property other than the Collateral, or by the guaranty, endorsement, assets or
property of any other Person, Lender shall have the right in its sole discretion
to determine which rights, security, liens, security interests or remedies
Lender shall at any time pursue, foreclose upon, relinquish, subordinate, modify
or take any other action with respect to, without in any way modifying or
affecting any of such rights, security, liens, security interests or remedies,
or any of Lenders’ rights under this Agreement

 

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3.12         Reference to Other Loan Documents.  Reference is hereby made to the
other Loan Documents for additional representations, covenants and other
agreements of the Borrowers regarding the Collateral covered by such Loan
Documents.

 

ARTICLE 4

 

CLOSING AND CONDITIONS PRECEDENT TO REVOLVING LOANS

 

Closing under this Agreement and the making of each Loan are subject to the
following conditions precedent (all documents to be in form and substance
satisfactory to Lender and Lender’s counsel):

 

4.01         Resolutions, Opinion, and Other Documents. At the Closing,
Borrowers shall have delivered to Lender the following:

 

(a)           this Agreement, the Revolving Note and the Perfection Certificate,
each properly executed;

 

(b)           each document and agreement required to be executed under any
provision of this Agreement or any of the other Loan Documents;

 

(c)           certified copies of (i) resolutions of each Borrower’s board of
director(s), or manager(s), as applicable authorizing the execution of this
Agreement, the Revolving Note, the other Loan Documents and each other document
to which it is a party, required to be delivered by any Section hereof and
(ii) each Borrower’s Organizational Documents;

 

(d)           incumbency certificates identifying all Authorized Officers of
each Borrower, with specimen signatures;

 

(e)           a written opinion of Borrowers’ independent counsel addressed to
Lender in the form attached hereto as Exhibit 4.01, which shall include, without
limitation, an opinion that Lender has a first priority perfected security
interest in the Collateral;

 

(f)            payment by Borrowers of all Expenses associated with the Credit
Facility incurred to the Closing Date and the Commitment Fee;

 

(g)           the Business Associate Agreement properly executed;

 

(h)           the Depository Agreements required pursuant to Section 2.07 hereof
and the Wells Fargo Depository Agreements;

 

(i)            Uniform Commercial Code, judgment, federal and state tax lien
searches pursuant to Section 3.05 hereof, which searches shall reflect no liens
in the Collateral, other than the Lender’s lien and Permitted Liens;

 

(j)            an initial borrowing base report dated the Closing Date
evidencing Borrower’s availability under the Borrowing Base;

 

(k)           an as-filed copy of the confirmation order entered by the
Bankruptcy Court with respect to the Plan of Reorganization, which order shall
provide for the release of all security interests in the Collateral;

 

(l)            certification by Borrowers that all past due payroll and
unemployment taxes have been paid in full and that Borrowers remain current on
such taxes;

 

(m)          copies of each of the accreditations, licenses, permits and
certifications related to the representations in Section 5.03 hereof, and all
Contracts requested by Lender;

 

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(n)           the fully executed Subordination Agreements;

 

(o)           monthly and year to date consolidated and consolidating financial
statements for the month ending January 31, 2009;

 

(p)           background checks on the senior management of Borrowers;

 

(q)           evidence satisfactory to Lender that the Required Insurance is in
full force and effect and that Lender has been named as a lender’s loss payee or
additional insurer with respect to such Required Insurance in a manner
satisfactory to Lender;

 

(r)            all UCC financing statements and similar documents required to be
filed in order to create in favor of Lender a first priority perfected security
interest in the Collateral (to the extent that such a security interest may be
perfected by a filing under the UCC or Applicable Law), shall have been properly
filed in each office in each jurisdiction required;

 

(s)           all information necessary for Lender to issue wire transfer
instructions on behalf of each Borrower for the initial and subsequent Loans,
including disbursement authorizations in form acceptable to Lender;

 

(t)            evidence satisfactory to Lender in its sole discretion that a
payment in the amount of $2,500,000.00 has been made by BMC to the Creditor
Trust;

 

(u)           an IRS Form 8821, complete in all respects and satisfactory to
Lender in its sole discretion, for each Borrower;

 

(v)           an order of the Bankruptcy Court confirming the Plan of
Reorganization that is in full force and effect and is unstayed, such order
being satisfactory to Lender in its sole discretion;

 

(w)          an Eagle 9 UCC insurance policy issued by First American Title
Company insuring the perfection of the Lender’s lien in the Collateral;

 

(x)            the Negative Pledge Agreement properly executed; and

 

(y)           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.

 

4.02         Additional Preconditions to Loans. Lender’s obligation to make the
initial Revolving Loan and each subsequent Revolving Loan shall be subject to
the satisfaction of each of the following conditions:

 

(a)           After giving effect to each such Revolving Loan:

 

(i)            the aggregate principal amount of all Revolving Loans outstanding
shall not exceed the Borrowing Base then in effect and the aggregate amount of
all Loans outstanding shall not exceed the Maximum Credit Limit;

 

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

 

(iii)          the amount of outstanding Revolving Loans supported by the ENV of
all Eligible Accounts included in the Borrowing Base which have not been billed
shall at no time exceed an amount equal to fifty percent (50%) of outstanding
Revolving Loans supported by the ENV of all Eligible Accounts included in the
Borrowing Base which have been billed.

 

(b)           All representations and warranties of Borrowers shall be deemed
reaffirmed as of the making of such Loan and shall be true both before and after
giving effect to such Loan, and no Event of Default or Unmatured Event of
Default shall have occurred and be continuing, no Material Adverse Effect shall
have occurred, Borrowers shall be in compliance with this Agreement and the
other Loan Documents, and Borrowers shall have certified such matters to Lender.

 

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(c)           Each Borrower shall have signed and delivered to Lender notices,
in the form of Exhibit 4.02(c), directing the Obligors (other than Obligors with
respect to Government Accounts and Obligors that pay into the Risk Pool Account)
to make payment to the Commercial Lockbox.

 

(d)           Each Borrower shall have signed and delivered to Lender notices,
in the form of Exhibit 4.02(d), directing the Obligors with respect to
Government Accounts to make payment to the Government Lockbox.

 

(e)           Borrowers shall have taken all actions necessary to permit Lender
to record all of the Eligible Accounts in Lender’s accounts receivable
monitoring system.

 

(f)            The lockbox arrangements required by Section 2.07 hereof shall be
in effect, and the amounts received in the lockboxes shall have been identified
or reconciled to Lender’s satisfaction, as required by Section 2.07(e) hereof.

 

(g)           All JHA Loan Documents shall be acceptable to Lender in its sole
discretion, the transactions contemplated by the JHA Loan Documents shall have
closed and such JHA Loan Documents shall be in full force and effect.

 

(h)           Borrowers shall have permitted Lender to access and interface with
any of Borrowers’ collateral monitoring systems, and provided assistance with
such access and interface as Lender requests.

 

(i)            No later than five (5) Business Days prior to the initial
Revolving Loan, Lender shall have been provided with sufficient access to
conduct a final on-site management meeting on the premises of BMC with such
officers of BMC as Lender requires.

 

(j)            On the Closing Date, the Borrowing Base less the amount of the
initial Revolving Loan shall be greater than $1,000,000.00.

 

(k)           Borrowers shall have taken such other actions, including the
delivery of documents and opinions as Lender may reasonably request.

 

4.03         Absence of Certain Events. As of the Closing Date and prior to each
Loan, no Event of Default or Unmatured Event of Default hereunder shall have
occurred and be continuing.

 

4.04         Compliance with this Agreement. Borrowers shall have performed and
complied with all agreements, covenants and conditions contained herein
including, without limitation, the provisions of Sections 6 and 7 hereof, which
are required to be performed or complied with by Borrowers before or at the
Closing Date and as of the date of each Revolving Loan.

 

4.05         Closing Certificate. Lender shall have received a certificate dated
the Closing Date and signed by the chief executive officer or chief financial
officer of Borrowers certifying that all of the conditions specified in this
Section have been fulfilled and that there has not occurred any material adverse
change in the operations and conditions (financial or otherwise) of Borrowers
since September 30, 2008.

 

4.06         Closing. Subject to the conditions of this Article 4, the Credit
Facility shall be made available on the date (“Closing Date”) this Agreement is
executed and all of the conditions contained in Section 4.01 and Section 4.02
hereof are completed (“Closing”).

 

4.07         Non-Waiver of Rights. By completing the Closing hereunder, or by
making Revolving 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.

 

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ARTICLE 5

 

REPRESENTATIONS AND WARRANTIES

 

To induce Lender to complete the Closing and make the Loans under the Credit
Facility to Borrowers, Borrowers warrant and represent to Lender that, subject
to such exceptions or qualifications as are disclosed in any disclosure
schedules delivered pursuant to this Article 5:

 

5.01         Organization and Validity.

 

(a)           Each Borrower is duly organized as either a partnership,
corporation or limited liability company and validly existing under the laws of
its state of organization, incorporation or formation, is duly qualified,
validly existing and, to the extent applicable, 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 could not reasonably be
expected to cause a Material Adverse Effect. A list of all states and other
jurisdictions where each Borrower is qualified to do business is attached hereto
as Schedule 5.01 and made a part hereof.

 

(b)           The making and performance of this Agreement and related
agreements, and each document required by any Section hereof will not violate
(i) any law, government rule, regulation, order, judgment or award applicable to
such Borrower or its Property, (ii) any provision of such Borrower’s
Organizational Documents, or (iii) violate or result in a default (immediately,
with the passage of time or with the giving of notice) under any contract,
agreement or instrument to which such Borrower is a party, or by which such
Borrower is bound. No Borrower is in violation of any term of any agreement or
instrument to which it is a party or by which it may be bound or of its
Organizational Documents or minutes, which violation could reasonably be
expected to cause a Material Adverse Effect.

 

(c)           Each Borrower 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 action
to authorize the execution, delivery and performance of this Agreement and the
other Loan Documents.

 

(d)           This Agreement, the Revolving Note and the other Loan Documents
required to be executed and delivered by any Borrower hereunder, when delivered,
will be valid and binding upon such all Borrowers a party thereto and
enforceable in accordance with their respective terms.

 

5.02         Places of Business; Borrower Names. Each Borrower’s jurisdiction of
organization is set forth in Schedule 5.02 hereto and (a) each Borrower’s chief
executive office, (b) all other places of business of each such Borrower and
(c) any other locations of any Collateral are located at the corresponding
addresses set forth on Schedule 5.02 hereto. Except as disclosed on Schedule
5.02 hereto: (a) no Borrower has been organized in any other jurisdiction nor
changed any such location in the last five (5) years, (b) no Borrower has
changed its name in the last five (5) years, and (c) during such period no
Borrower used, nor does any Borrower now use, any fictitious or trade name.

 

5.03         Healthcare Matters.

 

(a)           Operation of Facilities. Each Borrower owns or leases Healthcare
Facilities in which it provides healthcare services and with respect to the
operations of the Healthcare Facilities (i) maintains Medicare and Medicaid
provider status and is the holder of the provider identification numbers,
including but not limited to, Medicare, Medicaid and other third party payor
provider numbers and National Provider Identifiers, identified on Schedule 5.03
hereto, all of which are current and valid and such Borrower has not allowed,
permitted, authorized or caused any other Person to use any such provider
identification number, and (ii) has obtained all material Permits 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 and,
if organized as a not-for-profit entity, has and maintains its status, if any,
as an organization exempt from federal taxation under Section 501(c)(3) of the
Internal Revenue

 

12

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Code. No Borrower has been notified by any such governmental authority or other
Person during the immediately preceding 24 month period that such party has
rescinded, limited or not renewed, or intends to rescind, limit or not renew,
any such license or approval.

 

(b)           Healthcare Permits. With respect to the Healthcare Facilities,
each Borrower has (i) each Permit and other rights from, and have made all
declarations and filings with, all applicable Governmental Authorities, all self
regulatory authorities and all courts and other tribunals necessary to engage in
the ownership and operation of the Healthcare Facilities, except where such
failure could not reasonably be expected to have a Material Adverse Effect and
(ii) no knowledge that any Governmental Authority is considering limiting,
suspending or revoking any such Permit. All such Permits are valid and in full
force and effect and each Borrower is in material compliance with the terms and
conditions of all such Permits except where failure to be in such compliance or
for a Permit to be valid and in full force and effect could not reasonably be
expected to have a Material Adverse Effect.

 

(c)           Specific Licensing. Each Healthcare Facility is duly licensed
under the Applicable Laws of the state where the Healthcare Facility is located,
in order to operate as currently operated.

 

(d)           Participation Agreements/Provider Status/Cost Reports.

 

(i)            Each Borrower has the requisite participation agreement or
provider number or other Permit to bill the respective Medicaid program in the
state or states in which such Borrower operates (to the extent such Borrower
participates in the Medicare or Medicaid program in such state or states) and
all other Third Party Payor Programs (including Medicare) which account for any
portion of the revenues of such Healthcare Facility.

 

(ii)           There is no investigation, audit, claim review, or other action
pending or, to the knowledge of any Borrower, threatened which could result in a
revocation, suspension, termination, probation, material restriction,
limitation, or non-renewal of any participation agreements with Third Party
Payors with respect to the business of each Borrower (collectively,
“Participation Agreements”) or provider number or other Permit or result in a
Borrower’s exclusion from any Third Party Payor Program, nor has any Third Party
Payor Program made any decision not to renew any Participation Agreement or
provider agreement or other Permit related to any Healthcare Facility, nor has
any Borrower made any decision not to renew any Participation Agreement or
provider agreement or other Permit, nor is there any action pending or, to the
knowledge of Borrowers, threatened to impose material intermediate or
alternative sanctions with respect to any Healthcare Facility.

 

(iii)          Each Borrower, and, to the knowledge of such Borrower, its
contractors, have properly and legally billed all intermediaries and Third Party
Payors for services rendered with respect to the Healthcare Facilities and have
maintained their records to reflect such billing practices. No funds relating to
any Borrower are now, or, to the knowledge of any Borrower will be, withheld by
any Third Party Payor.

 

(iv)          All Medicare, Medicaid, and private insurance cost reports and
financial reports submitted by each Borrower are and will be materially accurate
and complete and have not been and will not be misleading in any material
respects. There are no current, pending or outstanding Medicare, Medicaid or
Third Party Payor Program reimbursement audits or appeals pending with respect
to the Healthcare Facilities or any Borrower.

 

(v)           With respect to the operation of the Healthcare Facilities, each
Borrower is properly enrolled in the Medicare program and is not experiencing
any material payment delays or denials as a result of the Medicare program’s use
and adoption of the National Provider Identifier.

 

(vi)          Each Borrower and Healthcare Facility is currently enrolled as a
participating provider in the Medicare program or is otherwise not subject to
the moratorium on the establishment of new long term care hospitals and long
term care hospital satellites contained in the Medicare, Medicaid and SCHIP
Extension Act of 2007.

 

(e)           No Violation of Healthcare Laws.

 

(i)            None of the Healthcare Facilities or any Borrower is, to the
knowledge of any Borrower, in violation of any Healthcare Laws, except where any
such violation could not reasonably be expected to have a Material Adverse
Effect.

 

(ii)           Each Borrower is, to the knowledge of each Borrower, HIPAA
Compliant with respect to the operations of the Healthcare Facilities.

 

(iii)          No Healthcare Facility has received a statement of deficiencies
or survey violation of a “Level A” (or equivalent) or worse (with respect to
assisted living facilities), or a tag level of “G” or

 

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higher with respect to any skilled nursing facility, within the past three years
for which a plan of correction has not been filed with the applicable state
authority. No Healthcare Facility is currently subject to any plan of correction
that has not been accepted by or is currently the subject of a review by the
applicable state authority. No Borrower has received notice of any charges of
patient abuse at any Healthcare Facility.

 

(f)            Proceedings. No Borrower or Healthcare Facility is subject to any
proceeding, suit or, to Borrowers’ knowledge, investigation by any federal,
state or local government or quasi-governmental body, agency, board or authority
or any other administrative or investigative body (including the Office of the
Inspector General of the United States Department of Health and Human Services):
(i) which may result in the imposition of a fine, alternative, interim or final
sanction, a lower reimbursement rate for services rendered to eligible patients
at the Healthcare Facilities; (ii) which could result in the revocation,
transfer, surrender, suspension or other material impairment of the operating
certificate provider agreement or Permits of any Healthcare Facility;
(iii) which pertains to any state or federal Medicare or Medicaid cost reports
or claims filed by any Borrower (including, but not limited to, any
reimbursement audits), or any disallowance by any commission, board or agency in
connection with any audit of such cost reports; or (iv) which pertains to or
requests any voluntary disclosure pertaining to a potential overpayment matter
involving the submission of claims to such payor by any Borrower, which, in each
case with respect to clauses (i), (iii) and (iv) above, has not been provided
for on their respective financials statements, or which could reasonably be
expected to have a Material Adverse Effect on any Borrower or the operation of
any individual Healthcare Facility.

 

(g)           Fraud & Abuse.

 

(i)            No Borrower has, or to its knowledge has been threatened to have,
and, to the knowledge of Borrower, no owner, officer, manager, employee or
person with a “direct or indirect ownership interest” (as that phrase is defined
in 42 C.F.R. §420.201) in any Borrower has, engaged in any of the following:
(A) knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or payment
under any Healthcare Laws; (B) knowingly and willfully making or causing to be
made any false statement or representation of a material fact for use in
determining rights to any benefit or payment under any Healthcare Laws;
(C) failing to disclose knowledge by a claimant of the occurrence of any event
affecting the initial or continued right to any benefit or payment under any
Healthcare Laws on its own behalf or on behalf of another, with intent to secure
such benefit or payment fraudulently; (D) knowingly and willfully soliciting or
receiving any remuneration (including any kickback, bribe or rebate), directly
or indirectly, overtly or covertly, in cash or in kind or offering to pay such
remuneration (1) in return for referring an individual to a person for the
furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part by any Healthcare Laws, or (2) in return
for purchasing, leasing or ordering or arranging for or recommending the
purchasing, leasing or ordering of any good, facility, service, or item for
which payment may be made in whole or in part by any Healthcare Laws;
(E) presenting or causing to be presented a claim for reimbursement for services
that is for an item or services that was known or should have been known to be
(1) not provided as claimed, or (2) false or fraudulent; or (F) knowingly and
willfully making or causing to be made or inducing or seeking to induce the
making of any false statement or representation (or omitting to state a fact
required to be stated therein or necessary to make the statements contained
therein not misleading) of a material fact with respect to (1) a facility in
order that the facility may qualify for Governmental Authority certification, or
(2) information required to be provided under 42 U.S.C. § 1320a-3.

 

(ii)           No Borrower has been, or to its knowledge has been threatened to
be, and, to the knowledge of Borrower, no owner, officer, manager, employee or
person with a “direct or indirect ownership interest” (as that phrase is defined
in 42 C.F.R. §420.201) in any Borrower: (A) has had a civil monetary penalty
assessed against him or her pursuant to 42 U.S.C. §1320a-7a or is the subject of
a proceeding seeking to assess such penalty; (B) has been excluded from
participation in a Federal Health Care Program (as that term is defined in 42
U.S.C. §1320a-7b) or is the subject of a proceeding seeking to assess such
penalty, or has been “suspended” or “debarred” from selling products to the U.S.
government or its agencies pursuant to the Federal Acquisition Regulation,
relating to debarment and suspension applicable to federal government agencies
generally (48 C.F.R. Subpart 8.4), or other Applicable Laws or regulations;
(C) has been convicted (as that term is defined in 42 C.F.R. §1001.2) of any of
those offenses described in 42 U.S.C. §1320a-7b or 18 U.S.C. §§669, 1035, 1347,
1518 or is the subject of a proceeding seeking to assess such penalty; (D) has
been involved or named in a U.S. Attorney complaint made or any other action
taken pursuant to the False Claims Act under 31 U.S.C. §§3729-3731 or qui tam
action brought pursuant to 31 U.S.C. §3729 et seq.; (E) has been made a party to
any other action by any governmental authority that may prohibit it from selling
products to any governmental or other purchaser pursuant to any law; or

 

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(F) was or has become subject to any federal, state, local governmental or
private payor civil or criminal investigations or inquiries, proceedings,
validation review, program integrity review or statement of charges involving
and/or related to its compliance with Healthcare Laws or involving or
threatening its participation in Medicare, Medicaid or other Third Party Payor
Programs or its billing practices with respect thereto.

 

5.04         Pending Litigation. There are no judgments or judicial or
administrative orders, proceedings or investigations (civil or criminal)
pending, or to the knowledge of any Borrower, threatened, against any Borrower
in any court or before any governmental authority or arbitration board or
tribunal, other than as set forth on Schedule 5.04 hereto, which, if adversely
determined could reasonably be expected to cause a Material Adverse Effect. No
Borrower is in default with respect to any order of any court, governmental
authority, regulatory agency or arbitration board or tribunal. No Shareholder or
executive officer of any Borrower has been indicted or convicted in connection
with or is engaging in any criminal conduct, or is currently subject to any
lawsuit or proceeding or under investigation in connection with any
anti-racketeering or other conduct or activity.

 

5.05         Medicaid and Medicare Cost Reporting. The Medicaid and Medicare
cost reports of each facility and of the home office of each Borrower for all
cost reporting periods have been submitted when and as required to (a) as to
Medicaid, the state agency, or other CMS-designated agent or agent of such state
agency, charged with such responsibility or (b) as to Medicare, the Medicare
intermediary or other CMS-designated agent charged with such responsibility.

 

5.06         Title to Collateral. Each Borrower has good and marketable title to
all the Collateral it respectively purports to own, free from co-owners, liens,
claims and encumbrances, except those of Lender and those listed on Schedule
5.06 hereto (“Permitted Liens”). The possession and use of the Collateral does
not and will not infringe, misappropriate or otherwise violate the intellectual
property rights of any Person.

 

5.07         Governmental Consent. Neither the nature of any Borrower or of any
Borrower’s business or Property, nor any relationship between any Borrower and
any other Person, nor any circumstance affecting any Borrower in connection with
the execution, issuance and/or delivery of this Agreement or the Revolving Note
is such as to require a consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority on the part of
any such Borrower in connection with the execution and delivery of this
Agreement or the issuance or delivery of the Revolving Note or other Loan
Documents.

 

5.08         Taxes. All tax returns required to be filed by Borrowers, or any of
them, in any jurisdiction have in fact been filed, and all Taxes, assessments,
fees and other governmental charges upon Borrowers, or any of them, or upon any
of their respective Property, 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 appropriate reserves have been maintained under GAAP. No Borrower is aware
of any proposed additional tax assessment or tax to be assessed against or
applicable to any Borrower that could reasonably be expected to cause a Material
Adverse Effect.

 

5.09         Financial Statements.

 

(a)           Borrowers’ annual consolidated and consolidating balance sheet as
of September 30, 2008 and the quarterly consolidated balance sheet, the related
income statements and statements of cash flows, each as of September 30, 2008
(complete copies of which have been delivered to Lender), have been prepared in
accordance with GAAP (other than the absence of footnotes) and present fairly,
accurately and completely (subject to audit adjustments) the financial position
of Borrowers as of such dates and the results of their operations for such
periods.

 

(b)           Since the date of the last annual consolidated and consolidating
balance sheet and related income statements and statements of cash flows, there
has been no event or circumstance that has had or could reasonably be expected
to have a Material Adverse Effect.

 

(c)           The fiscal year for each Borrower currently ends on the date set
forth on Schedule 5.09 hereto. Each Borrower’s federal tax identification number
and organization number are as set forth on Schedule 5.09 hereto.

 

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5.10         Full Disclosure. Neither the financial statements referred to in
Section 5.09 hereof, nor this Agreement or related agreements and documents or
any written statement furnished by any Borrower to Lender in connection with the
negotiation of the Credit Facility and contained in any financial statements
(subject to audit adjustments) or documents relating to any Borrower contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained therein or herein not misleading.

 

5.11         Guarantees, Contracts, etc.

 

(a)           No Borrower owns or holds partnership interests or equity or long
term debt investments in, has any outstanding advances to, or serves as
guarantor, surety or accommodation maker for the obligations of, any Person
except as described in Schedule 5.11 hereto.

 

(b)           No Borrower is a party to any contract or agreement, or subject to
any charter or other entity restriction which could reasonably be expected to
cause a Material Adverse Effect.

 

(c)           Except as otherwise specifically provided in this Agreement, no
Borrower 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 or encumbrance not permitted
by this Agreement.

 

5.12         Compliance with Laws.

 

(a)           No Borrower is in violation of, or has received written notice
that it is in violation of, any applicable statute, regulation or ordinance of
the United States of America, or of any state, city, town, municipality, county
or of any other jurisdiction, or of any agency, or department thereof,
(including, without limitation, environmental laws and regulations), which could
reasonably be expected to cause a Material Adverse Effect.

 

(b)           Each Borrower is current with all reports and documents required
to be filed with any state or federal securities commission (if any) or similar
agency and is in full compliance with all applicable rules and regulations of
such commissions, except where such failure to so comply could not reasonably be
expected to cause a Material Adverse Effect.

 

5.13         Other Associations. No Borrower is engaged in nor has an interest
in any joint venture or partnership with any other Person or has any
Subsidiaries or Affiliates, except as described on Schedule 5.13 hereto.

 

5.14         Environmental Matters. Except as disclosed on Schedule 5.14 hereto,
no Borrower has knowledge:

 

(a)           of violations of any Environmental Laws on any of the real
property where any Borrower maintains operations or has its personal property,
or where any Collateral is located;

 

(b)           of any claims or actions pending or threatened, or claims or
actions in the past during Borrower’s period of ownership, against Borrower or
any of such real property by any governmental entity or agency or by any other
person or entity relating to Hazardous Substances or pursuant to any
Environmental Laws;

 

(c)           of the presence of any Hazardous Substances on any of such real
property, other than solid or biohazardous wastes generated in the diagnosis or
treatment of patients as are commonly found in hospitals similar to the hospital
operated by BMC;

 

(d)           of any such real property ever having been used by any of the
Borrowers or, to the best of Borrowers’ knowledge any other person, to refine,
produce, store, handle, transfer, process, transport, or dispose of Hazardous
Substances other than in full compliance with Environmental Laws, except with
respect to any such use which would not reasonably be expected to result in a
Material Adverse Effect;

 

(e)           of storage tanks (including, without limitation, petroleum or
heating oil storage tanks), underground or above-ground, present on or under any
of such real property, or that have been on or under any such real property but
removed therefrom;

 

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(f)            of any on-site spills, releases, discharges, disposal, or storage
of Hazardous Substances, other than solid or biohazardous wastes generated in
the diagnosis or treatment of patients as are commonly found in hospitals
similar to the hospital operated by BMC, that have occurred or are presently
occurring on any of such real property, which spills, releases, discharges,
disposal or storage could be reasonably expected to have a Material Adverse
Effect; or

 

(g)           of any spills, releases, discharges, disposal, or storage of
Hazardous Substances, other than solid or biohazardous wastes generated in the
diagnosis or treatment of patients as are commonly found in hospitals similar to
the hospital operated by BMC, that have occurred or are presently occurring on
any other real property as a result of the conduct, action, or activities of any
Borrower, which spills, releases, discharges, disposal or storage could be
reasonably expected to have a Material Adverse Effect.

 

5.15         Capital Stock. The authorized and outstanding Capital Stock of each
Borrower is as set forth on Schedule 5.15 hereto. All of the Capital Stock and
equity interests of each Borrower have been duly and validly authorized and
issued and is 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. Except for the rights and
obligations set forth in Schedule 5.15 hereto, there are no subscriptions,
warrants, options, calls, commitments, rights or agreements by which any
Borrower or any of the Shareholders of any Borrower is bound relating to the
issuance, transfer, voting or redemption of its Capital Stock or any preemptive
rights held by any Person with respect to the Capital Stock of any such
Borrower. Except as set forth in Schedule 5.15 hereto, no Borrower has issued
any securities convertible into or exchangeable for its Capital Stock or any
options, warrants or other rights to acquire such Capital Stock or securities
convertible into or exchangeable for such Capital Stock.

 

5.16         Lockboxes. The Government Lockbox and the Commercial Lockbox are
the only lockbox accounts maintained by Borrowers, and each Obligor of an
Eligible Account has been directed by the notice attached as Exhibit 4.02(c) to
this Agreement, and is required to, remit all payments with respect to such
Account for deposit in the Commercial Lockbox (other than the Obligors of
Government Accounts which have been directed by the notice attached as
Exhibit 4.02(d) to this Agreement to remit all payments with respect to such
Accounts for deposit in the Government Lockbox).

 

5.17         Borrowing Base Reports. Each Borrowing Base Report signed by
Borrowers, on behalf of Borrowers, contains and will contain an accurate summary
of all Eligible Accounts of Borrowers contained in the Borrowing Base as of its
date.

 

5.18         Security Interest. The Borrowers represent and warrant to Lender
that except for the Permitted Liens, (a) upon the filing of UCC financing
statements covering the Collateral in all required jurisdictions, this Agreement
creates a valid, perfected, first priority security interest in the Collateral
as to which perfection may be achieved by filing, (b) Lender’s security
interests in the Collateral constitute, and will at all times constitute, first
priority and exclusive liens on the Collateral, and (c) each Borrower is, or
will be at the time additional Collateral is acquired by such Borrower, the
absolute owner of such additional Collateral with full right to pledge, sell,
transfer and create a security interest therein, free and clear of any and all
claims or liens other than Permitted Liens.

 

5.19         Accounts.

 

(a)           No Borrower has done nor shall do anything to interfere with the
collection of the Accounts and no Borrower shall amend or waive the terms or
conditions of any Account or any related Contract in any material adverse manner
without Lender’s prior written consent.

 

(b)           Each Borrower has made and will continue to make all payments to
Obligors necessary to prevent any Obligor from offsetting any earlier
overpayment to such Borrower against any amounts such Obligor owes on an
Account.

 

5.20         ERISA. Borrowers and each other member of its Controlled Group has
fulfilled its obligations under the minimum funding standards of, and is in
compliance in all material respects with, ERISA and the Code to

 

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the extent applicable to it and, other than a liability for premiums under
Section 4007 of ERISA, has not incurred any liability to the PBGC or a Plan
under Title IV of ERISA. Borrowers and their Subsidiaries and/or Affiliates have
no contingent liabilities with respect to any post-retirement benefits under a
welfare plan, as defined in Section 3(1) of ERISA, other than liability for
continuation coverage described in Article 6 of Title 1 of ERISA.

 

5.21         Representations and Warranties for each Loan. As of each date that
Borrowers shall request any Loan, each Borrower 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, complete and correct in all material respects. With respect
to each such Account that has been billed, the corresponding Borrower has
delivered to the Obligor all 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)           Other than the CMS Claim, there is no lien or 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, (ii) to the knowledge of Borrowers the legally enforceable obligation of
such Obligor, and (iii) an account or general intangible within the meaning of
the UCC, or is a right to payment under a policy of insurance or proceeds
thereof, and is not evidenced by any instrument or chattel paper. To the
knowledge of Borrowers, 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 assigned to Lender 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, or (iii) is past the statutory limit for
collection applicable to the Obligor.

 

(f)            Such Borrower does 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 as has been assigned to
Lender.

 

(g)           The services constituting the basis of such Account (i) were
medically necessary for the patient and (ii) at the time such services were
rendered, were fully covered by the insurance policy or Contract obligating the
applicable Obligor to make payment with respect to such Account (and the
corresponding Borrower has verified such determination), and (iii) the patient
received such services in the ordinary course of such Borrower’s business.

 

(h)           The fees and charges charged for the services constituting the
basis for such Account were when rendered consistent with (i) the usual,
customary and reasonable fees charged by Borrowers or (ii) pursuant to
negotiated fee contracts, or imposed fee schedules, with or by the applicable
Obligors.

 

(i)            The Obligor with respect to such Account is located in the United
States, and is (i) a party which in the ordinary course of its business or
activities agrees to pay for healthcare services received by individuals,
including, commercial insurance companies and non-profit insurance companies
issuing health, or other types of insurance, employers or unions, self-insured
healthcare organizations, preferred provider organizations, and health insured,
prepaid maintenance organizations, (ii) a state, an agency or instrumentality of
a state or a political subdivision of a state, or (iii) the United States or an
agency or instrumentality of the United States.

 

(j)            The insurance policy or Contract obligating an Obligor to make
payment (i) does not prohibit the transfer of such payment obligation from the
patient to the corresponding Borrower and (ii) is and was in full force and
effect and applicable to the patient at the time the services constituting the
basis for such Account were performed.

 

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(k)           The representations and warranties made by Borrowers in the Loan
Documents and all financial or other information delivered to Lender with
respect to Borrowers and such Account do not contain any untrue statement of
material fact or omit to state a material fact necessary to make the statement
made not misleading.

 

(l)            If requested by Lender, a copy of each related Contract to which
each Borrower is a party has been delivered to Lender unless any such Borrower
shall have, prior to the related Funding Date, certified in an Officer’s
Certificate that such delivery is prohibited by the terms of the Contract or by
law, and the circumstances of such prohibition.

 

(m)          If such Account has not been billed, the services giving rise to
such Account have been properly recorded in the corresponding Borrower’s
accounting system.

 

(n)           Such Account was (or if unbilled, will be) in any event billed no
later than forty-five (45) days after the date the services or goods giving rise
to such Account were rendered as provided, as applicable, and each bill contains
an express direction requiring the Obligor to remit payments to either the
Government Lockbox or Commercial Lockbox, as applicable.

 

(o)           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.

 

(p)           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 Borrowers are not
and, to the knowledge of Borrowers, no party to such related Contract is in
violation of any such law, rule or regulation in connection with such Contract.

 

(q)           As of the applicable Funding Date, to the Borrowers’ knowledge, no
Obligor on such Account is bankrupt, insolvent, or is unable to make payment of
its obligations when due, and no other fact exists which would cause any
Borrower reasonably to expect that the amount billed to the related Obligor for
such Account will not be paid in full when due.

 

5.22         Interrelatedness of Borrowers. The business operations of each
Borrower are interrelated and complement one another, and such companies have a
common business purpose, with intercompany bookkeeping and accounting
adjustments used to separate their respective Properties, liabilities and
transactions. To permit their uninterrupted and continuous operation, such
companies now require and will from time to time hereafter require funds for
general business purposes. The proceeds of Revolving Loans under the Credit
Facility will directly or indirectly benefit each Borrower hereunder severally
and jointly, regardless of which Borrower requests or receives part or all of
the proceeds of such Loan.

 

5.23         [Reserved]

 

5.24         [Reserved]

 

5.25         Intellectual Property. Except for “shrink-wrapped” software and as
shown on Schedule 5.25 hereto and made part hereof, (a) Borrowers do not require
any copyrights, patents, trademarks, other intellectual property or other
general intangibles (as defined in the UCC), or any license(s) to use any
patents, trademarks or other intellectual property in order to (i) provide
services to their customers, (ii) bill Obligors and collect therefrom, in the
ordinary course of business or (iii) otherwise conduct Borrowers’ business as
presently conducted, and (b) Borrowers have not granted an exclusive license to
any party that relates to Borrower’s intellectual property. All of Borrower’s
rights in its intellectual property are enforceable, valid and subsisting. No
action, suit, demand, charge or claim has been made or threatened which
challenges the enforceability or validity of Borrower’s intellectual property.

 

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5.26         Solvency. On the Closing Date and immediately prior to and after
giving effect to each borrowing hereunder and the use of the proceeds thereof,
with respect to each Borrower (a) the fair value of its assets is greater than
the amount of its liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated, (b) the
present fair saleable value of its assets is not less than the amount that will
be required to pay the probable liability on its debts as they become absolute
and matured, (c) it is able to realize upon its assets and pay its debts and
other liabilities (including disputed, contingent and unliquidated liabilities)
as they mature in the normal course of business, (d) it does not intend to, and
does not believe that it will, incur debts or liabilities beyond its ability to
pay as such debts and liabilities mature, and (e) it is not engaged in business
or a transaction, and is not about to engage in business or a transaction, for
which its property would constitute unreasonably small capital.

 

5.27         Schedules. Each of the Schedules attached to this Agreement sets
forth a true, correct and complete description of the matter or matters covered
thereby.

 

5.28         Location of Computerized Billing System; Books and Records.  Any
and all computer hardware, software and electronic data, as well as any books,
records or other information, necessary to bill for services provided by
Borrowers and collect payments for such services are stored and maintained in
good working condition at the Healthcare Facility located at 3828 Delmas
Terrace, Culver City, CA 90231, which is owed in fee simple by Borrowers.

 

5.29         No Documents or Correspondence Regarding CMS Claim. As of the
Closing Date, Borrowers have not received any notice, correspondence or
documentation of any kind from CMS regarding any CMS Claim.

 

ARTICLE 6

 

AFFIRMATIVE COVENANTS

 

Each Borrower covenants that until all of Borrowers’ Obligations to Lender are
paid and satisfied in full and the Credit Facility has been terminated:

 

6.01         Payment of Taxes and Claims. Each Borrower shall pay, before they
become delinquent, all Taxes, assessments and governmental charges or levies
imposed upon it or upon such Borrower’s 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.

 

6.02         Maintenance of Insurance, Financial Records and Existence.

 

(a)           Required Insurance. Borrowers shall maintain or cause to be
maintained insurance on its Property against fire, casualty, public liability,
business interruption and such other hazards, as well as general liability,
medical malpractice insurance and other liability insurance related to the
business of the Borrowers required by the Lender, all in such amounts, with such
deductibles and with such insurers as are at all times reasonably satisfactory
to Lender (the “Required Insurance”). The policies relating to the Required
Insurance shall contain standard “lender loss payable” clauses with respect to
property insurance and “additional insured” clauses with respect to general
liability or automobile insurance issued in favor of Lender pursuant to which
all losses thereunder shall be paid to Lender as Lender’s interests may appear.
Such policies shall expressly provide that the carrier of any Required Insurance
will endeavor to provide ten (10) days’ prior written notice of cancelation of
such policy for non-payment 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 certified as true and correct and
being in full force and effect as of the Closing Date or such other evidence of
the Required Insurance as Lender may require. In the event Borrowers fail to
procure or cause to be procured any of the Required Insurance or to timely pay
or cause to be paid the premium(s) on any of the Required Insurance, Lender may
do so for Borrowers, but Borrowers shall continue to be liable for the same.
Borrowers further covenant that all insurance premiums owing under its current
casualty policy have been paid. Borrowers also agree to notify Lender, promptly,
upon any Borrower’s receipt of a notice of termination, cancellation or
non-renewal from its insurance company of any of the Required Insurance. Each
Borrower hereby appoints Lender as its attorney-in-fact, exercisable at Lender’s
option, upon the

 

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occurrence and during the continuation of an Event of Default, to endorse any
check which may be payable to such Borrower in order to collect the proceeds of
the Required Insurance.

 

(b)           Financial Records. Borrowers shall keep current and accurate books
of records and accounts in which full and correct entries will be made of all of
its business transactions, and will reflect in its financial statements adequate
accruals and appropriations to reserves, all in accordance with GAAP. No
Borrower shall change its respective fiscal year end date without the prior
written notice to Lender.

 

(c)           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 legal
existence, good standing, rights and franchises.

 

6.03         Business Conducted. Each Borrower shall continue in the business
presently operated by it using its best efforts to maintain its customers. No
Borrower shall engage, directly or indirectly, in any line of business
substantially different from the businesses conducted by it immediately prior to
the Closing Date.

 

6.04         Litigation. Borrowers shall give prompt notice to Lender of any
litigation claiming in excess of $500,000.00 from Borrowers, or any of them, or
which could reasonably be expected to cause a Material Adverse Effect.

 

6.05         Taxes. Borrowers shall pay all Taxes when due (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 shall survive the
payment of Borrowers’ Obligations under this Agreement and the termination of
this Agreement.

 

6.06         Financial Covenants.

 

(a)           Maximum Loan Turn Days. Borrowers shall at all times maintain a
Maximum Loan Turn Days calculation, measured at the end of the fiscal quarter
ending June 30, 2009 and the end of each fiscal quarter thereafter, of not
greater than thirty (30) days.

(b)           Fixed Charge Coverage Ratio. Borrowers shall maintain a Fixed
Charge Coverage Ratio, measured quarterly at the end of each fiscal quarter, of
not less than (i) 1.10:1.00 for the fiscal quarter ending June 30, 2009;
(ii) 1.15:1.00 for the fiscal quarter ending September 30, 2009; and
(iii) 1.20:1.00 for each fiscal quarter ending thereafter. The Fixed Charge
Coverage Ratio shall be calculated for the four quarters immediately preceding
the quarter being measured, provided, however, that for the first three quarters
of testing following the Closing, the Fixed Charge Coverage Ratio shall be
calculated on a cumulative annualized basis. The first calculation of the Fixed
Charge Coverage Ratio shall be for the quarter ending June 30, 2009.

 

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

 

(a)           Financial Statements and Collateral Reports.

 

(i)            as soon as available but in any event within one hundred twenty
(120) days after the end of each fiscal year of Borrowers, financial statements
of Borrowers for such year which present fairly 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 of 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;

 

(ii)           as soon as available but in any event on the earlier of (i) the
date upon which Prospect Medical Holdings, Inc. files a Form 10-Q for such
fiscal quarter with the Securities and Exchange Commission and (ii) forty-five
(45) days after the end of each fiscal quarter, Borrowers’ internally prepared
quarterly consolidated and consolidating financial statements, for such fiscal
quarter, along with year to date information, including a balance sheet, income
statement and statement of cash flows with respect to the periods measured,
operating statistics and a quarterly compliance certificate;

 

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(iii)          promptly upon request, such other information concerning
Borrowers as Lender may from time to time request, including Medicare and
Medicaid cost reports and audits, annual reports, security law filings and
reports to any security holders;

 

(iv)          as soon as possible and no later than thirty (30) days prior to
the first day of each fiscal year, an annual operating budget along with annual
consolidated and consolidating projections for Borrowers for such year,
including a balance sheet, income statement and statement of cash flow, all
prepared on a monthly basis;

 

(v)           contemporaneously with delivery of the annual financial statements
referred to in clause (i) above, a good standing certificate from each
Borrower’s jurisdiction of organization evidencing that such Borrower remains in
good standing in, and continues to be organized under the laws of, such
jurisdiction;

 

(vi)          as soon as available but in any event within one hundred twenty
(120) days after the effective date of the Plan of Reorganization, audited
balance sheets for Borrowers for the fiscal year ended September 30, 2008, all
on a consolidated and consolidating basis, setting forth in the consolidated
statements in comparative form, the corresponding figures as of 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;

 

(vii)         as soon as available but in any event within one hundred twenty
(120) days after the effective date of the Plan of Reorganization, an audited
income statement for the fiscal year ended September 30, 2008, on a consolidated
and consolidating basis, audited by independent public accountants of recognized
standing, selected by Borrowers and reasonably satisfactory to Lender, and
prepared in accordance with GAAP; and

 

(viii)        such other data, reports, statements and information (financial or
otherwise), as Lender may reasonably request.

 

(b)           Notice of Event of Default or Unmatured Event of Default- promptly
(but at least within 2 Business Days) upon 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;

 

(c)           Notice of Claimed Default - promptly upon receipt by any Borrower,
notice of default, oral or written, given to such Borrower by any creditor for
borrowed money in excess of $100,000.00.

 

6.08         Officer’s Certificate. Along with the set of financial statements
delivered to Lender at the end of each fiscal quarter and fiscal year pursuant
to Section 6.07(a) hereof, deliver to Lender a certificate (in the form of
Exhibit 6.08 hereto and made a part hereof) from the chief financial officer of
Borrowers 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 6.06 as of the end of the period covered by the
financial statements then being furnished (and any exhibits appended thereto)
under Section 6.07 hereof; and

 

(b)           Event of Default - that the signer in his capacity as an 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.

 

6.09         Inspection. No more than two times per calendar year so long as no
Event of Default or Unmatured Event of Default has occurred and is continuing,
Borrowers will permit any of Lender’s officers or other representatives to visit
and inspect any Borrower’s location(s) or where any Collateral is kept during
regular business hours to examine and audit all of such Borrower’s books of
account, records, reports and other papers, to make copies and extracts
therefrom and to discuss its affairs, finances and accounts with its 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 $1,000.00 per day, per person (plus
reasonable out-of-pocket expenses payable monthly in arrears on the first day at
the immediately successive calendar month at the

 

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inspection). All reasonable costs, fees and expenses incurred by Lender in
connection with such inspections shall constitute Expenses for purposes of this
Agreement.

 

6.10         Tax Returns and Reports. At Lender’s request from time to time,
Borrowers shall promptly furnish Lender with copies of any annual federal and
state income tax returns, any other tax returns of Borrowers or any other
documents related to Taxes of the Borrowers

 

6.11         Material Adverse Developments. Each Borrower agrees that
immediately (but at least within 2 Business Days) upon it or any of its officers
becoming aware of any development or other information which would reasonably be
expected to have a Material Adverse Effect, it shall give to 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. Each Borrower shall give thirty (30) days prior
written notice to Lender of any changes to (a) its jurisdiction of organization,
(b) the location of any of its chief executive office or any other places of
business, or the establishment of any new, or the discontinuance of any existing
place of business, and (c) its name.

 

6.13         Notice of Action. Each Borrower will promptly notify Lender in the
event of any legal action, dispute, setoff, counterclaim, defense or reduction
that is or may be asserted by an Obligor with respect to any Account that may
have a Material Adverse Effect on the collectability of such Account or all
Accounts collectively.

 

6.14         Verification of Information. At the request of Lender, Borrowers
will promptly provide and verify the accuracy of information concerning
Borrowers and their Affiliates of the type provided to Lender in connection with
Lender’s decision to enter into this Agreement and such other information
concerning Borrowers and their Affiliates as Lender may reasonably request in
connection with any offering documents with respect to the sale of securities
backed by the Eligible Accounts (the “Securities”), including, without
limitation, all information necessary to provide full and complete disclosure 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. Such
information will be true and complete in all material respects and will not omit
to state a material fact necessary to make the statements contained in such
information, in light of the circumstances under which they were made, not
misleading.

 

6.15         Accounts Receivables Monitoring System. Borrowers shall permit
Lender or its agents to interface its accounts receivables monitoring system to
Borrowers’ data files and will assist Lender or its agent in completing and
maintaining such interface such that the interface can interpret, track and
reconcile the Accounts Detail File provided by Borrowers.

 

6.16         [Reserved]

 

6.17         Compliance with Laws.

 

(a)           Borrowers agree to comply with all Applicable Laws, and all orders
of any federal, state or local legislative, administrative or judicial body or
official, provided that Borrowers may contest any acts, rules, regulations,
orders and directions of such bodies or officials in any reasonable manner which
Lender determines will not materially and adversely effect Lender’s rights or
priorities in the Collateral.

 

(b)           Without limiting the generality of the foregoing, each Borrower
agrees to comply with all environmental statutes, acts, rules, regulations or
orders, as presently existing or as adopted or amended in the future, applicable
to the ownership and/or use of such Borrower’s real property and operation of
its business, if the failure to so comply could reasonably be expected to have a
Material Adverse Effect. No Borrower shall be deemed to have breached any
provision of this Section 6.17(b) if (i) the failure to comply with the
requirements of this Section 6.17(b) resulted from good faith error or innocent
omission, (ii) such Borrower promptly commences and

 

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diligently pursues a cure of such breach and (iii) such failure is cured within
thirty (30) days following such Borrower’s receipt of notice from Lender of such
failure, or if such breach cannot in good faith be cured within thirty (30) days
following such Borrower’s receipt of such notice, then such breach is cured
within a reasonable time frame based on the extent and nature of the breach and
the necessary remediation, and in conformity with any applicable consent order,
consensual agreement and Applicable Law.

 

(c)           Borrowers will (i) maintain in full force and effect, and free
from restrictions, probations, conditions or known conflicts which would
materially impair the use or operation of any Healthcare Facility for its
current use, all Permits necessary under Healthcare Laws to continue to receive
reimbursement under all Third Party Payor Programs in which any Borrower or any
Healthcare Facility participates as of the date of this Agreement, and
(ii) provide to Lender upon request, an accurate, complete and current list of
all participation agreements with Third Party Payors with respect to the
business of each Borrower (collectively, “Participation Agreements”). Borrowers
will at all times comply with all requirements, contracts, conditions and
stipulations applicable to such Borrower in order to maintain in good standing
and without default or limitation all such Participation Agreements.

 

6.18         Collateral Reporting.  Borrowers agree to furnish to Lender such
information as Lender reasonably requires in connection with monitoring the
Collateral, at the times and in the manner determined by Lender, including
Medicare and Medicaid cost reports and audits.

 

6.19         Collateral. Borrowers, at their expense, agree to forever warrant
and defend the Collateral from any and all claims and demands of any other
person, other than holders of Permitted Liens.

 

6.20         [Reserved]

 

6.21         Additional Creditor Trust Payment. On or prior to 180 days after
the Closing Date, Borrowers shall deliver to Lender evidence satisfactory to
Lender in its sole discretion that payment in the amount of $1,000,000.00 has
been made by BMC to the Creditors Trust.

 

6.22         Potential CMS Liability.

 

(a)           No later than five (5) Business Days after the first calendar day
of each month, Borrowers shall provide a description to Lender in writing,
acceptable to Lender in its sole discretion, detailing the status of any actual
or potential claims by CMS against Borrowers or any actual or potential
liability of Borrowers to CMS.

 

(b)           Borrowers shall immediately (but within 2 Business Days of
knowledge) upon Borrowers or any of its officers becoming aware of any claim
asserted by CMS, deliver a written notice specifying the nature and amount of
such claim, and provide copies of any documentation related to such claim, to
Lender.

 

6.23         Maintenance of Computerized Billing System; Books and Records.  Any
and all computer hardware, software and electronic data, as well as any books,
records or other information, necessary to bill for services provided by
Borrowers and collect payments for such services shall be maintained in good
working condition at its records location (the “Records Location”), which, as of
the Closing Date, is located at 3847 Delmas Terrace, Culver City, CA 90231 (the
“3847 Delmas Terrace Facility”). Until all Obligations have been paid in full,
Borrowers shall either (i) maintain the Records Location at the 3847 Delmas
Terrace Facility and continue to own the 3847 Delmas Terrace Facility in fee
simple, or, if the 3847 Delmas Terrace Facility is no longer owned in fee
simple, (ii) obtain a landlord waiver in form and substance similar to the form
attached hereto as Exhibit 6.23, and reasonably satisfactory to Lender,
simultaneously with the transfer of ownership of the 3847 Delmas Terrace
Facility or (iii) move the Records Location to another property owned in fee
simple by Borrower and provide written notice to Lender of such move and the
address of the subsequent location at least fifteen (15) Business Days prior to
such move.

 

6.24         Dissolution of Southern California Spine Institute, LLC. On or
prior to sixty (60) days after the Closing Date, BMC shall (i) cause Southern
California Spine Institute, LLC., a California limited liability company
(“SCSI”), which is a wholly-owned subsidiary of BMC, to transfer all of the
assets and liabilities of SCSI to BMC,

 

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and (ii) dissolve SCSI and provide to Lender evidence of such dissolution from
the appropriate Governmental Authority in California.

 

ARTICLE 7

 

NEGATIVE COVENANTS

 

Each Borrower covenants that until all of Borrowers’ Obligations to Lender are
paid and satisfied in full and the Credit Facility has been terminated:

 

7.01         Merger, Consolidation, Dissolution or Liquidation.

 

(a)           No Borrower shall sell, lease, license, transfer or otherwise
dispose of any material portion of its Property other than inventory sold to
patients/customers in the ordinary course or ordinary operation of such
Borrower’s business or pursuant to the JHA Loan Documents, without Lender’s
prior written consent.

 

(b)           No Borrower shall merge or consolidate with, or acquire any
Capital Stock or substantially all of the assets of any other Person, or
commence a dissolution or liquidation, other than through a merger with another
Borrower, without Lender’s prior written consent.

 

7.02         Liens and Encumbrances. No Borrower shall: (a) execute a negative
pledge agreement with any Person covering any of the Collateral, or (b) 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, claim or encumbrance other than those of
Lender and Permitted Liens.

 

7.03         Negative Pledge. No Borrower shall pledge or permit a lien or
security interest to exist on the Capital Stock of its Subsidiaries.

 

7.04         Transactions With Affiliates or Subsidiaries.

 

(a)           Except as set forth on Schedule 7.04, no Borrower shall enter into
any transaction with any Subsidiary or other Affiliate (other than another
Borrower) including, without limitation, the purchase, sale, lease or exchange
of Property, or the loaning, capitalization or giving of funds to any such
Affiliate or any Subsidiary, unless (i) such Subsidiary or Affiliate is engaged
in a business substantially related to the business conducted by such Borrower,
(ii) the transaction is in the ordinary course of and pursuant to the reasonable
requirements of such Borrower’s business and upon terms substantially the same
and no less favorable to such Borrower as it would obtain in a comparable arm’s
length transaction with any Person not an Affiliate or a Subsidiary, and
(iii) such transaction is not prohibited hereunder.

 

(b)           Except with the prior written consent of Lender, no Borrower shall
create or acquire any Subsidiary or own any Capital Stock in any Person.  In the
event that Lender permits the foregoing, Lender may, in its reasonable
discretion, require that such Person becomes a Borrower hereunder.

 

7.05         Guarantees. No Borrower shall become or be liable, directly or
indirectly, primary or secondary, 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 endorsements in the
ordinary course of business of negotiable instruments for deposit or collection.

 

7.06         Investments.         Without Lender’s prior written consent, no
Borrower shall make any Investments, except:

 

(a)           Investments consisting of cash or Cash Equivalents;

 

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(b)           Investments consisting of Accounts and promissory notes created,
acquired or made and trade credit extended in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms;

 

(c)           Investments consisting of Capital Stock, obligations, securities
or other property received in settlement of Accounts from financially troubled
obligors in the ordinary course of business;

 

(d)           Investments existing as of the Closing Date and set forth on
Schedule 7.06 hereto;

 

(e)           Guarantees permitted by Section 7.05 hereof;

 

(f)            Investments in any other Borrower that is a Borrower prior to
giving effect to such Investment; and

 

(g)           Investments permitted under Section 7.04.

 

7.07         Indebtedness.  Without Lender’s prior written consent, no Borrower
shall create, incur or suffer to exist any Indebtedness (exclusive of trade
debt) except (subject to compliance with Section 6.06 hereof):

 

(a)           Indebtedness to Lender;

 

(b)           Indebtedness specifically identified on Schedule 7.07 hereto;

 

(c)           Indebtedness constituting purchase money indebtedness for
financing of capital expenditures or a Capital Lease so long as such
Indebtedness is secured only by a security interest in the equipment being
financed, and so long as such Indebtedness does not cause, or result in, an
Event of Default or Unmatured Event of Default;

 

(d)           Indebtedness of any Borrower to any other Borrower;

 

(e)           Indebtedness constituting Subordinated Debt;

 

(f)            Indebtedness existing under the JHA Loan Documents;

 

(g)           Indebtedness incurred to finance the design and construction of a
new emergency room and related facilities;

 

(h)           Indebtedness issued pursuant to the Plan of Reorganization, in an
amount not to exceed $4,000,000; and

 

(i)            Indebtedness that refinances any Indebtedness permitted under
Sections 7.07(f) or 7.07(g) (the “Refinanced Indebtedness”) so long as (i) such
Refinanced Indebtedness does not exceed the original principal amount of the
Indebtedness it refinances on the date of its incurrence, (ii) no Event of
Default has occurred and is continuing, and (iii) Borrowers are in pro forma
compliance for the twelve (12) month period immediately preceding the
refinancing with the financial covenants set forth in Section 6.06 after giving
effect to such Refinanced Indebtedness.

 

7.08         Loans to Other Persons. No Borrower shall make or be permitted to
have outstanding any loans, advances or extensions of credit to any Person
(other than as permitted under Section 7.06(f)). Borrowers may make intercompany
loans to other Borrowers pursuant to Section 7.06(f), but such loans shall be
documented prior to the disbursement of the loan proceeds with such promissory
notes, loan agreements and collateral documents as Lender may require in its
sole discretion.

 

7.09         Change in Ownership/Management. No Borrower shall permit Prospect
Hospital Advisory Services, Inc. to at any time own, legally or beneficially,
less than fifty-one percent (51%) of the aggregate voting interest of all
classes of Capital Stock of such Borrower entitled to vote generally. No
Borrower shall replace its

 

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chief executive officer unless a replacement acceptable to Lender is employed
within ninety (90) days of any termination.

 

7.10         Subordinated Debt Payments. No Borrower shall make (i) any payment
in contravention of the terms and conditions of the Subordination Agreements or
(ii) any payment pursuant to any management agreement, or any similar agreement,
if an Event of Default or Unmatured Event of Default has occurred and is
continuing or if such payment would cause an Event of Default or Unmatured Event
of Default.

 

7.11         Distributions. Borrowers shall not declare or pay or make any forms
of Distributions to its Shareholders, Affiliates, officers or directors or their
respective successors or assigns, nor may any Borrower declare to pay or make
any form of Distribution, except to the extent that a Distribution can be made
without causing an Event of Default or an Unmatured Event of Default and only so
long as no Event of Default has occurred and is continuing.

 

7.12         No Change in Business. No Borrower shall engage in any line of
business which has not been disclosed in writing to Lender prior to the date
hereof without Lender’s prior written consent.

 

ARTICLE 8

 

DEFAULT

 

8.01         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
Sections 8.01(i), (j), (k), (l), (q) or (x) shall automatically cause an
acceleration of the Obligations without notice or demand):

 

(a)           Payments. if Borrowers fail to make any payment of principal,
interest, or 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 and such failure continues for a
period of one (1) Business Day; provided, however, that the one (1) 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;

 

(b)           Particular Covenant Defaults. if any Borrower fails to perform,
comply with or observe any covenant or undertaking contained in this Agreement
or any other Loan Document not otherwise described in this Section 8.01, and
such failure continues for a period of ten (10) Business Days after the earlier
of a Borrower becoming aware of such failure or a Borrower receiving written
notice of such failure;

 

(c)           Financial Information. if any statement, report, financial
statement, or certificate made or delivered by a Borrower or any of their
officers, employees or agents, to Lender is not true and correct, in all
material respects, when made;

 

(d)           Uninsured Loss. if there shall occur any uninsured damage to or
loss, theft, or destruction in excess of $100,000.00 with respect to any portion
of any Borrower’s Property;

 

(e)           Warranties or Representations. if any warranty, representation or
other statement by or on behalf of Borrowers, or any of them, contained in or
pursuant to this Agreement, any Loan Document, 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;

 

(f)            Agreements with Others. if Borrowers, or any of them, shall
default beyond any grace period under any agreement with respect to any
Indebtedness or Subordinated Debt 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, if the effect of such default is to

 

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cause or permit such Indebtedness to become due prior to its maturity date or
prior to its regularly scheduled date of payment;

 

(g)           Other Agreements with Lender.

 

(i)            the occurrence of any default or event of default (after giving
effect to any applicable grace cure period) under any of the other Loan
Documents;

 

(ii)           any of the other Loan Documents ceases to be valid, binding and
enforceable in accordance with its terms; and

 

(iii)          Borrowers, or any of them, breach or violate the terms of, or if
a default or an event of default, occurs under, any other existing or future
agreement (related or unrelated) between or among Borrowers, or any of them and
Lender, including, without limitation, any lease agreements or finance
agreements with any affiliate of Lender;

 

(h)           Judgments. if any final judgment for the payment of money in
excess of $100,000.00 shall be rendered against Borrowers, or any of them, which
is not fully and unconditionally covered by insurance (such coverage to be
acknowledged by a financially sound and reputable insurance company in writing)
or an appeal bond, or for which such Person has not established a cash or cash
equivalent reserve in the amount of such judgment each in the form, substance
and amount satisfactory to Lender in its reasonable discretion;

 

(i)            Assignment for Benefit of Creditors, etc. if Borrowers, or any of
them, call a meeting of the creditors of any Borrower for the purpose of
compromising such Borrower’s debts or obligations, or make or propose 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 any Borrower which
might materially and adversely affect such Person;

 

(j)            Bankruptcy, Dissolution, etc. upon the commencement of any action
for the bankruptcy, insolvency, receivership, assignment for the benefit of
creditors, dissolution or liquidation, or similar proceeding under any federal
or state law, of Borrowers, or any of them, or the commencement of any
proceeding to avoid any transaction entered into by Borrowers, or any of them,
or the commencement of any case or proceeding for reorganization or liquidation
of Borrowers’, or any of their debts under the United States Bankruptcy Code or
any other state or federal law now or hereafter enacted for the relief of
debtors, whether instituted by or against any Borrower; provided, however, that
Borrowers shall have ten (10) days to contest such proceeding and thirty (30)
days from the commencement of the action to obtain the dismissal or discharge of
involuntary proceedings filed against a Borrower, it being understood that
during such ten (10) and thirty (30) day periods, respectively, Lender shall be
not obligated to make Revolving Loans hereunder and Lender may seek adequate
protection, stay relief, right to setoff or recoupment, and/or any other right
or remedy deemed necessary in the sole discretion of Lender in any bankruptcy
proceeding;

 

(k)           Receiver.  upon the appointment of a receiver, liquidator,
custodian, trustee or similar official or fiduciary for Borrowers, or any of
them, or for any of any such Borrower’s Property;

 

(l)            Execution Process, Seizure, etc.  the issuance of any execution
or distraint process against any Borrower, or any of them, or any Property of
any such Borrower is seized by any governmental entity, federal, state or local;

 

(m)          Termination of Business. if Borrowers, or any of them, cease any
material portion of their business operations as presently conducted or any
Borrower fails to generally meet its debts as those debts mature;

 

(n)           Plans, etc. any Borrower or ERISA Affiliate shall (i) engage in
any “prohibited transaction” as defined in ERISA, (ii) incur any “accumulated
funding deficiency” as defined in ERISA, (iii) incur any “reportable event” as
defined in ERISA, (iv) an event or condition which constitutes grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan or Multiemployer Plan, (v) become subject to the assertion
of a material claim (other than routine claims for benefits) against any “plan”
(as defined in ERISA) or against any Borrower or ERISA Affiliate in connection
with any such plan, (vi) receive from the Internal Revenue Service notice of the
failure of any “plan” (as defined in ERISA) intended to be qualified under
Section 401(a) of the Code to qualify under such section or (vii) the imposition
of any liability under

 

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Title IV of ERISA, other than for PBGC premiums due but not delinquent under
Section 4007 of ERISA, upon any Borrower or ERISA Affiliate, and with respect to
this Section 8.01(n), such event or condition either (i) remains uncured for a
period of thirty (30) days from date of occurrence or (ii) could, in Lender’s
reasonable business judgment, subject any Borrower to any tax, penalty or other
liability having a Material Adverse Effect;

 

(o)           Investigations. any indication or evidence received by Lender that
reasonably leads it to believe Borrowers, or any of them, 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, or any of them, to any
Governmental Authority, which would reasonably be expected to have a Material
Adverse Effect;

 

(p)           Material Adverse Events.

 

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

 

(ii)           a Material Adverse Effect has occurred;

 

(q)           Lockbox Instructions. any instruction or agreement regarding the
Commercial Lockbox or the Government Lockbox or the bank accounts related
thereto, including the Depository Agreements and any standing transfer
instructions, is amended or terminated without the written consent of Lender, or
if any Borrower fails, within one (1) Business Day of receipt, to forward
Collections it receives with respect to any Accounts to the Commercial Lockbox
or the Government Lockbox, as the case may be;

 

(r)            Modification of Subordinated Debt. Borrowers (or any of them)
shall modify the terms or provisions of any agreement, instrument or other
document relating to any Subordinated Debt without Lender’s prior written
consent, unless such modification is permitted by the applicable Subordination
Agreement;

 

(s)           Change in Ownership/Management. any Borrower fails to perform,
comply with or observe the covenants and undertakings contained in Section 7.09
hereof;

 

(t)            Restraint on Business. any Borrower shall be prohibited or
otherwise restrained from conducting the business theretofore conducted by it at
any of the Healthcare Facilities in any manner that has or could reasonably be
expected to have or result in a Material Adverse Effect by virtue of any
determination, ruling, decision, decree, ordinance, or order of any court of
competent jurisdiction, Governmental Authority, or municipality;

 

(u)           Revocation of Permits.  a Governmental Authority shall have
revoked any material Permit, including any license, permit, certificate or
Medicaid or Medicare qualification pertaining to any Healthcare Facility,
regardless of whether such material Permit was held by or originally issued for
the benefit of any Borrower;

 

(v)           Taxes. If Borrowers fail to pay any obligation related to any
Taxes no later than the date that such obligations become due and payable,
unless the Borrowers are challenging the Taxes in good faith and are maintaining
adequate reserves;

 

(w)          CMS Claims.  If (i) CMS asserts a CMS Claim in an amount that
exceeds Excess Availability and is not approved by CMS for repayment under an
extended repayment plan, or (ii) Borrowers enter into a settlement agreement
and/or extended repayment plan with CMS that would result in Borrowers’
violating the Fixed Charge Coverage Ratio calculated as of the prior quarter-end
on a pro forma basis, assuming that payments due under any such settlement
agreement and/or extended repayment plan in the following 12 month period shall
be deemed paid in the prior 12 month period.

 

8.02         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 beyond any cure period specifically provided in this Agreement.

 

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8.03         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 of an
Event of Default, Lender may, in its discretion, charge Borrowers’ Default Rate
on all then outstanding or thereafter incurred Obligations and/or withhold or
cease making Revolving Loans under the Credit Facility, unless such Event of
Default is cured to Lender’s satisfaction or waived in accordance herewith.

 

(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 of an Event of Default, terminate the Credit Facility
(it also being understood that the occurrence of any of the events or conditions
set forth in Sections 8.01(i), (j), (k) or (q) hereof shall automatically cause
a termination of the Credit Facility without notice or demand).

 

(c)           The Lender will be entitled to take any and all actions to enforce
its claims against Borrowers to recover the balance of the Indebtedness then
due, including, without limitation, being entitled to pursue all remedies
provided for by law, equity, or otherwise, and to exercise the warrants of
attorney to confess judgment against Borrowers, or any of them, contained in
this Agreement or the other Loan Documents;

 

(d)           The Lender will be entitled to take any and all actions permitted
by this Agreement, the other Loan Documents, and/or by law, equity or otherwise;

 

(e)           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 of an Event of Default, exercise all rights under the UCC and any
other applicable law or in equity, by contract or otherwise, and under all Loan
Documents permitted to be exercised after the occurrence 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 or
foreclose on the Collateral (including removing from any premises where same may
be located any and all books and records, computers, electronic media and
software programs associated with any Collateral (including electronic records,
contracts and signatures pertaining thereto), documents, instruments and files,
and any receptacles or cabinets containing same, relating to the Accounts) by
any available judicial procedure, or without judicial process, and to enter any
premises where any Collateral may be located for the purpose of taking
possession of or removing the same, 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 Borrower, 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, or any of them, to an address designated by Lender) and
may use, at Borrowers’ expense, such of the Borrowers’ personnel, supplies or
space as may be necessary to manage such Accounts;

 

(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 (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;

 

(iii)          The right to reduce or modify the Revolving Loan Commitment,
Borrowing Base or any portion thereof or the Advance Rates or to modify the
terms and conditions upon which Lender may be willing to consider making
Revolving Loans under the Credit Facility or to take additional Reserves in the
Borrowing Base for any reason; or

 

(iv)          The right to sell, assign and deliver all or any part of the
Collateral, in the name of the Borrowers (or any of them) or Lender, or in the
name of such other party as Lender may designate, with or without advertisement,
at public or private sale, for cash, on credit or otherwise, at Lender’s sole
discretion, with or

 

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without warranties or representations (including warranties of title,
possession, quiet enjoyment and the like), and upon such other terms and
conditions as Lender in its sole discretion may deem advisable, and Lender may
bid or become a purchaser at any such sale, free from any right of redemption,
which right is hereby expressly waived by the Borrowers.

 

(f)            Borrowers hereby agree that a notice received by them at least
ten (10) days before the time of any intended public sale or of 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. Each Borrower covenants and agrees not
to interfere with or impose any obstacle to Lender’s exercise of its rights and
remedies with respect to the Collateral.

 

8.04         [Reserved]

 

8.05         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, OR ANY OF THEM, AT ANY TIME, UNDER ANY AGREEMENT, WITH ANY AVAILABLE
REMEDY AND IN ANY ORDER.

 

8.06         Set-Off. Upon the occurrence of an Event of Default, Lender and/or
any Affiliate of Lender and/or participant with Lender 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.

 

8.07         Application of Proceeds. The net cash proceeds resulting from
Lender’s exercise of any of Lenders rights pursuant to this Article 8 (after
deducting all Expenses relating thereto) shall be applied by Lender to the
payment of the Obligations as set forth in Section 2.08(b) hereof, and the
Borrowers shall remain liable to Lender for any deficiencies, and Lender in turn
agrees to remit to the Borrowers or their successors or assigns, any surplus
resulting therefrom.

 

ARTICLE 9

 

MISCELLANEOUS

 

9.01         GOVERNING LAW. THIS AGREEMENT, AND ALL MATTERS ARISING OUT OF OR
RELATING TO THIS AGREEMENT, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAWS, AND SHALL BE CONSTRUED WITHOUT THE AID OF ANY
CANON, CUSTOM OR RULE OF LAW REQUIRING CONSTRUCTION AGAINST THE DRAFTSMAN.

 

9.02         Integrated Agreement. The Revolving Note, the other Loan Documents,
all related agreements, and this Agreement 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.

 

9.03         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 any Borrower no waiver will be valid
unless in writing and signed by Lender and then only to the extent specified.

 

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(b)           Each Borrower releases and shall indemnify, defend and hold
harmless Lender, and its respective officers, directors, employees, attorneys
and agents (each, an “Indemnified Party”), of and from any claims, demands,
liabilities, obligations, judgments, injuries, losses, damages and costs and
expenses (including, without limitation, Expenses and reasonable legal fees) of
any kind or nature, which at any time may be imposed on, incurred by, or
asserted against any Indemnified Party, resulting from (i) acts or conduct of a
Borrower under, pursuant or related to this Agreement and the other Loan
Documents, (ii) as a result of Lender’s exercise of (or failure to exercise) any
of Lender’s rights and remedies hereunder, including (A) any sale or transfer of
the Collateral, (B) the preservation, repair, maintenance, preparation for sale
or securing of any Collateral, and (C) the defense of Lender’s interests in the
Collateral (including the defense of claims brought by the Borrowers (or any of
them) as a debtor-in-possession or otherwise, any secured or unsecured creditors
of the Borrowers (or any of them), or any trustee or receiver in bankruptcy);
(ii) as a result of any environmental pollution, hazardous material or
environmental clean-up and the Borrowers’ off-site disposal practices; (iii) in
connection with any regulatory investigation or proceeding by any regulatory
authority or agency having jurisdiction over the Borrowers (or any of them);
(iv) otherwise relating to or arising out of the transactions contemplated by
this Agreement and the other Loan Documents, or any action taken (or failure to
act) by any Indemnified Party with respect thereto; (v) any Borrower’s breach,
or alleged breach, or violation of any representation, warranty, covenant or
undertaking contained in this Agreement or the other Loan Documents, and
(vi) any Borrower’s 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, as finally determined by a court of competent jurisdiction.
This indemnification shall survive the termination of this Agreement and the
payment in full and satisfaction of the Obligations.

 

(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.

 

9.04         Time. Whenever Borrowers, or any of them, 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.

 

9.05         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 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 highest per annum rate of interest
applicable to the Loans.

 

(b)           In addition, at any time following the date of this Agreement,
Borrowers effect any changes 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 Lender’s accounts receivable monitoring
system is capable of importing such data, including an hourly fee of $150.00.

 

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9.06         Confidentiality. Except as provided in Section 9.19 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) disclosures made in the Bankruptcy Case, (ii) accountants, lawyers and
financial advisers of the parties who are informed of and agree to be bound by
this Section 9.06, and (iii) 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 9.06. Lender agrees to
maintain the confidentiality of patient information obtained as a result of its
interests in, or duties with respect to, the Accounts and as otherwise may be
required pursuant to the Business Associate Agreement.

 

9.07         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 facsimile or by nationally recognized overnight courier, or via first class,
certified or registered mail, postage prepaid, to the address of such party set
forth on the signature pages hereof, unless such address is changed by written
notice hereunder;

 

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

 

(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 a Revolving Loan or otherwise) as being genuine and
authorized.

 

9.08         Brokerage. Borrowers represent that Borrowers have not committed
Lender to the payment of any brokerage fee, commission or charge in connection
with this transaction. If any such claim is made on Lender by any broker, finder
or agent or other Person, each Borrower hereby indemnifies, defends and saves
Lender harmless against such claim and further will defend, with counsel
satisfactory to Lender, any action or actions to recover on such claim, at
Borrowers’ own cost and expense, including Lender’s reasonable counsel fees.
Each Borrower further agrees that until any such claim or demand is adjudicated
in Lender’s favor, the amount demanded shall be deemed an Obligation of
Borrowers under this Agreement.

 

9.09         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.

 

9.10         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 Revolving Note, 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 any or all
Borrowers hereunder or under any other agreement or instrument shall be deemed
continuing until all Obligations are satisfied in full.

 

9.11         Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties. No
Borrower may transfer, assign or delegate any of its duties or obligations
hereunder.

 

9.12         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.

 

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

 

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9.14         Signatories. Each individual signatory hereto represents and
warrants that he is duly authorized to execute this Agreement on behalf of his
principal and that he executes the Agreement in such capacity and not as a
party.

 

9.15         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 any Borrower. Nothing contained in
this Agreement shall be construed as a delegation to Lender of any Borrower’s
duty of performance, including, without limitation, such Borrower’s duties under
any account or contract with any other Person.

 

9.16         Waivers.

 

(a)           Borrowers hereby waive diligence, demand, presentment, protest and
any notices thereof as well as notices of nonpayment, intent to accelerate and
acceleration. Borrowers each hereby irrevocably, unconditionally and fully
subordinate in favor of Lender, any and all rights they or any of them, may have
at any time (whether arising directly or indirectly, by operation of law or
contract) to assert or receive payment on any claim against each other or any of
them, on account of payments made under this Agreement, including, without
limitation, any and all rights of subrogation, reimbursement, exoneration,
contribution or indemnity. Each Borrower waives any event or circumstances which
might constitute a legal or equitable defense of, or discharge of, such
Borrower. Furthermore, each Borrower agrees that if any payment on the
Obligations is recovered from or repaid by Lender in whole or in part in any
bankruptcy, insolvency or similar proceeding instituted by or against any
Borrower, the remaining Borrowers and/shall be obligated to the same extent as
if the recovered or repaid payment had never been originally made on such
Obligation. Each Borrower consents and agrees that Lender shall be under no
obligation to marshal any assets or Collateral in favor of such Borrower or
against or in payment of any or all of the Obligations.

 

(b)           Each Borrower hereby consents and agrees that Lender, at any time
or from time to time in its discretion may: (i) settle, compromise or grant
releases for liabilities of other Borrowers, and/or any other Person or Persons
liable for any Obligations, (ii) 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 such Borrower who hereby
agrees and shall remain bound upon this Agreement notwithstanding any such
action on Lender’s part.

 

(c)           The liability of each Borrower 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 (including other
Borrowers), or in any Property, (ii) the invalidity or unenforceability of any
Obligations or rights in any Collateral, (iii) any delay in making demand upon
other Borrowers or any delay in enforcing, or any failure to enforce, any rights
against other 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 against, or realize on, any Property of any
Borrower, or any other party securing the Obligations, (v) the existence or
nonexistence of any defenses which may be available to the other 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 Borrower.

 

9.17         CONSENT TO JURISDICTION. EACH BORROWER AND LENDER HEREBY
IRREVOCABLY CONSENT TO THE NONEXCLUSIVE JURISDICTION OF, AND VENUE IN, ANY STATE
OR FEDERAL COURT LOCATED IN THE COMMONWEALTH OF PENNSYLVANIA 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 OR COURTS AND ALL RIGHTS TO
TRANSFER FOR ANY REASON. EACH BORROWER IRREVOCABLY AGREES TO SERVICE OF PROCESS
BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED TO THE ADDRESS OF THE APPROPRIATE
PARTY SET FORTH HEREIN.

 

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9.18         WAIVER OF JURY TRIAL. EACH BORROWER AND LENDER HEREBY WAIVE ANY AND
ALL RIGHTS IT 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.

 

9.19         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, (a) the names of Borrowers and Lender,
(b) the size of the transaction and (c) those items of information commonly
included within a “tombstone advertisement” of the type customarily published in
financial or business periodicals.

 

9.20         Discharge of Taxes, Borrowers’ Obligations, Etc. Lender, in its
reasonable 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 and have
established appropriate reserves therefor under GAAP. Expenses and advances
shall be deemed Revolving Loans hereunder and shall be deemed Revolving Loans
hereunder and shall bear interest at the highest rate applied to the Loans until
reimbursed to Lender. Such payments and advances made by Lender shall not be
construed as a waiver by Lender of an Event of Default under this Agreement.

 

9.21         Injunctive Relief. The parties acknowledge and agree that, in the
event of a breach or threatened breach of any party’s obligations hereunder, the
other party 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, 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.

 

9.22         Assignment or Syndication by Lender. Lender may, at its sole
discretion, assign in whole or in part any and all of its rights and/or
obligations herein to any other person (other than Prime), including but not
limited to any assignment by Lender to an Affiliate of Lender or any assignment
in part or in whole of its rights herein to another party (other than Prime) as
collateral security for Lender’s obligation(s) to such other party.

 

9.23         Severability. If any provision hereof or of any other Loan Document
is held to be illegal or unenforceable, such provision shall be fully severable,
and the remaining provisions of the applicable agreement shall remain in full
force and effect and shall not be affected by such provision’s severance.
Furthermore, in lieu of any such provision, there shall be added automatically
as a part of the applicable agreement a legal and enforceable provision as
similar in terms to the severed provision as may be possible.

 

9.24         Authority.  Without limiting the powers granted to Lender in
Section 8.03 hereof, if an Event of Default shall have occurred, the Borrowers
hereby authorize Lender, or any person or agent which Lender may designate, at
the Borrowers’ cost and expense, to exercise all of the following powers, which
authority shall be irrevocable until the termination of this Agreement and the
full and final payment and satisfaction of the Obligations to: (a) receive,
take, endorse, sign, assign and deliver, all in the name of Lender or the
Borrowers (or any of them), any and all checks, notes, drafts, and other
documents or instruments relating to the Collateral; (b) receive, open and
dispose of all mail addressed to the Borrowers (or any of them), and to notify
postal authorities to change the address for delivery thereof to such address as
Lender may designate; (c) request from customers indebted on Accounts at any
time, in the name of Lender, information concerning the amounts owing on the
Accounts; (d) request from customers indebted on Accounts at any time, in the
name of the Borrowers (or any of them), any certified public accountant
designated by Lender or any other designee of Lender, information concerning the
amounts owing on the Accounts; (e) transmit to customers indebted on Accounts
notice of Lender’s interest therein and to notify customers indebted on Accounts
to make payment directly to Lender for the Borrowers’ account (subject to all
applicable laws and regulations governing payment of Medicare and Medicaid
receivables); and/or (f)

 

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take or bring, in the name of Lender or the Borrowers (or any of them), all
steps, actions, suits or proceedings deemed by Lender necessary or desirable to
enforce or effect collection of the Accounts.

 

9.25         Usury Limit.   In no event shall the Borrowers, upon demand by
Lender for payment of any indebtedness relating hereto, by acceleration of the
maturity thereof, or otherwise, be obligated to pay interest and fees in excess
of the amount permitted by law. Regardless of any provision herein or in any
agreement made in connection herewith, Lender shall never be entitled to
receive, charge or apply, as interest on any indebtedness relating hereto, any
amount in excess of the maximum amount of interest permissible under Applicable
Law. If Lender ever receives, collects or applies any such excess, it shall be
deemed a partial repayment of principal and treated as such. If as a result, the
entire principal amount of the Obligations is paid in full, any remaining excess
shall be refunded to Borrowers. This Section 9.25 shall control every other
provision of this Agreement, the other Loan Documents and any other agreement
made in connection herewith.

 

9.26         Termination.  Except as otherwise provided in Article 8 hereof,
Lender may terminate this Agreement only as of the Maturity Date. Borrowers, or
any one of them, may terminate this Agreement at any time prior to the Maturity
Date only in accordance with the terms of Section 2.03(c). A termination by one
Borrower shall be deemed to be a termination by all Borrowers.

 

ARTICLE 10

 

SPECIAL INTER-BORROWER PROVISIONS

 

10.01       Certain Borrower Acknowledgments and Agreements.

 

(a)           Each Borrower acknowledges that it will enjoy significant benefits
from the business conducted by the other Borrowers because of, inter alia, their
combined ability to bargain with other Persons including, without limitation,
their ability to receive the Credit Facility on favorable terms granted by this
Agreement and other Loan Documents which would not have been available to an
individual Borrower acting alone. Each Borrower has determined that it is in its
best interest to procure the Credit Facility which each Borrower may utilize
directly and which receive the credit support of the other Borrowers as
contemplated by this Agreement and the other Loan Documents.

 

(b)           Lender has advised Borrowers that it is unwilling to enter into
this Agreement and the other Loan Documents and make available the Credit
Facility extended hereby to any Borrower unless each Borrower agrees, among
other things, to be jointly and severally liable for the due and proper payment
of the Obligations of each Borrower under this Agreement and other Loan
Documents. Each Borrower has determined that it is in its best interest and in
pursuit of its purposes that it so induce Lender to extend credit pursuant to
this Agreement and the other documents executed in connection herewith
(i) because of the desirability to each Borrower of the Credit Facility, the
interest rates and the modes of borrowing available hereunder, (ii) because each
Borrower may engage in transactions jointly with other Borrowers and
(iii) because each Borrower may require, from time to time, access to funds
under this Agreement for the purposes herein set forth.

 

(c)           Each Borrower has determined that it has and, after giving effect
to the transactions contemplated by this Agreement and the other Loan Documents
(including, without limitation, the inter-Borrower arrangement set forth in this
Section 10.01) will have, assets having a fair saleable value in excess of the
amount required to pay its probable liability on its existing debts as they fall
due for payment and that the sum of its debts is not and will not then be
greater than all of its Property at a fair valuation, that such Borrower has,
and will have, access to adequate capital for the conduct of its business and
the ability to pay its debts from time to time incurred in connection therewith
as such debts mature and that the value of the benefits to be derived by such
Borrower from the access to funds under this Agreement (including, without
limitation, the inter-Borrower arrangement set forth in this Section 10.01) is
reasonably equivalent to the obligations undertaken pursuant hereto.

 

(d)           Borrower Representative (on behalf of each Borrower) shall
maintain records specifying (i) all Obligations incurred by each Borrower,
(ii) the date of such incurrence, (iii) the date and amount of any payments made
in respect of such Obligations and (iv) all inter-Borrower obligations pursuant
to this Section 10. Borrower Representative shall make copies of such records
available to Lender, upon request.

 

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10.02       Maximum Amount of Joint and Several Liability.  Notwithstanding any
provisions of this Agreement to the contrary, it is the intent of the parties
hereto that the primary and secondary nature of the liabilities of the
Borrowers, and the security interests granted by the Borrowers to secure the
Obligations directly incurred by any Borrower not constitute a fraudulent
conveyance under Section 548 of Chapter 11 of Title II of the United States Code
(11 U.S.C. § 101, et seq.), as amended, or a fraudulent conveyance or fraudulent
transfer under the applicable provisions of any fraudulent conveyance,
fraudulent transfer or similar law of any state, nation or other governmental
unit, as in effect from time to time or otherwise be rendered invalid or
unenforceable due to the nature of the joint and several liability. Accordingly,
Lender and Borrowers agree that if the Obligations of any Borrower, or any
security interests granted by such Borrower securing the Obligations would, but
for the application of this sentence, constitute a fraudulent conveyance or
fraudulent transfer under Applicable Law, or would otherwise render such
Borrower’s Obligations or the security interests granted herein invalid or
unenforceable, the Obligations of such Borrower hereunder, as well as the
security interests securing such Obligations, shall be valid and enforceable
only to the maximum extent that would not cause such Obligations or security
interests to constitute a fraudulent conveyance or fraudulent transfer under
Applicable Law or otherwise result in such invalidity or unenforceability;
provided however that each Borrower’s Obligations shall be presumptively valid
and enforceable to their fullest extent in accordance with the terms hereof or
thereof, as if this Section 10.02 were not a part of this Agreement.

 

10.03       Authorization of Borrower Representative by Borrowers.

 

(a)           Each of Borrowers hereby irrevocably authorizes Borrower
Representative to give notices, make requests, make payments, receive payments
and notices, give receipts and execute agreements, make agreements or take any
other action whatever on behalf of such Borrower under and with respect to any
Loan Document and each Borrower shall be bound thereby. This authorization is
coupled with an interest and shall be irrevocable, and Lender may rely on any
notice, request, information supplied by Borrower Representative, every document
executed by Borrower Representative, every agreement made by Borrower
Representative or other action taken by Borrower Representative in respect of
Borrowers or any thereof as if the same were supplied, made or taken by any or
all Borrowers. Without limiting the generality of the foregoing, the failure of
one or more Borrowers to join in the execution of any writing in connection
herewith shall not, unless the context clearly requires, relieve any such
Borrower from obligations in respect of such writing.

 

(b)           Borrowers acknowledge that the credit provided hereunder is on
terms more favorable than any Borrower acting alone would receive and that each
Borrower benefits directly and indirectly from all Revolving Loans hereunder.
Each of Borrowers, shall be jointly and severally liable for all Obligations,
regardless of, inter alia, which Borrower requested (or received the proceeds
of) a particular Revolving Loan.

 

10.04       Joint and Several Liability.        The Loans made to the Borrowers
shall be deemed jointly funded to, and received by, all of the Borrowers. Each
Borrower jointly and severally agrees to pay, and shall be joint and severally
liable for the payment and performance of, all Obligations directly incurred by
any other Borrower, regardless of whether such Borrower actually receives the
proceeds of the indebtedness governed hereby or the benefit of any other
extensions of credit hereunder. Each Borrower acknowledges and agrees that the
joint and several liability of the Borrowers is provided as an inducement to
Lender to provide loans and other financial accommodations to the Borrowers, and
that each such Loan or other financial accommodation shall be deemed to have
been done or extended by Lender in consideration of, and in reliance upon, the
joint and several liability of the Borrowers. The joint and several liability of
each Borrower hereunder is absolute, unconditional and continuing, regardless of
the validity or enforceability of any of the Obligations, or the fact that a
security interest or lien in any Collateral may not be enforceable or subject to
equities or defenses or prior claims in favor of others, or may be invalid or
defective in any way and for any reason. Each Borrower hereby waives: (a) all
notices to which such Borrower may be entitled as a co-obligor with respect to
the Obligations, including notice of (i) acceptance of this Agreement, (ii) the
making of Loans or other financial accommodations under this Agreement, or the
creation or existence of the Obligations, and (iii) presentment, demand,
protest, notice of protest and notice of non-payment; and (b) all defenses based
on (i) any modification (or series of modifications) of this Agreement, the
other Loan Documents, that may create a substituted contract, or that may
fundamentally alter the risks imposed on such Borrower hereunder, (ii) the
release of any other Borrower from its duties this Agreement, the other Loan
Documents, or the extension of the time of performance of any other Borrower’s
duties hereunder or thereunder, (iii) the taking, releasing, impairment or
abandonment of any Collateral, or the settlement, release or compromise of

 

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the Obligations or any other Borrower’s liabilities with respect to all or any
portion of the Obligations, or (iv) any other act (or any failure to act) that
fundamentally alters the risks imposed on such Borrower by virtue of its joint
and several liability hereunder. It is the intent of each Borrower by this
paragraph to waive any and all suretyship defenses available to such Borrower
with respect to the Obligations, whether or not specifically enumerated above.
Borrowers acknowledge that the credit provided hereunder is on terms more
favorable than any Borrower acting alone would receive and that each Borrower
benefits directly and indirectly from the Loans made hereunder. Each Borrower
shall be jointly and severally liable for all Obligations regardless of, inter
alia, which Borrower received proceeds of the Loans.

 

[Remainder of Page Intentionally Left Blank]

 

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

 

 

BORROWERS:

 

 

 

 

 

 

 

Address for notices to Borrowers:

 

BROTMAN MEDICAL CENTER, INC.

 

 

 

 

Brotman Medical Center, Inc.

 

 

 

3828 Delmas Terrace

 

 

 

Culver City, CA 90231

 

 

 

Attn: Michael Lane, Chief Restructuring Officer

 

By:

/s/ Stanley Otake

Fax: (310) 202-4125

 

Name:

Stanley Otake

 

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

 

LENDER:

 

 

 

 

 

 

 

Address for notices to Lender:

 

GEMINO HEALTHCARE FINANCE, LLC

 

 

 

 

Gemino Healthcare Finance, LLC

 

 

 

1 International Plaza, Suite 220

 

By:

/s/ Stacy L. Allen

Philadelphia, PA 19113

 

Name:

Stacy L. Allen

Attn: Tom Schneider

 

Title:

Vice President

Fax: (610) 870-5401

 

 

 

 

 

 

 

With a copy to (which shall not constitute notice):

 

 

 

 

 

 

 

Waller Lansden Dortch & Davis, LLP

 

 

 

511 Union Street, Suite 2700

 

 

 

Nashville City Center

 

 

 

Nashville, TN 37219

 

 

 

Attn:

Robert L. Harris

 

 

 

 

J. Kevin Kidd

 

 

 

Fax: (615) 244-6804

 

 

 

 

Signature Page to Credit Agreement

 

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ANNEX I

 

DEFINITIONS

 

“Account(s)” means (a) all of Borrowers’ present and future Accounts, Payment
Intangibles, Instruments, Chattel Paper (including Electronic Chattel Paper)
(all as defined in the UCC) and all other rights of each Borrower to receive
payments including, without limitation, the third party reimbursable portion of
accounts receivable owing to a Borrower arising out of the delivery by such
Borrower of medical, surgical, diagnostic, treatment or other professional or
medical or healthcare related services and/or the supply of goods related to any
of such services (whether such services are supplied by a Borrower or a third
party), including, without limitation all Health-Care-Insurance-Receivables (as
defined in the UCC) and all other rights to reimbursement 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 and, all rights of 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 such Borrower in respect of such Accounts (other
than any such information and data subject to legal restrictions of patient
confidentiality), and (d) all Proceeds of any of the foregoing.

 

“Accounts Detail File” has the meaning set forth in Section 2.02(b) hereof.

 

“Advance Rate” means (a) seventy-five percent (75%), provided, however, that
(i) if no Event of Default or Unmatured Event of Default has occurred on or
prior to Lender’s receipt of the Officer’s Certificate delivered pursuant to
Section 6.08 for the fiscal quarter ending September 30, 2009, the Advance Rate
shall be increased to eighty percent (80%) as of the date such Officer’s
Certificate is received; and (ii) if no Event of Default or Unmatured Event of
Default has occurred on or prior to Lender’s receipt of the Officer’s
Certificate delivered pursuant to Section 6.08 for the fiscal quarter ending
December 31, 2009, the Advance Rate shall be increased to eighty-five (85%) as
of the date such Officer’s Certificate is received; or (b) such other
percentage(s) resulting from an adjustment pursuant to Section 2.01(e).

 

“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, whether by way of equity ownership or
through a management agreement and (b) any partner, director or officer (or, in
the case of a Person which is not a corporation, any individual having analogous
powers) of the Specified Person. 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, five percent (5%) or more of the Capital Stock
of such Person. Notwithstanding the foregoing, Lender shall not be deemed to be
an Affiliate of any Borrower or any Affiliate thereof.

 

“Applicable Law” shall mean, as to any Borrower or its assets, any law,
ordinance, policy, manual provision, administrative guidance, statute, rule or
regulation, or any determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Borrower
or any of its assets, or to which such Borrower or any of its assets is subject.

 

“Authorized Officer” means any officer, member or partner of a Borrower
authorized by specific resolution of Borrower to request Loans as set forth in
the incumbency certificate referred to in Section 4.01(d) of this Agreement.

 

“Average Outstanding Balance” means an amount calculated each month equal to a
fraction the numerator of which is equal to the sum of the outstanding balances
of all Revolving Loans hereunder for each day of such month and the denominator
of which is the number of actual days in such month.

 

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“Bankruptcy Case” means Case number 07-19705 commenced by BMC under chapter 11
of title 11 of the United States Code in the Bankruptcy Court.

 

“Bankruptcy Court” means the United States Bankruptcy Court for the Central
Division of California.

 

“Billing Date” means (a) the last Business Day of the week in which goods or the
services giving rise to the corresponding Account were rendered or provided in
the case of out- patient services and (b) the earlier of the discharge date or
the regular monthly billing date for billing the respective Obligor, or if none,
the last Business Day of a calendar month, in the case of inpatient services.

 

“Borrower Representative” shall mean Brotman Medical Center, Inc.

 

“Borrowing Base” means, at any date, an amount equal to the lesser of (a) the
Revolving Loan Commitment, or (b) the product of (i) the applicable Advance Rate
then in effect, times (ii) the Estimated Net Value of all Eligible Accounts as
of such date, minus (iii) an amount equal to any Reserves, minus (iv) unposted
cash.

 

“Borrowing Base Deficiency” means, as of any date, the amount, if any, by which
(a) the aggregate amount of all Revolving Loans outstanding as of such date
exceeds (b) the Borrowing Base as of such date.

 

“Borrowing Base Excess” means, as of any date, the amount, if any, by which
(a) the Borrowing Base as of such date exceeds (b) the aggregate amount of all
Revolving Loans outstanding as of such date.

 

“Borrowing Base Report” has the meaning set forth in Section 2.02(b) hereof.

 

“Business Associate Agreement” means that certain Business Associate Agreement
among Borrowers and Lender of even date herewith, as the same may be modified,
amended, restated or replaced from time to time.

 

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

 

“Capital Lease” means, with respect to any Person, any lease of any property
(whether real, personal or mixed) by such Person as lessee which would, in
accordance with GAAP, be required to be accounted for as a capital lease on the
balance sheet of such person.

 

“Capital Stock” means (a) in the case of a corporation, capital stock, (b) in
the case of an association or business entity, any and all shares, units,
interests, participations, rights or other equivalents (however designated) of
capital stock, (c) in the case of a partnership, partnership interests (whether
general or limited), (d) in the case of a limited liability company, membership
interests and (e) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.

 

“Cash Equivalents” means, as at any date:

 

(a)           securities issued or directly and fully guaranteed or insured by
the United States or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having
maturities of not more than twelve (12) months from the date of acquisition;

 

(b)           dollar denominated time deposits and certificates of deposit of
(i) any Lender, (ii) any domestic commercial bank of recognized standing having
capital and surplus in excess of $500,000,000.00 or (iii) any bank whose
short-term commercial paper rating from S&P is at least A-1 or the equivalent
thereof or from Moody’s is at least P-1 or the equivalent thereof (any such bank
being an “Approved Institution”), in each case with maturities of not more than
two hundred seventy (270) days from the date of acquisition;

 

A-2

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(c)           commercial paper and variable or fixed rate notes issued by any
Approved Institution (or by the parent company thereof) or any variable rate
notes issued by, or guaranteed by, any domestic corporation rated A-1 (or the
equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or
better by Moody’s and maturing within six (6) months of the date of acquisition;

 

(d)           repurchase agreements entered into by any Person with a bank or
trust company (including any of the Lenders) or recognized securities dealer
having capital and surplus in excess of $500,000,000.00 for direct obligations
issued by or fully guaranteed by the United States in which such Person shall
have a perfected first priority security interest (subject to no other Liens)
and having, on the date of purchase thereof, a fair market value of at least one
hundred percent (100%) of the amount of the repurchase obligations;

 

(e)           debt obligations issued by any domestic corporation or any
domestic government instrumentality, in each case rated A-1 (or the equivalent
thereof) or better by S&P or P-1 (or the equivalent thereof) or better by
Moody’s and maturing within six (6) months of the date of acquisition; and

 

(f)            Investments, classified in accordance with GAAP as current
assets, in money market investment programs registered under the Investment
Company Act of 1940 which are administered by reputable financial institutions
having capital of at least $500,000,000.00 and the portfolios of which are
limited to Investments of the character described in the foregoing clauses
(a) through (e).

 

“Closing” has the meaning set forth in Section 4.06 hereof.

 

“Closing Date” has the meaning set forth in Section 4.06 hereof.

 

“CMS” means the Centers for Medicare and Medicaid Services of the United States
Department of Health and Human Services and any successor thereof and any
predecessor thereof, including the United States Health Care Financing
Administration.

 

“CMS Claim” means any claim held by CMS against BMC in respect of potential
overpayments made to BMC by CMS.

 

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

 

“Collateral” has the meaning set forth in Section 3.01 hereof.

 

“Collateral Monitoring Fee” has the meaning set forth in Section 2.03(e) hereof.

 

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

 

“Collection Account” has the meaning set forth in Section 2.07(a) hereof.

 

“Commercial Lockbox” means a lockbox in the name of Lender (or a nominee of
Lender) and maintained at the Lockbox Bank, or such other bank as is acceptable
to Lender, to which Collections on all Accounts, other than Government Accounts,
are sent.

 

“Commitment Fee” has the meaning set forth in Section 2.03(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 hereto as in effect from time to time.

 

“Contract” means an agreement by which an Obligor is obligated to pay for
services rendered to patients of Borrower.

 

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“Controlled Group” means all members of a controlled group of corporations and
all trades or businesses (whether or not incorporated) under common control
which, together with Borrowers, are treated as a single employer under
Section 414 of the Code.

 

“Credit Facility” has the meaning set forth in Section 2.01(a) hereof.

 

“Creditor Trust” has the meaning ascribed to such term in the Plan of
Reorganization.

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

 

“Default Rate” means three percent (3%) above the Interest Rate otherwise
applicable on the Loans.

 

“Defaulted Account” means an Account as to which (a) the initial ENV has not
been received in full as Collections within one hundred fifty (150) days of the
Billing Date, or (b) Lender reasonably deems uncollectible because of the
bankruptcy or insolvency of the Obligor or any other reason.

 

“Depository Agreement(s)” means those certain Depository Agreements entered into
in connection with this Agreement among Borrowers, Lender and the Lockbox Bank,
relating to the Commercial Lockbox and the Government Lockbox, as applicable.

 

“Distribution” means (a) dividends or other distributions on Capital Stock of a
Borrower in cash, equity or any other form of consideration, including without
limitation distributions for the payment of Taxes; (b) the redemption,
repurchase or acquisition of such Capital Stock or of warrants, rights or other
options to purchase such Capital Stock; and (c) loans made to any Shareholders,
officers, directors and/or Affiliates of such Borrower.

 

“Download Date” has the meaning set forth in Section 2.02(b) hereof.

 

“EBITDAC” means the sum of net income plus interest expense, plus taxes, plus
depreciation and amortization, plus consulting fee expense.

 

“Eligible Account” means an Account of a Borrower:

 

(a)           which is a liability of an Obligor which is (i) a commercial
insurance company acceptable to Lender, organized under the laws of any
jurisdiction in the United States, having its principal office in the United
States, other than those listed on Schedule 1 hereto as ineligible, (ii) a Blue
Cross/Blue Shield Plan other than those listed on Schedule 1 hereto as
ineligible, (iii) Medicaid, (iv) an HMO, PPO, or an institutional Obligor
acceptable to Lender or (v) any other type of obligor, not included in the
categories of obligors listed in the foregoing clauses (i) - (iv), organized
under the laws of any jurisdiction in the United States, having its principal
office in the United States, and listed on Schedule 1 hereto as an eligible
Obligor,

 

(b)           the Obligor of which is not an Affiliate of Borrower;

 

(c)           the Obligor of which has received a letter substantially in the
form of Exhibit 4.02(c), (in the case of all Accounts other than Government
Accounts), or a letter substantially in the form of Exhibit 4.02(d) (in the case
of all Government Accounts);

 

(d)           in an amount, as relating to an individual patient, not less than
$5.00 nor more than $250,000.00, denominated and payable in dollars in the
United States;

 

(e)           as to which the representations and warranties of Section 5.21
hereof are true;

 

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(f)            which, if such Account is in the form of a cost report receivable
owing from any governmental agency, Lender has agreed to include it in the
Borrowing Base;

 

(g)           which (i) does not arise from the delivery of cosmetic surgery
services, (ii) is not a workers’ compensation claim (unless the Obligor on such
Account is a type of Obligor permitted pursuant to clause (a) of this
definition), (iii) does not arise from any services delivered for injury
sustained in a motor vehicle accident (unless the Obligor on such Account is a
type of Obligor permitted pursuant to clause (a) of this definition) and (iv) is
not an Individual Payor Account;

 

(h)           which is not outstanding more than (i) one hundred fifty (150)
days past the discharge date of the patient in the case of Accounts that have
been billed, and (ii) thirty (30) days past the date the corresponding services
and/or goods were provided in the case of Accounts that have not been billed;
provided however that in no event may the Account be outstanding more than one
hundred eighty (180) days past the date the corresponding services and/or goods
were provided;

 

(i)            the Obligor on which does not have fifty percent (50%) or more of
its Accounts owing to Borrowers constituting Defaulted Accounts;

 

(j)            to the extent such Account does not include late charges or
finance charges;

 

(k)           which is not subject to a dispute between the Obligor and
applicable Borrower;

 

(l)            which is not an Account for Health Net Medicare Advantage
enrollees, which gets paid into the Risk Pool Account; and

 

(m)          which complies with such other criteria and requirements as may be
specified from time to time by Lender in its reasonable discretion.

 

“Emergency Room Account” means any account established, or to be established, by
Borrower pursuant to the JHA Loan Documents at a financial institution approved
by JHA West 16, LLC to reserve for all soft and hard costs of design and
construction of the new emergency room facility as required by the JHA Loan
Documents.

 

“Environmental Laws” means, collectively, any local, state or federal law,
rule or regulation or common law duty pertaining to the environment, natural
resources, pollution, health (including any environmental clean up statutes and
all regulations adopted by any local, state, federal or other governmental
authority, and any statute, ordinance, code, order, decree, law rule or
regulation all of which pertain to or impose liability or standards of conduct
concerning medical waste or medical products, equipment or supplies), safety or
clean-up, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq.), the
Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. § 5101 et seq.), the Clean Air Act (42
U.S.C. § 7401 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act
(7 U.S.C. § 136 et seq.), the Emergency Planning and Community Right-to-Know Act
(42 U.S.C. § 11001 et seq.), the Residential Lead-Based Paint Hazard Reduction
Act (42 U.S.C. § 4851 et seq.), any analogous state or local laws, any
amendments thereto, and the regulations promulgated pursuant to said laws,
together with all amendments from time to time to any of the foregoing.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with any Borrower, is treated as a single employer under Sections
414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, is treated as a single employer under Section 414 of
the Code.

 

“Escrow Accounts” means any account established, or to be established, by
Borrower with Old Republic Title Company in connection with the JHA Loan
Documents.

 

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“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 in its reasonable discretion, except that if Lender determines in its
reasonable discretion 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 8.01 hereof.

 

“Excess Availability” means, as of any date, the amount, if any, by which
(a) the Borrowing Base as of such date exceeds (b) the greater of (i) the
aggregate amount of all Revolving Loans outstanding as of such date and (ii) the
Minimum Balance.

 

“Excluded Deposit Accounts” means Borrowers’ Emergency Room Account, Reserve
Accounts, Tax and Insurance Deposit Accounts and Escrow Accounts, the Risk Pool
Account and the Letter of Credit Account.

 

“Expenses” has the meaning set forth in Section 9.05(a) hereof.

 

“Fixed Charge Coverage Ratio” means the ratio of (a) EBITDAC, to (b) the sum of
(i) the current portion of any long-term Indebtedness, plus (ii) the current
portion of lease payments under capitalized leases, plus (iii) cash interest
paid, plus (iv) income taxes paid, plus (v) any unfinanced capital expenditures
paid in cash by Borrower, plus (vi) any Distributions paid in cash, plus
(vii) any management fees (including without limitation the Prospect Consulting
Fee) paid, plus (viii) current portion of any amount due to CMS under any
extended repayment plan in connection with any CMS Claim, in accordance with
generally accepted accounting principles consistently applied, on a rolling four
quarter basis; provided, however, that such calculation as of the fiscal quarter
ending June 30, 2009 shall be for the most recent fiscal quarterly period ending
on such date on a cumulative, annualized basis; such calculation for the fiscal
quarter ending September 30, 2009 shall be for the two (2) most recent fiscal
quarterly periods ending on such date on a cumulative, annualized basis and such
calculation for the fiscal quarter ending December 31, 2009 shall be for the
three (3) most recent fiscal quarterly periods ending on such date on a
cumulative, annualized basis.

 

“Funded Indebtedness” means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:

 

(a)           all obligations for borrowed money, whether current or long-term
(including the Obligations, the Subordinated Debt) and all obligations of such
Person evidenced by bonds, debentures, notes, loan agreements or other similar
instruments;

 

(b)           all purchase money indebtedness;

 

(c)           the principal portion of all obligations under conditional sale or
other title retention agreements relating to Property purchased by such Person
(other than customary reservations or retentions of title under agreements with
suppliers entered into in the ordinary course of business);

 

(d)           the maximum amount available to be drawn under letters of credit
(including standby and commercial), bankers’ acceptances, bank guaranties,
surety bonds and similar instruments;

 

(e)           all obligations in respect of the deferred purchase price of
Property or services (other than trade accounts payable in the ordinary course
of business);

 

(f)            all indebtedness in respect of Capital Leases;

 

(g)           all preferred stock or other equity interests providing for
mandatory redemptions, sinking fund or like payments prior to the Maturity Date;

 

(h)           all Funded Indebtedness of others secured by (or for which the
holder of such Funded Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of

 

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the proceeds of production from, Property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed; and

 

(i)            all guarantees with respect to Funded Indebtedness of the types
specified in clauses (a) through (h) above of another Person.

 

“Funding Date” has the meaning set forth in Section 2.02(a) hereof.

 

“GAAP” means generally accepted accounting principles, consistently applied.

 

“Government Accounts” means Accounts on which any federal or state governmental
unit or any intermediary for federal or state governmental unit is the Obligor.

 

“Government Lockbox” means a lockbox and/or deposit account in the name of
Borrower(s) maintained at the Lockbox Bank, or such other bank as is acceptable
to Lender, to which Collections on all Government Accounts are sent.

 

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any agency, department or person exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any corporation or other person owned or controlled
(through Capital Stock or capital ownership or otherwise) by any of the
foregoing, whether domestic or foreign.

 

“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.

 

“Healthcare Facility” or “Healthcare Facilities”, as applicable, shall mean any
one or more of the hospitals and other healthcare facilities operated by a
Borrower, including the healthcare facilities described on Schedule 5.03 hereto.

 

“Healthcare Laws” shall mean: (a) any and all federal, state and local fraud and
abuse laws, including (i) the federal Anti-Kickback Statute (42 U.S.C.
§ 1320a-7(b)), (ii) the Stark Law (42 U.S.C. § 1395nn and §1395(q)), (iii) the
civil False Claims Act (31 U.S.C. § 3729 et seq.), (iv) Sections 1320a-7 and
1320a-7a of Title 42 of the United States Code, and (v) the regulations
promulgated pursuant to such statutes; (b) the federal Food, Drug & Cosmetic Act
(21 U.S.C. §§ 301 et seq.) and the regulations promulgated pursuant thereto;
(c) the Health Insurance Portability and Accountability Act of 1996 (Pub. L.
No. 104-191) and the regulations promulgated pursuant thereto; (d) laws,
rules and regulations governing Medicare and Medicaid; (e) the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L.
No. 108-173) and the regulations promulgated pursuant thereto; (f) quality,
safety, life safety, and accreditation standards and requirements of all
applicable state laws or regulatory bodies; (g) any Applicable Law relating to
the Borrowers’ ownership, management, or operation of a healthcare facility or
business, or assets used in connection therewith; (h) any Applicable Law
relating to the billing or submission of claims, collection of accounts
receivable, underwriting the cost of, or provision of management or
administrative services in connection with, any and all of the foregoing, by any
Borrower; and (i) any and all other applicable healthcare laws, regulations,
manual provisions, policies and administrative guidance, each of (a) through
(h) as may be amended from time to time.

 

“Indebtedness” means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:

 

(a)           all Funded Indebtedness; and

 

(b)           all guarantees with respect to outstanding Indebtedness of the
types specified in clauses (a) and (b) above of any other Person.

 

“Indemnified Party” has the meaning set forth in Section 9.03(b) hereof.

 

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“Individual Payor Account” means an Account owing by an Obligor who is the
individual patient or Person who received the goods or services rendered.

 

“Initial Term” has the meaning set forth in Section 2.01(d) hereof.

 

“Interest Rate” and “Interest Rates” has the meaning set forth in
Section 2.03(a) hereof.

 

“Investment” means, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of Capital Stock of another Person, or (b) a loan, advance or
capital contribution to, guarantee or assumption of debt of, or purchase or
other acquisition of any other debt or equity participation or interest in,
another Person, including any partnership or joint venture interest in such
other Person. For purposes of determining covenant compliance, the amount of any
Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment.

 

“JHA Loan Documents” means (i) that certain Loan Agreement between BMC and JHA
West 16 LLC and any and all documents, instruments or agreements required or
delivered in connection with the transaction contemplated therein and (ii) that
certain Loan Agreement between BMC and JHA East 7 LLC and any and all documents,
instruments or agreements required or delivered in connection with the
transaction contemplated therein.

 

“JHA Loans” means any and all credit facilities, loans or advances in connection
with (i) that certain Loan Agreement between BMC and JHA West 16 LLC or
(ii) that certain Loan Agreement between BMC and JHA East 7 LLC.

 

“JHA Maturity Date” means the earlier of (i) the date of termination or payoff
of the credit facility described in that certain Loan Agreement between BMC and
JHA West 16 LLC as contemplated by the Plan of Reorganization (other than upon
exercise by JHA West 16 LLC of its option to acquire property in satisfaction of
debt or any refinancing thereof permitted by Section 7.07(i) hereof), and
(ii) the termination or payoff of the credit facility described in that certain
Loan Agreement between BMC and JHA East 7 LLC as contemplated by the Plan of
Reorganization of BMC (other than any refinancing thereof permitted by
Section 7.07(i) hereof).

 

“Letter of Credit Account” means that certain deposit account at Wells Fargo
Bank securing BMC’s workers’ compensation insurance arrangements.

 

“LIBOR Rate” means an annual rate equal to the greater of (i) four percent
(4.0%) per annum or (ii) as a reference rate, the annual rate reported as the
London Interbank Offer Rate applicable to thirty (30) day deposits of United
States dollars as reported in the Money Rates Section of The Wall Street Journal
on the date of determination. If The Wall Street Journal is not published on
such Business Day or does not report such reference rate, such reference rate
shall be as reported by such other publication or source as Lender may select.

 

“Loan(s)” means collectively the Revolving Loans, and each may also be referred
to as a “Loan”.

 

“Loan Documents” means this Agreement, the Revolving Note, the Business
Associate Agreement, the Depository Agreements, and all agreements relating to
the Government Lockbox and the Commercial Lockbox, all financing statements, the
Subordination Agreement(s), the Perfection Certificate, the Negative Pledge
Agreement and any other agreements, instruments, documents and certificates
delivered in connection with this Agreement.

 

“Loan Request” has the meaning set forth in Section 2.02(c) hereof.

 

“Lockbox Bank” means Citizens Bank of Pennsylvania or such other bank that is
acceptable to Lender.

 

“Material Adverse Effect” shall mean a material adverse affect upon, or a
material adverse change in, any of (a) the financial condition, operations,
business, Property or prospects of Borrowers, taken as a whole; (b) the ability
of Borrowers to perform their Obligations; (c) the legality, validity or
enforceability of any Loan

 

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Document; (d) the perfection or priority of the liens of Lender granted under
the Loan Documents or the rights and remedies of Lender under the Loan
Documents; or (e) the condition or value of any portion of the Collateral as
defined herein (other than market fluctuations in the values of such
Collateral); (f) the use or scope of any Permit or (g) the continued
participation or the ability to accept or bill for goods or services in the
Medicaid, Medicare or other government reimbursement programs by any Borrower.

 

“Maturity Date” has the meaning set forth in Section 2.01(d) hereof.

 

“Maximum Credit Limit” means an amount, from time to time, equal to the
Revolving Loan Commitment, not to exceed at any time Six Million and No/Dollars
($6,000,000.00) in the aggregate.

 

“Maximum Loan Turn Days” means a number of days calculated as follows: (i) the
result of (a) the average outstanding balance of the Revolving Loans for the
trailing three (3) month period ending on the calculation date divided by
(b) the average monthly cash collections for the trailing three (3) month period
ending on the calculation date, multiplied by (ii) thirty (30).

 

“Medicaid” means, collectively, the healthcare assistance program established by
Title XIX of the Social Security Act (42 U.S.C. §§ 1396 et. seq.) and any
statutes succeeding thereto, and all laws, rules, regulations, manuals, orders,
guidelines or requirements (whether or not having the force of law) pertaining
to such program, in each case as the same may be amended, supplemented or
otherwise modified from time to time.

 

“Medicare” means, collectively, the health insurance program for the aged and
disabled established by Title XVIII of the Social Security Act (42 U.S.C. §§
1395 et. seq.) and any statutes succeeding thereto, and all laws, rules,
regulations, manuals, orders or guidelines (whether or not having the force of
law) pertaining to such program, in each case as the same may be amended,
supplemented or otherwise modified from time to time.

 

“Multiemployer Plan” means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.

 

“Negative Pledge Agreement” means the Negative Pledge Agreement, dated as of the
date hereof, between Prospect Hospital Advisory Services, Inc. and Lender.

 

“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, or any of them, 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, or any of them, under the Loan Documents, whether or not evidenced by
any note or other instrument.

 

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

 

“Organizational Documents” means, (a) with respect to any corporation, the,
charter, certificate or articles of incorporation and the bylaws (or equivalent
or comparable constituent documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; and (c) with respect to
any partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.

 

“Participation Agreements” has the meaning set forth in
Section 5.03(d)(ii) hereof.

 

“PBGC” means the Pension Benefit Guaranty Corporation or any Person succeeding
to any or all of its functions under ERISA.

 

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“Perfection Certificate” means that certain Perfection Certificate, in form and
substance satisfactory to Lender, entered into by Borrowers as of the date
hereof.

 

“Permit” shall mean any permit, approval, authorization, license, accreditation,
certification, provider or supplier number, registration, certificate of
authority, certificate of need, certificate of reimbursement, variance,
qualification, filing or consent required under any Applicable Law.

 

“Permitted Liens” has the meaning set forth in Section 5.06 hereof.

 

“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.

 

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which Borrowers or any ERISA Affiliate
is (or, if such plan were terminated, would under Section 4069 of ERISA be
deemed to be) an “employer” as defined in Section 3(5) of ERISA.

 

“Plan of Reorganization” means that certain “Second Amended Joint Chapter 11
Plan of Reorganization Proposed by Brotman Medical Center, Inc. and the Official
Committee of Unsecured Creditors (dated November 6, 2008)” confirmed pursuant to
11 U.S.C. § 1129 by the Bankruptcy Court that is in full force and effect.

 

“Prime” means Prime Healthcare Services Los Angeles, LLC, its Affiliates, and
any successor or assign thereof.

 

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

 

“Prospect Consulting Fee” means the consulting fee payable pursuant to that
certain Consulting Services Agreement, dated as of August 1, 2005 (as amended by
that certain Amendment to Consulting Services Agreement, dated as of October 25,
2007), by and between BMC and Prospect Hospital Advisory Services, Inc. (f/k/a
Prospect Medical Management, Inc.).

 

“Required Insurance” has the meaning set forth in Section 6.02(a) hereof

 

“Reserves” has the meaning set forth in Section 2.01(a) hereof.

 

“Reserve Accounts” means any account established, or to be established, by
Borrower pursuant to the JHA Loan Documents at a financial institution approved
by JHA West 16, LLC or JHA East 7, LLC to pay for capital improvements, repairs
and replacements as described in the JHA Loan Documents.

 

“Revolving Loan(s)” has the meaning set forth in Section 2.01(a) hereof.

 

“Revolving Loan Commitment” means an amount equal to Six Million and No/Dollars
($6,000,000.00).

 

“Revolving Note” has the meaning set forth in Section 2.01(b) hereof.

 

“Revolving Termination Fee” has the meaning set forth in Section 2.03(c) hereof.

 

“Risk Pool Account” means that certain deposit account at Wells Fargo Bank that
receives certain capitation payments from Health Net of California, Inc. for
Health Net Medicare Advantage enrollees and which is subject to the joint
control of BMC and Prospect Medical Group, Inc.

 

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

 

“Settlement Date” has the meaning set forth in Section 2.02(a) hereof.

 

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

 

“Subordinated Debt” means debt or other obligations of a Borrower that is
subordinated to the Obligations of Borrowers to Lender on terms and conditions
that are satisfactory to the Lender in its sole discretion.

 

“Subordination Agreement” means collectively and individually those certain
Subordination Agreements, in form and substance satisfactory to Lender, from the
holders of the Subordinated Debt in favor of Lender.

 

“Subsidiary” of a Person means a corporation, partnership, limited liability
company or other business entity of which fifty-one percent (51%) of the Capital
Stock having ordinary voting power for the election of directors or other
governing body (other than Capital Stock having such power only by reason of the
happening of a contingency) are at the time beneficially owned, or the
management of which is otherwise controlled, directly, or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise specified, all
references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a
Subsidiary or Subsidiaries of the Borrowers.

 

“Tax and Insurance Deposit Accounts” means any account established, or to be
established, by Borrower pursuant to the JHA Loan Documents at a financial
institution approved by JHA West 16, LLC or JHA East 7, LLC for the purpose of
depositing payments of real estate taxes and assessments and insurance premiums
in the amounts and in the manner set forth in the JHA Loan Documents.

 

“Taxes” shall mean all federal, state, local, foreign and other net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, lease, service, service use, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, windfall profits,
customs, duties or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax, or
additional amounts with respect thereto, and including liabilities under
escheat, unclaimed property laws or similar laws, and the term “Tax” means any
of the foregoing taxes.

 

“Third Party Payor” means Medicare, Medicaid, TRICARE, and other state or
federal health care program, Blue Cross and/or Blue Shield, private insurers,
managed care plans and any other person or entity which presently or in the
future maintains Third Party Payor Programs.

 

“Third Party Payor Programs” means all payment and reimbursement programs
sponsored by a Third Party Payor, in which a Borrower participates.

 

“TRICARE” means the health care plan for the uniformed services, retirees and
their families.

 

“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as in
effect from time to time in the State of New York or any other state, as
applicable.

 

“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 2.03(d) hereof.

 

“Wells Fargo Depository Agreements” means that certain Collection Account
Agreement, dated as of the date hereof, between BMC, Wells Fargo Bank, National
Association, and Gemino Healthcare Finance, LLC and that certain Four Party
Wholesale Lockbox Agreement (Access Restricted Immediately), dated as of the
date hereof, between BMC, Wells Fargo Bank, National Association (as Lockbox
Processor), Wells Fargo Bank, National Association (as Depository Bank), and
Gemino Healthcare Finance, LLC.

 

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